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THE 
 
 ELEMENTS 
 
 OF 
 
 THE SCIEN^CE OF MONEY, 
 
 FOUNDED OX 
 
 Principles 
 
 OF 
 
 THE LAW OF NATURE. 
 
 BY JOHN PRINCE SMITH, Esq. 
 OF Gray's Inn, Barrister at Law. 
 
 LONDON 
 
 PRINTED FOR LONGMAN, HURST, REES, ORME, 
 AND BROWN, PATERNOSTER-ROW. 
 
 1813. 
 W. Flint, Printer, Old Bailey, London, 
 
i.'^y 
 
 
TO 
 THE MOST NOBLE 
 
 HENRY, MARQVISS OF LANSDOWNE, 
 
 My Lord, 
 The name of Petty stands foremost 
 amongst the fathers of the Science of spo- 
 litical econom}^ and your Lordship is 
 by descent, as it were, a patron of financial 
 knowledge. In your own character 3^ou 
 have displayed an attention to these and 
 other subjects of state importance, which 
 adds dignity to your rank, and renders 
 your career a source of public utilit3% It 
 is to noblemen such as your Lordship, 
 who combine eloquence, talents, virtue, and 
 patriotism, with the independence of high 
 birth and fortune, that the nation must 
 turn in all the most difficult states of pub- 
 b 2 
 
 106006 
 
IV DEDICATION, 
 
 lie emergency. Permit me, therefore, to 
 dedicate to you, as an humble token of 
 my respect, a work which, whatever 
 may be the defects of its execution, is the 
 result of much labour and a studious desire 
 to render ray own- lif^ useful in some 
 degree, however small, to the country 
 
 to which I belong. 
 
 ' I have the honour to be 
 
 Your Lordship's most humble Servant, 
 
 JOHN PRIN€£ SMITH. 
 
 No. 24, Chancery- lane, 
 Not. l»t, 1812. 
 
PREFACE. 
 
 JL HREE powers may be said to rule the 
 world : money, arts, and arms ; or wealth, 
 knowledge, and force. 
 
 It ought not, therefore, to excite surprize, 
 that the circumstances of the present time 
 have occasioned extensive inquiry and 
 various opinion. A nation, populous, 
 mighty in arms, rich in commerce, profound 
 in science, skilful in arts, is arrived at a new 
 era in political economy. Burthened with 
 debt and taxation, it is absolutely without 
 money. Its debts are estimated at more than 
 eight hundred millions,* the average revenue is 
 63J63J4!6; , the annual loans are 12,673,548, 
 and the total expenditure 82,205,066^ taking 
 the estimate of the year 1811; while the 
 income tax, upon the private revenue of all 
 persons having 6oL a year, amounts to 
 
 ♦ The sum paid, as it is called, by the operation of the 
 sinking fund is here neglected. It amounts to 240,000,0001, 
 
VI PREFACE. 
 
 11,000,0001. and the total of such revenue to 
 about 110,000,0001. Yet is all this revenue 
 and expenditure managed with much facility. 
 The different amounts are settled by the ex^- 
 change of certain pieces of paper, vrith a quan- 
 tity of dollar- tokens, and bad shillings from 
 which every stamp of authority is effaced. 
 
 This is a phenomenon that canmrt ferl 
 to impress a thoughtful mind' with asto- 
 nishment; and it has justly afforded matter 
 of argument to pamphlets innumerable. 
 A committee of the House of Commons 
 has investigated the subject, and pronounced 
 a judgment which has been overruled by an 
 opinion declared by the whole house. By 
 some it is pronounced that money in specie 
 is necessary to the existence of the state ; by 
 others that it is an incumbrance ; that paper, 
 being cheaper is more useful, facilitates com- 
 merce better, and gives stronger and broader 
 wings to trade. Amidst a general discori^ancy 
 of opinion, there is, however, a general sense 
 of alarm ; and the most powerful antagonists 
 of the money system, who are the principal 
 leaders in the House of Commons, profess to 
 think that the paper is but a temporary sup- 
 
PREFACE^ VU 
 
 To collect the truth, if possible, from the 
 jarring discord of party, it should seem, that 
 the sense of value, as it has been called;, 
 would preponderate in favour of gold : but, 
 that the sense of danger far outweighs it, and 
 makes the supporters of ministry, the bank, 
 and all those who are concerned m trade, to- 
 gether with the timid who dread confusion 
 and love repose, unanimous in upholding that 
 system of public and private credit,, which is 
 the basis of paper money. 
 
 Credit, said the apostle of revolution, the 
 celebrated Pai?ie^ is suspicion asleep. Paper 
 credit, he might now say, is maintained at its 
 highestpoint by the awakening of terror. Never 
 was the alarm against paper more violent, never 
 was its circulation more extensive or more in- 
 creasing. It is fear only which now gives a 
 currency to paper so universal that, at its 
 lowest estimate, it will be impossible to con- 
 vert it into coin at its true standard, and, 
 therefore, impossible to pay it, in any legiti* 
 mate sense. It is fear alone which will sustain 
 it, till the hour when its evils shall so out- 
 weigh its benefits, that the whole nation will 
 cry aloud for its destruction. 
 
 How near or how distant may be that period. 
 
Vlll ^ PREFACE. 
 
 it is not for any one to pronounce ; but it seems 
 a reasonable opinion, that ^ there are certain 
 elements in the composition of public credit 
 Vhich must finally lead to its overthrow. And 
 that nations, having for above a century in- 
 volved themselves in debt, will, like indivi- 
 duals, find the burthen insupportable and en- 
 deavour to shake it otF. 
 
 Hume pronounced, that either the nation 
 must destroy public credit, or public credit 
 must destroy the nation. By nation, he under- 
 stands^of course, the state ; since the only means 
 of destroying a people are by the mortality of* 
 war and desolation , by plague, pestilence, and 
 famine :. and we have seen one nation of 
 Europe rise like AntcBus^ as a giant refreshed^ 
 from having fallen with the ruin of her finances. 
 
 We have seen France stripped of all her 
 gold, unsheath the sword of conquest, bring* 
 wealth in abundance to her treasury, by the 
 plunder of surrounding states, and maintain 
 a circulation of coin, unparalleled in purity 
 and.; extent by any of her neighbours. 
 Whether a similar fate is reserved for England 
 no one can venture to surmise. But there are 
 many amongst us, who look to a national bank- , 
 rpp|:cy as to a state? of Regeneration : as the 
 
PREFACE. IX 
 
 era from which to date a new career of glory 
 and of grandeur to the British name and the 
 British constitution. 
 
 By others^ however, it is thought that the 
 discovery of the sinking fund is like a new 
 power in mechanics, and will enable the state 
 to roll on, with the everlasting course of the 
 planetary system, through a splendid zodiac 
 of debt and taxation, revenue and expendi- 
 ture, bank notes, and exchequer bills, annual 
 loans and quarterly accumulations of interest, 
 repurchases of old debts, and immediate inte- 
 grations of new ones. To such visionaries 
 the bank and the tax office appear the sourcCvS 
 of political light and vitality, as necessary to 
 the preservation of liberty and commerce, as 
 the sun and moon to the ruling of the day and 
 night. 
 
 A friend to truth and to his country 
 may, however, be permitted to stand 
 between these antagonists in opinion, and 
 holding that debt cannot be perpetual, pro- 
 nounce, that, while he fears the sinking fund 
 will be discovered, in the end, to have more 
 of deception in it than is generally suppos- 
 ed, yet there are terrors in a national 
 bankruptcy, which may well give us pause. 
 
*:{ PREFACE. 
 
 bel^^e we declare an act of insolvency to de- 
 liver th€ state from its present enthralment. 
 
 An impartial observer may speak his 
 opinions, or rather confess his fears expli- 
 citly. Of the two parties in th^ House of 
 Commons, one has pronounced, that the 
 state is in danger from the extension of* 
 paper credit. That it is absolutely neces- 
 sary to restore coin into circulation, and for 
 this purpose, to compel the bank of England 
 to pay all its notes within two years. While; 
 the opposite side agree in the necessity of 
 restoring the currency of coin, but declare 
 that the time is not arrived at which it can be 
 effected. The latter enumerate the v^riousitems 
 of taxation, revenue and expenditure, and the 
 amount of bank notes, omitting to notice those 
 of country bankers ; and declare, that it is 
 quite impossible to support the circulation 
 requisite for these purposes with a smaller 
 number of notes. They propose, therefore, to 
 delay the time of payment till the arrival 6t 
 peace; when the bank of England will, by 
 the present statute law of the realm, be" com- 
 pelled to pay all its notes on demand, after six 
 months from the signing of a definitive treaiyj 
 
 To this opinion the House of Com- 
 
PREFACE. XI 
 
 mons have subscribed their assent, by passing 
 the resol'itions moved by Mr. Vansittari; 
 and, by no means agreeing with any of 
 the doctrines there insinuated rather than ex- 
 pressed, the author cannot but concur in 
 the conclusion, nearly upon the principles 
 expressed in two admirable speeches de* 
 livered by the Right Honourable George 
 Canning, 
 
 That accomplished orator, in language most 
 forcible, and with eloquence most convincing, 
 has pronounced, what the author thinks 
 to be the real sense of the majority both in and 
 out of theHouseof Commons ; namely, that the 
 times will not admit of immediate payment by 
 the bank ; but, that it is the duty of the legis- 
 lature, while it departs from the true system 
 of money and coin so necessary to all states, 
 to declare expressly the cause of the departure,, 
 and its intention to return, when the ne- 
 cessity shall cease or the opportunity of returni 
 occur: and to pronounce also, that it wiUi 
 adopt the speediest means to remove the iie^ 
 oessity and to seize the opportunity. 
 
 When and how these are to arrive, it is- 
 of immediate importance to enquire. 
 
Xa PREPACK. 
 
 Mr. }i7or72^r, (no mean authority) and hi* 
 associates of the committee, whose talents are 
 as conspicuous as their patriotism is undoubt- 
 ed, are of opinion that in two years the means 
 may be prepared for opening the bank. Mr. 
 Va?isiUart ^nd the majority declare, that it 
 cannot be expected till six months after a treaty 
 of peace. Mr. Rcmdle Jackson, in the name of 
 the bank proprietors, but probably without 
 any delegation of authority, declares that if 
 Government would pay its debt to the bank, 
 the bank would pay all its debts to the public 
 instantly. 
 
 Allow them two months or three, and it 
 maybe conceded to Mr. Jackson that the bank 
 may pay every note outstanding in guineas. 
 
 Mr. Huskisson indeed says that, the debt 
 meant is the original capital, which having, 
 been ativanced on loan to the state, at 3l. per 
 cent, interest during the existence of the char- 
 ter, cannot now be repaid, and on aceount of 
 that debt the bank can claim no aid from, 
 government. Notwithstanding which, it still 
 seems obvious, that the bank might accede to 
 the challenge, and faithfully redeem its pledge, 
 in the strictest terms. Yet would not 
 
PREFACE. Xlli 
 
 the state of the country be in the smallest 
 degree improved by it. 
 
 The actual money in circulation is always 
 equal to the demand for money : the demand 
 for money is affected by the state of prices arid 
 the number of exchanges : the state of prices 
 is, at all times, raised to a height below which 
 it cannot easily subside, without affecting the 
 revenue: and the demand for ttiotiey is in- 
 creased by demand for the payment of Veventie, 
 of loans, and of state expenditure. 
 
 On the arrival of peace, the demand for pay- 
 ments on revenue will in some measure increase; 
 but the extraordinary expenditure of oovern- 
 ment will be diminished. Prices, however, 
 will not immediately subside, probably they 
 will keep rising; and the increased demands 
 for new speculations in commerce will either 
 equal the demand of money for the extraordi- 
 nary expenditure of the state, or trade must 
 decay and revenue fail. The currency requi- 
 site in the first twelve months of peace will, 
 therefore, not fall short of that which is requi- 
 site at present. ' ' 
 
 Unless the whole tendency ofMT.Vansittarfs 
 
XIV PREFACE. 
 
 Resolutions is now misunderstood, it may be 
 collected from them, that the reason why the 
 bank notes are not deemed excessive is, because 
 it is thought they are necessary to support a cur- 
 rency equal to the demand in the above itejns; and 
 bank notes cannot be paid till that currency is 
 reduced. But, if the above principles are ju^t, 
 and they appear to be admitted by Mr. Van- 
 dttart^ to be denied by no one, and to be abso- 
 lutely indisputable, peace will afford no oppor- 
 tunity for the reduction of currency ; and, of 
 course, no relief to the bank in the payment of 
 its notes. The nature of the demand for cur- 
 rency on a peace, will be changed, therefore, 
 but not its extent. 
 
 Bank notes are issued in advances to 
 government,and to the merchants. The advaiices 
 to government will be diminished, and the 
 notes to an equal amount destroyed. Either 
 prices and revenue must then fall, or 
 the vacuity be filled up wath new bank notes, 
 country bank notes, or guineas. 
 
 But it is easy to see, that the supply will be 
 formed by the increase of country bank notes, 
 or a larger issueby the bank in discounts ; and, 
 precisely in the same degree that the bank di- 
 minishes its issues on discount, will the country 
 
PRPFACjE. %^ 
 
 bankers increase their issue of notes ; unless, 
 taking alarm at the threatened opening of the 
 bank, and fearing a run upon them, they also 
 shall think proper, as in prudence they will, to 
 withhold their discounts, and restrain their 
 issues. 
 
 If the bank prepares to pay, it will previously 
 ascertain the quantity of coin and bullion in its 
 coffers ; it will anticipate a run, to be occa- 
 sioned merely by the desire of the country 
 bankers to pay all thfeir notes in specie ; and a 
 run,or extraordinary demand for guineas, will,of 
 course, take place. But the bank will assuredly 
 pay all its notes in guineas, rather than again 
 break its faith with the public. To effect this 
 payment it has only to reduce its discounts 
 daily, and in two months its outstanding notes 
 may not exceed 400,0001, But till the alarm 
 is over, it will be cautiom of re-issuing its 
 notes : and, guineas being in circulation, an 
 equal demand will arise against the country 
 bankers, who must proceed exactly as the bank 
 did. They must calculate how many bank notes 
 they possess capable of being converted into 
 coin, at the Bank of England, and proportion 
 . their issues exactly to this amount : for, in the 
 general alarm, nothing but guineas, or bank 
 vki^m tony^rtihlQ into guineas, will assist them. 
 
XVI PREFACE. 
 
 And by a similar process their issues may ht 
 reduced to any assignable limit. This restraint 
 upon discounts, however, will diminishJcirr*- 
 rency; and, upon every principle of the. true 
 science af money, cause prices to fall rapidly. 
 
 In the mean time, how is the currenc}'^ to be 
 
 supplied ? How is the revenue to be raised ? 
 
 How is bullion to be procured to be coined 
 
 -into guineas at the original standard ? •ol» 
 
 To the author, to all who shall be impressed 
 with, the facts, arid principles stated in this 
 work, and to all who will fairly explain the 
 nature of currency arid demand, prices and 
 taxation, it must appear impossible. 
 
 ?' J ^Either, therefore, paper must be continued 
 in use, or prices and revenue fall and demand 
 for currency be diminished, or the restoration 
 of the Ooin at its present standard is impossible, 
 without great distress, whenever the Bank shall 
 be re-opened for the payment in specie. Whe- 
 ther that shall take place in six morrhs, or not 
 
 ^ till six years, before, or after the restoration of 
 peace, the difficulty will remain: neither, would 
 any change of ministry, newform of government, 
 increase of territory, or acq uriitiofi^f conquest, 
 
 . except the importation of trtt^eure gained in war, 
 
PREFACE. XVii 
 
 by the state, and delivered to the bank in 
 payment of its debts, facilitate the payment 
 and conversion into specie of the now exist- 
 ing paper currency. 
 
 But the state is pledged, and the law enacts, 
 that in six months after the restoration of peace, 
 the bank shall pay its notes in coin of the old 
 standard value, according to its repeated pro- 
 mises. 
 
 The bank will be ready to keep its faith : 
 but, will the state and the people suffer it ; is 
 a question now proposed for the most serious 
 consideration of all who have influence or 
 voices in parliament ; and who regard the 
 state and the revenue as worthy of preservation. 
 
 A long and serious reflection on this subject 
 has produced complete conviction in the mind 
 of the author, founded upon arguments which it 
 is not necessary now to detail, because they are 
 clearly deducible from the following pages, 
 that, on the restoration of coin at its present 
 standard, the fall of paper and of the revenue of 
 the state, will be the certain result of adherence 
 to the bank restriction act ; which requires that 
 payment shall be made in coin at ^ix month* 
 after the restoration of peace. 
 
 Q 
 
XVlll PREFACE. 
 
 What alteration of the standard will enabfe 
 us to restore coin, it is impossible to anticipate r 
 but the destruction of the standard will of 
 course be a change of value, and the demand 
 for bullion and its influx, will be attended with 
 distress to trade and to the creditors of the 
 state, which no one can venture to depict. - 
 
 . Ill this difficulty should the jd'estruction of 
 the funds be decreed in any proportion, or alto-' 
 gether, as is predicted by Hume^ and most 
 calmly, not to say with utter Contempt of coh- 
 seiquepces, anticipated by Cobbett, and iftahy- 
 of (the writers in the Political JRegistier;^h'kt- 
 Can save thei state from destruction, and > that 
 absolute chaos of anarchy which convulsed all 
 France, during the turbulent periods of the 
 Revolution ! ! 
 
 To the needy and the daring this may afford 
 a prospect of felicitous adveature ; but what a 
 scene does it open to the fears of those, whose 
 families depend for support upon the publiC' 
 funds 1 And who is there without friends or 
 relations, parents, aged widows, and helples* 
 
 oj-phans,* ^^ ho by the fall of funded property, 
 
 ,^ . , ., ^ , , ■ ' ', * 
 
 . * The property in the hands of the receiver-general of the 
 &o\iYt of Chancery, chiefly in settlements, amounts to nearly 
 27,000,0001. ; this is all- vested in the public funds^ 
 
PREFACE. XIX 
 
 must be driven upon the world, abject and for- 
 lorn, helpless and without bread ! 
 
 The income from funded property is one- 
 fifth of the whole taxable income of the country; 
 that is, of all persons not living upon manual 
 labour, anjd earning more than 60l. a-year. 
 One^fifth of the people, of the middle class, 
 must therefore be ruined by the destruction of 
 the funding .system ; and the number of these 
 may be about one-twentieth part of the popula- 
 tion. 
 
 ' ' If othigr causes were wanting at anytime for 
 the destruction of a state, the instantaneous 
 reduction of one-fifth of its most useful, most 
 virtuous, and most intelligent subjects to ill-per- 
 suasive penury and want,* would tend to pro- 
 duce a revolution the most violent and destruc- 
 tive. 
 
 * Many views have been given of the prif^disposing causes 
 to tumult during the French revolution; but is it not 
 sufficient to account for the madness of partizans, the fury of 
 democratic violence,and all the horrors of the reignof terror ; 
 that by the fall of the finances, and of the assignat^, men 
 well educated, bred to luxury, subtle of coat ivance, and 
 daring inMventure, were reduced on a sudden to want and 
 desperation. 
 
 Tranquillity wat never restored to France till the Emperor 
 c 2 
 
XX PREFACE. 
 
 In such an emergency, how to provide for 
 the evil, and prevent it, is amongst the first 
 enquiries that a mind possessed with feeling, or 
 with patriotism, will institute. Accordingly, the 
 author has patiently investigated the means of 
 thestate; and imagines, that he has discovered the 
 true and only remedy; and that its application 
 is just, speedy, and secure. It consists simply 
 
 Napoleon regulated the fiuauces, and secured to his subjects 
 the due payment of the interest on the remnant of the na- 
 *^nal funds. 
 
 Had the ministers of Louis the XVIth known how t» 
 meet the difficulties ot the state by proper regulations of 
 finance, the furious storms of the revolution might have 
 been avoided, and a complete reform have saved the throne 
 •f France to the family of the Bourbons. 
 
 Individuals may be ruined by insolvency ; but he who can 
 command the resources of a whole nation, is weak and igno- 
 rant, if he cannot provide for the security of the state, while 
 he new-models her revenue and expenditure. It is one 
 of the objects of this work to examine in what consists the true 
 power of a nation, and how best to provide for the regular 
 supply of the funds, which administered with economy and 
 "Wisdom, may contribute to its preservation, to its happinesi- 
 and its glory. 
 
 In this inquiry an endeavour is made to avoid all considera- 
 tion of the form of government. The power of the state 
 must be vested somewhere, and where that power is, there 
 are the means of wealth. 
 
PREFACE. XXI 
 
 in the equitable division of the land and pro- 
 perty of the nation among its present possessors 
 and the mortgagees or public creditors. A 
 measure of the facility*of which he entertains 
 no doubt 
 
 It may be said, that these apprehensions 
 are vain ; that the failure of revenue, and 
 the fall of the paper system, and the state 
 is a chimera which will have no existence in 
 reality. 
 
 Be it so, and let him be censured for his vaia 
 fears ! But still, if the event be only possible, 
 there is no danger in preparing, prospectively, 
 a remedy ; and it is well to have an insurance, 
 and an escape, though a fire should never hap- 
 pen. 
 
 But is it so certain that the paper system must 
 endure for ever ? Are those who are most stre- 
 nuous in its praise, most confident in their 
 hopes ; and is not some latent fear to be descried 
 amidst all their clamorous boasting ? 
 
 If paper is wholly good, why not establish 
 it wholly, and let it pass current unmixed with 
 baser metal. If it is desirable for its excellence, 
 why not perpetuate the bank restriction, and 
 
XXh PREFACE. 
 
 destroy the ^sstablishment at the Mint, which is 
 become a sinecure of 1 6,0001. * a-year, while 
 the establishment at the Bank supplies us with 
 so large a sum as 20 millions, at the trifling 
 expence of 1,000,0001. for interest and 
 ;500,000l. for management, annually. 
 
 Be the ever|t distant or near, probable or 
 improbable, the contemplation of it is at least 
 natural ; and it has led to the composition of 
 the present work ; for which the author offers 
 an apology to his profession as well as his 
 friends. Fpr he is well aware that the study of 
 such subjects is deemed wholly derogatory to 
 the interest of those whose dependence is upon 
 professional support. 
 
 It was hardly possible to be insensible to 
 the clamour raised on all sides by the report 
 of the Bullion Committee, or to the difficulty 
 experienced by the people for want of change. 
 In common with others. He read the pamphlets; 
 ^nd found that the subject was in general very 
 little understood, foir want of elementary know- 
 ledge ; and ill discussed ifor want of examining 
 it systematically ; that the speculations of most 
 
 ♦ it appears we have paid 200,00^1. for the estalslishment 
 t)f the Mint, sindethe B&nk has stopped payment^ andtht 
 Mint ceased to coin money. 
 
P.RU^'ACE. XX III 
 
 writers were founded upon imperfect data, 8^nd 
 almost a total disregard of the ex tent of the paper 
 system ; which owes its increase to the absolute 
 freedom which has been given to paper credit. 
 
 It is this which has distributed paper money 
 so universally, and which has effected for the 
 pound notes of England^ what no force could 
 do for the assignais of France^ or the paper 
 money of any other country. But at the same 
 time, it has only increased the evil, and rendered 
 a paper system less advantageous to the govern- 
 ment, than if all the notes were .issued upoi^ 
 the security of the state. 
 
 It is shewn hereafter, see Elements^ Book 
 II. Chap, v., how paper has wrested from 
 the state the power over the standard 
 of currency, and placed the sceptre and the 
 royal authority as to money almost entirely in 
 the hands of the bank corporation, and the 
 scattered body of private bankers. And whether 
 .power so delegated and dispersed, is justly com- 
 mitted to them, w ill be seen also by the perusal 
 of these Elements of the Science of Money. 
 
 Jn compiling thisbook theauthor has raised his 
 views above the present times, and avoided allu- 
 sions to temporary matter,except when absolute- 
 ly necessary to the present subject. He hasdis- 
 
XXIV PREFACE, 
 
 cussed it fully, patiently, and without party- 
 spirit. Would those who hold that a paper 
 system in currency is necessary to the support 
 of commerce and the prosperity of states, at- 
 tempt the same thing, instead of declaiming in 
 general terms, they would either reason them- 
 selves out of their mistakes, or establish their 
 doctrines upon a sure and irrefragable basis : 
 they would be either intelligible, or palpably 
 inconsistent. 
 
 In this work will be found the substance of 
 numerous pamphlets ; and much apparent learn- 
 ing might have been displayed by the citation 
 of many authorities of nobler size. One ad- 
 vantage of a general treatise is, th?t it avoids 
 party strife and personal censure; but on this 
 occasion there is no immediate cause for violent 
 abuse, and truth will make a progress not the 
 less rapid for the dignity of her demeanour, and 
 the gentleness of her carriage. 
 
 As to the present ministers, the error of the 
 paper system does not belong exclusively to 
 them. It is a disease of inheritance derived to 
 the nation by several descents, through every 
 reign of the last century ; and ultimately to be 
 traced to the glorious king William and the 
 revolution. It is an error into which the whole 
 Nation, together with all the nations of Europe, 
 
PREFACE, XXV 
 
 have fallen ; and like other nations, Britain 
 must also work out her salvation with fear and 
 trembling. The hope of our safety is in the 
 course of nature, which in the midst of disease 
 produces the crisis by which it terminates. 
 The principle to which she points in all cases 
 of public distress is plain and visible in 
 the common career of life. When an indivi- 
 dual is bankrupt, his effects must be sold to 
 liquidate his debts. When a nation is bank- 
 rupt, the lands must be divided to satisfy the 
 lawful creditors, or ruin and anarchy ensue, 
 and violence ultimately divides the spoil. 
 
 It has been often said, that the funds 
 are good security, because the faith of the 
 nation is pledged, and the proprietors of stock 
 have a mortgage upon the land : to which it 
 may be added, that, whenever the interest on a 
 mortgaged estate cannot be paid, it is time to 
 foreclose. 
 
 It will be proved, accordingly, in these Ele- 
 ments, that the creditors of the state are not 
 duly paid, while the money which they receive 
 is daily and rapidly diminished in value. It 
 will appear also that the claims of all pensioners, 
 all charities, all incumbents of small livings, 
 all curates, and alj officers serving by sea and 
 
XXVI ^REPACEi 
 
 land, as well as the humble servants of the 
 state, employed in the excise and customs, cry 
 aloud for immediate aid. For these numer- 
 ous classes of persons are all rapidly descend- 
 ing into absolute poverty, through the effect 
 of the funding system; which is intimately con- 
 nected with the paper system and which must 
 «tand or fall by it. 
 
 With a view to public safety, a plan is 
 given by which the funds may be destroyed 
 without injuring the fund-holders, who will, it 
 is expect^, by no means, be averse to the con- 
 version of all their funded stock into landed 
 property, and real estate. Neither will the great 
 landed proprietors, it is hoped, refuse to accede 
 to a plan w^hich would leave them also in the 
 same relative rank in society as at present ; with 
 the same permanence of heritable property, and 
 an effective revenue, not diminished, but in- 
 creasing. The Agrarian law here proposed, is 
 not a law of equality, but of equity; not an 
 act for the subversion, but for the preservation 
 of the existing orders in society. 
 
 To the Bank directors no apology need be 
 
 offered for any occasional notice of the nature 
 
 .,30f;their establishment ; calculation, ^nd not 
 
 ceiisure, is the business of this work : ancl in- 
 
PREFAGE,» XXVii: 
 
 deed the Bank directors are liable to no censure; 
 they have acted during the whole period since 
 the bank restriction, with great honour and 
 much forbearance. 
 
 Under all circumstances, it is probable that 
 had they attended to exchanges, and the price 
 of bullion, as it was their interest formerly to 
 do, they would have ill discharged their duty 
 to the public, and to the merchants of London ^ 
 who would have been compelled to seek in 
 loans from the country bankers, the aid which 
 was refused to them by the Bank directors, or 
 else the London merchants must have yielded 
 to the traders of Bristol^ Hull^ Liverpool^ and 
 other outports, in the fair competition of com- 
 merce. That the extent of the Bank discounts 
 has, however, encouraged speculation, cannot 
 be denied ; but that evil was not to be avoided 
 without immediate prejudice to trade and the 
 revenue. 
 
 In fine, the Bank directors are become per- 
 sons of the first influence in the state, and their 
 command of wealth by the allowance of dis- 
 counts to their friends and connexions, is 
 greater than any possessed by the most power- 
 ful minister of the most powerful nation. Yet 
 have these geatlemea -conducted themselveg 
 
XXVllJ PREFACE, 
 
 with great moderation and decorum. And 
 when the talents of a Baring and others, are 
 considered, as they have been displayed upon 
 the very question of the depreciation of money, 
 including, in great part, the paper of the Bank, 
 London may proudly boast of the intelligence 
 and integrity of her citizens. 
 
 One consideration which will impress the 
 reader of this work most forcibly, and which 
 has not probably been noticed by others, is the 
 moral effect of a money continually and rapidly 
 decreasing in value. It is briefly treated in the 
 following elements ; but it might afford mat- 
 ter for volumes of political and moral essays. 
 
 " The necessity of the times," is a phrase of 
 constant occurrence, but it has never yet been 
 explained. Necessity is sometimes a salutary 
 principle, and adversity in her milder form is a 
 moral teacher of unrivalled power, who is at 
 once the touchstone of wit, and the spur of 
 industry. Not so, however, when necessity, 
 as in the present period, assumes the form of 
 want, and frowns despair on every labour; not 
 sowhen every'man, haunted bytheevil genius 
 of Sisyphm^ moves forward with unceasing 
 struggles, the wheel of his adverse fortune ; and 
 at every expected station of his hope, beholds 
 
PREFACE. XXIX 
 
 it roll back with perverse malignity. Not so, 
 when exhausted labour, instead of tranquillity 
 finds nothing but keen anxious penury in retire- 
 ment ; and when the cares of a parent to place a 
 child in the moderate independence of a perma- 
 uent estate, prove at last that incessant labour 
 or absolute want must be the lot of all men. 
 
 In such times there can be no influence of 
 the middle class, no prevailing sentiment of 
 calm dignity, and refined philosophy: all is 
 contention, struggle, heat, anxiety, desperation, 
 giddy vanity, idle dissipation, and gloomy 
 want. 
 
 The state of society has undergone an alarm* 
 ing change ; luxury increases amongst all 
 classes; and it is unavoidable in a state of arts 
 and manufactures rapidly progressive. Specu- 
 lation proceeds with various success, notorious, 
 in the splendour of its rise, and forgotten in the 
 obscurity of its fall. Money daily decreases 
 fast in value ; the wants of every man increase, 
 as his income grows more unequal to their sup- 
 ply : the poor are driven to despair, the rich 
 are goaded by their necessities. Political 
 corruption and a train of innumerable vices 
 jise in pestilential exhalations from the sordid 
 mixture of pining want, overheated speculation, 
 
XXX PREFACE. 
 
 and loose extravagance. Whence, if not from 
 these causes, arise the encreasing thirst of 
 lucre, and that devotion to parliamentary in- 
 fluence, which has banished from the country 
 the independence of the lesser gentry ! Whence 
 the restlessness of all classes in their actual 
 situation, and the ceaseless desire of change ! 
 Whence the decrease of the moral influence of 
 the virtuous, but poor and disregarded clergy- 
 man ! Whence the cupidity of office ! Whence 
 the contempt of all virtuous indifference to the 
 acquisition of money ! Whence the repeated 
 failures of so many collectors and distributors 
 of the public revenue ; who become peculators 
 and defaulters amidst splendour and with the 
 countenance of the great ; when all are obliged 
 to confess, that while their emoluments seem 
 adequate to every fair expence, all settled ex- 
 pence becomes ruinous, without a nominal 
 revenue daily increasing ! 
 
 The ordinary thirst for money, and its neces- 
 sary depreciation, will in some degree account 
 for these facts so fully ac^knowledged. But, 
 add to the temptations of lucre the increasing 
 pressure of the times, occasioned by the daily 
 and rapid decrease of the value of money, a 
 new power of manifold attraction is immediate- 
 ly given to this natural passion, and innumera- 
 
PREFACE. XXXI 
 
 tie victime, who would else escape, are brought 
 within the vortex of its most destructive ifl-* 
 fluence. 
 
 '-^l^t the Virtuous amongst our legislators 
 reflect de^eply on this single topic, and disco- 
 ver that these are the infallible effects of a 
 debased currency, which Converts apparent 
 wealth into real poverty, and loudly will they 
 demand a reform in this anomalous and unna-* 
 fctfral system of money : which may bring us 
 baick to settled ratfes of exchange, and settled 
 habits of economy; and with the uniformity 
 of th€ coin, and the equality of paper, restore 
 to us the more uniform practice of virtue and 
 moderation. 
 
 Amongst other topics of some novelty intror 
 duced into this work, are the estimated dangers 
 of the sinking fund ; and if this universal 
 ^nacea of state insolvency, this nostrum of 
 •duplicate proportion, be not founded on an 
 erroneous principle, in which the numerical 
 powiers of calculation are mistaken for the phy- 
 sical powers of money, let it remain. But if its 
 real theory is of questionable efficacy let it be 
 examined through the medium of the press 
 t'^ith adequate caution ; let it be discussed with 
 
XX5cn PREFACE, 
 
 freedom and philosophy; and, if in the end 
 necessity demands it, * let it be destroyed* 
 
 But to innovate or to destroy without exami- 
 nation, is odious and rash ; and the minister 
 that shall touch it before the press has prepared 
 the nation for its removal, will risk the contempt 
 of the liberal, and the detestation of a disap- 
 pointed people. 
 
 By the press, then, let the sinking fund, and 
 its operation be previously examined, and let 
 not, as on some recent occasions, disguised and 
 indirect censures be insinuated against the 
 freedom of public inquiry into existing institu- 
 tions,! and the abuses of ill- delegated power ; 
 
 * The author is not singular in his opinion : the Earl of 
 l:.auderdale in his Treatise on the Sources of National Wealth 
 has exposed the erroneous principles of the sinking fund, and 
 shewn the ruinous effects of its operation in setting loose 
 vast sums of money. Although his lordship has not ad- 
 vanced to the full developement of the intricacy and decep- 
 tion of the sinking fund, he justly claims the merit of an 
 early discoverer, in pointing out the fallacy of its basis, 
 
 •fit has been said that a memorial to the proper authorities, 
 as they are called, that is, the ministers, is the proper vehi- 
 cle of all plans for reform. Our answer is, that it may be s» 
 in Turkey, where reforms are hopeless, but not in England* 
 where the law professes to support a free press. 
 
PREFACE. XXXlll 
 
 for it is a right, without which freedom has no 
 security, virtue no honour, baseness no infamy, 
 and truth and science no air or nutriment. 
 
 Happy is the author of this work to hav^ 
 been, in any the most humble degree, the advo- 
 cate of the equal and mutual rights of religious 
 toleration and a free press ; and never may it 
 escape the recollection of his fellow Britons, 
 that the press is the safest oracle of public opi- 
 nion, to inform, to controul, and to direct, even 
 the faithful delegates of a people, truly repre- 
 sented by honest election, in the legislative 
 assembly of the nation; while the free unbiassed 
 opinion of an enlightened, liberal, uncorrupted, 
 tmbewildered, and undeluded people, is the 
 true support of free government, the basis of 
 legitimate authority, and the spring and source 
 of all that is pure and illustrious in the dignity 
 of rightful thrones. 
 
CONTENTS. 
 
 Fdge. 
 
 Dedication . . ii 
 
 Preface . • . ▼ 
 
 Emendations and Additions. 
 
 On the Law of Nature^ an Introductory 
 Essaij ... S 
 
 BOOK THE FIRST. 
 CHAP. I. 
 
 History -of Exchange and the Litroduction^ 
 Nature and Use of Money , ^6 
 
 CHAP. II. 
 Definition of Money , ^ • SI 
 
 CHAP. HI. 
 
 Of Price and Value^ and the Variations in 
 the Value of Money , , 33 
 
 CHAP. ly. 
 
 Of a common Measure; and Money as a 
 Measure of Value , . .18 
 
 CHAP. V. 
 
 Of Commerce ; the Balance of Trade, and 
 
 die Source of Mercantile Profits 47 
 
 d2 
 
CONTENTS. - 
 
 Page, 
 CHAP, v.* 
 
 Of Credit and Bills of Exchange . 66 
 
 CHAP. VL 
 
 Of the Increase of Money hy Commerce . 63 
 
 CHAP. vn. 
 
 Of Wealth; Circulation; Prices; and the 
 Value of Money ... 69 
 
 CHAP. vni. 
 
 Some Axioms concerning Money by way of 
 Recapitulation^ from theforegoing Chapters 77 
 
 CHAP. IX. 
 
 Of Coins, and the Duties of the State, in re- 
 gardto Coinage . . 87 
 
 CHAP. X. 
 
 Of debasing the Coins by the State, and the 
 mischievous Effects thereof; and how the 
 same Thing is effected by Paper Money 104 
 
 CHAP. XI. 
 
 Of the successive Debasements of the English 
 Coin: the Prerogative of the Crown relative 
 to Coin ; and the Law of Nature thereon \\6 
 
 BOOK THE SECOND. 
 Introduction . . 141 
 
CONTENTS. 
 
 Page. 
 CHAI^. I. 
 
 On Banks of Deposit^ with an Account of 
 the Bank of Amsterdam . •142 
 
 CHAP. II. 
 
 Of Banks of Circulation ; and of the Bank 
 of England . ^ . 14.7 
 
 CHAP. III. 
 
 Some of the leading Principles of Bank- 
 ing explained . . .181 
 
 CHAP. IV. 
 Of the Bullion Trade in ZjOndon, as car- 
 ried on principally through the Agency 'of 
 the Bank of England . 1 90 
 
 CHAP. V. 
 On Foreign Trade^ Foreign Expenditure and 
 Exchange . , 208 
 
 CHAP. VI. 
 
 Practical View of Exchanges . 23 i 
 
 CHAP. VII. * 
 
 The three Functions of Mo ey, taken as Na* 
 tional Currency and notNational Capital ^ 
 augmenting itself without increasing 
 Wealth, and not permanently possessing a 
 greater Ejfect in one Place than another ; 
 
/ CONTENTS. 
 
 Page, 
 considered according to the Priuciples of 
 Mr, Wlieatley . . 254 
 
 CHAP. VIII. 
 
 Of the Amount of the Circidating Medium, 
 and how far Bills of Exchange may b& 
 considered as Circulating Medium^ with 
 an Estimate of the total Amount of the 
 Money Transactions in Great Britain 27^ 
 
 CHAP. IX. 
 
 On the Amount of Coin circulating in Eng* 
 iand^ during the greater part of the Eigh- 
 teenth Century • . 295 
 
 CHAP. X. 
 
 Of the mutual Value ofCoiti and Credit Notes3l9^ 
 
 CHAP. XI. 
 
 Of the Price ofBullion^as a mere Commodity^ 
 when it ceases to he Money ^ S^5> 
 
 CHAP. XII. 
 
 Of the Rights and Duty of the State over 
 Paper Money, as correlative with its Rights 
 and Duty concerning Coin ; with Consi- 
 derations on the Nature of various Con^ 
 tracts, and their due Performance ; parti- 
 cularly with regard to Rents, Also of 
 debased Currencies v 330 
 
CONTENTS. 
 
 Page. 
 
 CHAP. XIII. 
 
 Evidences of the Depreciation of Money ^ and 
 its Effects , . .345 
 
 CHAP. XIV. 
 
 Of the Moral and Political Effects of the ra- 
 pid Depreciation or Debasement of Money 3^7 
 
 CHAP. XV. 
 
 Of the Depreciation and Debasement of Mo- 
 ney as it affects Agriculture . ^6^ 
 
 CHAP. XVI. 
 
 Effect of Debasement of Coin and Paper 
 Money as an Engine of the State ^ and 
 of its supposed Cheapness . 370 
 
 CHAP. XVII. 
 
 Of Taxation and Prices during a State of 
 Currency in Coin . . 397 
 
 CHAP. XVIII. 
 
 Of Usury and Interest, ^ . 386 
 
 BOOK THE THIRD. 
 Introduction . . - 397 
 
 CHAP. I. 
 
 Of public Debts , . . 399 
 
CONTENTS. 
 
 Page, 
 CHAP. IL 
 
 Of paying the Debt of the State : of Com- 
 pound Interest^ and Accmnulation of 
 Mmiey by Sinking Funds . 429 
 
 CHAP. ni. 
 
 Of the true Operation of a Sinking Fund 437 
 
 CHAP. IV. 
 On the Restoration of Coin^during the Con^ 
 tinuance of a large Debt and Sinking 
 ^Fund . . . 450 
 
 CHAP. V. 
 Of the Burthen of Taxes^ and of a Tax on 
 Capital . . .458 
 
 CHAP. VI. 
 
 Of raising the Supplies of the State within 
 the Year, — Conclusion . . 466 
 
 APPENDIX. 
 ART. I. 
 
 Estimate of the effective Debasement of 
 Money in the Eighteenth Century , 472 
 
 ART. II. 
 
 Leather or Paper Money in the East . 488 
 
 ART. III. 
 
 The Author s Suggestions concerning the 
 present Crisis m 1812. , . , 489 
 
EMENDATIONS AND ADDITIONS. 
 
 The greater part of this work was composed as it went 
 through the press, the author having entirely changed and 
 greatly enlarged his plan after the first sheet was printed- 
 This will account for such defects of style or arrangement 
 as are most obvious. But the materials were previously pre- 
 pared,and the principles frequently revolved and examined. 
 They constitute the intrinsic merit or demerit of the work, 
 and experience will in due time pronounce upon his 
 theory. He has referred to the law of nature, because the 
 laws of most nations, and of England in particular, concern- 
 ing money, are built upon unsound principles. 
 
 The following passages seem to require; alteration to 
 render them explicit and correct. 
 
 For Book I. Chap. IV. § 1. p. 38, read as follows: 
 
 1. " A common measure is a quantity which will measure 
 any two numbers or quantities equally without a remainder. 
 The unit, or one of its multiples, is the common measure 
 of all equal numbers, integrals, and fractions ; and the unit 
 repeatedly applied to unequals ascertains their difference. 
 Hence thewwf^ may be called the measure of all numbers.*" 
 
EMENDATIONS AND ADDITIONS. 
 
 In the next section No. 2, for * common measure^ read 
 ' measure^^ 
 
 In the same chapter, p. 44, § 23, alter the whole section 
 thus : 
 
 23. ** A degree is only imaginary when it is used as a 
 generical name or an abstract term, and gives no definite 
 idea. It means the 360th part of any actual circle. A 
 degree in latitude is that space of the earth, taken north 
 ^and south,which must be passed over to obtain one degree of 
 angular elevation or depression of the pole star, or other fix- 
 ed point near the pole. This degree of depression or elevation 
 is measured, like all angles, upon any given or definite 
 circle whatsoever. A degree in longitude is the 360th 
 part of the earth's circumference, east and west, in a similar 
 straight line, going directly round the globe ; which is 
 most conveniently ascertained by the apparent course of 
 the heavenly bodies. Each of these is an actual portion of 
 the earth's circumference in different directions, at right 
 angles to each other. The circles in the heavens are actually 
 measured by definite quadrants on the earth. 
 
 At the end of the same Chapter IV. Book I. make the 
 following additions. 
 
 Further Considerations concerning Money as a Measure of 
 Value, 
 
 28. In considering money as a measure of value we have 
 noticed its uniform and invariable quality,pure gold and silver 
 being identically of the same nature in all times and places, 
 absolutely unchangeable and -ndestructible. It is even said 
 that great part of the gold and silver used by the patriarch* 
 
EMENDATIONS AND ADDITIONS. 
 
 before Abraham^ is supposed still to exist. But there is at 
 further quality of the precious metals, which renders them 
 of all articles the best adapted for a measure of value of any- 
 other in nature : this is, the facility with which they are 
 transported from place to place, and the little cost of their 
 transit compared with their value. 
 
 29. All dealers frequent the cheapest market, and the dif- 
 ference in the real price of all commodities at different 
 places, is governed by the difficulty or facility of transport- 
 ing them from market to market. Thus iron being a bulky 
 commodity, and of low price, will not bear the carriage from 
 a ditJtant country, unless the difference in the price will 
 allow a profit after deducting a great expence of carriage. 
 A ton of iron would bear a very small proportion in value to 
 a ton of gold ; yet the ton of gold would be conveyed from 
 India to England with ranch greater facility, A hundred 
 head of cattle in South America, would be of small value 
 compared with the like number in Smithfield market; but 
 the difhculty and expence of carriage would be so great, as 
 to exceed the difference in price ; and they are never there- 
 fore brought to this country, notwithstanding the great de< 
 mand for cattle in the one place, and the comparative cheap-* 
 ness in the other. 
 
 30. If there were a perfect facility of transit from all the 
 markets in the world to every bther market ; if the cost 6f 
 conveyance were either reduced to nothing, or very small 
 compared to the value of the commodity ; and if there were 
 the utmost conceivable rapidity in shifting the goods from 
 market to market, there would be very little, if any,difference 
 in the price of similar commodities in the various nations of 
 the world. For setting aside the expence of carriage, risk, 
 and loss of time, from the going to any particular market, 
 *U markets would be alike, or as one market ; and, all th** 
 
EMENDATIONS AND ADDITIONS. 
 
 world being competitors, buyers, or sellers in that universal 
 market, prices would be alike, at any given time, through- 
 out the world, for the same reason that the piice of any one 
 article, of uniform quality, is, at any given time, equal 
 throughout any given market. 
 
 31. It is the peculiar excellence of the precious metals to 
 possess almost in perfection, this quality of being in every 
 market, nearly at the same time. This they derive from their 
 universal demand, their uniform quality, great divisibility, 
 ready transit, and small comparative cost of conveyance. 
 The latter, indeed, by the practice of foreign exchange, 
 and the other arts of banking, i§ rendered almost a nullity, 
 and the ubiquity of the universal market for the precious 
 metals, is so complete, that it is inconceivable what a small 
 variation between the price of one of the precious metals, as 
 compared with the other, will cause it to be attracted from 
 the place where it is, for a time, cheap, to the other markets 
 where it is a little dearer. It is exemplified in the facility 
 with which money, notwithstanding many absurd restric- 
 tions, finds its way from New Spain immediately to every 
 other commercial mart in the world, 
 
 32. In this sense, the course of foreign exchange is the 
 bullion market, which keeps a very regular supply all over 
 the world, and may be said to give to the mass of money 
 existing in it, a sort of omnipresence, as to market, which 
 constitutes it, in a general sense,, the commodity, by way of 
 excellence, above all others; renders it nearly a complete 
 standard of comparative value for different nations, at any 
 given time ; and the best measure of value that can be 
 devised. It owes this character to its, natural qualities; 
 which, as they are independent of all accidental circum- 
 stances, neither to be given lior taken away by the art or 
 power of man, and to be controuled only in part by the vio- 
 
EMENDATIONS AND ADDITIONS. 
 
 lence of state authority, warring against the consent and 
 interest of all mankind; so, by the common sense of all na- 
 tions, in all ages, by the cuatoinary law of nature, it ha 
 been considered the universal measure of value, apd medium 
 of exchange. 
 
 In page 6, for "taming of the ferocity of a carnivoroui 
 nature," read " a taming of their ferocity, and an expul- 
 sion of the unconquerable violence of a carnivorous na- 
 ture." 
 
 In page 31, § 5, for ** almost to infinity," read " to great 
 minuteness." 
 
 In page 40, § 9, for " cannot exist," read ** is inapplicable 
 in reality." 
 
 In page 41, ^ 13, for " it has ceased," read *« it has in prac- 
 tice ceased.** 
 
 In page 45, line 4, for " is,** read " are." 
 
 In page 69, § 4, line 4, for " found," read " said.** To that 
 section add the following note : " See on the contrary the 
 low price of provisions in the East Indies. But consider 
 also the low rate of wages and high value of money, Com- 
 modities are in truth dear there, as respects the mass of 
 the people, who are very poorly fed, clothed, and lodged.** 
 
 In page 72, § 14, line 5, for " increases,** read "decreases.** 
 
 In page 81, § 26, line 3, for " wil,** read " will;** and iit 
 28 , for « levell," read « level." 
 
 In page 91, ^ 11, line 6, for " four,'* read " five.** 
 
 In page 95, § 17, line 10, for " its," read ** it." 
 
EMENDATIONS AND ADDITIONS, 
 
 In page 97, ^ 20, for " one," read " two shillings." 
 
 lu page 102, at the end add, *« 32. Allowing for the differ- 
 ence in the standard of the silver a guinea is equal to 
 11. 6s. 9d. in bank money ; a pound note to 15s. 8^d, 
 sterling ; and a bank three shilling token to 2s. 4^d. ' 
 and a bank shilling to 9|d. sterling. Mr. Monck now 
 states that out of 12 current shillings the total weighed 
 28dwts. 12gr. = 684gr. and their mean weight was 57gr, 
 that the heaviest weighed 62gr. and the lightest only 
 42gr. the mean of which is 52gr. of silver, instead of the 
 true weight of 93gr. This is below even the value of 
 the commercial tokens lately issued, the average of which 
 are from 9d. to lOd. intrinsic value. 
 
 In page 187, ^ 13. line 1, dele ** which." 
 
 In page 256, § 2, line ult. Add the following note, 
 ** Money is capital in the same sense only as machinery. 
 It is a principal engine of commerce, and its object as a 
 machine is to facilitate the exchange and circulation of 
 commodities, or real wealth. Whatsoever is absolutely 
 necessary for this purpose, is pethaps useful and profitable 
 fixed capital to the nation. The excess is so much money 
 ill employed in useless and unprofitable dead stock, or 
 over expensive machinery. If a mill that costs 10001. 
 works to the same effect precisely as one that costs 
 20001. there is a waste of 10001. capital in the latter. 
 On the same principle, every addition to the mass of mo- 
 ney is wasteful, and no real addition to the capital of tlie 
 nation ; because any given sum will effectuate the ex- 
 change of an increased quantity of commodities by re- 
 ducing their individual price, in the same proportion as 
 
EM ENDATIONS AND ADDITIONS. 
 
 the commodities are increased ; just as well as if the stock 
 of money were proportionably augmented. If, from the 
 nature of commercial exchange,a paper money could serve 
 equally as well as the precious metals, fora ju8t measure 
 of value, it would be in many respects preferable. It is 
 the object of this work to examine and decide that impor- 
 tant quesion. 
 
 in page 294, 1. 1, for "imports," read "imposts." 
 
 In page 316, h 13, 1. 6. for " elevenths," read " fifths." 
 
 In page 355. S 12, 1. penult, after " their," insert *« real.*' 
 
 In page 377, § 13, 1. 2, aft^r the word « law," insert " simi- 
 lar to the forbearance of money, which is." 
 
 In page 407, in the table, on the left hand division, insert, 
 « 5 . 108," and for " 6 . 152," read " 6 . 1C2." 
 
 In page 411, § 21, 1. 21, for " credit ends," read " credit 
 tends." ' , 
 
 In page 430, § 3, 1. 2, state the debt at 266,725,097 12 10 
 for 1786, including a valuation of the terminable an- 
 nuities. 
 
 In page 432, ^ 4, 1. ult. for " are reduced," read " are in- 
 creased, or the rapidity of the circulation reduced also." 
 
 In page 444, § 12, line 8, for " one twentieth," read •« one 
 tenth." 
 
 In page 463, I. 10, after" whole amount," insert " per 
 cent." 
 
 In page 464, n, 1. 1, for " produce," read "produces,'* 
 
• EMENDATIONS AND ADDITIONS. 
 
 The following statements respecting financial and sta- 
 tistical points discussed in this work, have been collected 
 since it was printed, and are hereby added by way of 
 illustration. 
 
 NATIONAL DEBT AND FINANCES. 
 
 The statement of the national debt and other financial 
 items in the body of the work and the preface, is given for 
 the years 1810 and 1811. The following statement is from 
 the latest public accounts up to the end of the year 1812. 
 
 £. s. d. 
 
 Capital of the funded debt of " 
 
 Great Britain and Ireland , . . 817,101,745 5 81 
 Unfunded for Great Britain, on 
 
 theSth Jan. 1812 , 59,454,166 15 8 
 
 Ireland 1,843,012 10 
 
 Amount of the Sinking Fund, 
 
 Feb, 1st, 1812 236,993,237 
 
 Producein the quarter, June, 1812 3,584,477 17 5? 
 
 The total of money raised in the 
 
 year, ending 5th Jan, 1812, was . 61,241,097 7 71 
 The amount of exchequer bills 
 
 outstanding on the 5th of 
 
 April, 1812 43,406,800 
 
 The stamped dollars issued by the 
 
 bank, from 19th Feb. 1811 to 
 
 13th April, 1812, emount in 
 
 nominal value, to 1,447,469 4 6 
 
 Mr, Manning stated in the House 
 
 of Commons, 8th Dec. 1812, 
 
 that in 15 months the Bank had 
 
 issued in silver 1,800,000 
 
EMENDATIONS AND ADDITIONS. - 
 
 On the'lTth June, 1812, Mr. Vansittart, the Chan- 
 t^ellor of the Exchequer, brought forward the budget for 
 the jrear, which contained the following items: 
 
 the expences of the Navy . * 19,702,399 
 
 The Army 17,756,160 
 
 Army extraordinaries .... 5,200,000 
 
 The Ordnance 5,279,897 
 
 Extraordinary Services . . . 10,250,000 
 
 Sundry charges 4,187,892 
 
 total expences of Warlike Establishments 62,376,348 
 The charges of the interest of the debt and 
 
 civil list, are ......*. . 36,356,000 
 
 Total for the year . £98,732,348 
 
 the supplies were as follows : 
 
 The Consolidated Fund, or permanent 
 
 Taxes, producing . * . . . 39,750,000 
 The War Taxes ....... 20,500,000 
 
 The Loan 20,000,000 
 
 The New Taxes 1,900,000 
 
 The balance is made up by three millions of annual 
 
 duties ; by subscription to exchequer bills seven millions ; 
 
 by a vote of credit three millions ; and by smaller items 
 
 producmg by the figures on the minister's paper, 40,00Q/. 
 
 excess, supposing the taxes to produce, as calculated. 
 
 £. s, d. 
 The income of the consol idated fund, 
 
 was, for the year ending January, 
 
 1811 42,286,152 18 lU 
 
 Charges , 35,296,313 10 91 
 
 Surplus 6,989,839 8 2i 
 
 ft 
 
EMENDATIONS AND ADDITIONS. 
 
 The income of the consolidated fund, 
 
 was, for the year ending January, 
 
 1812 40,917,835 18 4§ 
 
 Chaises , 36,801,993 18 9| 
 
 Dencienqy 4,H5,811 19 H 
 
 The decrease of income was chiefly under the head of 
 customs. 
 
 The war taxes for 1810, produced . 23,027,444 9 7| 
 -. . 1811 22,393,053 13 5j 
 
 Decrease 634,390 16 1| 
 
 STAMPS AND COUNTRY BANKS. 
 
 Stamps for reissuable notes, not exceeding one 
 
 guinea in value 
 From 16th Feb. 1811, to 15th April, 1812 . . 3,323,130 
 Exce^eding 50/. and not exceeding 100/. . . . 1,390 
 
 Total number . . . 4,445,556 
 
 In 1811, up to the 10th of October of that year, the 
 number of country banks was 779, and the increase of 
 new banks 83. From the 11th of October, 1811, to the 
 20th April, 1812, there were granted licences to 788 
 bankers, of which 735 were renewed licences, and 53 new 
 banks; by which it appears, there was a total increase of 9 
 banks, and a considerable change amongst the individuals, 
 wising, in part from failures, and partly from changes of 
 
EMENDATIONS AND ADDITIONS. / 
 
 firms and new speculations. In Scotland, during that pe- 
 riod, the whole number was 50. The total was 1662. 
 
 PRICE OF CORN AND BREAD. 
 
 1812, Feb. Wheat 488. to 120s. per quarter. Potatoes 
 40s. 608. 80s. per ton. Quartern loaf, in March, lO^d 
 April, 18id. June, lO^d. July, Is. Sd. Oct. ISid.— 
 November, Wheat, 95s. to 145s. Quartern loaf. Is. 6|d. 
 Potatoes, 140s. to 200s. per ton, 
 
 PRICE OF GOLD IN 1812. 
 
 1812, March 14, Gold fell 2s. per oz. 
 
 The price of pure refined metal, 
 
 without alloy, was then 
 November 12th 
 A guinea, worth about 
 Six one pound notes . , 
 
 In order to give the value of standard gold, deduct the 
 price of 1 dwt. 16 gr. from the gold, and of 1 dwt. 12 gr, 
 from the silver. 
 
 Light guineas have been sold for 11. Ts, 2d, each. Gold 
 was stated, Dec. 9th, 1812, in the House of Commons, to 
 be at 5s. 5d. per oz. for standard bullion, and the dif- 
 fere..ce between paper and gold to be £35 per cent. 
 
 STATE OF THE CLERGY, 
 
 Number of incumbents . . , . . 10,261 
 Residents only . . . . 4,421 
 
 ■ Gold. 
 
 
 Silver. 
 
 £, s. 
 
 d. 
 
 £. s. d. 
 
 5 8 
 
 
 
 7 
 
 5 14 
 
 
 
 7 3 
 
 1 9 
 
 6 
 
 
 4 4 
 
 
 
 
EMENDATIONS AXD ADDITIONS. 
 
 There are in England and WaleS^ 3,938 livings under 
 501. avfiar. 
 
 ^ 12 do not exceed lOK 
 
 72 201. 
 
 191 301. 
 
 355 401. 
 
 433 501. 
 
 LICENCBS TO TRADE WITH THE ENEMY. 
 
 In 1802 were granted 68 
 
 1803 836 
 
 1804 1,141 
 
 1805 791 
 
 1806 1,621 
 
 1807 — ^ 2,606 
 
 1808 : 1,910 
 
 1809 15,226 
 
 1810 18,356 
 
 1111 7,602 
 
 The fees of office on these are considerable, 
 
 f' 
 
ON 
 
 THE LAW OF NATURE. 
 
ON 
 
 THE LAW OF NATURE; 
 
 AN 
 
 INTRODUCTORY ESSAY. 
 
 JLAW is, essentially, a rule of conduct, whe- 
 ther imposed by reason or by civil author! ty» 
 
 The laws of peculiar states are rules of con- 
 duct imposed by the state. 
 
 The law of nature is that rule of conduct 
 ivhich is most convenient for man generally; 
 and which arises out of a due consideration 
 of his duties and correspondent rights, in a 
 state of society, generally, without reference 
 to particular customs and institutions. 
 
 It is discoverable by the light of reason, 
 
 Its obligation is the duty, which each man 
 owes to his neighbour, of doing, in every case, 
 that which is most conducive to the peace^ 
 good order and well being of society, 
 
 b2 
 
4 ON THE LAW OF NATURE. 
 
 Which is, as it were by way of eminence, 
 the social compact ; since society implies a 
 consent, arising froipi necessity, to live together 
 ^n peace. 
 
 The necessity, which produces the consent, 
 is the natural authority which imposes the 
 law of peace. Retaliation is the sanction by 
 which the law is enforced. 
 
 This law is observed, or professed, by all 
 nations in their mutual intercourse ; and re- 
 gulates the conduct of all moral men in civil- 
 ized states, independently of the municipal laws. 
 
 It forms the basis of all municipal laws ; not 
 connected with unjust fiscal exactions, or su- 
 perstitious iiicroachments on civil power ; often 
 supplies their defects, moderates, controuls, 
 counteracts, and finally reforms them. 
 
 Its effects are, principally, observed in the 
 laws respecting contracts, commerce and war; 
 and its authority is universally acknowledged, 
 and enforced, under the name of equity, in 
 every civilized nation. 
 
 When municipal laws violate any of its fun-' 
 damental principles, they gradually fall into 
 disuse, and are necessarily evaded. 
 
ON THE LAW OF NATURE^ 3 
 
 The origin of tbe law of nature and its sanc-^ « 
 tions is differently accounted for, by different 
 authors. They refer it to conscience, to an 
 internal monitor, a moral sense, divine justice, 
 the will of God, natural or revealed religion. 
 But all these diflferent views are equally just ; 
 inasmuch, as the peace and good order of 
 society must be consentaneous to justice, whe- 
 ther it be s tiled natural or divine ; to good 
 conscience ; to every sense of morality and re-< 
 ligion, as well natural as revealed. 
 
 Natural religion cannot be adverse to the law 
 of nature or to right reason* 
 
 The revealed religion of Christianity avowedly 
 sanctions the first general principle, the lead- 
 ing doctrine of this law; and, in conformity 
 with a celebrated axiom of a Grecian poet and 
 moralist, expressly requires that every man 
 should do unto others as he would they should 
 do unto him. 
 
 In this sentence, is included, as a first prin- 
 ciple of infallible reason, applicable to all cases, 
 that code of equity which is laid down with 
 such nice discrimination and profound learning, 
 in the civil law of the Romans ; and has been 
 
D ON THE LAW OF NATURE. 
 
 the guide of all European judges and chan- 
 cellors, for so many centuries. 
 
 Natural law has been greatly misrepresented 
 and misunderstood : chiefly from mistaken 
 notions coLceraing a state of nature ; in which 
 man has, by some, been supposed to exist with- 
 out social rights or duties ; the untamed savage 
 of a wood, the beast of prey condemned to 
 solitude in a cave, and the lare of a desert ; 
 one of a herd of ferocious animals, liable to 
 be disturbed by the fury of every individual 
 of which it is composed. But, in truth, this 
 state cannot exist. Man is born in society, is 
 preserved and supported by it : and even gre- 
 garious animals cannot herd together, without 
 a compact, as it were of peace ; a taming of 
 the ferocity of a carnivorous nature. 
 
 Life in all its stages of civilization and of 
 savage rudeness, is, more or less, a state of so- 
 ciety, of order and of compact ; in which rights, 
 more or less ample, and duties, more or less 
 complicated, are observed. 
 
 These rights and duties are increased by the 
 knowledge and wealth of civilized society. 
 
 In what is called the savage state, they are sim- 
 
ON THE LAW OP NATURE. / 
 
 pie* because the poverty of the savage produces 
 a paucity of wants ; and, the consequent facility 
 of gratifying them, renders the imposition of 
 many restraints unnecessary. The violent ex- 
 cesses of passion are checked by the fear of re- 
 taliation ; and it is only in war, that the ferocity 
 of uncivilized man is thoroughly displayed; 
 when he becomes a murderous assassin, a san-*^ 
 guinary tormentor, and a cannibal, from re- 
 venge and false glory. 
 
 Yet, even in this state, natural law, reason, 
 convenience, the sense of doing to others as 
 they may be expected to do unto us, the dread 
 of retaliation, render the savage observant of 
 the rights of property amongst his neighbours ; 
 of conjugal fidelity, where promiscuous inter- 
 course is forbidden ; of respect to elders and 
 rollers, where elders and rulers are in authority ; 
 of obedience to leaders, where war is pursued 
 with system ; of good faith in promises, 
 where traffic is admitted; and of hospitality to 
 strangers, where the intercourse of travellers 
 occurs. 
 
 All this arises of necessity ; because no so- 
 ciety can exist without it : and man cannot 
 exist without society ; nor society be extended 
 without order ; which, as it increases the pos- 
 sessions, the means of life, the wealth, the 
 
8 ON THE LAW OF NAtUtlE. 
 
 wants, the desires, the appetites, the vanity, 
 the ambition of man, miiltipiies his duties and 
 his rights equally. For duties and rights are 
 reciprocal. That, which it is right for me to 
 cnjo}^, it becomes the duty of every other in- 
 dividual in society to secure to me ; and that 
 which I owe, as a duty to others, is owing in 
 virtue of some right, arising from some mere 
 municipal institution, or the natural order and 
 consequent rights and obligations of civil so- 
 ciety, acknowledged and supported by right 
 reason and natural law. 
 
 In every state is man subject to this law ; 
 which is operative, where all other laws are 
 silent; and which is never violated without 
 injury to societ}^ through some individual, 
 and, most frequently, to the ultimate disad- 
 vantage, either of him who commits the wrong, 
 or of his relatives and descendants. 
 
 The law of nature is, therefore, universal 
 ^ and inviolable. It is the law of nations, be- 
 cause with them^ all positive law ceases ; and, 
 there being no superior authority to whom they 
 can appeal, individual nations are like indi- 
 vidual men living without municipal laws. 
 They respect each other's rights, in the hope 
 of preserving their own ; they violate them, 
 when their passions overcome their reason, and 
 
ON THE LAW OF NATURE. 9 
 
 their dread of retaliation is diminished, through 
 a consciousness of their own strength, or the 
 imbecihty of their neighbours. Thus they act 
 with more or less justice, fraud, or vio- 
 lence, according to the disposition of their 
 rulers, the spirit of the times, and the state 
 of knowledge and civilization ; which huma- 
 nize their characters, moderate their ambition,, 
 and create a sort of refinement in moral sense 
 amongst nations^ 
 
 This law being discoverable only by the light 
 of reason; being, in effect, the natural equity 
 which results from an improved knowledge of 
 the real organization of society, and of the 
 true interests of mankind ; is improved, regu- 
 lated, and rendered operative and effectual, by 
 the increase of knowledge, wisdom, and ex- 
 perience only. It preserves peace, and regu- 
 lates commerce ; it inspires active virtue ; it en, 
 courages arts, promotes benevolence, mitigates 
 warfare, and advances happiness, universally. 
 Its essence is right reason ; its end the well- 
 being of man. It is the anin^ting genius of 
 all society. It is the main support of all civil 
 institutions. 
 
 Yet it is for such institutions that some be- 
 wildered declaimers have pronounced, that man 
 has yielded up his liberty, and quitted the 
 
lO ON THE LAW OF NATURE. 
 
 freedom of a state of nature, to submit IcJ 
 the silken chains, or the galling manacles of 
 society. 
 
 j^ Absurd sophists ! idle dreamers ! Man is, 
 by nature, social. In submitting to the law of 
 nature, and the necessary institutions of order 
 in society, he has yielded up nothing; he 
 has quitted no freedom ; relinquished no ad- 
 vantages. 
 
 He has exchanged, mutually, a pledge of 
 security; bound himself reciprocally with 
 others to contribute to their mutual happiness. 
 He has knit, as it were, the union of peace 
 and concord ; by forming the natural compact 
 of society and civil order, for the preservation 
 of his life and freedom. 
 
 p^ He is in a state of nature still ; so far as he 
 is governed only by wise laws, founded on 
 useful, just, and •equitable iestitntions, a»d the 
 Jaw of nature and right reason. For it is the 
 jBrst law of nature, that man should will his 
 self-preservation, his individual happiness and 
 the good of his posterity. 
 
 ^.^ It is this sort of tacit agreement to all the 
 laws of right reason, which constitutes the true 
 
ON THE LAW OF NATURE. H 
 
 social compact ; a compact which is the off- 
 spring of society, not its parent. For they err 
 widely, who understand by it an agreement, 
 previous to the existence of society; since so- 
 ciety is necessary to the existence of man. And 
 its compacts, as founded in nature merely, are 
 necessary and purely beneficial. 
 
 If man has not gained, or if he has lost any 
 thing in society, it has been by the combined 
 effects of the ignorance of the many, and the 
 subtle frauds of the few. The error is neither 
 in man, in nature, nor in society, in general ; 
 but in particular frauds and individual usur- 
 pations, which reason and knowledge will in 
 time redress. 
 
 These are my general views of the law of 
 nature. 
 
 Of its particular application I propose to 
 exhibit an example in the following pages ; 
 which are dedicated to my country, and to 
 that of all men ; adapted to the present, as 
 well as to future circumstances ; as far as my 
 experience, or that of the present times will 
 allow me to sketch the laws, which should re- 
 gulate the conduct of future generatipns. 
 
l!^ ON THE LAW OF'^'AXtJRl?:. 
 
 I propose to enquire what is the nature of 
 vioney, what is its object and use iti society : 
 what the cause of its introduction ; what are 
 the rights an^l duties of the state^ and of indi- 
 viduals Goneerviiiig it. And, when its nature 
 i& thoroughly understood, and its operations 
 and ettects are clearJy investigated, there will 
 result from these certain rights, which nei- 
 ther individuals, nor the state can violate ; 
 without a dereliction of that equity and 
 justice, which is the foundation of the so^ 
 ciai compact and of the law of nature. 
 
 In all this, reason must be our guide ; and 
 the light which she throws on the immutable 
 nature of things, will lead us to a true know- 
 ledge of their relations and dependencies; 
 without which, all political institution is error, 
 all municipal law capricious ordinance and rash 
 empiricism. 
 
 Should any doubt remain, as to the con- 
 nexion of the science of money with the law 
 of nature, it will appear in the following 
 pages, that man exists only in society ; ex- 
 change is necessary to society ; equality neces- 
 sary to exchange ; and money necessary as the 
 medium of that equality. 
 
ELEMENTS 
 
 OF THK 
 
 SCIENCE OF MONEY. 
 
ELEMENTS 
 
 OF THE 
 
 SCIENCE OF MONEY. 
 
 CHAP. L 
 flistory of Exchange^ and the Introduciioih, 
 Nature and Use of Money, 
 
 ^O understand the true nature of money 
 and its effects on society, it is necessary to 
 review, shortly, the history of exchange and of 
 commerce, for the facilitating of which money 
 was introduced : and, then, to inquire what 
 really constitutes that which is become the 
 universal medium or instrument of exchange 
 and measure of value, amongst all civilized 
 nations, which enjoy an extensive commerce. 
 
 1. Whatever may be the final destination of 
 man in a future state, his existence, in this 
 world is, primarily, designed for the support 
 of his individual life, in ease, comfort, and 
 enjoyment ; and for the continuance of his 
 species, by the production, education, and maia^ 
 tenance of his progeny. 
 
16 HISTORY OF EXCHANGE, [CHAP. I. 
 
 2. This end can only be attained, when man- 
 kind has increased greatly beyond a sino'le 
 pair and their immediate progeny, by the la- 
 bour of the whole, or the greater . part of 
 society, employed in cultivating the earth, and 
 collecting and preserving its productions, or 
 manufacturing them into different articles of 
 necessity, utility, convenience, or luxury. 
 
 3. These are severally denominated commo^i- 
 /zcCasbeTng' essentially apt and useful to some 
 of the above purposes, and to the various wants 
 and desires of mankind in different states of ^ 
 natural simplicity, artificial civilization, or 
 refined luxury, and capricious taste. 
 
 4. In the simple state of the first family which 
 may be placed in any particular region of the 
 earth, the distribution of the simple produc- ' 
 tions, of nature, as they, are individually coU . ^ 
 lected- ifc gratuitoils ; ^r upon a sense of duty ^^ ^ 
 or affection merely, without the interchange of^^^^^^ 
 any equivalents. 4T^_ /f!^^ 
 
 b. When the numbers increase, and families 
 multiply, this sense of duty and affection ex- 
 tending only to the small circle of the family, 
 a notion of property arises ; and what each 
 individual or the head of each family possesses, 
 hovrsoever it is acquired, is considered as indU 
 
CHAP. I.] AND INTRODUCTION OF MONEY. 17 
 
 vidually appropriated to them, by general con- 
 sent and natural right, arising out of universal 
 convenience. 
 
 6. From this individuality of appropriation, >'-- 
 called property^, arises the necessity of exchange. 
 
 7. For, either the commodities possessed by -^^ 
 one family, being, more abundant than is neces- 
 sary for immediate use or consumption, and, for 
 the most part, incapable of long preservation ; or, 
 two families possessing each a commodity of 
 some kind different from the other ; and each 
 having an immediate want for the commodity 
 
 in the other's possession, these are exchanged 
 the one for the other. 
 
 8. Hence arises a sense of value or worth, ^ 
 in exchange. 
 
 9. For, by easy steps in reasoning, it will be •' 
 seen, that, of necessity, each individual must 
 consider what quantity of one article he will 
 give for another of a different nature. 
 
 iO. And this estimation of value proceeds, in -^^ 
 every instance, upon a sen;se of equality^ 
 which is mutual or interchangeable, at the in- 
 stant of the exchange. 
 
1^ HISTORY OF EXCHANGE, [cHAP. t • 
 
 11. In this exchange the sense of value is di- 
 rected by each party, primarily, to the commodity 
 which is newly to be acquired, rather than to that 
 which is parted with. 
 
 ^ji^ 12. Thus A. has a horse, B. a cow and a quan- 
 tity of corn, which they are about to exchange ; 
 B. wants the horse, and A. the cow and the corn. 
 B. directs his attention principally to the horse, 
 and, knowing that A. will not sell it for the cow 
 alone, he is guided, in estimating the quantity 
 of corn to be given in addition, by the desire 
 he has to possess the horse primarily, and 
 then by the quantity of corn which he can 
 spare. The reverse is the case with A. ; whose 
 first consideration is the desire he has for a cow 
 and the corn, to induce him to part with his 
 horse. The desire of acquisition, in each^ must 
 \ preponderate respectively, and on opposite sides, 
 over the necessity or desire of retaining the 
 commodity exchanged ; and thus, from the op- 
 position and counteraction of the tvva prepon- 
 derating desires, a sense of equality is produced, 
 which is the motive and the basis of the ex- 
 change. 
 
 » 
 
 ^ 13. The corn in this instance being a commo- 
 dit}^ of universal demand, which is capable of 
 being stored and preserved, for a considerable 
 time, and is also divisible into very minute por- 
 
CHAP. I.] AND INTRODUCTION OF MONEY. 19 
 
 tions or single grains, is the article chosen, to be 
 added to the cow, in order to make up for the 
 deficiency of her value, in comparison with 
 that of the horse. 
 
 14. This is called barter or exchange, and is'>^ 
 the basis of all contracts of purchase and sale, in ) 
 trade and commerce ; each of which is an ex- ^ 
 change of equivalents ; that is, of something 
 given and something taken, upon a sense of/ 
 equality in their value, at the time of the ex- ) 
 change. All other modes of acquisition of \ 
 property consist in occupancy, inheritance, '^ 
 production, gift, loan, rapine, and authoritative ( 
 levy, in taxation, by the state. "^ 
 
 15. Where one article can be exchanged, 
 in specie, for another, as a sheep for a pig, as 
 being equal in value, no corn will be required 
 to make them equal. 
 
 16. But, where this equality does not exist, in 
 the opinion of the two parties, some commodity 
 possessing the qualities of the corn in the in- 
 stance given, will be requisite, to produce 
 equality in exchange. 
 
 17. These qualities are universality in de- 
 mand, capacity of being preserved without dete- 
 rioration for a considerable time, and divisibility 
 into minute portions. 
 
 C2 
 
20 HISTORY OF EXCHANGE, [cHAP. I. 
 
 ^_x 18. In process of time, exchanges becoming- 
 frequent and barter being pursued for gain, as 
 well as through necessity, individuals will 
 desire to exchange their commodities for any 
 other commodity of value which can be pre- 
 served, and with which other exchanges may 
 be made to advantage, or with gain. 
 
 ^^ 19. In this case, the commodity which per- 
 / forms theoffice of the corn in our given instance, 
 I is frequently trucked or bartered, against 
 every other article whatsoever ; and, by frequent 
 use, its value being constantly brought into 
 comparison with all other commodities,it is the 
 medium of comparison by which the value of all 
 things is estimated. 
 
 20. It is then the medium of exchange and 
 measure of all value. 
 
 / 21. Whatsoever this commodity maybe, it 
 \ acquires an additional value' from its novel use 
 / as a medium of exchange. 
 
 22. As a measure of value^ its utility will 
 depend upon the qualities of universal demand, 
 durability and minute divisibility: to which 
 must be added, to give it any degree of per- 
 fection and stability as a measure, a certain 
 . steadiness of value ; which can arise only from 
 V its being a commodity in universal demand, 
 
^. 
 
 CHAP. I,] AlTD INTRODUCTION OF MONEY. 91 
 
 and that demand not likely to be glutted by a 
 too great or too rapid supply. 
 
 23. Its use, as a medium of exchange, does 
 not arise from an immediate demand for con- 
 sumption ; but, on the contrary, because, for 
 the most part, the commodity exchanged for 
 it is consumable : and this commodity, which 
 is the medium of exchange, may be stored and 
 preserved, until it is wanted to be re-exchang- 
 ed for other commodities. 
 
 24. It is laid up as a sort of pledge, or de- 
 posit, by means of which other commodities 
 may, at any future period, be obtained in 
 exchange. 
 
 2o. The necessity of laying it up requires,"/- 
 therefore, that it should be durable^ and not 
 likely to change in value greatly, by the time 
 when it may be required to be used in ex- 
 change. 
 
 26. Being laid up, to be thus exchanged at a ^^ 
 future period, it is considered by the owner as 
 the representative x^f all other commodities ; 
 and since wealth consists in the possession of 
 an abundance of commodities ; or things use- 
 ful to purposes of necessity, or. the gTatifica- 
 tion of some enjoyment ; it is considered as the 
 
52 HISTORY OF EXCHANGE, [CHAP. I. 
 
 pledge of wealth, the evidence of wealth, the 
 means of wealth, or as wealth itself. 
 
 ^ 57. Hence the possession of this article is 
 the great object of human desire, and it may be 
 considered as the principal of all commodities: 
 the commodity^ byway 'of excellence; or from 
 its being universally exchanged, it may be 
 called the universal merchandize ; or from its 
 passing from hand to hand rapidly, in all ex- 
 changes, it may be called currency, 
 
 x 28. One of its most essential qualities is, 
 that it is in constant demand. Hence it must 
 not be an article, the demand for which de- 
 pends entirely upon variable fashion or caprice; 
 which may entirely change before the article 
 is required to be exchanged for other com- 
 modities. 
 
 29. This commodity, which we now call 
 i medium of exchange, or currency^ is different 
 Xin different states of society. 
 
 ( 
 
 _/ SO. In some it has been said to consist of 
 \ salt, hides, sugar, tobacco,'Cacao, gold deist, and 
 /even of shells, which are said to be used in 
 ( Africa. 
 
CHAP. I.] AND INTRODUCTION* OF MONEY. 23 
 
 31. By frequent, usage, either of these com- " 
 modities, or any other, may acquire the pro-^ 
 perty of being in general demand, and readily ( 
 exchangeable, and thus pass current, as the ( 
 medium of exchange ; but they have their ori- ) 
 
 gin ascurrencies^^pnndpalh^ their original I ^^ 
 
 value in use ; as even the shells may be highly ' 
 esteemed for ornament among savage nations. 
 
 32. These articles can, however, serve only '^- 
 in very simple states of society, where the ex- 
 changes are comparatively few, and the wealth 
 of the people is very small ; but they cannot 
 pass in exchange amongst other nations. 
 
 33. They serve the purpose of simple states, ^' 
 ViS dumps and marbles are used to make up 
 the equality in the exchanges between qhil- 
 tlren ; when they ti'uck their toys one against 
 another, and wish to make a peg-top equal in 
 exchange for a hoop, a cart, or a wheel- 
 barrow ; or would exchange either of these for 
 
 a live puppy, a rabbit, or a Guinea-pig. 
 
 34. But the articles which suit the purpose -^^ 
 of universal exchange the best of all others, 
 are the precious metals of gold and silver ; to 
 M'hich may be added copper and brass. 
 
24 HISTORY OF EXCHANGE, fcHAP. I. 
 
 '^ 36. These have^ each in their several de- 
 grees, the quahties peculiarly necessary for a 
 medium of exchange and measure of value. 
 7 ^TEeylire of intjinsic value, being raised from ] 
 the earth and purified with great labour, with I 
 much art, and at^considerable expence. They 
 are in very general demand for their beauty 
 and utility ; as ornaments, or the materials for 
 instruments of much service. When purified, 
 they arc of the same comparative value: one 
 piece of purs gold or silver, differing in no 
 \ respect from ^nother^j They are almost inde- 
 structible, even by fire ; and are almost infi- 
 nitely divisible. They will also take any shape 
 or form, and any stamp or impression. 
 
 36, Hence, where these articles are known, 
 and can be procured in sufficient quantities, 
 they become, by general consent, the universal 
 medium of exchange. 
 
 37. Gold and silver, in their pure state, in 
 masses of ordinary size, are called bullion^ in 
 England ; either from billot^ a mass ; or Billon^ 
 a place where money is made ; or from vellon^ 
 a Spanish word for a brass coin, stamped with a 
 
 .fleece ; as the pecunia^ or money of the ancients 
 was named from pecus^ cattle, with the figure 
 of which it \vas impressed. 
 
CHAP. I.] AND INTRODUCTION OF MONEY. 95 
 
 38. When gold and silver become universally 
 exchangeable, their utility is much increased, 
 and exchange is greatly facilitated, by having 
 certain pieces of known size and purity, 
 stamped with appropriate marks. This ren- 
 ders it unnecessary, either to make trial of 
 their purity, or to weigh them ^ whereby much 
 labour is saved, and great inconvenience, and 
 many frauds upon the ignorant or unwary are 
 avoided. As is done, also, when other articles 
 are exchanged by the piece, such as linen, or 
 cloth, or iace ; which, being marked, after 
 measurement, by some person in authority^ 
 may the more readily be exchanged from one 
 dealer to another, without the necessity of 
 repeated examinations and remeasurements, 
 to ascertain the due length, and entirety of the 
 piece. . 
 
 39. 1 his markmg, weighuig and assaymgws 
 done by persons in authority, that is, by the 
 state y wimAi adds a small value to the metal, 
 by the greater currency which is given to it, 
 
 For it is, in this state, a more useful article of 
 .general exchange. 
 
 40. All these currencies are, as we have seen, .^ 
 and particularly /s^old and silver, conimodities 
 universally exchangeable ana intrinsically va- Cinu^huta 
 
S6 HISTORY OF EXCHANGE, [cHAP. I. 
 
 I liable, before they attract the notice of the 
 state and are thus marked with a stamp. 
 
 41. The marking is called coining, either 
 from cudendo, the Latin word for forging, ham- 
 mering or shaping of metals ; or from koinon 
 the Greek word for a thing used in common ; 
 or, more probably, from coigjie, the French 
 word for a thing cornered off or squared ; the 
 ) English silver currency being, formerly, ham- 
 mered out with corners. 
 
 I 
 
 i 
 
 42. The pieces so made and stamped are 
 called coins, and all such coins, are denominated 
 generically mopey, moneta ; which, it is said, 
 comes from jiionitum, a Latin word, meaning a 
 thing of which advice or notice is given; be- 
 cause, by the mark, the state gives notice, ^ 
 the receiver, of its weight, purity and value, 
 compared with other pieces of gold or silver. 
 
 ^ 43. This is all that the state can do by coin- 
 ing. For the stamp, though it ascertains the 
 quantity of gold or silver in each piece, can- 
 not alter the, value of gold or silver, materially, 
 in exchange ; and, therefore, coining can only 
 ascertain the value of a given piece of gold or 
 silver in exchange for other gold, or silver, raw 
 or in bullion ; or manufactured in utensils; or 
 j,ather in other pieces of gold and silver coin. 
 
CHAP. I.] AND INTRODUCTION OF MONEY. 27 
 
 44. Such pieces of money pass current in 
 exchange for all commodities; which are first 
 valued in some given species of money, most 
 usually adopted as the measure of value ; and 
 then, the commodity is received in exchange 
 for its equivalent in value, made up in any ne- 
 cessary quantity of coins. 
 
 45. Hence arises the practice of buying and 
 selling, when the money paid is called price ; 
 and the things given in exchange are denomi- 
 nated merchandizes, goods, or, generally, com- 
 modities. X 
 
 X I am happy to derive authority for my positions from 
 that stupendous monument of human intelligence the Digest, 
 See lib. xviii. tit. de Contr. Empt. Leg. i. 
 
 " Origo emendi vendendique a perirutationibus csepit : V 
 Olim enimnon ita erat nummus ; neque aliud merx, aliud / 
 pretium yocabatur ; sed unusquisque, secundum necessi- \ 
 tatem temporum ac renim, utilibus inutilia permutabat, I 
 quando plerumque evenit ut quod alteri superest alteri de- 1 
 sit. Sed quia non semper, nee facile concurrebat, ut cumf 
 tu haberes quod ego desiderareni, invicem haberem quod \ 
 tu accipere velles, electa materia est, cujus publica ac / 
 perpetua sestimatio difticultatibus permutationum tEt{iiali- \ 
 tate 'quantitatis subveniret ; eaque materia forma publica / 
 percussa, usum dominiumque, non tarn ex substantia pra3- /^ 
 
 bet quam ex quantitate ; nee ultra merx utrumque, sed al- j 
 tcrum pretium vocatur." ^-^ 
 
 r<u^ 
 
S8 HISTORY OF EXCHANGE, [cHAP. I* 
 
 _ji^ 46. Other articles of currency have been 
 
 called money ; such as shells, which are said to - 
 
 be the money of some rude people in Africa. 
 
 ^) But this is not strictly the proper meaning of 
 
 ' money; which is something obtaining general 
 
 currency, partly by the authoritative mark or 
 
 admonition of the state ; whereas these articles 
 
 ^/^ are mere commodities adopted in general ex- 
 
 chanffe,/^.^/^* ^^^^t^^ L^^A^^i^^^^M^, •^^^ 
 
 > 47. They are however the medium of ex- 
 yCf change and measure of value, 
 
 48. Coins of various kinds may be used £ts 
 money; but it is only one species, or one 
 
 S^ identical tiling, which can be said to be the 
 ' measure of value. Uniformity is necessary to 
 a measure ; and this, most frequently, is some 
 coin whi(:h, though formerly in use, has dis- 
 appeared; but the value of which is ascertained 
 with respect to other coins ; as the pound 
 sterling, which is equal to twenty parts in 
 sixty-two of a pound of standard silver. 
 
 49. This measure of value may be^ in some 
 'In places, wholly ideal ; as a macoute in Africa, 
 
 which is no coin ; or a bar, which is supposed 
 to have a value of about two shillings sterling, 
 but was never in existence as a coin. 
 
 50. An actual standard, of value generaHy;, 
 
CHAP. 1.] AND INTRODlt^CTION OF MONEY. 29 
 
 can, in strictness, have no existence ; because \ 
 value means only what a thing is worth ; that ! 
 is, what it will exchange for ; and not even gold f\ 
 or silver can have a value perpetually the same. / 
 
 51 1 The standard, in England, means the 
 settled purity which is required for gold and 
 silver, and the actual weights and alloy of 
 all coined monies; jand, consequently, their 
 value in gold or silver. 
 
 52. Henceforth, in the whole of this work, ^ 
 the word moneij will be used in the sense of / 
 cmi ; in which it is frequently employed '\ 
 by Locke, and others at the beginning of the / 
 last century : before paper currency became ge- 
 neral, and the notion was adopted that paper 
 may be considered as money. Whereas paper * 
 is money, only in as far as it represents agiveii 
 sum of money immediately or speedily forth- ^^ 
 coming ; and will never continue long to have 
 any value, when, the hope of its being paid 
 is entirely lost. It will, then, represent the 
 macout$ of Africa; which never passes as a cur- f,') 
 rency, but comes into and goes out of the 
 mind of the buy^r and seller, upon ever}^ pur- 
 chase and sale ; as a middle term in logic, or 
 medium by which to estimate a value between 
 
 them. 
 
 9 
 
30 HISTORY OF EXCHANGE. [CHAP. I. 
 
 ' 63 . The only sense in which the word monej/ 
 
 will be used, in these pages, is that of any given 
 
 \ coin, made of bullion, of the precious metals, or 
 
 as bullion itself. 
 
 \ 
 
 o4. It will be shewn that nothing else, ex- 
 I cept some commodity adopted by the free con- 
 \ sent of a people ; or a promissory note or paper, 
 O ( for which the nominal sum is always forth- 
 coming in coin ; can pass current in exchange ; 
 without some deception, much individual in- 
 \ jury, and great public inconvenience. 
 
CHAP. IT.] DEFINITION OF MONEY. 31 
 
 CHAP. II. 
 
 J)eJinition of Money, 
 
 From a review of the preceding chapter, 
 lye may define money by stating its essential 
 properties. 
 
 1. Real money is made of silver, gold, or 
 other precious metal, and is a commodity of ^ 
 intrinsic value. 
 
 9. It is raised by l^>ur, and purchased with 
 commodities. 
 
 3. Its real value is the price of such la- , 
 bour. 
 
 4. It is so durable as to be almost inde- 
 structible. 
 
 5. It is divisible almost to infinity. 
 
 6. It is used by the convmilon of all nations, 
 and all ages, as^e regresentative^of all things \ ^^ 
 wanted. 
 
 7. It serves as a pledge and surety that, 
 whenever the want.of any thing vendible shall 
 occur, it will be speedily gratified, by ex- 
 change for it. 
 
33 DEFINITION OF MONEY. [cHAP. 11. 
 
 y 8. Its name in Greek and Latin, is nomisma^ 
 j ?Lnd7iiimmus ; derived from nomos, a word signify- 
 ing law ; which indicates that it is in part 
 founded on convention, 
 
 9. As this conve7ilion is universal, the law is 
 a law of all nations, and a law of nature*, 
 
 * Axioms 6, 7, 8, are taken almost verbatim from Aris- 
 totle^ Ethics, lib. 5. See Gillies's translation, p. 270, Quarto 
 Edition ; p. 375, Octavo. 
 
 I have added Axiom 9, to correct, what I consider, an er< 
 ror in all who have followed his words too implicitly, with** 
 out attending to their general meaning. 
 
 He says, however, expressly, that its use is founded not 
 on nature, but on laio; and, that human laws, which have 
 thought fit to employ it as a measure of vahie, may, at plea- 
 t;ure, put this use of it aside, and employ some other mea- 
 sure in its stead. 
 
 But he proceeds to say, " Money, which represents the 
 value of all other things, varies in its own ; but the varia- 
 tions (meanin^g of real money) are less considerable than 
 those of most other substances. It serves, therefore, to fix 
 their price, and to render them commensurate with each 
 other ; thus performing a function essential to the existence 
 of civil society : for community could not subsist without 
 exchange ; nor exchange without equality ; nor equality 
 without a common measure." 
 
 It is impossible not to admire the intelligence and wisdom 
 embodied in this sentence. All theories of money must be 
 a comment and a paraphrase upon this text. 
 
CHAP. III.] OP PRICE AND VALUE. .^S 
 
 CHAP. III. 
 
 Of Price and Value^ and the Variations in the 
 Value of Monet/, 
 
 1. Before we state the properties of money, v 
 as a measure of value ; it is necessary to con- 
 sider, shortly, what valuer as a commercial 
 term, and jyrice^ as its correlative expression, 
 justly signify ; and how they rise and fall in 
 trade and commerce. 
 
 2. Value is variously defined, as it is applied 
 to the estimation or regard, in which an indi- 
 
 But it appears obvious, that, if money varies less than 
 other commodities in value ; and is, therefore, more useful 
 as a common measure; and a common measure is necessary 
 to the existence of socit-ty ; the use of money in exchange 
 is as natural as exchange itself; and will last as long as 
 society. 
 
 To say that human laws may change its use, is erroneous' 
 They cannot, until they have found an equal common mea- 
 sure. Where paper has been introduced, gold has been 
 still the true measure, and will be while society lasts. 
 
 D 
 
34 OF THE VARIATIOKS [cHxiP. Ill, 
 
 / vidiial holds jinj thing ; as it respects, either 
 ^ his own convenience, liking, desire, want, or 
 * affection. It is also considered, either as 
 
 real, or imaginary; and, frequently most, as 
 
 commercial or exchangeable. 
 
 3. Upon the present subject, all values may be 
 omitted, from our consideration, save that 
 which is purely commercial ; and which affects 
 the general price of commodities, at any given 
 time. 
 
 / 4. In which sense, value and price, may be 
 \ considered as equal and corresponding terms ; 
 and, when any commodity is exchanged, the 
 one is the value, or the price of the other. 
 
 ^ 5, But, as barter \s disused, and sale consti- 
 tutes the whole of commercial exchanges; since, 
 even where goods are exchanged one for an- 
 other, they are first valued in money, and ex- 
 changed for it in idea ; every thing is estimated 
 ( in money, which is called the price ; * and the 
 / commodity which is set against it, may be 
 { considered as the value of the money. 
 
 / 
 
 * Writers on the law of nations, denominate it the price 
 of eminence^ or the price by way of eminence. But price 
 \ and value, in exchange, mean the same thing. They are as 
 two equal weights^ placed iu opposite scales. 
 
CHAP. III.] IN THE VALUE OF MONEY. 55 
 
 6. Thechange of these denominations does not, 
 however, alter the nature of the things ; which 
 «till remain, as well the money as the goods, 
 exchangeable commodities. 
 
 7. The principle, upon which alone they are 
 exchanged, has been explained, already, to 
 be the desire which each party has to obtain 
 that which the other possesses ; and trans- 
 fer it from the one to the other; upon a 
 sense of equality, arising out of their mutual 
 wants. 
 
 8. Hence the inducement to exchange and sale, 
 or purchase, is mutual want ; which is called 
 demand : and the means of effecting exchange 
 is the possession of the equivalent, to be 
 transferred in place of the thing wanted. 
 
 9. This want, and thepossession of the equiva- 
 lent, combined, is called the effective demand. 
 
 10. The effective demand rests with the buyer^ 
 as respects the price: the amount of which 
 is agreed between the buyer and seller. And 
 where there are more persons desirous of sell- 
 ing than of buying, the price will fall ; or, 
 when the contrary is the case, it will rise. 
 
 d2 _ 
 
36 OF THE VARIATIONS [CHAP. Ill 
 
 11. Now the increase in the quantity of any 
 article^ beyond its ordinary demand, increases 
 the number of sellers; as the increase of wio- 
 ney does that of buyers, 
 
 12. Of course, prices rise or fall, as commo- 
 dities or money are increased, relatively, to 
 each other. 
 
 13. Commorii/zV^ are increased by agriculture, 
 mining, fisheries, manufactures, and other 
 productive arts: and in some sort also by com- 
 merce. 
 
 14. Money is increased, either by mining, or 
 commerce. 
 
 15. Prices will, therefore, generally be^igher 
 -©r4»wer, as there are more or less commo- 
 dities to be exchanged ; and more or less mo- 
 ney in general circulation. 
 
 16. But the quantity oi money in circulation 
 does not, wholly, depend ujpon its absolute 
 quantity. It is greatly affected by the state of 
 credit, and the mode of conducting trade ; by 
 
 ' nieans of which, traders, dealing together and 
 ,^ ^^^,,^allowing each other credit, do not exchange mo- 
 "' ^ ' ney for goods upon every transaction ; but wait 
 
 /. ,■ ■> 
 
CHAP. III.] IN THE VALUE OF MONEY. 37 
 
 till after many dealings are had; and, then, 
 pay over only the money due upon an actual 
 balance, f ' " " ' ' ' ' ' ' ' 
 
 17. By this means, much less money is em- 
 ployed, than w^ould otherwise be necessary ; 
 the rate of prices still remaining the same. And 
 this effect of trade and credit on the quantity 
 of money is greatly increased, by the facilities 
 afforded in payments through bankers and 
 bills of exchange ; and, particularly, by the 
 mode of settling balances between bankers, 
 each day, at a place called the settling -house, 
 
 18. These may be denominated the artifices o^ 
 commerce ; and operate, more or less, accord- 
 ing to commercial skill at any given time. 
 
 19. The value of money depends upon the 
 ^price of commodities, and must be subject to 
 many variations : but, before we can thorough- 
 ly explain the laws of its variation, we must 
 enter into several preliminary inquiries, which 
 will form the subject of some of the following 
 chapters*. 
 
38 OF A COMMON MEASURE. [CHA|». lY, 
 
 CHAP. lY. 
 
 Of a common Measure ; and Money as & 
 Measure of Value. 
 
 / 1. A COMMON measure is a quantity which 
 
 : will measure any two numbers or quantities 
 
 equally, without a remainder ; and unity is the 
 
 common measure of all integral numbers and 
 
 fractions. 
 
 f . A common measure of space is any given 
 portion of space, considered as an unit^ applied 
 to any other quantity of space ; as a foot^ or 
 a yard ; and a common measure of gravity is 
 a given weight applied, as a measure, to all 
 other weights ; by which their quantity is 
 compared. 
 
 3. When these measures of space and gravity 
 are accurately ascertained, a precise standard^ 
 or fixed measure and weight, may be obtained ; 
 by which all things may be compared with 
 each other ; in respect of extension or space 
 and gravity ; now and for ever. 
 
 4. All goods may, therefore, be weighed 
 
CHAP. IV.] OF A COMMON MEASURE. 39 
 
 and measured; and their proportions to each 
 other fixed; without any possible variation, j 
 IJutpWc^and value are not properties inherent 
 in things ; in the same manner as extension 
 and gravity. They are accidents of a moral 
 or political nature : the mere result of conven- 
 tional exchanges; an4jre_not capable of 
 accurate admeasurement, at all times and / 
 in all places: the price and value of all things 
 depending upon accidents of time and place ; 
 and other variable circumstances. 
 
 5, AJPthipgs _ may, however, be compared 
 with any one individual commodity, at any 
 given tim e ; ^nd their relative value thereby 
 ascertained: although this relative value can 
 never remain constant or fixed. And, in all 
 (Commercial exchanges, articles are coiupared 
 with money ; by which their relative value 
 is fixed, as nearly as possible ; and moneif is£ j 
 for jhis reason, deemed a good common 
 measure. 
 
 6. It is the best common measure of value 
 hitherto known ; because it is capable of I 
 being reduced to perfect identity, at all times 
 and places. For one pound of pure gold and 
 silver is as little different from another as any 
 
40 OF A COMMON MEASURE. [cHAP. IV. 
 
 ideal unit ; or as any quantity of extension and 
 gravity is from another. And this quality is 
 sufficient to give to the precious metals a 
 superiority over all other articles as a common 
 measure. 
 
 ) 7. In addition to which there are no com- 
 V modities, which vary so slowly in their price or 
 / value as gold and silver. 
 
 I 8. They vary necessarily ; but their varia- 
 tions are connected intimately With the nature 
 of exchange and value; with commerce itself; 
 with the quantity, production and increase 
 of all articles of commerce. 
 
 9. Some writers, as Sir James Stewart, con- 
 sider a money of account, or an ideal unit^ as 
 the best common measure. But they have all 
 erred in attributing to these things a metaphy- 
 
 C sical notion which, like most other metaphy- 
 sical ideas, cannot exis't. 
 
 10. Money oi account is di more name; which 
 when translated truly, means a given quantity 
 of gold or silver in some coin not in use ; but the 
 real quantity of whichisascertainableby figures. 
 
 \ 11. The money of account, in England^ 
 was, formerly^ the pound sterling ; which was 
 
CHAP. IV.] OF A COMMON MEASURE. 41 
 
 1718 grains, and seven tenths of a grain 
 (1718 .7) of fine silver; or 113 grains and 
 five tenths of a grain (il8 .6) of pure gold. 
 
 13. The real money of account in England, 
 for many years, has consisted entirely of notes 
 of the bank of England, or more properly of 
 all sorts of notes : those of country bankers 
 passing at exactly the same value. 
 
 15. The pound sterling has varied in suc- 
 cessive reigns, by frequent debasements. From, 
 the reign of Queen Elizabeth, to the year 
 1797, it may be considered as fixed at the 
 above standard. But, from that time, it has 
 ceased to have any standard ; and now varies 
 with the value of a bank note : which has one 
 value as to one thing and one as to another ; 
 but which ought, in justice, to bear always 
 the same value as to gold and silver. 
 
 14. Either, therefore, the pound sterling does . 
 not exist ; is gone out of use ; or the money 
 of account in England is changed, from a fixed 
 and known standard, to a variable quantity. 
 
 16, An ideal unit, as applied to value, is 
 merely a quaint, metaphysical, term; signify- 
 ing the number one ; and the number one is 
 
49 OF A COMMON MEASURE. [CHAP. lY. 
 
 itself a mere term of no definite meaning ; 
 until it is applied to some one thing. It is a 
 mere symbol; and, like all other symbols, 
 means nothing, until the thing typified by 
 the symbol is put in its place. 
 
 ^,\ 16. Thus, in talking of any number ot 
 pounds sterling, we settle nothing ; until we 
 ascertain what, in reality, those words stand 
 for, syvibolize^ typ^fj/t ^^ ^^P^y- ^^ i^ay as 
 well write, nine digits as nine pounds ; until 
 we translate them into meaning. And then 
 in different reigns we have, as the thing sig- 
 , nified, different quantities of gold and sil- 
 ver; till, in the present year, we find that 
 'nine pounds*. mean nine bank notes, which 
 will purchase ^ certain quantity of gold ; but 
 which, whenever they are paid^ in strictness, 
 and converted, by the actual discharge of them, 
 into the thing signified by their original im- 
 port ; will produce, and therefore, signify^ a 
 much greater quantity of gold ; namely 118 .6 
 grains of pure gold. 
 
 17. The convenience of using a common 
 measure of value in gold, is the same as that 
 of using a fixed measure of space ; and mea- 
 suring by a foot of twelve inches, instead of 
 the individual foot of a human being. The 
 
CHAP. IV.] OP A COMMON MEASURE. 43 
 
 one is fixed and known, at all times and places, 
 as far as it can be known. The other is vari- 
 able and uncertain. The one is readily com- 
 pared with all other measures ; the other re- 
 quires several previous calculations. 
 
 18. The valu^ of gold or silver must be the 
 same in all countries, as to themselves; and 
 the proportion which they bear to all com- 
 modities is the best measure of price, in dif- 
 ferent countries : because, by sending commo- 
 dities to the mines in exchange, gold and silver 
 can, at all times, be procured. 
 
 19. The relative cheapness or dearness of living 
 is, howe/er, frequently confounded with ideas 
 of value generally ; but these depend upon 
 the relative quantity of money and its pro- 
 portion to commodities ; and the different dis- 
 tribution of wealth, at different times and 
 places. 
 
 20. Sir James Stewart, and his followers, 
 have puzzled themselves and their readers by 
 mentific comparisons ; which for want of a sim- 
 ple logic, have confused what might have been 
 rendered very clear. 
 
 SI, They notice the geographical measures 
 
44 OF A COMMON MEASURE. [cHAP. IV. 
 
 of degrees of latitude and longitude ; and the 
 inaccuracies of such measures ; and then infer 
 that, because no two degrees are mathemati- 
 cally equal, no two measures of value will be 
 equal. They then state, that the true mea- 
 sure of latitude and longitude is an imaginary 
 circle and its parts ; and, thence, infer, that the 
 true measure of value should be an ideal unit, 
 
 52. This is merely bad logic ; for imaginary 
 measures can ascertain nothing. 
 
 23. The truth is, that a degree in latitude 
 and longitude is, properly defined, the one 
 such a space of the earth as will be passed 
 over in a right line, to give one degree of 
 elevation of the pole-star, measured on any 
 circle by the quadrant from north to south; 
 and the other is, the three hundred and six- 
 tieth part of the earth's circumference, from 
 east to west ; measured by the apparent course 
 of the celestial bodies. 
 
 24. The difficulty of measuring these things 
 in feet and inches, is very great ; as is the 
 difficulty of weighing with absolute certainty 
 a pound of gold or silver ; and much more 
 so that of purifying gold and silver perfectly. 
 But these difficulties are inherent in the nature 
 
fcttAP. IV.] OF A COMMON MEASURE. 45 
 
 of things ; and are not remedied by recourse 
 to ideal units and mathematical measures of 
 imaginary lines ; for the imaginary line and 
 the ideal unit, when truth and accuracy is re- 
 quired, must still be reduced to the natural 
 pound, and the natural space over the earth, 
 actually implied by the term. 
 
 2.5. To explain, according to truth, the mC" 
 taphysical language of Sir James Stewart and 
 his followers, the imaglnarj/ line in geography 
 can never be accurately measured ; whereas 
 the money of account, the ideal unit, whether 
 it is a pound sterling, or twenty stivers banco 
 of Amsterdam^ or a bank note o^ England; are 
 terms referring, immediately, to a certain quan- 
 tity of gold and silver, at some given time ; and 
 then, by implication, to any other article of 
 commerce, which that quantity of gold or sil- 
 ver will obtain in exchange. 
 
 26. A common measure should be uniform ; 
 and, therefore, the common measure of value 
 should be, either gold or silver simply, or 
 gold and silver together, in certain propor- 
 tions ; and not either the one or the other in- 
 differently, at the same time. 
 
 27* Locke^ and the writers of his day, were 
 
46 OF A COMMON MEASURE. [cttAP.lt. 
 
 therefore, correct in saying, that money should 
 be composed of silver alone, and gold be left ^ 
 to its value, as a commodity : the reasons for 
 which are well explained by Sir James Stewart*^ 
 to whose work the reader must be referred, 
 for the arguments in detail ; by which the ne- 
 cessity of an uniform common measure of va- 
 lue is clearly proved. 
 
 * See the Principles of Money, by Sir James Stewart^ 
 Bart. 
 
CHAP, v.] OF COMMERCE. 47 
 
 CHAP. V 
 
 Of Commerce ; the Balance of Jrade^ and 
 the Source of mercantile Profits. 
 
 1. In the first chapter of these elements, an 
 attempt was made to explain, concisely, the 
 nature of money from the history of exchange; 
 which it was shewn proceeded, always, on a 
 sense of equality; produced by the mutual 
 opposition of equal and contrary desires. 
 
 2. From this arises all trade or traffic and all 
 commerce; which is only, the extension of 
 trade to foreign dealings : and consists of a 
 mutual exchange of equivalents. 
 
 3. As in agriculture, so also in all manufac- 
 tures, the first object was to provide for the 
 immediate consumption of the individual and 
 his family : when, by the necessary course of 
 all such arts, the produce exceeded their im- 
 mediate wants, and the surplus was exchanged 
 for some other commodities ; and, in time, the 
 produce exceeding the consumption of the im- 
 mediate community, this second surplus was 
 carried to a greater distance ; and exchanged 
 with the members of some other community. 
 
48 OF. COMMERCE. [cHAP. V* 
 
 4. It is impossible to measure production ex- 
 actly to immediate or domestic demand ; and 
 therefore, if foreign commerce did not take off 
 the excess, manufactures and the productive 
 arts must, each in their turn, frequently lan- 
 guish and decay ; become excessive ; or re- 
 lapse. 
 
 5. But in process of time the foreign demand 
 IS considered as an original demand ; produc- 
 tions are educed, for the immediate purpose 
 of supplying it; and thus, that which might 
 be considered as the drain for an overflow, or 
 surplus, is rendered a constant and equable 
 stream ; and commerce is, really, trade extend- 
 ed, and by its enlargement rendered more 
 generally certain ; but, still, like all other trade, 
 when the channel is full, subject to occasional 
 vacillations or relapses. 
 
 6. The nature of exchange is, however, not in 
 the least altered, by this process. It con- 
 tinues still a conventional act ; by which one 
 equivalent is transferred for another ; by which 
 neither party loses ; but each gains. 
 
 7. In speaking of commerce, there is therefore 
 
CHAP, IV.] OF COMMERCJE; '' 49 
 
 a palpable absurdity, in considering tile balance 
 of trade as favourable or unfavourable to any 
 country; if to that idea is attached, as is 
 generally done, the belief of any inequality in 
 the transactions, between the two countries. 
 
 8. To give credit to the rriinisters and finan- 
 ciers of most nations, it must be supposed, that 
 every nation fancies it has cheated every other 
 uation in the world ; while by evi^ry other 
 nation it is considered as having been cheated; 
 for each nation states the balance of imports 
 and exports as in its own favour and against 
 3II the world. 
 
 9. The difference is supposed to be made up 
 by the transmission of bullion, from the one 
 to the other. This trade, wdiich in earlier times 
 was deemed the chief source of national wealth, 
 is noTv geiicrally allowed to be of little ultimate 
 advantage to any country. 
 
 lb. Yet, still, do the financiers make their 
 boast of this balance ; stiil does the assembly, 
 before whom their accounts are detailed, bow 
 a grave assent, or yield a vain applause ; and 
 still does error prevail in almost ali the popular 
 notions upon commerce. For statesmen, igno- 
 rant or careless of the truth, too frequently, are 
 content to flatter the rooted prejudices of the 
 people, for the purpose of more easy delusion, 
 
60 
 
 OF COMMEKCE. [cHAP. IV 
 
 i-ather than improve that knowledge, the exten- 
 sion of which would but too often betray their 
 own imbecility or corruption. 
 
 11. The fallacy arises from the narrow views 
 of professed traders ; by w^hom the language of 
 finance has been framed. 
 
 12. They are accustomed to balance their ac- 
 counts, debtor and creditor, by the ultimate 
 amount which rernains to be paid ; and, wher^ 
 the exports exceed the imports, they consider, 
 that a sum remain^ to be paid ; which they 
 treat as gain. 
 
 13. The mystery can only be solved by con-, 
 sidering the practical effects of what is tech- 
 nically called exchange ; when it will be 
 found, that this balance will for the most 
 part disappear ; or be converted into items 
 of foreign expenditure, payment of rents, trans- 
 mission of dividends on public stock, differences 
 of exchange, bullion; and losses by sea-risks, 
 and captures, to countervail it. 
 
 14. The true balance of trade is, like every 
 ot}ier balance, an equality ; it is a scale in 
 which commodities aye valued ; and in which 
 neither preponderate. 
 
 1^. It is always beneficial or it ceases to be 
 pursued. I go to niy baker, because I wan 
 to purchase bread ; to my hatter, for l*^ts* 
 
Chap, iv.] of coMMERCEi ^1 
 
 to the jeweller^ ^or jewels ; to the wine mer- 
 ohapLt, for wine. I go to each without com- 
 pulsion ; to satisfy my wants, my convenience, 
 or my pleasure. I send to another, to pay a 
 bill in money ; to another, and offer him goods 
 instead of money which I owe ; to another, 
 to give him a bill upon a third person, ia 
 payments 
 
 IG. Just such is all commerce; it is the ex- 
 change of mutual equivalents and mutual con- 
 veniences ; upon a voluntary contract : and, 
 each trader goes where he is best served* 
 
 17. When, therefore, 2iuy Jinancier interferes to 
 compel the trader to purchase at one market, 
 rather than another, he does an universal 
 injury ; for all traders will speedily discov.^r 
 where they are besl served. 
 
 18* Busy idlers, officious meddlers, trouble- 
 some intruders, baneful despoilers ! cease your 
 attacks on commerce ! learn, statesmen, that all 
 interference with commerce is mischievous ; 
 teach your subjects good faith ; compel them' 
 to pay foreigners their debts ; and let com- 
 merce flourish, free as the wind that bears her 
 merchant ships across the ocean* - 
 
 19. And, like the wind, let it shift first to one 
 
62 ©F COMMERCE. [cHAP. IV, 
 
 quarter and then to another. For it would 
 not be difficult to prove, that every act of 
 interference with commerce has been ineffec- 
 tual, delusive or injurious ; without excepting 
 even the famous navigation acts, to which so 
 many advantages are falsely attributed ; ad-» 
 vantages which are owing solely to freedom, 
 the nurse of every art, the parent of every 
 virtue, the source of every excellence. 
 
 20. As little is it worthy of a statesman, to 
 encourage pommerce if he could. 
 
 21. Increase of population and inequality 
 of possessions, naturally engender commerce ; 
 or the difficulty of supporting life checks popu- 
 lation, and produces, either misery, or more 
 simple manners ; as the people enjoy a mode- 
 rate equality, or the few usurp the rights of 
 the many. 
 
 » 
 
 22. Every state of society has its natural ad- 
 vantages ; which alone should be improved; 
 cultivated, naturally, and not forced. 
 
 23. Nor are these the only errors which pre- 
 vail, with respect to commerce. 
 
 24. The merchants, themselves, appear not to 
 
CHAP. IV.] OF COMMERCE, 53 
 
 understand from whom their profits are derived; 
 or we should not hear so much of the absurd 
 notion of the balance of trade. They see all 
 nations exchange their surplus commodities 
 with each other ; they presume that others lose, 
 and we alone gain. 
 
 25. Yet they see their fellow traders mutually 
 selling and reselling ; and getting rich. 
 
 26. They overlook this plain fact. — The profit 
 of the merchant is gained at home and not 
 from abroad. He gives less fpr the commodity 
 abroad, or buys it with some cheap com- 
 modity ; but it is the purchaser for home con- 
 sumption that pays him the additional per 
 centage in money ; which enables him to hve. 
 
 27. What, then, is the true secret ? 
 
 28. Is it not this ? The wealth of every nation 
 is unequally distributed. Industry increases 
 its productions. Industry transfers them from 
 hand to hand in trade ; manufactures them into 
 conveniences and luxuries ; and transports 
 them in exchange, for other articles of neces- 
 sity, convenience, or luxury^ in foreign com- 
 merce. 
 
 29. In every exchange, industry keeps back a 
 
5i OF COMMERCE. [cHAP. IV 
 
 portion for its own use; and thus earns its 
 fair reward. The more it can appropriate to 
 itself, the greater will be its exertion; till 
 it grows rich, luxurious, and idle, and makes 
 room for the industry of others. 
 
 30. Secure, therefore, to industry, its free 
 competition, and the enjoyment of its fair gains, 
 and a nation will flourish : but whether its in- 
 dustry is employed in one manufacture or an-t 
 
 "other, is immaterial ; for the world cannot be 
 "all farmers, all manufacturers, nor all merchants. 
 
 3 1 . The happiness of a nation must, therefore, 
 consist solely in its equal law^s, its moral ha- 
 bits, its political freedom, its domestic tran- 
 quillity ; and it matters little whether it is 
 chiefly agricultural or commercial. 
 
 32. Many errors also prevail, w^ith respect to 
 the effects of money. 
 
 33. This, as it always commands^a market, and 
 can always purchase commodities, is supposed 
 to be, in its total effect, exactly what it is in 
 the hands of individuals, the means of increas- 
 ing wealth; but Hume has proved, that in- 
 crease of money, or any other currency, can 
 only augment priges and depreciate itself; an4 
 
CHAP. IV.] OF COMMERCE. 56 
 
 Wheatley * has sufficiently established, that it 
 necessarily goes by tVie operations of com- 
 merce and exchange, to the place where it can 
 purchase most commodities; and, thus, be- 
 comes distributed all over the world, with a 
 nice equality, as to its effects ; though with 
 great inequalities, as to its actual quantity. 
 
 * See an Essay on the Theory of Money and Principles 
 of Commerce; by JohnlVhgatlet/. Cadell, 1S07. 
 
5S OF CREDIT ANP [.CHAP. V, 
 
 CHAP. V. 
 
 O/" Credit and Bills of Exchcmgc. 
 
 1. Credit, as it regards commerce, is found? 
 ed on good faith ; and is the giving of time, for 
 the payment of the price of any commodity. In 
 which case, the seller delivers over the pro- 
 perty to the buyer, upon a price agreed to be 
 paid at a future day. 
 
 2. This price is, for various reasons, aWays 
 higher than where the money is paid imme- 
 diately: for the seller might make some ad- 
 vantage of the money in the interval; and must 
 have some compensation for the risk which he 
 runs of the debt not being paid. 
 
 3. Credit, however, greatly facilitates com- 
 merce. It enables m^ny more persons to 
 make purchases, and ePxter into competition 
 in the market ; bidding against each other; 
 than could, otherwise, find means tq become 
 purchasers. 
 
 4. By this iticrease of competition, -or of the 
 
CHAP, v.] BILLS OF EXCHANGE. 67 
 
 number of buyers, and the' effective demand, 
 it also augments the price of commodities ; but 
 it. also, promotes the increase of commodities, 
 by increasing the demand and the market. 
 And these circumstances have a mutual and 
 opposite effect on each other. 
 
 5. By means of credit, merchants and traders 
 are enabled to carry on a gr^ at deal of business, 
 and make many exchanges of commodities ; 
 before they actually pay any sum of money, 
 as the equivalent ; or cpnsideration, for their 
 dealings. 
 
 6. The commddities are thus only valued 
 in money, mentally, or in idea. They are then 
 frequently set off against each other ; and the 
 ultimate sum, or balance, which is due on the 
 expiration of the tim^ allowed for credit, is 
 the only sum of money paid over. 
 
 7. This happens very much not only in 
 domestic trade ; bi|t also in commerce or 
 foreign trade : and, hence, the greater part 
 of the commercial dealixigs of the worHmay, 
 in effect, be considered as an actual barter of 
 one commodity for another; in which the use 
 pf money is, chiefly, as a measure of their 
 
 3 
 
58 OF CREDIT AND [CHAP. V, 
 
 value; and not as an equivalent, actually ex- 
 changed. 
 
 8. A much less actual quantity of money is, 
 therefore, requisite for the purpose of trade 
 and commerce with credit, than without; 
 and its effect is equal, in all respects, to that 
 of a larger quantity. 
 
 9. This effect of credit, upon the quantity 
 of money, is also increased, by the number of 
 dealers, through whose hands a commodity 
 passes before it is ultimately consumed. For 
 the object of each dealer is to gain by his ex- 
 change ; and he adds something to the price, 
 on each transaction. 
 
 10. It is of the nature of trade and com- 
 petition, however, to accommodate these ex- 
 changes to the actual necessity of commercial 
 transactions ; and to that limit which is 
 necessary to the supply of commodities, for 
 the demand of the consumers. And these 
 exchanges may be considered as, always, 
 necessary and beneficial to commerce, 
 
 12. Although, really, beneficial to the con- 
 sumerSj its effect on money is to increase its 
 
CHAP, v.] BILLS OF EXCHANGE. 59 
 
 quantity; either in reality or in appearance. 
 And the apparent as well as the real increase of 
 money has the same effect, upon its value ; 
 as compared with commodities. 
 
 13. The real quantity of money,'in any coun- 
 try, can only be increased by mining ; or by 
 exporting commodities in exchange for money. 
 
 14. The apparent quantity of money may, 
 however, be justly said to be increased by the 
 increase of credit ; and by all those artifices 
 of commerce, by means of which actual pay- 
 ments of money are deferred or avoided, 
 
 15. A bill of exchange is an instrument by 
 which the drawer, who is the creditor, orders 
 the drawee, who is the debtor, to pay to a third 
 person any sum of money due to him. By 
 means of which, the actual debt is transferred 
 to the holder of the bill. 
 
 16. In foreign trade, thjs is an instrument 
 of great convenience ; by appointing an agent, 
 who is immediately interested ii> the receiving 
 of the debt, 
 
 17. But it is also used in transactions of 
 domestic trade ; where, it§» use b^in^ iess ob^ 
 
60 OF CREDIT AND [cHAP. V. 
 
 vious, the transfer of the actual debt^ with all 
 the rights of the original creditor, was not, for 
 a long period, acknowledged by law. It was 
 however, so acknowledged by a decision in 
 the tirae of Janies I. ; whereas the validity 
 of foreign bills of exchange, in transferring a 
 right of action, was admitted some time before. 
 
 18. In commerce and also in trade; when 
 dealings have been had to any extent, between 
 traders ; these instruments are created : and 
 they are, afterwards, repeatedly transferred 
 from one dealer to another, in payment of 
 debts; and thus are made to pass as money. 
 
 19. The increase of these instruments, there- 
 fore, must give an apparent increase to the 
 quantity of money ; and must have a similar 
 effect on the value of money, as its actual 
 increase. 
 
 20. It must not, however, be omitted, thatbills 
 of exchange, for any length of credit, cannot 
 so pass as money. They are only the means of 
 extending credit, by passing from one tp the 
 other, and giving the holder a better security 
 for his debt. In which respect, they increase 
 the effect of credit; and still further diminish 
 the necessity of employing money in exchange^ 
 
CHAP.V.] BILLS OF EXCHANGE. 61 
 
 They repeat the circulation of commodities ; 
 but do not in an equal degree, increase the 
 apparent mass, or general stock of money: 
 
 21. But for more than a century past, promis- 
 sory notes, payable on demand, have been used 
 in payments ; instead of money. 
 
 22. These were first issued, about the time 
 of King Charles II. and somewhat previous ; 
 by the goldsmiths, who acted as bankers ; and 
 they were called goldsmiths notes. 
 
 23. After the revolution, the bank of England 
 was instituted ; and their promissory notes 
 superseded the use of the goldsmiths notes. 
 
 24. Subsequently, persons have formed banks, 
 as they are called, all over England, in almost 
 every town and village ; which issue notes pay- 
 able on demand ; and all tbese notes are paid 
 and transferred from one dealer to another ; as 
 money. 
 
 25. The efFect'of these instruments is, greath^^ 
 to increase the apparent quantity of money ; 
 and to render a very much less quantity of coin 
 necessary to carry on the exchanges. 
 
62 OP CREDIT, &C. [chap. V. 
 
 26. A further artifice for rendering the actual 
 employment o^ money unnecessary in exchange, 
 has been noticed already ; namely, the employ-^ 
 ment of bankers, by all traders indiscriminately ; 
 who pay their bills, that is to say, all their com- 
 mercial debts, b}'^ means of written orders, or 
 checks, on their bankers.- — These also have con- 
 trived a further artifice for diminishing the quan- 
 tity of money, necessary to make their pay- 
 ments; by agreeing to hold all the checks each 
 banker receives, payable by other bankers, until 
 a certain hour of the day ; and then meeting at 
 an appointed place, and paying over only the 
 balance due by each ; after setting off the 
 checks debtor, against those which each holds, 
 as creditor. 
 
 27. This is called settling amongst bankers, 
 and is fully explained in the appendix to the 
 report of the Committee on bullion 1810. 
 
 28. By means of this artifice, it appears, that 
 a sum total of 5,000,000/.; being the average 
 amount of drafts and bills payable in one day ; 
 may be actually paid and settled by the transfer, 
 in specie, or in notes of a very small sum^ in 
 comparison. 
 
CHAP. VI.] INCREASE OF MONEY, 63 
 
 CHAP. VI. 
 
 Of the Increase of Money hij Commerce^ 
 
 1. Money being once introduced, it must 
 appear obvious, that, in all exchanges, mone^^ 
 will be the principal object of commercial 
 dealing. 
 
 2. On one side, money will always be made 
 to pass, either really or in idea ; whenever any 
 commodity is transferred Trom one purchaser 
 
 ■y^ to another. 
 
 3. It is, therefore, truly considered, as the 
 commodity, byway of excellence ; and, as it 
 always finds a ready purchaser, it is always in 
 demand. 
 
 4. It is, therefore, the medium of all com- 
 mercial exchanges; the article by means of 
 which all commercial exchange is effected ; 
 and without which commerce must necessarily 
 languish. 
 
 5. For, in all commercial dealings, for gain, 
 it is of the greatest importance, and indeed 
 
64f rK^RI^ASfi ©F MONEY. fcHAP. Vt. 
 
 matter of absolute necessity, to have a return 
 or investment in some article of certain sale. 
 And money may, always, be considered as 
 this article* 
 
 6. Hence it follows, that, the demand for 
 money being unlimited ; where money can be 
 increased, it wijl, always, be kept in a state of 
 perpetual increase. 
 
 7. This increase, how*ever, is limited, as to 
 money, that is coined money, generally^ all over 
 the world, by the production of the mines ; 
 and the quantity of the precious metals 
 that can be raised annually* 
 
 84 The quantity which is possessed by any 
 individual nation, which has no mines of the 
 precious metal, must depend upon its com- 
 mercial dealings ; either with the country 
 having mines ; or w^ith other countries pos- 
 sessed of the produce of the mines. 
 
 9. And the quantity of money which any 
 commercial nation, not possessing mines, can 
 acquire by commerce must depend upon its 
 commercial dealings ; and upon the quantity 
 of goods or commodities which it can export, 
 in exchange for money. 
 
CHAP. VI.] BY COMMERCE. 6J 
 
 10. The quantity of these goods must, fur- 
 ther, depend upon the number of its inhabi- 
 tants or population, and its arts of production 
 and manufacture ; by which alone the native 
 stock of commodities can be increased. 
 
 1 1. And, indeed, as it is apparent, that money 
 or commodities, from abroad, can only be in- 
 troduced, by exchanging these for equal quan- 
 tities of money or commodities or their equiva- 
 lents in labour ; so commodities and money 
 cannot be increased by commerce directly ; 
 but only indirectly, as it is the medium of 
 exchange. 
 
 12. The true source of the increase of com- 
 modities and money is, therefore, in all cases 
 the productive labour of the inhabitants. 
 
 13. In one respect, v^ar itself may be con- 
 sidered as productive labour. 
 
 14. For, if a nation agree to perforhi ser- 
 vices in war for another and receive the hire 
 of its soldiers, or a subsidy, in money or goods, 
 from a foreign nation ; then, does the war actu- 
 ally increase the stock of commodities ; with- 
 out exporting any equivalent for them in 
 money or commodities. 
 
 F 
 
66 INCREASE OF MONEY [c'HAP. VI. 
 
 15. Supposing, that a nation were possessed 
 of commodities in abundance ; but wholly 
 without money ; then, might the commodities 
 be exported and money received in return ; 
 which would introduce money and decrease 
 the stock of commodities. 
 
 16. In all foreign commerce, therefore, the 
 introduction of money is effected by the 
 decrease of the stock of commodities ; and 
 again, when the money is exported, commo- 
 dities are returned, as the equivalent in ex- 
 change. ^ 
 
 17. Thus the stock of commodities and of 
 money, in a comniprcial state alternately rises 
 and falls ; by the exportation and importation 
 of money and commodities. These are there- 
 fore, continually, fluctuating. 
 
 18. It is the nature of trade, that all deal- 
 ers will carry their goods to that market, 
 where the highest pric^ is to be had for them, 
 in money ; and they also go to market to 
 purchase goods, where they are to be sold 
 cheapest. 
 
 19. The only impediment to the frequent- 
 ing of any particular market, is the expence 
 
CHAP. VI.] BY COMMERCE. 67 
 
 of attending it, and t)f carrying and recarrying 
 the goods. This expence must be paid out 
 of the profits of trade : and commerce will 
 only be carried on, so long as it will pay this 
 expence ; which, in foreign trade, chiefly con- 
 sists in freight and insurance. 
 
 20. Foreign merchants, therefore, observe 
 the money price of commodities in different 
 foreign markets, and export or import goods 
 as they appear higher or lower in one market 
 than another. 
 
 21. Wherefore, when the general price of 
 goods, from an abundance of money, is greater 
 in any market than in another ; commodities 
 will immediately be sent there, to get the high 
 money price. And, on the contrary, the money 
 will be transferred to the other country. 
 
 22. Thus it will always, happen, that, as 
 goods are cheap or dear, and money in a state 
 of abundance or scarcity, so each will be in- 
 terchanged ; and thus, gradually, there will be 
 a tendency to an equality of prices, and an 
 equality in the effect of the stock of money : 
 whether we consider prices to depend upon 
 the whole stock of money, or otherwise. 
 
 F 2 
 
68 INCREASE OF MONEY, &C. [cHAP. VI. 
 
 25. Money is thus, absolutely, necessary 
 for the encouragement of foreign commerce ; 
 and for the medium by which it is affected : 
 and on the other hand commerce is necessary 
 for the general diffusion of money, all over 
 the world ; which it produces with great equa- 
 lity as to its real effect. For the process of 
 which we must refer, as before, to Wheat lei/ on 
 money and commerce ; and to the considera- 
 tion of the process of what is called technically 
 exchange: which is the peculiar business of 
 the dealers in foreign money, amongst all 
 nations. 
 
CHAP. VII.] OF COMMERCE. 69 
 
 CHAP. yii. 
 
 Of Wealth ; Circulation ; Prices ; and the Value 
 of Money, 
 
 1. Wealth may be defined the possession 
 of durable and consumable commodities. 
 
 2. Money is wealth also, in as far as it is the 
 representative of such commodities ; and may 
 be exchanged for them. And when it may be 
 exchanged -for them, in foreign commerce, it 
 may be considered as national wealth, generally. 
 
 > 3. All commodities and, therefore, wealth 
 are unequally distributed in every state. And, 
 as commodities are distributed unequally, so, 
 also, is money. 
 
 4. Those who possess a larger share of the 
 mass of the money in any state, are enabled to 
 purchase commodities at a higher rate, than 
 others ; and it is generally found, that, where 
 wealth is distributed with great inequality, the 
 prices of commodities of necessity will be in- 
 creased thereby ; but the tendency to this in- 
 crease may be affected by some counterpoise. 
 
70 at' CIRCULATION AND PRICES. [cHAPi VII, 
 
 in the nature, course, or, as we may call it^ 
 the elements of prices. ' 
 
 6, The exchange of commodities for money 
 is, frequently, denominated the circulation of 
 money, which must, from necessity and the 
 nature of things, be incessantly repeated. It 
 has been observed, however, with some jus- 
 tice, that it is rather the exchange of the com- 
 modities, which produces the circulation of 
 money, than the money which influences the 
 exchange of the commodities. The notion of 
 circulation is, notwithstanding, well applied 
 to money ; and deserves our principal consi- 
 deration. 
 
 6. It is from the peculiar circumstances, 
 which attend this circulation, that arise the 
 different variations in the mass, or whole stock 
 of money in any country ; and the rise and fall^ 
 or permanent state of prices* 
 
 7. These circumstances may be considered 
 distinctly ; and, Jirst, the number of ex- 
 changes,, or circulation of money, in a given 
 space of territory^ will be more or less, as the 
 actual number of the people, or the population 
 of the state^ is greater or less. In the lan- 
 guage of mathematicians, therefore, it may be 
 
CHAP. VII.] OF CIRCULATION AND PRICES. 71 
 
 said, that circulation varies with, or as populi:^- 
 tion : and this we shall call its^V^^ element. 
 
 8. Secondly^ the number of exchanges must 
 be increased, or diminished, by the actual in- 
 crease, or diminution, of the quantity of ex* 
 changeable commodities, in a nation ; or its 
 wealth ; which may be called its second ele- 
 ment. 
 
 9. Thirdly^ These exchanges will be more 
 or less frequent, as the effective demand ; that 
 is, the possession of the equivalents to be ex- 
 changed, and the wants of the consumers. 
 And this is its third element. 
 
 10. Again, we may consider, how these ele- 
 ments themselves are subject to variations; 
 and, as to the changes in the amount of popu- 
 lation, we may consider it as having a ten- 
 dency to perpetual increase, restrained only by 
 the effects of war, disease, vice, moral re- 
 straints, and the other checks to population ; 
 which are so admirably discussed, and so am- 
 ply detailed, in the excellent work of Mal- 
 thus on that most important subject. 
 
 11. Secondly^ The quantity of consumable 
 commodities varies, according to the different 
 
7^ OF CIRCULATION AND PRICES. [ciIAP. VII. 
 
 States of the arts of production : as agriculture 
 and manufactures : and also, as commerce is 
 more or less extensive, and trade more or lessr 
 free. 
 
 12. The effective demand, or power of giv- 
 ing any fixed sum of money, or price for any 
 commodity, is different, under different distri- 
 butions of wealth ; and, therefore, varies by 
 the enjoyment of civil and personal liberty; 
 and as the arts and facilities of commerce are 
 more or less improved ; and also according to 
 the prevalence of habits of consumption, or 
 parsimony ; that is, as luxury or economy pre- 
 vail. 
 
 13. Price has been already defined to be, the 
 money given for commodities ; and value may 
 be considered as the quantity of commodities 
 exchanged for any given sum of money. 
 
 14. It will, therefore, readily be perceived, 
 that the masSy or stock of money, in actual 
 circulation^ must depend upou all the above 
 circumstances ; which affect circulation.^ And 
 that the general rate of prices, in any given 
 territory, will be in a ratio compounded of the 
 frequency of circulation, and the mass of the 
 money which is in circulation. In other 
 
CHAP. VII.] OF CIRCULATION AND PRICES. 73 
 
 words, that, all the above circumstHnces, or 
 elements of circulation, remaining the same, 
 ])rices will be higher, when the mass of money 
 in circulation is greater; and, on the contrary, 
 that they will fall, as it increases. While the 
 value of money will vary, exactly in an oppo- 
 site direction, with the price of commodities. 
 
 15. It will also appear, that, if these cir- 
 cumstances, which affect prices, vary in them- 
 selves ; prices may remain the same, under 
 very different circumstances : because a change 
 in one element of circulation affecting prices, 
 maybe counterpoised by some opposite change 
 in another element. 
 
 16. Thus prices vary as the mass of money, 
 and as circulation, and its elements. Suppose 
 the mass of money 2, and circulation 3, then 
 2X3 = 6, and if the mass of money be in- 
 creased to 3, and the circulation fall to 2, the 
 product will still remain equal to 6. 
 
 17. Credit, it has been seen, affects the 
 mass of money, by rendering less money neces- 
 sary ; but it gives the same, or a greater effect 
 to a small sum, as would be produced, under 
 like circumstances, by a large sum; and ra- 
 ther increases prices, than otherwise. 
 
74 OF CIRCULATION AKD PRICES. [CHAI*. VII. 
 
 18. The same may be said of trade and com- 
 merce, in all their arts ; except so far as su- 
 perior arts and manufactures increase commo- 
 dities. 
 
 19. With respect to the increase of prices, 
 and their gradual, or sudden rise and fall, this 
 must depend upon sudden, or gradual changes, 
 in the above elements of circulation and of 
 price ; they may, therefore, be said to increase 
 invariably with the rapid increase of money; 
 provided it increases faster than the above ele- 
 ments of population, commodities, and de- 
 mand ; or provided each of them does not keep 
 pace with it. 
 
 20. Now, as the mines of the precious me- 
 tals continue constantly to be worked, and to 
 produce incessantly more and more money ; 
 which is distributed in commerce amongst 
 all nations ; it may be expected, that prices 
 will be incessantly rising. 
 
 21. This is certainly true to a great extent ; 
 but as no state can acquire any quantity of the 
 precious metals, except in exchange for com- 
 modities, or labour; it follows, that this in« 
 crease of money is a great encouragement to 
 the production of commodities ; and that the 
 
CttAP. VII.] OP CIRCUrATION AND PRICES. 76 
 
 proportion of the mass of money in any state, 
 is very slowly increased; though its actual 
 quantity is incessantly augmenting. And, in 
 general, money may be said to bear a very 
 constant ratio, to the increase of commodities : 
 considering money, as the generical term for 
 all coins of the precious metals. 
 
 22. Aristotle is therefore correct when he 
 says, " Money, which represents the value 
 of all other things, varies in its own; but the 
 variations are Less considerable than those of \ 
 most other substances." But this can only 
 
 be true' of money, as a generical term for the 
 precious metals coined into money ; the rate 
 and nominal value of which is not altered by 
 the state. It is true of no other sort of cur- 
 rency ; falsely called money. It is false, when 
 the value of money may be capriciously altered 
 by the state. It is not true, when a money of 
 paper can be created instantaneously ; at the 
 will of the state, or of individuals. 
 
 23. The real cause of this quality of money 
 is, that it is, in its nature, a commodity; raised 
 by labour ; purified with art ; and to be pur- 
 chased only by the exchange of commodities. 
 
 21. Depreciation of money is the increase of 
 
76 OF VARIATION AND PRICES. fcHAP. VII. 
 
 prices. Increase of the value of money is the 
 fall of prices. 
 
 25. Depreciation is a fact to be ascertained 
 by experience ; by the increase in the rate 
 of prices generally ; and more particularly 
 by the increase in the price of arable and 
 pasture land ; which, as it is the chief source 
 of production, and is generally of a steady 
 value, is the best test of the value of money. ♦ 
 
 26. The increase of real money is definite ; 
 and cannot exceed the increase of the quantity 
 of the precious metals by mining. 
 
 27. But the increase of all the representa- 
 tives of money, which depend upon credit, 
 is indefinite; for credit itself has no limit. 
 
 28. The increase of real money is a perpe- 
 tual incitement to commerce ; and also to the 
 production of commodities. 
 
 * See Puffendorff, Lib. v. Cap. 11. ^ec. 15, 16. 
 
CHAP. VIII.] AXIOMS CONCERNING MONEY* 71 
 
 CHAP. VIII. 
 
 Some Axioms concerning Money by way ofreca^ 
 jjitulation, from the foregoing Chapter. 
 
 As the extent and multiplicity of subjects 
 considered in the foregoing chapters may, 
 upon reference be somewhat embarrassing ; 
 it may be convenient to recapitulate some of 
 the most important results, by way of axioms ; 
 in the most concise terms that we can devise. 
 
 Axioms concerning Money, byway of recapi- 
 tulation. 
 
 Of (he Variations in the Value of Money. 
 
 1. Money, which represents the value of 
 ail other things, varies in its own. 
 
 2. But its variations are less considerable 
 than those of most other substances. 
 
 3. It varies as the effective demand for it, 
 and its own quantity or supply. 
 
 4. Both its quantity and its effective de- 
 mand vary, as the commodities by which it 
 
78 AXIOMS CONCERNING MONEY [cHAP. VIII. 
 
 is first purchased, and for which it is ex- 
 changed*. 
 
 5, These exchangeable commodities vary 
 in quantity and value as population and the 
 productiveness and quantity of labour. 
 
 6. Its quantity and effect also vary as the 
 number of exchanges or degree of its circula- 
 tion ; which varies as population ; and as the 
 quantity of commodities ; which also varies as 
 the distribution of wealth ; as the productive 
 arts ; as commerce, and the arts of money 
 dealing ; and as luxury and economy. 
 
 Money a good common Measure, 
 
 8. .Money is a good common measure of all 
 things in exchange. It is indeed the best 
 known. 
 
 9. Exchange is essential to society. 
 
 10. Equality is essential to exchange, and 
 money produces this equality. 
 
 * Money would not be raised, if it were not to be used, 
 or to be exchanged, for commodities. It is, in its very es- 
 sence, a pledge of commodities. 
 
CHAP. VIII.] IN RECAPITULATION. 79 
 
 1 1 . The exchangeable value of money has a 
 tendency to equality every where. 
 
 12. Bat it is never equal in all places; but 
 is constantly fluctuating by the operations of 
 commerce. 
 
 13. To illustrate it by a figure, money, in 
 commerce, is like the water of the ocean ; 
 which is elevated by the swell of the tides per- 
 petually; has a constant tendency to subside 
 into a level; and is, therefore, never stagnant 
 or at rest. 
 
 Price and Value, witat they are and their 
 Changes. 
 
 14. Price is the money given for a commo- 
 dity ; and value ip exchange, the commodity 
 given for money. 
 
 15. Prices vary with the relative quantity of 
 money ; and the stock of coiuinodiues in the 
 market. 
 
 16. The value of money is <^stim8ted by the 
 quantity of commodities whicn it wai par- 
 chase. ^ ,- 
 
 17* Prices determine this value. 
 
80 AXIOMS CONCERNING MONEY [cHAP. VIII. 
 
 18. Increase of money advances prices. 
 
 19. The advance of price is the diminution 
 of the value of money. 
 
 20. Prices are steady or unsteady, when the 
 demand and supply of commodities and of 
 money are regular or steady ; or the reverse. 
 
 21. Prices become steady, when money has_ 
 got into circulation, and measured the price of 
 many commodities. 
 
 Of Wealth, 
 
 22. Wealth is the possession of productive, 
 permanent, and consumable commodities. 
 
 Money ^ a Pledge or Symbol of Wealth. 
 
 23. Money being a pledge or symbol of value, 
 is a pledge of wealth. 
 
 When Increase of Money is Increase of 
 Wealth . 
 
 24. The increase of money, as a pledge, or 
 symbol, can be no increase of wealth, until 
 the wealth, which the pledge, or symbol, re- 
 presents, is forthcoming. And w^hile it de- 
 creases prices, it is no increase of wealth; but 
 
<;map,viii.3 in recapitulation 81 
 
 may become so, by exportation and the pur- 
 Kihase of commodities, which are wealth. 
 
 26, The expectation of this increase may be 
 called convertibility of money into wealth. 
 
 Commerce what, and its Effects on Monei/. 
 
 26. If prices are higher in one place than an- 
 <)ther, commodities will be carried from the 
 one to the other, while the difference wil. 
 pay the charge of conveyance. 
 
 27. This promotes trade and commerce. 
 
 28. Commerce tends to bring prices to a levell 
 
 29. The effects of commerce can only be im- 
 peded by financial and other restrictions ; ex- 
 cept such as are for the maintenance of good 
 faith. 
 
 30. Commerce is necessary to the first intro- 
 duction and continual supply of money. 
 
 31. It circulates money, and effects the ex- 
 change of commodities universally. 
 
 32. It tends to equalize the price of com- 
 
 UO*E L/S^v 
 
8S AXIOMS CONCERNING MONEY [cHAP. VlII. 
 
 modities, and the value of money universally ; 
 except as far as it is impeded by financial re- 
 gulations. 
 
 Medium of Exchange. 
 
 3:3. Money is necessary to commerce as the 
 medium of exchange. 
 
 34. Money is the incitement to commerce, 
 by affording a ready and safe pledge of value 
 and medium of exchange. 
 
 Money the chief Object of Commerce. 
 
 3.5. Money, being considered as a pledge, or 
 symbol, of wealth, is the chief object of com- 
 mercial exchange. 
 
 56. Money can pass from nation to nation, 
 only in exchange for value, in labour or com- 
 modities. 
 
 37. It is exchanged for commodities, when 
 the price is higher where the commodities are 
 to be consumed. 
 
 33. By the above Axioms 15, 18, prices will 
 be higher where the relative quantity of money 
 is greater, and where the productiveness and 
 
CHAP. VIII.] IN RECAPITULATION. 83 
 
 quantity of labour and skill in commerce are 
 less. 
 
 Of the Equalization of the relative Quantity of 
 Money, 
 
 39» By exchange in commerce, the rela- 
 tive quantity of money will be reduced or 
 equalized. 
 
 40. As money is the pledge or symbol of 
 wealth, commodities, being valued in money, 
 pass from nation to nation in exchange ; upon 
 a sense of equality. 
 
 Of Foreign Expenditure. 
 
 41. Labour being valued in money; if any 
 state, by convention, agree to perform certain 
 offices of labour, for another, as in war ; money 
 or commodities must pass to pay for it. The 
 price of such labour is called a subsidy. 
 
 42. This, as well as the pay of armies and 
 agents of the state, in foreign countries, is 
 called foreign expenditure. 
 
 43. Domestic trade occasions a circulation of 
 money, in exchange for labour and commodi- 
 
 g2 
 
84a xrOMS CONCERNING MONEY. [cHAP. VIII, 
 
 ties, and in payment of taxes, or the price of 
 the labour of the state, the one for the other. 
 
 44, Foreign commerce effectuates the ex* 
 change of labour, or foreign expenditure, money 
 and commodities ; to which mav be added the 
 payment of rent and annuities, from the inhabit 
 taat of one country to the inhabitant of another., 
 
 The true Balance or Equality of Commerce, 
 
 A6. In trade and commerce, these articles 
 liiust balance each other equally. 
 
 Commerce spreads the Supply of Money equally. 
 
 46. The quantity of money which passes 
 from one nation to another must be regulated 
 by the supply from the mines and by Axioms 
 6 and 1^. 
 
 47. Commerce equalizes this supply, and dis- 
 perses the money raised at the mines all over 
 the world, 
 
 48. The supply being definite, the circulation 
 of money cannot exceed it. 
 
 False Notion of the Balance of Trade corrected. 
 
 49. The old notion of a balance of trade. 
 
<3HAP. VIII.] I.^I RECAPITULATION* 85 
 
 meaning that an inriportation of money is the 
 only beneficial trade ; is absurd. Such an im^ 
 portation is useful, or otherwise, according as 
 money is the real pledge or symbol of wealth. 
 
 ,50. As money comes into any country by 
 commerce, in exchange for wealth or labour ; 
 it goes outi also, in exchange for wealth or labour. 
 
 ol. A balance of trade invariably on one side 
 Cannot be paid in money ; except where the 
 country paying the balance possesses the ex- 
 clusive property of the mines : or either, an 
 exclusive or superior trade with the country 
 possessing the mines. 
 
 Credit defined, 
 
 59. Credit, in commerce, is a pledge of faith 
 for the payment of money. 
 
 53. Credit gives an apparent increase to the 
 quantity of money ; as money does an apparent 
 increase of wealth. 
 
 Of Bills of Exchange. 
 
 54, Bills of exchange and promissory notes 
 ^re evidences of credit* 
 
S6 AXIOMS CONCERNING MONEY [cHAP. Vlll, 
 
 55, Increase of bills of exchange and pro- 
 missory notes is an apparent increase in the 
 effectual quantity of money. 
 
 56. Credit being a pledge for money, and 
 money a pledge for wealth, wealth is increased 
 by neither, till the things apparently repre- 
 sented by them, that is wealth, is forth- 
 coming. 
 
 Credit affects Prices indefinitely, 
 57* Increase of credit, bills and notes, in- 
 creases prices. 
 
 ^8. Credit, is ideal, and matter of opinion. 
 
 59. Credit does not vary, as the labour and 
 commodities, by which money is first pur- 
 chased ; nor, as the productiveness and quantity 
 of labour. 
 
 60. Increase of credit, and of bills and notes, 
 is indefinite, and has no fixed or definite pro- 
 portion to labour and commodities, or to their 
 production. 
 
 61. Credit beinor ideal has no natural limit. 
 
CHAP. IX. OF COINAGE AND DUTIES. S7 
 
 CHAP. IX. 
 
 Of Coins^ and the Duties of the State^ in regard 
 to Coinaoe. 
 
 1. Bullion is gold or silver, purified to va- 
 
 )US 
 
 made, 
 
 rious degrees of fineness ; from which coin is 
 
 9. Coin consists only of certain portions of 
 the precious metals assayed, weighed, and 
 stamped by the jiuthority of the state, and al- 
 lowed to pass current in all payments. It is a 
 thing so well known in specie, that to describe 
 it is wholly unnecessary* 
 
 3. While coin remains within the territory 
 of the state, by w^hich it is stamped, or by 
 which it is authoritatively allowed, it is call- 
 ed money ; the stamp upon it marking the de- 
 gree of its purity. 
 
 4. The imposition of this stamp is an im- 
 portant duty of the state, which cannot be 
 neglected. For, although, it is apparent, that, 
 when the purity of bullion, or money, is as- 
 certained, a*better measure of value cannot be 
 
8S OF COINAGE, AND DUTIES [cHAP. IX. 
 
 formed ; yet, unless that purity is known, and 
 can be readily discovered, there is, perhaps, no 
 worse measure of value ; because there is no- 
 thing, in which persons may, ordinarily, be 
 so greatly deceived, as in the real quantity of 
 pure gold or silver, in any given bar, or ingot 
 of bullion, or any piece of plate. Hence the 
 gross imposition of those who make base and 
 counterfeit money. 
 
 6, It is true, that science has afforded an- 
 easy method of ascertaining the purity of these 
 metals, by the hydrostatic balance ; which ascer- 
 tains the specific gravity of every metal. But, m 
 early times, this art was not known ; and, for 
 the convenience of exchange, it is necessary 
 that good and bad money should he known by 
 immediate inspection, which can only be done 
 by stamping it in the manner of coin. When it 
 will be readily distinguished, by the correctness 
 of the impression, whether it is genuine ; and, 
 by its perfection, whether it is of full weight, 
 or diminished by wearing. 
 
 6. Fraud, in this article, must be prevented 
 by the severest penalties ; and all states punish, 
 with inflexible rigour, every act of counter- 
 feiting, debasing, or diminishing the coin ; ex- 
 
CHAP. IX.] OF THE STATE THEREI.V. 89 
 
 cept when it is effected at the will of the state 
 itself, or of those who wield its powers. 
 
 7. From the moment that any coin is 
 adopted by the state, all ordinary contracts of 
 exchange will be made, for^ payment in some 
 such coin ; and, in performing them, it is ne- 
 cessary that a definite rule should be laid down 
 by the state, as to the quantity of coin, money, 
 or bullion, which shall correspond to any given 
 denomination ; as a pound sterling. And the 
 settled qugntity of pure gold or silver, in each 
 coin, is called the standard, or fixed purity and 
 alloy; and necessarily fixes its value in ex- 
 change. While the ordaining, that a parti- 
 cular coin, or quantity of gold or silver, shall 
 pass, in all exchanges, with time given for 
 payment ; according to certain rules, as to 
 weight and intrinsic value, is called the legal 
 tender. 
 
 8. These are most necessary and important 
 objects of concern in every state ; whose duty 
 it is to provide for them, with a just attention 
 to the interests of its subjects. For, without 
 them, all money payments, with time, must 
 be rendered uncertain and insecure ; and the 
 greatest confusion introduced. What expe- 
 dients might be adopted, if the state did not 
 
90 OF COINAGE, ANi) DUTIES [CHAP. IX* 
 
 interfere we shall not inquire; though, pro- 
 bably, commercial men would have discovered 
 some means of making their payments in bul- 
 lion, with accuracy and justice. And banks, 
 upon the principle of those of Hamhro and 
 Amsterdam ; where bullion is assayed, depo- 
 sited for safe custody, and transferred from one 
 account to another; would, sufficiently, an- 
 swer the purpose. These banks are, indeed, 
 entirely an artifice of mercantile invention ; 
 and an evidence how easily commerce adapts 
 its usasfes to its actual wants. For the ordinary 
 purposes of life, however, some small coins 
 seem to be absolutely necessary : and these it 
 is the duty of the state to provide. 
 
 9. The nature of money, as a measure of 
 value, has been already sufficiently explained. 
 It is this use of it, which demands the peculiar 
 .attention of the state. If a money could be 
 devised of one of the precious metals only; 
 which should be divisible into portions suf- 
 ficiently minute for the purposes of small 
 change, and the standard be invariably fixed ; 
 a measure of value would *be obtained as per- 
 fect as the nature of money will allow. A 
 permanent standard of value, it has been 
 seen, is not in the nature of things. But, it 
 is clear, that a money, upon the principle of 
 
CHAP. IX.] OF THE STATE THEREIN. 91 
 
 the Hamhro bank, would answer the purpose of 
 small change also ; if the small sums were trans- 
 ferrable to bearer, by notes like those of the bank 
 England. The actual and corresponding deposit, 
 must, in that case, at all times, be retained in 
 specie, in the bank ; ready to be delivered to the 
 holder immediately. The advantage of such a 
 money would be, that it would afford a single 
 and uniform measure of all value in exchange. 
 
 10. As monies or coins are at present made, 
 consisting of different sorts of metal, there is, 
 necessarily, a difference in their comparative 
 values ; which occasions many inconveniences 
 to the circulation of money ; and almost con- 
 stantly affords a profitable speculation to 
 acute money dealers in every nation. 
 
 11. When a state fabricates two species of 
 coin, the one of silver and the other of gold, 
 it ordains, that one shall be exchanged against 
 the other, at a certain rate ; as a guinea for 
 twenty-one shillings ; or a louis d'or for twenty- 
 four livres. By this act, it necessarily fixes 
 a maximum ; and establishes a price, which 
 its subjects cannot exceed. But, whether this 
 price is the just value of gold and silver, com- 
 paratively speaking, can never be truly ascer- 
 tained. It may be the just proportion to- 
 
92 OF COINAGE, AND DUTIES [cHAP. IX* 
 
 day ; but is not so to-morrow* For it is the 
 nature of all commodities, and of gold and 
 silver amongst the rest, to fluctuate in their 
 comparative values : a truth which we shall not 
 further investigate; having already established, 
 at so much length, the real nature of Vjalue in 
 exchange* 
 
 12. The instant, that this relative value 
 alters, a skilful refiner has an opportunity of 
 gaining money, in the easiest manner ; without 
 exciting the suspicion of his simple neigh- 
 bours. He immediately proceeds to collect 
 all the coin of this metal w hich is underrated 
 in the coin, melts it in his crucible, and sells 
 it for plate ; or sends it to some other country, 
 where its true value is obtamed. And thus, 
 in a short time, is all the coin of this kind 
 made to disappear. This happens particularly, 
 when the proportions of gold and silver coins, 
 a valued by the state, are different in neigh- 
 bouring countries. Thus in 1690, in Germany 
 the proportion of value in coins of the country, 
 was as 12 to one, the gold against the silver, 
 in Flanders as 12} to one; in England as 
 15 T to one; and in France as 13 1 to one, 
 Whence, it is apparent, that by coUectinggold 
 in exchange for silver, in any of the above 
 countries, and transmitting it to France, a 
 
CHAP, IX.j OF THE STATE THEREIN. 93 
 
 profit might be made; and particularly by 
 transmitting it from Germany, 
 
 13. This will be sufficient to shew the dif* 
 ficulty there is of affixing justly the relativ^e 
 price of gold and silver, in the coins ; but, if 
 a further practical elucidation of the subject 
 is necessary, it may be obtaintd in the work o^ 
 ^\x James Stewart^ already cited. For, although, 
 in theory, that writer is very defective, as 
 will be observed by the perusal of the fore- 
 going chapters, yet in his statement of facts 
 there is much accuracy. 
 
 14. We shall further illustrate the subject, 
 by analytical calculation. — Suppose the com- 
 mon proportion, throughout Europe, of gold 
 to silver, in value, as 15 to 1, weight for 
 weight ; and let a signify a pound of gold and 
 h a pound of silver : the equation is a = \6b. 
 Then, if any nation values its gold coin in the 
 proportion of 16 to one, it will in coin be a =: 
 \6h ', and each neighbouring nation will send 
 gold to exchange for silver, and gain one six- 
 teenth upon each transaction ; or the same 
 thing will be effected by a refiner, who melts 
 and converts it into plate. 
 
 15. The same thing will happen also, Avhen 
 
04 OF COINAGE, AND DUTIES []cHAP. IX. 
 
 the alloy or impure mixture in coins, is not 
 preserved in equal proportion in silver and 
 gold. Thus let the fine gold, in pure coins be 
 16. c. ; and the fine silver 6. d. ; and suppose 
 it required, to make a coin of gold, only half as 
 fme, the pure gold will be 8. c. Wherefore, 
 to preserve the proportion, of value in the 
 gold and silver coins the pure silver in the 
 latter must be 3. d. For 8. c. 3. d. :: 16 Cp 
 6. d. But, if the proportion is increased in 
 favour of gold, and 8. c. made equal to 4. d, oj* 
 8. c. = 4. d; then will foreigners gain by ex- 
 change, and the refiners, by melting, one fourth 
 part or 25 per cent. And gold w^ill be ex- 
 changed against silver until the whole silver 
 coin is destroyed. 
 
 16. Upon the above suppositions 
 a + 16 c =: 15 b + 6 d 
 a + 8 c = 15 b + 3 d 
 And if the proportion of one is altered it 
 must be set right by the other ; 
 a-i-10c = 30 b-f3 d :: a + 16 c = lo b + 6 d 
 a-l-8c=7-Jb4-6d::a + Sc=15b + 3d 
 It follows, therefore, that the alloy is valued 
 as nothing, in all foreign exchanges. And the 
 standard being equal, it is the quantity which 
 is given for the most plentiful metal, in change 
 for the more rare, that forms the proportion of 
 their value. 
 
fcHAP. IX.] OF THE STATE THEREIN. 9-3 
 
 17. Also, when exchange fs favourable, and 
 without departing from the above rules of pro- 
 portion, so as to leave a difference which may 
 encourage the withdrawing of one of these 
 metals, there is a small advantage in favour of 
 the other ; it is clear the balance will be paid 
 in the preferable metal ; and after a number 
 of years this will be the most abundant 
 in the currency. Besides which, if this metal 
 is the most rare, its being susceptible of 
 fewer divisions,- the commodities of luxury 
 which are purchased by the rich, will be some- 
 what higher in price, than if the preference 
 were given to the more plentiful metal. And 
 as it is easily conceivable, that the more mi- 
 nute are the subdivisions of coin, the greater 
 opportunity there is for depressing the price 
 of commodities in traffic, and dividing the 
 difference betw^een buyers ^nd sellers ; so, if 
 there are not pieces of coin sufficiently small, 
 the poor must feel great inconveniences ; 
 and riches must be very unequally divided. 
 Of course, small money of copper or some 
 coins greatly alloyed become necessary. 
 
 18. But this, two-fold proportion, between 
 the weights and the standard of the different 
 coins, is not the only one necessary to be 
 observed. These constituting the only intrinsic 
 
5)6 OF COINAGE, AND DUTIES [cHAP. IX. 
 
 value of coins, an equal proportion is essential 
 between the divisions and subdivisions of each 
 coin. For example, let there be one quantity 
 of silver m, of the weight a, of a given stan- 
 dard, of the denomination c\ Then is a ^=2 c 
 But let the standard be altered ; that is, sup- 
 pose the quantity of silver m is changed ; by 
 placing instead of any given portion of it, as .r, 
 an equal weight of alloy as y ; while the por- 
 tion of silver m^ in the other coin, remains still 
 of the weight a. Let z be the difference be- 
 tween the real value, and the nominal value of 
 the quantities x and y : and there will be one 
 weight a T=:. c — z. If then the eglislature 
 directs that this weight in money a, of 6ne 
 kind or other indifferently, shall be paid for 
 € ; it is precisely the same thing, as if it should 
 command that c in figures shall be equal to 
 c, — z\ or c, less z — which is impossible. 
 And thus the equality, which is the basis of 
 all exchange, is destroyed. 
 
 19. It must, then, happen, of necessity, that 
 every one will endeavour to make the payment 
 of 6*, in the less valuable coin ; that is in that 
 weight called a, which is equal to c — z \ to 
 which nobody is willing to consent ; and a 
 great interruption of commerce and general 
 disorder follows, by the locking up of all the 
 
C HAP. IX.] DUTIES OF STATE THEREIN. 97 
 
 pieces denominated a which are equal to c. 
 The case would be exactly the same, ir, by 
 any other means, the equality of exchange 
 was interrupted. The most valuable coin 
 w^ouid be no longer circulated. And this prin- 
 ciple is incontestable, namely, that when a 
 state gives, at the same time, two different 
 intrinsic values to the same nominal value of 
 its specie ; or two different nominal values 
 to the same intrinsic value, it stops the circu- 
 lation and diminishes the quantity or general 
 mass of its coins. 
 
 20. Art iri^fance of this now occurs. The dol- 
 lar token is valued at 55. 6c/. and its subdivisions, 
 the 3s, and \s, 6d. tokens, are estimated at the 
 like rate; while a croien is estimated at ^s. 
 and a half-crown at 9s. 6d, Whereas the 
 crown contains sixpenny worth of fine silver 
 more than the dollar token. Again, the bank 
 note is, to many legal purposes, a tender for 
 9Qs, sterlino- : while it is valued bv the bank 
 at 3 dollars, one Is. 6d. token and one shilling. 
 And the guinea sterling, which is worth 21*. 
 sterling silver, or four crowns and one shilling, 
 is required by law to pass for a pound note 
 and a shilling. The pound note is, therefore, 
 the representative of a coin, w^hicih has two 
 
 H 
 
98 OF COINAGE, AND THE [cHAP. X. 
 
 different values. The whole of the good sil- 
 ver 'and gold coins is out of use, and the 
 bank note is never exchanged, except for the 
 bank tokens and some light shillings. 
 
 21. The reason of this is apparent from the 
 principle of exchange ; which being a volun- 
 
 ^ tary contract, can never proceed, except upon 
 the fair principle of a just equality. When 
 this principle is violated, exchange never 
 takes place, without the deception of one of 
 the parties ; when it is properly denominated 
 fraud ; or by the violence of the law ; when law 
 enforces rapine. If, upon any other principle, 
 a man exchanges a crown for a dollar, he 
 gives nine-pence, or more, out of his pocket 
 for nothing, apparently; unless he has some 
 secret interest in imposing upon the bystanders. 
 This act is not an exchange simply, but a gift; 
 with the probable purpose of delusion. 
 
 22. While the people remain ignorant of any 
 disorder in the coinage, these exchanges will 
 pass without notice ; until the most valuable 
 coin becomes scarce, by being withdrawn from 
 circulation, and melted by the refiners. And, 
 during this time, many artful money dealers 
 
 3 
 
CflAP. X.] DUTIES OF STATE THERIEIX, 99 
 
 will profit by the universal ignorance of their 
 countrymen. 
 
 23. From these principles it follows, that it 
 is the duty of the state to watch, with great 
 caution, over its monies ; and not to alter 
 them without absolute necessity, 
 
 24. It is not the simple denomination, but 
 the intrinsic value of the coin, which gives it 
 a value in exchange. If, therefore, the coin 
 is worn, or much diminished in weight, it will 
 be unequal in value to new coin, and cannot 
 be exchans^ed for it. So that if the old coin is 
 suffered to pass by law in payments, no new 
 coin will be made; and that which is good will 
 be melted. So, if an allowance is made for 
 wear in coin ; an opportunity will be afforded 
 to the artful of quickly reducing all new coin 
 to the lowest standard, at whi6h it is permit- 
 ted to pass current. Thus, in the English 
 guinea^ an allowance is made of one grain and 
 four-tenths of a grain for wear. This affords 
 a profit to any one, who is artful enough 
 to reduce all his guineas to this lowest stand- 
 ard. And hence it has followed, that, al- 
 though the actual and fair w^ear of a guinea 
 would not sensibly diminish its weight, in 
 many years ; yet a great part of the coin, which 
 
 H 2 
 
lOD OF COINAGE,' AND THE [cHAP. JXl 
 
 was formerly current in England, was re- 
 duced below the standard ; and nearly all of it 
 was diminished to the lowest current value. 
 
 ^5, The cost price of coining gold in England., 
 is now estimated by Mr, Mushet, of his Ma- 
 jesty's mint, at fifteen shillings in the hun- 
 dred pounds ; which he justly says cannot, 
 upon any principle, create a material rise in the 
 price of commodities, or an alteration in fo- 
 reign exchange. It is probable, indeed, that, 
 as the price of coinage is not valued in foreign 
 exchange, by which, however, the price of 
 commodities must be greatly regulated, the 
 price of coinage is seldom valued in the ex- 
 change of money for commodities ; whatever 
 it may be with regard to bullion. The value of 
 money, hovv^ever, is, principally, as the value of 
 bullion ; which was commonly lower than that 
 of coin, by a small per centage of three shil- 
 lings and seven pence half-penny. This, it will 
 be seen, might be about the real loss of in- 
 terest by coinage ; the cost of which was paid 
 by the government. * ^ 
 
 26. It will not, therefore, be necessary to 
 enter into the question, whether, or not, the 
 coinage should be at the expense of the state ; 
 but it may be assumed, that it should be paid 
 
CHAf». IX.] DUTIES OF STATE THEREIN. 101 
 
 by the owner of the bullion. Because, then, 
 the state might gain some advantage by coin- 
 age, and might freely admit of the exportation 
 of its coin. While, for the purpose of pre- 
 venting the frauds above alluded to, it might 
 strictly preserve the standard ; by allowing no 
 coin to pass current, except at the full weight ; 
 or with a very small allowance for wear. 
 
 27. At present, the recent issue of tokens 
 from the bank of England^ supplies the only 
 metallic currency of considerable value. All 
 the shillings are reduced greatly below the 
 standard ; or they could not pass current with 
 the bank tokens : and it may be safely pre- 
 dicted that, in a short time, the arts of the 
 money dealers will reduce the whole of this 
 silver currency greatly in value. It is only 
 necessary to use a simple process to re- 
 duce any silver coin, imperceptibly ; by a 
 per centage, which will yield a tempting profit 
 10 the dealers ; and, as this currency has now 
 no regular standard, the public are exposed to 
 the greatest frauds ; without any adequate se- 
 curity. 
 
 28. If the current coin were not allowed 
 to pass, except in a very perfect state, means 
 would be found of adopting banks of deposit 
 in every town ; upon the principle of the 
 
10f2 OF COINAGE, AND THE [CHAP. X. 
 
 Hamhro bank, by which the wear oi the coin 
 would be greatly prevented. It would then 
 be possible to render every piece equal or 
 nearly so in value. For, without these deposits, 
 as soon as the coin becomes worn, there is al- 
 ways a temptation to cull out the heaviest 
 pieces ; and reduce them to the lowest cur- 
 rent value. 
 
 29. In regard to the true value of a guinea 
 and a pound note, the following appears to be 
 a tolerably accurate calculation ; although, 
 it is rather too high as to the bank note ; be- 
 cause the dollar token is not made of silver 
 equally pure, with the English statute coin, 
 weight for weight. 
 
 30. Thus a bank three shilling token weighs 
 9 dwts. 1 1 grs. or 227 grs. and the weight of 
 three shiUings is 1 1 dwts. \5 grs. or 279 grs. 
 
 Therefore 7 tokens are = to 1589 grains of 
 silver, and 21 shillings =: i9o3 ditto ditto. 
 
 Therefore a guinea: 6 tokens :: 195^: 1589. 
 
 Therefore a guinea is equal to ^ ' ^^q" 
 
 tokens ; equal to - — — - tokens ; which is 
 
 equal to 8 tokens Is. c)|H. -ffr-f c>r a guinea is, 
 equal to 2os. 6|d. bank currency. 
 
CHAP. XI. I DUTIES OF STATE THEREIN. 103 
 
 Now by deducting 93 grs. (the weight of ^a 
 shilling) from 19^3; and 76 grs. (the weight 
 of i token) from 1589', we shall have a one 
 pound note : 20s. :: 1513 : 1860. 
 
 Therefore the one pound note is equal to 
 
 20+ 1513 , .„. , . .'^04()0 , .,,. 
 
 — -1-T shillmffs; equal to -"tt- shilhngs ; 
 
 18()0 ^ ^ 1S()0 ^ 
 
 equal to l6s. 4|d. -14 J or a one pound note is 
 about equal to l6s. 4-J-d statute currency. 
 
 31 . We may therefore state the proportion of 
 these currencies nearly as follows ; viz. — A 
 guinea is as 1953 grains of silver ; a pound 
 note as 1589 grains of silver; a shilling 93 
 grains ; a bank shilling as 76 grains of silver. 
 A guinea equal to 96s, 91 bank money ; and 
 a pound note eqyal to 16^. 4c?. i f4"- 
 
104 DEBASING COINS [CHAP.X. 
 
 CHAP. X, 
 
 Of debasing the Coins by the State^ and the mis-' 
 chievous Effects thereof; and how ihe same 
 thing is effected by Paper Money, 
 
 1. As coin, or money, is rendered less valua- 
 ble, by diminishing either its weight or purity ; 
 it has frequently happened, that the ruling 
 powers of every nation have, by all these 
 methods, for particular purposes, and for tem- 
 porary advantages, diminished the value of 
 the coins, retaining their nominal values. 
 
 2. The purpose immediately in view was the 
 liquidation of the debts of the state ; when the 
 sovereign, having a certain quantity of coin in 
 his treasury, was desirous of paying his 
 debts at an easier rate. Thus, if the king owes 
 one million of guineas to his subjects, and has 
 five hundred thousand in his coffers, it is easy 
 to coin these into a million guineas of a new 
 standard, and to pay, in this new coin, the 
 whole of the old debt, 
 
 3. Although this is a plain fraud, the ruling 
 powers in all states, in early times, have com- 
 
CHAP. X.] BY THE STATE. 105 
 
 mitted it. Biit there is reason to hope it will 
 not be attempted again ; at least, not for the 
 same reason. Fraud is seldom long-sighted ; and 
 frequently injures itself. On a great scale it 
 is productive of pure mischief, and is an ad- 
 vantage to no one. And so it has happened 
 with the monarchs, who have wantonly altered, 
 or debased, their coinage. 
 
 4. Their debtors are paid, by compulsion, iii 
 the new coin ; which immediately sinks in va- 
 lue, with respect to commodities, and to the 
 old coin. Its value is in the exact propor- 
 tion of its weight in bullion, compared 
 with the old coin. And, at this rate, only, it 
 passes in all future exchange 
 
 res. 
 
 6, It then follows, that if the monarch 
 omits to increase his taxes, his future revenues 
 cease to be equally productive in real wqalth. 
 
 6. In all future contracts, the price of com- 
 modities is immediately raised upon him ; and 
 if " he is paid in his own coin," a vulgar 
 phrase drawn from this bad practice, and de- 
 noting retaliation and severe retribution, he be- 
 comes poorer than before. If he should increase 
 lis exactions, he is rendered odious, and is 
 execrated as a tyrant. His ministers soon fail 
 
105 DEBASING COINS {cHAP. X. 
 
 to serve him, in this fraudulent practice. For 
 they speedily discover, that, as exchanges 
 are continually circulating, the evil is con- 
 stantly returning upon themselves. Their sa- 
 laries are paid in the debased coinage: in other 
 words, they are diminished, in an equal de- 
 gree as the public is defrauded. The army, 
 also, discovers the fraud, and revolts at the 
 measure^ unless its pay is immediately in- 
 creased. 
 
 7. Without ministers and an army, a mo- 
 narch is a feeble being. He is, absolutely, 
 without power. When, therefore, a scheme is 
 proposed, in which, neither his ministers, nor 
 his army, will assist him, the monarch must 
 desist from his design, or submit to be de- 
 posed, 
 
 8. What is the principle of this ? The equa- 
 lity of exchange is broken, by attempting to 
 make a guinea pass for half its value ; or half 
 its value be exchanged for a guinea. Society 
 cannot exist without exchanges; nor exchanges 
 take place without equality. This is one of th^ 
 first laws of nature, which are inviolable. N( 
 tyrant, however powerful, can break it. Th' 
 
CHAP. X.] BY THE STATE. 107 
 
 equity of commerce discovers the fraud, and 
 circulation ceases, till the error is corrected. 
 
 9. Whenever this attempt has been made, it 
 has failed ; because it is a fraud too palpable to 
 be concealed ; too gross to be palliated ; too 
 violent to be endured. The remedy is in the 
 hands of every one ; the knovv^ledge of the re- 
 medy is w^ith every one ; and it is instantly re- 
 sorted to. Power thus finds a natural limit. It 
 is defeated by knowledge ; it is stripped of its 
 hands ; it finds no agents to perpetrate its 
 misdoings. For it is a truth of eternal force, 
 that powder will never find a voluntary agent of 
 gratuitous mischief. The agents of mischief, 
 must share in its gains ; they will not become 
 odious without compensation. 
 
 10. Would,' therefore, a monarch in future, 
 interfere with the coinage by debasing it, he 
 must expect that all exchanges upon an ine- 
 quality will cease. He must, therefore, stop 
 the circulation of money ; and raise all the 
 wealth necessary for his dignity and support ; 
 for the pay of his soldiers and his ministers ; 
 by simple requisitions. 
 
 11. One reason why these frauds have not 
 succeeded is, because they are of easy detep- 
 
lOS PAPER xMONEY [cHAP. X. 
 
 tion ; for even the debasement of money, by ad- 
 ding to the alloy, is speedily discovered. They 
 can also be repeated only at distant intervals, 
 when the treasury is full. Besides which, it 
 takes some time to complete the coinage ; and 
 the operations of the state must be almost sus- 
 pended for the interval. 
 
 12- Were a means discovered of concealinsr 
 the evil, and repeating it slowly, imperceptibly, 
 by easy degrees, and without checking the 
 circulation, it would probably be resorted to, 
 even in this enlightened age. 
 
 1 3. It will be shewn, hereafter, that a paper 
 money affords the means of doing this, in a 
 very effectual manner, for a long time. 
 
 14. Paper money was introduced about the 
 time, when the monarchs of England ceased 
 to debase the coin ; and it has been resorted 
 to by every state in Europe^ and by the re- 
 public of America. Its mischievous effects 
 have, in many states, been most severely felt; 
 and it has then ceased to obtain any currency. 
 
 \5. In England its currency is universal; 
 but it is formed upon a system so complete and 
 so intricate ; yet so moderated by certain 
 elements which tend to its support; that 
 
CHAP. X.] IS DEBASED CURRENCY. lOQ 
 
 its mischiefs have not been felt ; to such a 
 degree, as to render it either intolerable or 
 odious. 
 
 16. It will require a long and perhaps 
 tedious investigation to unravel the mystery : 
 but, in the elements of the science ofmoney^ this 
 fact must be made to appear; or the work 
 will' be justly deemed defective. 
 
 17. How a paper money of some kind, may 
 be made to produce the effect of debasement 
 jcan thus briefly be demonstrated. 
 
 IS. Suppose a sovereign to institute a bank 
 or banks upon the principle of a deposit or of 
 a pawnbroker's shop; and to raise, by force 
 or on loan, all the money of his people. This he 
 might deposit in his treasury ; in order to pay his 
 foreign troops : and, for every guinea and shil- 
 4ing thus raised, he might give a note, check, 
 token or duplicate ; in exchange for which he 
 promises to return the money pledged, either 
 on demand, or at a future day. 
 
 19. Before tjie day comes, he privately crc^ 
 ates new notes or duplicates, as like the former 
 as possible ; with the same stamp of authority. 
 No one can see a difference ; no one is ac- 
 
no PAPER MONEY [CHAP.X. 
 
 quainted with the actual sum in the treasury. 
 They cannot be weighed ; they cannot be rung 
 on the counter first, and then nailed to it ; 
 as bad shillings are, to stop their circulation. 
 The notes pass for exactly the same sum as 
 they did originally. 
 
 20. They are increased gradually, from day 
 to day, and their effect is slowly perceived in 
 the rise of prices. For such an increase of 
 money necessarily raises prices. Land grows 
 dearer ; bread rises constantly ; wages can- 
 not keep pace with it ; the poor starve ; the 
 rich find their incomes inadequate to their 
 expenditure. All this has passed for years, with- 
 out any one suspecting the cause. The truth 
 is, the monarch has been secretly debasing his 
 money ; violating his compact ; infusing, daily, 
 not a base metal, but a quantity of bad faith 
 into his new paper coin. But as bad faith is a 
 quality of which no subject can suspect his 
 monarch ; a few calculators onlv, discover it ; 
 but no one speaks out, and the notes conti- 
 nue to circulate. 
 
 21. At length, the demands of the state 
 increase rapidly ; the money must be increased 
 with equal rapidity ; and prices rise as rapidly. 
 With the rise of prices, the demands of the 
 
€HAP. X.3 IS DEBASED CURRENCY. Ill 
 
 state increase ; the pay o^ the army becomes 
 insufficient; the army demands an increase; 
 more new paper money must be issued ; and 
 prices still increase. The officers of the state 
 require higher salaries ; the army again de- 
 mands higher pay ; and more money is again 
 made. 
 
 22. Till, at last, it is found, that increase 
 of money and rise of prices revolve in an 
 endless circle. The money is increased; 
 but not its effect. General discontent pre- 
 vails ; the ministers find it of no use to con- 
 tinue to struggle against the law of nature ; 
 which, by the equality of exchange, constant- 
 ly defeats their purpose. Justice is then re- 
 sorted to, as the only policy which can restore 
 public tranquillity; the coinage is reformed; 
 and the state by adhering to good faith reco- 
 vers its equilibrium. 
 
 23. This exact career has been run by nearly 
 all the nations of Europe, England only ex- 
 cepted. And, if we look to France we shall 
 find that, during the revolution, all the most 
 violent commotions happened during the cur- 
 rency of paper money, or while its ruinous 
 effects were fresh in recollection. Napoleon, 
 the emperor of the extended dominion of 
 France, notwithstanding his military talents. 
 
112 PAPER MONEY [CHAP>X. 
 
 probably owes the stability of his reign to the 
 having fixed or prescrv^ed the pure standard of 
 the French coins ; and thus maintained public 
 credit : or rather to the having had so little 
 recourse to public credit, as respects money, 
 that it is not to be regarded. 
 
 2-k The mischiefs of paper money are well 
 known ; and a paper, issued by the state, is, 
 generally deemed odious in EnQ;land. it would 
 probably be too revolting to the parliament to 
 adopt it; and the virtues of the Brunswick 
 line of kings are too well known, to believe 
 that they would willingly yield their sanction 
 to it. 
 
 ^6, A paper currency is, however, univer- 
 sal in England ; but its influence is not as 
 yet of equal malignity with that which we 
 have hitherto described. 
 
 26. That it will in time be felt, and will be 
 destroyed is capable of de.non strati on ; for 
 no paper money can differ, in its real effect, 
 from that which we have described. Its 
 poison may be concealed ; and it may be 
 sw^allowed greedily. It may be administered 
 in small doses, and, like opium, may stimulate 
 ^with pleasure ; long before it destroys w^th 
 
CHAP. X.] IS DEBASED CURRENCY. 115 
 
 Stupefaction. It may giv.6 a temporary vigour 
 to the trader ; but it saps the constitution. 
 
 27. Before we proceed to our detailed ac- 
 count of the paper money of Eng^land, let us 
 attempt a brief and ready demonstration that 
 all paper money must have the same effect 
 as debasement. It will satisfy the rapid glance 
 of those less cautious and scientific inquirers, 
 who seek to know all things by intuition. 
 It will lay bare the principle of the science, 
 while it leaves the practice of the art to be 
 slowly acquired. 
 
 28. By collecting the whole money of a 
 nation, and issuing paper in exchange, we 
 have shewn how easily a monarch may de- 
 base it. By collecting all the money in the 
 state, and issuing notes, it will be easy for 
 a bank to do the san^e thing. By collect- 
 ing but half, and issuing notes equal to tvvice 
 the other half, it will render the whole cur- 
 rency of less actual value, by one fourth. 
 The pure metal in this case is the coin ; the 
 alloj/ is the credit of. the bank, whether founde4 
 upon public or on private faith. 
 
 S9. The same effect is produced in the rise 
 
IM PAPER MONEY, &C- [cHAP. X. 
 
 of prices ; the same increase in the money or 
 paper price of land; the same inadequacy of 
 wages to support life; the same insufficiency 
 of the pay of soldiers to maintain respect; the 
 same want of the means of luxury renders 
 the rich discontented, and ministers them- 
 selves uneasy in their post, unsettled in their 
 state. 
 
 30. The crown itself is not exempt from th^ 
 #ril. The revenue of the state is deficient, and 
 its deficiency daily increases. 
 
 SI. We shall explain the whole, in due 
 course ; but for the present we will assume, 
 from t)ur brief demonstration, that all paper 
 currency is debased money ; always accom- 
 panied with deception ; but sometimes with- 
 out intentional fraud ; as we sincerely believe 
 to be the case with respect to the English 
 currency. 
 
CHAP. XI.] SUCCESSIVE DEBASEMENTS. ,115 
 
 CHAP. XI. 
 
 Of the successive Debasements of the English 
 Coin : the Prerogative of the Crow7i relative 
 to Coin; and the Law of Nature thereon, 
 
 1. The successive debasements of the English 
 
 coin may be most clearly stated, by giving 
 
 a table of the weight of a pound sterling at 
 
 several successive periods. 
 
 V 
 
 2. Thus, according to Lord Liverpool's 
 
 statement*, the Tower pound of silver was 
 coined in 
 
 A. D. 
 
 
 
 s. 
 
 d. 
 
 
 
 
 1066 
 
 into 
 
 20 
 
 
 
 
 
 
 1300 
 
 - 
 
 - 
 
 20 
 
 3 
 
 
 
 
 1344 
 
 - 
 
 - 
 
 ^^ 
 
 2 
 
 
 
 
 1346 
 
 - 
 
 - 
 
 22 
 
 6 
 
 
 
 
 1353 
 
 - 
 
 - 
 
 ^5 
 
 
 
 
 
 
 1412 
 
 - 
 
 - 
 
 30 
 
 
 
 
 
 
 1464 
 
 - 
 
 - 
 
 3 
 
 6 
 
 
 s. 
 
 d. 
 
 1527 
 
 - 
 
 m 
 
 42 
 
 2i 
 
 Pound 
 
 Troy 45 
 
 
 
 1560 
 
 . 
 
 . 
 
 56 
 
 3 
 
 . 
 
 60 
 
 
 
 1601 
 
 M 
 
 - 
 
 58 
 
 1| 
 
 • 
 
 62 
 
 
 
 * See a Treatise on the Coins of the Realm ; in a Letter to 
 die King, by Charles Earl of Liverpool Cadell, 180^. 
 
 I 2 
 
116 SUCCESSIVE DEBASEMENTS [CHAP. Xl^ 
 
 3. By these successive debasements, fron^ 
 William the First to Elizabeth, therefore, the 
 pound in tale, or 205., was nearly reduced tq 
 one third of its primitive weight*. 
 
 ^ Afterwards in the reign of King Charles the II. simi- 
 lar attempts were projected. The following short tract of 
 Sir Robert Cotton is scarce ; and as it contains impor- 
 tant information on the subject, and clearly shews that oux 
 ^octrines are nc|t novel or rash, we shall insert it in 
 form of a note. 
 
 yf Speeckf made hy Sir Robert Cottoif, Knight and Ba- 
 ronet, be/ore the Lords of His Majesty's most Honorable 
 Privy Council, at the Councel Table; being thither 
 failed to deliver his Opinion, touching the Alteration of 
 Coynt. % Sept. ^nnoque Regni Regis Caroli 2. 
 
 My Lq|Ids, 
 
 Since it hi^th pleased this honourable table to com- 
 mand, amongst others, my poor opinion concerning this 
 ^eighty proposition qf money, I most humbly crave par- 
 don; if with that freedom tjiat becomes my duty to my 
 good and gracious master, an^ my obedience to your great 
 coinmand, I deliver it sp up. 
 
 I cannot (my good Lords) but assuredly conceive, that 
 this intended prefect of enhancing the coin, will trench 
 both intp the honour, the justice, and the profit of my 
 jroyaJ naaster very far. 
 
 AU estate^ ^QSt^hd ma^isfam^ ^"^^ ^h ^f Trn^us saith 
 3 
 
 I 
 
CHAP. XI.] OP ENGLISH MONEY; 1 17 
 
 4. The debasements, which were made in 
 the coin during this period, were partly effect- 
 
 of Rome : and wealth in every kingdom is one of the essen- 
 tial marks of their greatness : and that is best expressed in 
 the measure and purity of their monies. Hence was i* 
 that so long as the Roman empire (a pattern of best go- 
 vernment) held up their glory And greatness, they ever 
 maintained, with little or no charge, the standard of their 
 coin. But after the loose times of Commodus had led ill 
 need by excess, and so that shift of changing the standard^ 
 the majesty of that empire fell by degrees. And as V<^ 
 piscas saith, the steps, by which that state descended, were 
 visibly known most by the gradual alteration of their coin. 
 And there is no surer symptom of a consumption in state 
 than the corruption in money. 
 
 What renown is left to the posterity of Edward tbe, First 
 in amending the standarcl, both in purity and weight from 
 that of elder and more barbaroi^s times, must stick as a 
 blemish upon princes that do the contrary. Thus we see it 
 ^as with Henry the Sixth ; who, after he had begun with 
 abating the measure, he after fell to abating the matter ; 
 and granted commissioni to Missenden and others to prat!- 
 tise alchfemy to serve his mint. The extremity of the state 
 in general felt this aggrievance ; besides the dishonour it 
 laid upon the person of the king, was not the least ad^ 
 vantage his disloyal kinsiiian took to ingrace- himself into 
 the people's favour, to his sovereign's ruim 
 
 When Henry the Eighth hacj gained ds much of powiHtv 
 and glory abroad, of love and obedience at home, as ever \, 
 any ; he suffered shipwreck of all upon this rock. 
 
 When his daughter qneen Elizabeth came to the crowns 
 
!18 SUCCESSIVE DEBASEMENTS [cHAP. XI, 
 
 ed for the purpose of augmenting the revenue 
 by the seignorage which was subtracted frona 
 
 she was happy in council to amend that error of her father ; 
 for, in a memorial of the Lord Treasurcir Burleigii's hand, 
 I find that he and Sir Thomas Smith (a grave and learned 
 man) advising the queen that it was the honour of her 
 crown, and the true wealth of her self and people, to re- 
 duce the standard to the ancient purity, and purity of her 
 ]^eat grandfather King Edward IV. And that it was not 
 the short ends of wit, nor starting holes of devices that can 
 sustain the expence of a monarchy, but sound and solid 
 courses: for so are the words. She followed their advice, 
 and began to reduce the monies to their elder goodness.) 
 stiling that work in her first proclamation Anno 3. A 
 famous act. The next year following, having perfected it as 
 it after stood; she tells her people, by another edict, that she 
 had conquered now that monster that had so long devoured 
 them, meaning the variation of the standard : and so long 
 as that sad adviser lived, she never (though often by pro- 
 jectors importuned) could be drawn to any shift or change 
 in the rate of her monies. 
 
 To avoid the trick of permutation, coin was devised, as a 
 rate and measure of merchandise and matiufactures ; which 
 if mutable, no man can tell either what he hath, or what 
 lie oweth, no contract can be certain, and so all commerce, 
 both public and private, destroyed; and men again en- 
 forced to permutation with things iK)t subject to wit or 
 fraud. 
 
 The regulating of coin hath been left to the care of princes, 
 who are presumed to be ever the fathers of the common- 
 wealth/ Upon their honours they are debtors ancf'^war* 
 
CHAP. XI.] OF ENGLISH MONEY. U9 * 
 
 the coin on its refabri cation, and partly with 
 the view of relieving the crown from its ex* 
 
 ranties of justice to the subject in that behalf. They can- 
 not, saith Bodin, alter the price of the monies, to the pre- 
 judice of the subjects, without incurring the reproach of 
 Faux monnoyeiirs* And therefore the stories term Philip de 
 Bell, for using it, Fahijicateur de moneta. Omnino mO' 
 netct integritas debet qtieri ubi vultus noster imprimitur, 
 saith Theodoret the Goth, to his mint-master, Quidnam 
 erit tuiuni si in nostra pcccetur effigie? Princes must not 
 suffer their faces to warrant falsehood. 
 
 Although I am not of opinion with Mirror des Justices^ 
 the ancient book of our common law, that Le roy ne pott 
 sa mony empeirer ne amender sans Vassent de touts ses 
 counts, which was the greatest council of the kingdom ; yet 
 can I not pass over the goodness and grace of many of our 
 kings : (As Edward the First and the Third, Henry the 
 Fourth and Fifth, with others, who, out of that rule of this 
 justice. Quod ad omnes spectat,db omnibus debet approbariy 
 have often advised with the people in parliament, both for the 
 alloy, weight, number of pieces, cut of coinageand exchange:) 
 and must, with infinite comfort acknowledge, the care and 
 justice now of my good master, and your lordships wis- 
 doms, that would not, upon information of some few officers 
 of the mint, before a free and careful debate, put in exe- 
 cution this project, that I much (under your honour's fa- 
 vour) suspect, would have taken away the tenth part oi^ , 
 every man's due debt, or rent already reserved througho.ut 
 the realm, not sparing Ihe king ; which would have been 
 little lesa.timn a species of that which the Roman stories call 
 
t20 SUCCESSIVE DEBASEMENTS [cHAP. XT- 
 
 igencies, by enabling it to liquidate its debt» 
 with a smaller sum of money. 
 
 Tabul(B novee, from whence very often seditions have 
 sprung : as that of Marcus Gratidianus in Livy, who pre- 
 tending in his consulship, that the current money was 
 wasted by use, called it in, and altered the standard ; which 
 grew so heavy and grievous to the people, as the author 
 saith, because no man thereby knew certainly his wealth, 
 that it caused a tumult. 
 
 In this last part, which is, the disprofit this enfeebling the 
 coin will bring both to his Majesty and the common wealth, 
 I must distinguish the monies of gold and silver, as tliey 
 are bullion or commorlities, and as they are measure : the 
 one, the extrinsic quality, which is at the king's pleasure, 
 as all .other measures, to name ; the other the intrinsic quap- 
 tity of pure metal, whicli is in the merchant to value. As 
 then the measure shall be either lessened or enlarged, ' so is 
 the quantity of the commodity that is to be exchanged. If 
 then the king shall cut his. shilling or pound nominal lesd 
 than it was before, a less proportion of such commodities as 
 shall be exchanged for it, must be received. It wust then 
 of force follow, that all things of necessity, as victuals, ap- 
 parel, and the rest, as well as those of pleasure, must be 
 inhanced. If then all men shall receive, in their shillings 
 wid pounds a less proportion of silver and gold than they 
 did before this projected alteration, and pay for what they 
 buy a rate enhanced, it must cast upon all a double loss. 
 
 What the king will suffer by it in the rents of his lands» 
 is ctemonstrated enough by the alterations since the 18 
 of Edward the Third, when all the revenue of the ctow> 
 
CHAP. XI.] OF ENGLISH MONEY, 12l 
 
 6, According to Lord Liverpool, the silver 
 subtracted on re-coinage, or the dues of seig- 
 
 came into the receipt pondere et numero, after five groats ia 
 the ounce, which since that time, by the several changes of 
 the standard is come to five shillings, whereby the king 
 hath lost two third parts of his just revenue. 
 
 Id his customs, the best of rate being regulated by 
 pounds and shillings, his majesty must lose alike ; and so 
 in all and whatsoever monies that after this he shall receive. 
 
 The profit by this change in coinage, cannot be much, 
 nor manent. In the other the loss lasting, and so large, 
 that it reacheth to little less than yearly to a sixth part 6f 
 his whole revenue : for hereby in every pound tale of gold 
 there is nine ounces, one penny weight, and 19 grains loss, 
 which is 2^ 1. in account, and in the 100 1. tale of silver 
 09 ounces, which is 14 1. 17s. more. 
 
 And as his majesty shall undergo all these losses hereafter 
 in all his receipts ; so shall he no less inmany of his disburse- 
 ments. The wages of his soldiers must be rateably ad- 
 vanced as the money is decreased. This Edward the Third 
 (as appeareth by the account of the wardrobe and Ex- 
 chequer) as all the kings after were enforced to do, as often 
 as they lessened the standard of their monies. The prices of 
 what shall be bought for his majesty's service, must in like 
 proportion be inhauced on him. And as his majesty hath 
 the greatest of receipts and issues, so must he of necessity- 
 taste the most of loss by this device. 
 
 It will discourage a great proportion of the trade ia 
 England, and so impair his majesty's customs. For that. 
 
122 SUCCESSIVE DEBASEMENTS [cHAP. XI. 
 
 norage, sometimes amounted to a considerable 
 sum, as the frauds which were practised, ia 
 
 part (being hot tlie least) tliat payeth upon trust and credit 
 vill be overtlirown ; for all men being doubtful of dimi- 
 nution hereby of tlieir personal estates, will call in their 
 monies already out, and no man \\'ill part with that which 
 is by him, upon such apparent loss as this must bring. 
 What danger may befal the state by such a sudden stand 
 of trade, I cannot guess. 
 
 The monies of gold and silver formerly coined and 
 abroad, being richer than these intended, will be made for 
 the most part thereby bullion, and so transported ; which I 
 conceive to be none of the least inducements that hath 
 drawn so many goldsmiths to side this project, that they 
 may be thereby factors for the strangers, who by the low- 
 ness of minting (being but 2s. silver the pound weight, 
 and 4s. for gold ; whereas with us the one is 4s. and the; 
 other 5s.) may make tliat profit beyond sea they cannot 
 here, and so his majesty's mint unset on work. 
 
 And as his majesty shall lose apparently in the altera 
 ation of monies a 14th m all the silver, and a 25th part in 
 all the gold he after shall receive ; so shall the nobility,' 
 gentry, and all other, in all their former settled rents, 
 annuities, pensions, and loans of money. The like will fall 
 upon the labourers and workmen in their statute-wages : 
 and as their receipts are lei?sened hereby ; so are their- 
 issues increased, either by improving all prices, or dis- 
 furnishing the market, which must necessarily follow." 
 For if in 5 Edward C, 3 Mary, and 4 Elizabeth, it ap- 
 peareth by the proclamations, that a rumour only of an 
 
CHAP. XI.] OF ENGLISH MONEY. 12S 
 
 the-remedy of the coin and the admixture of 
 alloy materially contributed to its augmen- 
 tation. 
 
 alteration caused these efFects, punishing the author of 
 siucli reports with imprisonment and pillory ; it cannot he 
 doubted but the projecting a chanpje must be cf far more 
 consequence and dangqr to the $tate, and would be 
 wished that the actors and authors of such disturbances 
 in the common wealth, at all times hereafter might undei^ 
 ^o a punishment proportionable. 
 
 It cannot be held (I presume) an advice of best judg- 
 ment that layeth tlic loss upon ourselves, and the gaiii 
 upon our enemies : for who is like to be in this the greater 
 thriver ? Is it not usual, that the stranger that transportetii 
 over monies for bullion, our own goldsmiths that are their 
 brokers, and the foreign hedgminters of the Netlierlands 
 (wliich terms them well) have a fresh and full trade by this 
 abatement ? And we cannot do the Spanish King (our 
 greatest enemy) so great a favour as by this, who being 
 the lord of this commodity by his AVest Indies, we shall 
 so advance them to our impoverishing ; for it is not in the 
 power of any state to raise the price of their own, but the 
 value that their neighbour princes acceptance sets upon 
 them. 
 
 Experience hath taught us, that the enfeebling of coin 
 is but a shift for a while, as drink to one in a dropsy, to 
 make him swell the more: But the state was never 
 thoroughly cured, as we saw by Henry the Eighth's time 
 and the late Queen's, until the coin was made up again. - 
 
124 SUCCESSIVE DEBASEMENTS [CHAP.Xt. 
 
 6, The familiar habit of circulating money 
 by tale, instead of by weight, had given rise 
 to an opinion that government was enabled to 
 affix on the coin an arbitrary value, and that 
 it was only necessary to declare, that such a 
 piece of money should be a legal tender for 
 such a sum, in order to make it permanently 
 pass for so much value. But though, in the 
 common intercourse of society, any given coin, 
 impressed with a particular stamp, and design 
 nated by a particular term, may pass current by 
 tale from a confidence in the government, 
 which publishes it, without any consideration 
 of its weight ; yet when, from an alteration 
 in the standard, it no longer indicates the 
 same quantity of metal, which it antecedently 
 
 I cannot but then conclude (my honourable lords) that 
 if the proportion of gold and silver to each otiier be 
 wrought to that parity, by the advice of artists, that 
 neither may be too rich for the other, that the mintage 
 may be reduced to some proportion of neighbour parts, 
 and that the issue of our native commodities may be 
 "brought to overburthen the entrance of the foreign, we 
 need not seek any way of shift, but shall agaiu see our 
 trade to florish, the mint (as the pulse of the common- 
 wealth) again to beat, and our materials, by industry, 
 to be a mine of gold and silver to us, and the honour, 
 justice and profit of his majesty (which we all wish and 
 nork for) supported. 
 
CHAP. XI.] OF ENGLISH MONEY, ' 1^5 
 
 expressed, it is immediately deeried, and cir- 
 culated at the value which it actually contains, 
 
 7. The mischief of these debasements ex- 
 tended, therefore, through all the gradation^ 
 of society ; and in every relation of private 
 life, maintained by the paym.ent of a fixed 
 income, an injury was sustained,*. 
 
 ♦ Dr, Hejirj^ in liis History of Britain has ably illustrated 
 the effects which they produced. 
 
 ,** Though our kings and great barons," he says, "werp 
 tlie chief promoters of the diminution of the weight and 
 value of the coin, they were by far the greatest sufferers by 
 that imprudent measure ; for by that means all the fixcii 
 annual payments that were due to them from their sub- 
 jects and vassals, were much diminished in their real 
 value, though they continued the same in name ; they re- 
 ceived the same number of pounds, which had been 
 originally stipulated, but these pounds did not contain 
 the same quantity pf silver, and would not purchase the 
 same quantity of goods with those in the original stipula-j,, 
 tion. The king and the nobility discovered the error they 
 had made and the loss they had sustained, and endeavour- 
 ed to apply a remedy, but it was not the natural and only , 
 /effectual one of restoring the coin to its original weight and , 
 purity. An act of parliament \yas made in 1467 to the fol- 
 lowing purpose : * that all debts should be paid in the same^ 
 jpubstance or quantity of silver, as at the time of making the 
 ppntracts,' This law was certainly very equitable, but it is 
 j^l^vious the ^xecut^on of it would be attended with many " ^ 
 
l^') OF ROYAL PREROGATIVE [cHAP. XI. 
 
 ' 8. In estimating the value of money in 
 the age between William the First and Eli- 
 zabeth with the value of money in the pre- 
 sent times, it is necessary to convert the 
 money of the particular reign into the money 
 of the present times, for the purpose of re- 
 *i^ucing them to a common standard. This 
 reduction may be effected by the follow^ing 
 table of the specific gravity of our coin from 
 William the First to Elizabeth^ construct- 
 ed in the able and elaborate treatise of Mr. 
 Folkes*. 
 
 difficulties, and productive of many disputes, and that it 
 would be no easy matter to persuade vassals, tenants, and 
 debtors of all kinds, to pay a greater number of pounds, 
 shillings, and pence, than they were bound to pay by their 
 original obligations. There is sufBcient evidence still re- 
 maininof, "that though several laws were made of ,the same 
 tenor witli that above, none of them could be executed* 
 and that the several feudal payments, due by the vassals of 
 iHe king and barons, by the successive changes of the coin, 
 and of the value of money, dwindled down to less than the 
 hundredth part of what was originally intended, and in 
 many cases, to a mere trifle.'* 
 
 * See Treatise of Mr. Folkes on Coins. 
 
CHAP. XI.] CONCERNING MONEY. 
 
 127 
 
 Year of the Kiac's 
 
 Standard 
 
 Weight of 
 
 Val 
 
 ue o 
 
 Fthe 
 
 Propor- 
 
 Re'gn, and A. D. 
 
 of the 
 
 20 Shilling-^ 
 
 same in 
 
 
 tion. 
 
 
 Silver. 
 
 in tale. 
 
 present iMoney 
 
 
 
 
 oz. diet. i^r. 
 
 £. s. 
 
 d. 
 
 
 
 Conquest, l6fiG 
 
 old fiter. 
 
 U 05 00 
 
 2 IB 
 
 01 
 
 2/?. 
 
 2.906 
 
 28 Kd. 1. 1300 
 
 ._ 
 
 11 Q2 05 
 
 J 17 
 
 05 
 
 
 2.871 
 
 18Hd. III. I'i44 
 
 — 
 
 10 03 00 
 
 2 12 
 
 05 
 
 1^ 
 
 2.622 
 
 ilOsame 1346 
 
 
 
 10 00 00 
 
 2 11 
 
 OS 
 
 
 2.583 
 
 27 same K).')3 
 
 
 
 9 00 00 
 
 2 06 
 
 06 
 
 
 2.32.'» 
 
 13 Hen. IV. 1412 
 
 __ 
 
 7 10 00 
 
 1 18 
 
 09 
 
 
 1.937 
 
 4 Ed. IV. 1464 
 
 
 
 6 00 00 
 
 1 11 
 
 00 
 
 
 1.55 
 
 18 H. VIII. 15'<J7 
 
 — 
 
 5 06 IC 
 
 I 07 
 
 06 
 
 3g. 
 
 1.378 
 
 
 OS. diet. 
 
 
 
 
 
 
 34 same 1543 
 
 w 1 2 
 
 5 00 00 
 
 I 03 
 
 03 
 
 Ig. 
 
 1.1^:3 
 
 36 same 15.35 
 
 w5 2 
 
 -_ .i_ 
 
 13 
 
 II 
 
 2(/. 
 
 0.699 
 
 37 same 1546 
 
 w7 2 
 
 - 
 
 09 
 
 03 
 
 3tf. 
 
 0.46S 
 
 3 Ed. VI. 1549 
 
 w5 '2 
 
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 9. As the sovereigns of Europe liave exercised, 
 from time" immemorial, the right of declaring 
 at vi^hat rate or value the coins of every deno- 
 mination, current in their dominions, shall 
 pass, and become, in that respect, lawful coins^ 
 or legal tender ; So have the kings of England 
 always enjoyed and exercised this right. Sir 
 Matthew Hale reckons it inter jura ynajestatis^ 
 and says, that it is an unquestionable prero- 
 gative of the crow^n ; and he treats with great 
 ability of the nature and extent of this prero- 
 gative. In very ancient times, some of the 
 powerful and rebellious barons appear to have 
 jissumed this right contrary to law, ^' which 
 
V2^ OF ROYAL PREROGATIVE, &C. [cHAP. XI, 
 
 occasioned great confusion and corruption in 
 money and commerce ;'* and he adds, that 
 Henry II. coming to the crown, reformed thi^ 
 usurpation and abuse.— In the articles of peace 
 between Stephen and Henry, there was one, 
 which required that the silver coin * should be 
 one and the same throughout the kingdom. In 
 times less ancient this right has been conferrc^d^ 
 by special charters, on ecclesiastical corpora- 
 tions, such as the archbishops of Canterbury 
 and York, the bishop of Durham, &c. and on 
 some of the most dignified abbots. But Sir 
 Matthew Hale adds, '^ that they had only the 
 profit of coinage, and the residence of some 
 moneyers at their cities, &c. and that they had 
 not the power of instituting either the alloy, 
 the denomination, or the stamp.'* The stamps 
 were usually sent to them by the treasurer and 
 barons of the exchequer, by the king's com- 
 mand, under his great seal ; and the masters of 
 these mints, or the chief officers employed 
 therein, were sworn to the king for the just 
 execution of their offices. It appears from the 
 coins made in these mints, which have been 
 preserved, that they were in general of the 
 
 * There was at this time, probably, no gold coin in cur* 
 i-ency ; at le^st, none that was made at the English rojnt. 
 
CHAP. XI-I -CONCERNING COIN. 129 
 
 smaller denominations ; and it is probable that 
 the right of coining, which was given to them 
 by these charters, was restrained to pieces of 
 this description : but the practice of devolving 
 this right of coining gold and silver to the cor- 
 porations before-mentioned, has never been ex- 
 ercised since the reign of Edward VI. 
 
 10. The kings of this realm had frequently 
 mints of their own, not only in London, but 
 in Southwark, Calais, Bristol, Hull, Dublin, 
 and many other cities and towns of England 
 and Ireland ; but these were all royal mints, 
 and under the immediate management and di- 
 rection of the king's officers. 
 
 1 1. The right of setting a rate, or nominal 
 value, on coins authorised to be current, has 
 been exercised by the kings of this realm in 
 two ways : Firsts By their mint indentures, in 
 which a clause is inserted, declaring, at what 
 rate or nominal value the coins, therein or- 
 dered to be made, shall be current. Secondly^ 
 By proclamation. Sir M. Hale inclines to 
 think, that proclamations are not absolutely 
 necessary to legitimate any coin made at the 
 mint, or to make it current ; but that the 
 mint indenture, or general usage, is in this re- 
 
 K 
 
130 <SV ROYAL PREROGATIVE [cHAP. XT, 
 
 spect sufficient evidence, except in the fol« 
 lowing cases : First, To legitimate or make 
 current base coin, or such as is below the 
 standard of sterling. He observes, that a pro- 
 clamation is in this case necessary, in order to 
 dispense with the provisions of the statute of 
 96 Edw. III. ch. 13. and the 9 Henry V. Ses- 
 sion 2. ch. 6*. Secondly, To raise any coin al- 
 ready in currency to a higher denomination or 
 extrinsic value. Thirdly, To decry any mo- 
 ney already current, that is, either to reject 
 it wholly out of circulation, or to make it pass 
 
 * Sir William Blackstone is of opinion, that by the sta- 
 tute of 25 Edw. III. ch. 13. the king's prerogative seemeth 
 not to extend to the debasing or enhancing the value of the 
 coin below or above the sterling value. He acknowledges, 
 however, that Sir 3Iatthew Hale appears to be of another 
 opinion. But if this opinion of Sir William Blackstone ia 
 true, the king is also restrained, by the same statute, from, 
 diminishing the weight of his gold or silver money. The 
 gold of all the gold coins now circulating in the 
 kingdom has more alloy in it, and consequently is of a 
 baser standard, than in 25 Ed. III. Blackstone* s Commen- 
 taries, book i. chap. 7. What is called in the text the 9 
 Henry V. is in Sir Matthew Hale's Pleas of the Crown, 
 said to be th^ 4th Henry V. ch. 6. which last statute has 
 no relation to this subject; and this mistake is probably 
 owing to the copyists or printers of Sir Matthew Hale's 
 •p/ork. (See Lord Liverpool on Coins, p. 19.) 
 
CHAP. XI.] CONCERNING COINS. ' 131 
 
 at a less rate or value than that, at which it has 
 hitherto been current. In conformity to this 
 rule, a proclamation was issued on the 17th 
 day of December, 1717, reducing the value* of 
 guineas from twenty-one shillings and six- 
 pence to twenty-one shillings ; and there are 
 many other instances of the same kind in pre- 
 ceding periods. Fourthly^ To make foreign 
 coin current at a determined rate or value. The 
 reasons which make proclamations necessary in 
 the two last instances, are so evident, that 
 there is no occasion to state them. 
 
 12. In consequence of the great confusion 
 introduced into the system of our coins, by the 
 frequent debasements and alterations, that 
 were made in them during the latter part of the 
 reign of Henry VIII. and the reign of Edward 
 VI. a new practice was introduced in thd first 
 year of Edward VI. of notifying to the public 
 the rate or value of some of our silver coins, by 
 placing on the face of them figures, denoting 
 at what rate, or value, they should be taken in 
 payment. The variety of silver coins, then in 
 circulation, of the same denominations, though 
 of different intrinsic values, made it highly 
 convenient that the people should in this man- 
 ner be apprised of the rate, or value, at which 
 k2 
 
1S8 OF ROYAL PREROGATIVE [CHAP. XI. 
 
 the sovereign intended that they should be 
 current. This practice continued in use in 
 some of the subsequent reigns, but not in that of 
 Elizabeth (none of whose coins have any such 
 figure upon them) : and the same practice of 
 placing figures on some of our gold coins, to 
 denote the nominal value at which they should 
 be current, was first introduced in the begin- 
 ning of the reign of James I. But this man- 
 ner of ascertaining the nominal value of our 
 coins has been discontinued for about a cen- 
 tury past, except in small silver coins, under 
 the value of a sixpence, which still have 
 figures, denoting the rate at which they are to 
 pass, on the reverse of them. 
 
 IS. The parliament has frequently complain- 
 ed, and endeavoured to restrain this branch of 
 the prerogative: for in the 5th Ed. II. it was 
 provided by the lords ordainers, (persons, who 
 at that time were intrusted with the govern- 
 ment of the kingdom,) that no change should 
 be made in the coin of this realm, without the 
 consent of the barons in parliament ; but this, 
 among other regulations made by these lords 
 ordainers, was repealed in a subsequent year of 
 this king's reign. Another attempt was made 
 by the commons in the 20th Ed. III. to re- 
 
CHAP. XI.] CONCERNING TOIN§. 133 
 
 Strain this prerogative; but Edward III. frus- 
 trated their request, by returning an evasive 
 answer to their petition. The frequent de- 
 basements, made by this monarch in his coins, 
 induced the commons, in the 25th year of his 
 reign, to make a further attempt; and they 
 petitioned that the money of gold and silver 
 then current should not be impaired in weight, 
 or alloy. The answer returned to this petition 
 was apromiseon the part of the king, " that as 
 soon as a good way could be found, the money 
 of gold and silver should be put into its ancient 
 state.'' In imitation of this monarch, the kings 
 of this realm, in succeeding periods, very fre- 
 quently exercised this prerogative ; and this 
 prerogative was at length recognized and 
 confirmed by an act of parliament passed 
 in the 19th Henry VII. chap. 5. by which it 
 was enacted, that all gold and silver coins 
 " shall be current for the sum that they were 
 coined for ;*' and by an act passed in the 5th 
 and 6th years of Edward VI. chap. 19. by 
 which it was enacted, " that if any person ex- 
 changed any coined gold, or coined silver, re- 
 ceiving or paying any more in value, than the 
 same is, or shall be declared by his majesty's 
 proclamation to be, current for, within his 
 Majesty's dominions, the salne shall be for- 
 
134 TRUE POWER OF THE STATE [cjIAP, XI. 
 
 felted," and the persons so offending shall be 
 punished in the manner therein directed.* 
 
 ll. Such, says Lord Liverpool, is the his- 
 tory of the law of this kingdom and the ex- 
 tent of the prerogative, as stated by Sir Mat- 
 thew Hale, in the History of the Pleas of the 
 - crown. Previous to that period, several statutes 
 were passed, establishing regulations with re- 
 spect to the royal mints, and requiring that the 
 coins issued from them should be of due weight; 
 but not one, that took from the sovereign the 
 right of giving to the coins, circulating in hisr 
 dominions, their denominative value. 
 
 16, Though this great prerogative is, how- 
 ever, unquestionable, says Lord Liverpool, it 
 is certainly adviseable, that in the exercise of 
 it, whenever any great change is intended to be 
 made, the king should avail himself of the wis- 
 dom and support of his parliament.' Sir Mat- 
 thew Hale observes, that it is neither safe, nor 
 honourable, for the king to debase his coin be- 
 
 * In the subsequent period, that is, in the 6th and 7th 
 William III. ch. 17. thin prerogative is farther confirmed 
 and acknowledged, by enacting additional penalties against 
 those ** who shall receive or pay any undipped silver mo- 
 ney, of the coin of this kingdom, for more than in tale it 
 v/»s coined for, and ought by law to go for.*' 
 
CHAP. XI.] CONCERNING COINS. 135 
 
 low Sterling ; " if it be at any time done, it is fit 
 to be done by the assent of parliament ; " and h^ 
 concludes, that, on such occasions, '•^ fieri non 
 debility factum valet," -- At has happened, that 
 since the revolution, the kings of this realm 
 have occasionally exercised this prerogative, 
 on smaller occasions, without consulting the 
 two houses of parliament : yet, on greater oc- 
 casions, such as a general recoinage, they have 
 always thought it right to avail themselves of 
 their advice and report. 
 
 16. We have thus given, from the best au- 
 thorities, what is considered to be the regal 
 prerogative, in England; which corresponds 
 with the power assumed by the monarchs of 
 every other state in Europe, 
 
 17. But it will appear, from the foregoing chap- 
 ters, that wherever this power is exercised, in 
 altering the coin by rendering it less pure, or 
 less weighty^ it is done for the private advan- 
 tage of the monarch, and for the deception and 
 injury of his subjects; and that, in the end, 
 it fails to produce any permanent advantage. 
 In practice, therefore, it has long fallen into 
 disuse. 
 
 18. From the exercise of this power, informer 
 
136 TRUE POWER OF THE STATE [cHAP. XT. 
 
 times, it has grown into a general belief, that 
 the king can set any value which he pleases 
 upon his money^ as it is erroneously called. 
 But the king can, in truth, have no money, 
 except that which he holds in his own trea- 
 sury; as a private man holds money in his 
 private coffers. To this he may assume 
 the power of giving what denomination he 
 pleases, and may call this a right ; but he can, 
 by this act, do no more than a private man, 
 who, having incurred debts to the amount of 
 one thousand pounds, and possessing only five 
 hundred in specie^ should deliver them to his 
 creditors, and obtain an acquittance for the 
 one thousand pounds. In both cases this is, 
 either a fraud, or an act of insolvency and 
 compounding with creditors. 
 
 19. It is clear, the monarch can have no other 
 inducement than insolvency, to alter his coins ; 
 unless he orders, that all former contracts shall 
 be satisfied in equal weights of metal ; and not 
 in tale: in which case, it is certain, the mo- 
 narch will rarely find occasion for the debase- 
 ment of coin. 
 
 20. The power of the monarch, or of the state, 
 
CHAP. XI.] CONCERNING COINS, 1S7 
 
 has been, therefore, misunderstood. The pre- 
 rogative, as it is called, is founded on erroneous 
 and impracticable notions of arbitrary pawer, 
 ill suited to the present times: and it would be 
 simple justice to the advanced knowledge of 
 the present age to annul it altogether ; and to 
 declare, that the king should order, in all 
 cases, the purest metal to be formed into coins; 
 the coins to be current only at their just 
 weight, with a very small allowance, if any, 
 for wear; and the legal tender to be observed 
 in the utmost strictness. 
 
 21. The legal tenderr, in effect, is nothing more 
 than a legal definition of the meaning of the 
 words pound, guinea, crown, and shilling ; and 
 if these things are altered, it is evident that a 
 gross injury is sustained by all creditors, who 
 are made to receive in payment a less quantity 
 of the thing, than that for which they have sti- 
 pulated. It would not, in any degree be less a 
 fraud, to declare, that, having purchased a load 
 of corn, I should receive but half a load; than, 
 that, having bargained to sell a load of corn for 
 f.ve guineas, of a certain weight, I should be 
 compelled to receive j5ve guineas of half their 
 veight in gold. 
 
133 TRUE POWER OF THE STATE [CHAP. XT. 
 
 22. The state ought never to interfere in 
 feither case. Its duty is to maintain equity and 
 justice, between all its subjects ; and it has no 
 more right to interfere with the weights of mo- 
 ney, than with the weights of other things ; ex- 
 cept in as far as it is a part of its duty to prevent 
 fraud in all weights and measures. The stand- 
 ard of its measures in money, should, there- 
 fore, be as invariable as that of all its other 
 measures ; and a pound sterling, in tale, as fixed 
 as a pound troy. With the exchangeable value 
 of a pound sterling, the state can have no inter- 
 ference. It can no more fix a price on money 
 than on any other article ; and, in truth, to 
 establish the exchangeable value of money, 
 upon an invariable footing, is, in other words, 
 to fix the price of every commodity whatsoever. 
 An attempt, which is as feasible as to com- 
 mand the tides not to flow ; the wind to re- 
 main stationary ; or, what would really be the 
 effect of it, the corn not to grow, and the peo- 
 ple not to eat. 
 
 23. We may therefore conclude, that the pre- 
 rogative concerning money, in the extent ;n 
 which it has been claimed and exercised ty 
 some kings of England^ and all the other mc- 
 narchs of Europe^ is a mere assumption of ai- 
 bitrary power; in direct violation of the law ^f 
 
CHAP. XI.] CONCERNING COINS. 139 
 
 nature. And we may be well assured, that, 
 in this country at least, until the return of 
 the barbarity and ignorance of former times, 
 the prerogative will not be exercised to that 
 extent. 
 
 24. Whether the kings of England will, in 
 future, even in the empty name, boast of a pre- 
 rogative, which is a mere relict of ignorance 
 and barbarity, will appear, at least, problema- 
 tical. It is plain that such a prerogative can 
 add neither to the dignity, nor the splendour of 
 the crown ; which are best preserved, by ren* 
 dering it the perfect symbol of invariable jus- 
 tice and untainted honour. 
 
 25. We may observe, however, that in times 
 of great distress, as in the midst of a siege, the 
 greatest monarchs have issued a money, as it is 
 called, of diminished value, termed obsidional 
 money. This, however, is nothing more than 
 an engagement to pay to the holder a good 
 coin, at the end of the siege ; and is wholly 
 superseded by the use of promissory notes and 
 exchequer bills. Such articles cannot properly 
 be called money ; which, in truth, means no- 
 thing more than metals, coined and stamp(?d 
 with a monition^ or monitori/ mark of their 
 
140 POWER OP THE STATE, &C. [cHAP. XI. 
 
 weight and purity. Money, in right of this 
 mark, always passes for its intrinsic and ex- 
 changeable value. All other articles, falsely 
 called money, whether of paper, or metal, must 
 pass, at a higher rate, than their real value in 
 mere metal or paper, by the eflfect of credit; or 
 by force of violence, which authorizes legal 
 rapine. 
 
( HI ) 
 ELEMENTS 
 
 OF THE 
 
 SCIENCE OF MONEY. 
 
 BOOK THE SECOND, 
 
 Introduction » 
 
 IN the foregoing chapters, which we may 
 consider as the first book of our Elements, we 
 have discussed,' at considerable length, the 
 nature and effects of money, in its real sense, 
 as consisting of bullion, coined by the autho- 
 rity of the state. 
 
 We shall, now, proceed to an inquiry into the 
 nature of those artifices, by which the use 
 of real money has been supplanted, and a pa- 
 per money*, as it is called, has been intro- 
 duced ; whence we shall proceed to examine 
 its effects upon society. 
 
 ♦ This paper-money is, perhaps, better defined circulate 
 ing credit : as bullion has been called the universal equi' 
 valent. 
 
142 OF BANKS OF DEPOSIT. [bOOK II. 
 
 CHAP. I. 
 
 On Banks of Deposit^ with an Account of the 
 Bank of Amsterdam, 
 
 1. Banks have been properly divided into 
 two sorts : those of deposit^ and those of cir- 
 culalion, 
 
 9. A bank of deposit is instituted for the 
 purpose of receiving into its coffers, sums of 
 money in coin and bullion, valuing each ac- 
 cording to its real quantity of bullion only: for 
 which the owner has credit in the books of the 
 bank ; and this credit is transferred on demand 
 of the owner, from his own account to that of 
 some other person. 
 
 3. A bank, upon this principle, is only a 
 warehouse for safe custody of coin, or bullion ; 
 and the only profit to be gained is by the 
 sum paid for the warehouse-room, or for the 
 transfer. 
 
 4. Such a bank has been instituted, for a 
 long time, at Amsterdam and at Hamburgh; 
 and it affords many advantages to the state, 
 
CHAP. I.] OF BANKS OF DEPOSIT. 14-3 
 
 chiefly in providing a preventative against any 
 alteration in the value of coins, by inequality 
 of wear, or by the frauds of money-jobbers, 
 or coiners, or by the arbitrary abuse of power 
 amongst princes. For the principle of its in- 
 stitution consists in rating all coins whatso- 
 ever by the mere quantity of bullion which 
 they contain ; that is to say, at their real in- 
 trinsic value. 
 
 .'), By appointing particular hours for the 
 making of transfers, and a specified time, 
 within which no bullion can be taken out of 
 the bank, much inconvenience is avoided. 
 
 6. The transfers of such a bank, it is clear, 
 can be nothing but the payment of a price for 
 any given commodity in bullion; that is to 
 say, in so many grains of pure gold and silver. 
 
 7. Such a bank, therefore, answers all the 
 purpose of the royal authority, in making a 
 good pure coin ; as far as respects large pay- 
 ments amongst merchants. With this addi- 
 tional advantage, that there is no trouble in 
 iveighing, no fear of deception, no loss by 
 wear of the coin, no expence of coinage. To 
 counterbalance which, and to provide for the 
 
144 OP BANKS OF DEPOSIT. [bOOK II. 
 
 cxpences of the bank, a small sum is paid 
 upon every transfer*. 
 
 * The rules of the Amsterdam bank are as follows : The 
 accounts are kept in florins, styvers, and deniers ; a florin be- 
 ing twenty styvers, and a styver sixteen deniers. Persons keep- 
 ing accounts pay three florins for opening the account. Bul- 
 lion is kept thcjre, ^d may be demanded at any time, at 
 -JLth per cent. So that an ounce of bullion being taken and 
 received one thousand six hundred times in a year, the bank 
 gains one ounce of bullion; and if it were suff*ered to re- 
 main there one thousand six hundred years, the bank would 
 receive the one hundred and sixteenth part of an ounce for 
 its trouble. Bullion is, however, of small value, unless it 
 changes hands ; and therefore the bank is not liable to be 
 burthened with its custody, without profit, for a long time. 
 
 The transfer is made by a note to the following effect : 
 
 Folio 1124. Messrs. the Commissaries of the hank, 
 please to pai/ P, N, the sum of twelve hundred ffty-four 
 Florins, twelve Stivers, eight Deniers, at Amsterdam, the 
 Ist Day of January, 1702. 
 
 Florins 1254. 12. 8.^ J. J. 
 
 The folio is the page of the account of the person making 
 the transfer, and must be duly inserted ; and, if the credit 
 is upon account of a third party, this must be noticed. These 
 notes are carried to the bank at any time between seven and 
 eleven o'clock in the forenoon ; but afterwards each transfer 
 is charged six styvers. Deniers are never written except to 
 the exact number eight ; all below or above are omitted. 
 
CHAP. I.] OF BANKS OF DEPOSIT. 14^ 
 
 8. In these banks credit has no place, con- 
 sidered in a commercial view. The only cre- 
 dit that is required is the good faith of the 
 public, that the money, or bullion, shall be 
 continually retained in the coffers of the bank. 
 
 A credit cannot be transferred the same day it is received, 
 except twice a year on tlie settling of accounts ; or on pay- 
 ment of 3 per cent, for the transfer. 
 
 The parties send before eight o'clock in the morning, to 
 know if a transfer has been duly made ; between eight and 
 nine a fee of two sty vers is paid ; and between nine and 
 three, a fee of six styvers ; or the clerks for ten ducatoons a 
 year will send daily notice ; and a fine of three percent, 
 is payable, upon writing off more than is in the account. 
 
 In January and July the accounts are balanced, and within 
 six weeks each person must go and check his balance, tinder 
 a penalty of twenty-five florins. All payments above, or 
 to the amount of three hundred florins, are to be made in 
 the bank ; and no sum is entered in their books under that 
 amount. See A General Treatise of Money and Exchanges, 
 1707. 
 
 It is obvious, that by means of subsidiary bankers, and « 
 settling house, much labour might be saved. 
 
 The origin of this bank was in 1669, to facilitate pay- 
 ments in countries where, from their vicinity to other 
 states, there was a great influx of foreign coin, over which 
 there could be no legislative check, or controul. This it 
 h^ effected by reducing all coins to bullion merely. 
 
146 OF BANKS OF DEPOSIT. [bOOK If 
 
 9. The object of such a bank is not to 
 supply a deficiency of coin, currency, circu- 
 lating medium, or money ; but to obviate the 
 inconveniences which arise from the circula- 
 tion of various unauthorised coins, the value of 
 which it is difficult to estimate. 
 
 10. The transfer in this bank being an ac^ 
 tual transfer of money, what is called bank 
 money, at Amsterdam^ is truly money, and not 
 a substitute for money. It is the purest money 
 in the world. 
 
 il. One great political advantage of such in- 
 stitutions is, that, thereby, the actual quantity 
 of money in circulation, in large payments, 
 may readily be ascertained. 
 
eilAP. II.] OF BANKS OF CIRCULATION. \^7 
 
 CHAP. II. 
 
 Of Banks of Circulation ; and of the Bank of 
 England. 
 
 1. Banks of circulation are formed on a 
 principle entirely different from hanks of deposit: 
 the object of them being, not to correct any 
 inequality in the value of the coins in circula- 
 tion ; but to supply an additional quantity 
 of money, by affording a ready substitute for 
 coin, in general payments. 
 
 2. This is effected by issuing a promissory 
 note, importing that, either upon demand, or 
 at some fixed day, the bearer shall receive a 
 certain sum in coin. 
 
 3. The basis of such banks therefore is ei- 
 ther public or private credit ; which is sup- 
 ported by the confidence which the people, in 
 general, place in the expectation, that the 
 money will be received upon demand. 
 
 4. Banks have been divided into those which 
 are founded upon real, those on personal secu- 
 
 L 2 
 
148 ' OF BANKS OF CIRCULATION. [boOK II, 
 
 rity, and those on government security. But, 
 in the view which will shortly be given of the 
 system of banking, it does not appear very 
 material to ascertain, what is the security upon 
 which a bank, founded on credit, to a very^ 
 large extent, ultimately rests. They are de- 
 nominated, chiefly; according to the nature of 
 the security, or pledges, upon which they 
 make advances. 
 
 6. In the infancy of the system of banking, 
 it was thought that the bank which should 
 issue notes upon the security of landed, pro-? 
 perty, or real security, would be, under all 
 circumstances, safe. But a little experience 
 discovered the fallacy of this opinion ; for it 
 was shortly found that, by advancing notes to 
 a person who pledged land as a security, the 
 bank rendered itself liable to pay its notes in- 
 stantly on demand ; and might be called upon 
 suddenly to pay very large sums, without the 
 means of providing funds as suddenly, through 
 the aid of the landed security. It was, there- 
 fore, deemed most adviseable to issue notes 
 upon personal or mercantile security ; that is, 
 upon bills of exchange, drawn between mer- 
 phants, and payable at short dates. 
 
fcHAP. II.] OF BANKS OP CIRCULATION. 143 
 
 6. In this manner the bank would have aa 
 ppportLinity of speedily collecting in its debts, 
 and meeting all the demands upon it ; and, a* 
 those bills of exchange are created upon the 
 sale or transfer of goods, or other property, it 
 is obvious, that if the bank, instead of hold- 
 ing the security in specie^ receives a bill of ex- 
 change, or personal security, from those who 
 hold the real security ; the bank, . in effect, is 
 nearly as well assured of repayment, as if it 
 had possession of the effects in its own cus- 
 tody ; without the trouble and inconvenience 
 of maintaining warehouses for the deposit of 
 goods, or of inspecting titles to lands* Where- 
 fore it is probable that banks upon landed se- 
 curity, will never again be established ; their 
 object being as well attained by other persons 
 accepting mortgages, and drawing and redraw- 
 ing bills, which may be discounted at a 
 bank, as by the bank itself taking the mort- 
 gage. 
 
 7. When a bank is instituted upon govern- 
 ment security, the faith of the government is 
 pledged for the payment of the notes; and this 
 is the case, when government issues exchequer 
 bills, or creates funds of stock, as they are 
 called; by which is, however, more tTuI/ 
 
\50 OF BANKS OF CIRCULATION. [bOOK II 
 
 meant, the contracting a debt, of which the 
 interest is to be paid annuall3\ For difimd 
 should imply something real ; whereas public 
 funds are nothing more than the credit of the 
 existing government: which- promises to pay 
 certain sums of money, that can only be raised 
 through the voluntary aid of the people, or 
 by compulsory levies from them in taxation. 
 And such a government is liable, by the accidents 
 of time, and especially by oppressive taxation, 
 to lose its influence and authority over the 
 people, and ultimately may fail in its payments. 
 
 8. The object of instituting such banks 
 is two-fold. Firsty as it respects the bank or 
 company, it is the private gain of the partners 
 by the profit of banking. Secondly/, as respects 
 the state, or the persons dealing with it, the 
 object is to raise a substitute for money ; which 
 we have seen is the credit of the bank. Mere 
 credit is, therefore, made to pass as money ; 
 and bank notes are justly denominated circulate 
 ing credit. 
 
 9. Wherever, therefore, credit \iotes are made 
 to circulate largely, in any country, with or 
 without an accompanying circulation of mo- 
 ney, the whole money of the country must be 
 considered as composed of two articles^ namely, 
 
CHAP. H.] OF THE BANK OF ENGLAND. 151 
 
 of the precious metals, and of circulating cre^ 
 dit. Whence, also, we may draw a further 
 illustration of the principle already suggested^ 
 that paper money is, in effect, a debasement of 
 the currency. For it obviously gives to the 
 whole sum of money an increased extent, be- 
 yond the absolute quantity and value of the 
 metals in the coin. ,The effects of which we 
 shall hereafter consider. 
 
 10. To explain the prihciples, upon which 
 all such banks are founded, it will' be useful 
 to consider the institution and practice of the 
 hank of England, For which purpose we may 
 adopt, with safety, the very accurate account 
 of Sir James Stewart ; from whose work the 
 succeed! no- paragraphs of this chapter are ex- 
 tracted ; omitting all those observations of 
 theory, which he has interspersed throughout : 
 and which we consider greatly defective and 
 confused, from his very inaccurate notions of 
 the nature of money and value. 
 
 11. The establishment of this great compa- 
 ny, the bank of England, was formed about the 
 year 1694. Government at that time having 
 great occasion for money, a set of men was 
 found who lent to it about one million two 
 hundred thousand pounds sterling, at eight /?<:r 
 
152 OF THE BANK OF ENGLAND. [bOOK II. 
 
 cent, for the exclusive privilege of banking for 
 thirteen years : with this additional clause, that 
 four thousand pounds sterling per annum 
 should be given them to defray the expence of 
 the undertaking. This sum of one million two 
 hundred thousand pounds sterling, was the 
 original bank stock. It has been since in« 
 creased to eleven millions of pounds, by farther 
 loans to government, for the prolongation of 
 their privileges*. 
 
 * In addition to the account given in the text, we add 
 the following still more authentic account of the business 
 of the bank from the reports of the house of commons. As 
 these reports are voluminous and expensive, we have ex- 
 tracted an abridged account from a useful work, called 
 The Literary Panorama for Januarj^, 1808, the editor of 
 which very judiciously furnishes the public with a cheap 
 account of the authentic documents published by parlia- 
 ment ; documents which will hereafter form a basis for a 
 perfect school of financial instruction, 
 
 BANK OF ENGLAND. 
 
 Second report of the committee of the honorable the house of 
 commons, appointed to examine and consider what regu- 
 lations and checks have been established, in order to con- 
 troul the several branches of the public expenditure m 
 Great Britain and Ireland ; and how far the same have 
 been effectual ; and what further measures can be adopted 
 for reducing any part of the said expenditure, or dimin- 
 ishing the amount of salaries and emoluments, without 
 detriment to the public .sei vice. [Ordered to be printed 
 August 10, 1807.} 
 
CHAP, II.] OF THE BANK OF ENGLAND. i;5S 
 
 12. It is arulewith the bank of England not to 
 issue any notes upon mortgage ; but the prin- 
 
 The business of banking is, beyond a doubt, one of the 
 most artificial that is followed as a profession. It results 
 from no law or operation of nature, but is a mere convention 
 among a certain description of persons, for mutual conve- 
 iiiency. Commerce was originally conducted by barter ; 
 then money became the medium of cpmmerce, and, the 
 admitted standard of valuation ; and, at length, it not only 
 became the umpire of bargain and sale, but its services were 
 bought, and it was hired out, by those who had a super- 
 fluity of it, to those who could employ it to advantage. 
 Merchants hired the money with which they bought goods 
 in one place ,to sell in another ; farmers hired money, with 
 "which to pay the labourers who tilled their ground, and the 
 expected crop was to discharge the loan ; and governments 
 hired money with which to pay the troops who defended 
 them, or attacked their enemies. 
 
 The merchant and the farmer need but small quantities 
 of money, but the operations of government are on so large 
 a scale, that it may be considered as a wholesale dealer in 
 this primum mobile. The wants of the merchant and farmer 
 may be supplied by private individuals ; but the wealth of 
 individuals cannot be equal to the demands of a state, the 
 necessities of which press suddenly, and often in all direc- 
 tions. 
 
 To meet such exigencies, companies have been estab- 
 lished, and have met with special protection from the 
 ruling powers, in most nations of Europe. The plans on 
 which they have been established have been various ; dif- 
 fering sometimes according to the constitution of the go- 
 
15lf OF THE BANK OF ENGLAND. [boOK lis 
 
 cipal branches of their business may be com- 
 prehended under four articles, viz. i. The cir- 
 
 veniment, the disposition of the people, or the circum- 
 Etances which determined their institution. 
 
 The bank of England, under its present establishment, 
 may be considered as a consequence of the Revolution ; it 
 was patronized by William III, and after struggling witli 
 various difficulties in its infancy (for its notes were at a dis- 
 count) it surmounted them all, and has for many years been 
 the most considerable money-center in Europe, and in the 
 world. 
 
 The bank is by its charter restricted to dealings m gold 
 and silver, coined, or in bullion, and in securities. It cannot 
 purchase land, or adventure in shipping ; it cannot stock its 
 warehouses with merchandize ; and che propriety of this re- 
 gulation is evident, since it makes payments with its own 
 notes, and by its credit might accumulate stores of various 
 descriptions to its own injury, or that of the communitj% 
 
 We have no occasion to pursue these hints any further, as 
 a sufficient knowledge of the nature of the bank for the pur- 
 pose of the present paper may be obtained from that part of 
 the second report from the committee on the public expen- 
 diture, &c. of the united kingdom, made to the Right Hon. 
 the House of Commons; from which we transcribe the fol- 
 lowing information. 
 
 The funds of the bank, which are the sources of profit, and 
 which constitute the measure of the sum they have to lend, 
 (subject only to a deduction on account of cash and bul- 
 lion,) may be classed under tlu'ee heads. 
 
 First, The sum received from their proprietors a* 
 
CHAP. II.J OF THE BANK OF ENGLAND. 1 jl 
 
 dilation of the trade of London. 2. The ex- 
 chequer business of Great Britain. 3. The 
 
 capital, together with the savings which have been added 
 to it. 
 
 Secondly, The sum received from persons keeping cash 
 at the bank. This sum consists of the balances on the de- 
 posit accounts both of government and of individuals. In 
 17G7, this fund, including all the balances of individuals, 
 was only £5,130,140. The present government balances 
 alone have been stated at between eleven and twelve mil- 
 lions, including bank notes deposited in the exchequer. 
 
 Thirdly, The sum received in return for notes put into 
 circulation. A corresponding value for every note must ori- 
 ginally have been given, and the value thus given for notes 
 constitutes one part of the general fund to be lent at interest. 
 A note holder, indeed, does not differ essentially from a per- 
 son to whom a balance is due. Both are creditors of the 
 bank, the one holding a note, which is the evidence of the 
 debt clue to him, the other having the evidence of an entry 
 in the ledger of the bank. The sum at all times running at 
 interest will be in exact proportion to the amount of these 
 three funds combined, deduction being made for the value 
 of cash and bullion. 
 
 Under the three heads above-mentioned, first, of capital 
 and savings ; secondly, balances of deposit accounts ; and, 
 thirdly, notes in circulation ; all the sums are stated which 
 the bank would have to discharge in the event of the wind- 
 ing up of their affairs ; and they wiust of course have assets 
 sufficient and available for this purpose, which assets can 
 only consist of cash and bullion, and securities for money 
 lent. 
 
\56 OF THE BANK OF ENGLAND. BOOK Hi 
 
 paying of the interest of all the funds transfer- 
 rable at the bank. 4. Their trade in gold and 
 
 In whatever degree, therefore, any one of the three first- 
 mentioned items, namely, capital, deposits, or notes, in», 
 crease, the other two remaining- fixed, in the same degree, 
 must the sum running at interest increase, provided the 
 cash and bullion do not vary ; and this adaptation of tlie 
 sum at interest to the amount of the balances, may be pre- 
 sumed to take place without any particular cognizance of 
 the subject by the directors, who make a profitable use of 
 the balances by consenting so far to satisfy the current de- 
 mands for discount, or by making such loans to govern- 
 ment, or buying such number of exchequer bills, or 
 other securities, as may suffice to maintain in circulation 
 the accustomed quantity of notes. 
 
 Those balances are lent at interest, because a demand for 
 loans to this extent cannot fail to arise out of the natural 
 demand for the accustomed quantity of notes. The bank 
 have no property of any moment lying dead, cash and bul- 
 lion excepted ; they possess, indeed, property in buildings, 
 but these are stated in the evidence to have been paid for 
 as they were erected, out of their current profits, and con-» 
 stitute no article in tlieir accounts. Unless therefore they 
 have a sum at interest applicable, together with the cash 
 and bullion, to the purpose of answering the demands of 
 those who have deposits in their hands> they have not assets 
 necessary to satisfy the three classes of claimants which have 
 b^en mentioned. 
 
 * 
 The productive quality of the floating balances is con- 
 firmed by a statement presented by tlie bank itself to tlie 
 fecret committee of the House of Lords, in 1797, (pa^e 
 
CHAP, II.] OF THE BANK OF ENGLAND. 157 
 
 silver. We shall now shortly explain the nature 
 of these four great operations ; and first, as to 
 the circulation of the trade of London, 
 
 132) From thence it appears that the bank notes were on 
 the 25tli February, 1797 £8,640,250 
 
 And the " drawing accounts'" (or de|>osit ac- 
 counts) and " audit roll" (or unclaimed di- 
 vidends, &c. 5,140,130 
 And the " surplus" (or undivided profit) of 
 the bank, which was of the nature of ad- 
 ditional capital 3,626,890 
 
 Making together £17,597,280 
 
 This debit side of the account exhibited the total sum due 
 both to the bank proprietors and others, on the 25th Feb. 
 1797, with the exception of £11,680,800 capital lent to go- 
 vernment, which was adverted to only at the foot of the 
 statement. The credit side of the account enumerated the 
 effects (amounting to £17,597,280) applicable to the pay- 
 pient of thfit debt. 
 
 These assets were stated to consist of ''advances on go- 
 vernment securities," viz. *' on land and malt," on ex- 
 chequer bills, &c." " bills discounted, &c," and " cash and 
 bullion." Supposing therefore the amount of surplus ca- 
 pital, and bank notes on the debit side, and the cash and 
 bullion on the credit side, to continue stationary, the 
 amount of the other articles on the credit side (all of them 
 articles producing interest) must necessarily fluctuate in ex- 
 act correspondence with every fluctuation of the deposits; 
 ^nd in case anotlier statement, formed in the same manner 
 ^ that presented in 1797, were now to be made out, the 
 
lo8 OF THE BANK OF ENGLAND. [bOOK II, 
 
 13. If a London merchant has occasion for 
 money at any time, he sends to the bank the 
 
 sum of £8,640,250 of notes having been augmented to 
 £16,621,390, and the sum of £5,130,000 of deposits having 
 risen probably to about thirteen or fourteen millions, there 
 would unquestionably be an increase of about sixteen or se- 
 venteen millions running at interest, to be stated on the 
 other side, deducting wliatever may have been added to 
 the cash and bullion since February, 1797. 
 
 •2 -The annual and temporary bonus of five per cent, which 
 the bank have, for some successive years, added to their 
 accustomed dividends of seven percent, and the recent aug- 
 mentation of their regular dividends to ten per cent, exclu- 
 sive of property tax ; the rise also of the market price of their 
 stock, which having sold in 1800 from £156 to 172 per 
 cent, now sells at £230, are strong circumstances in confir- 
 mation of the large increase of their profits. This increase 
 cannot be accounted for by any material augmentation of 
 the advantages derived from the management of their own 
 capital, nor from that part of their business which they 
 transact as bankers to individuals, (a part, indeed, at all 
 times comparatively small in its amount ;) for although the 
 number of persons having accounts open with the bank, 
 has been lately much increased, the floating balances oij 
 those accounts are known to be in general very small, most 
 of the accounts being kept open only for the sake of the 
 opportunity which they afford of borrowing in the way of 
 discount. The extension either of loans to government, or 
 of discounts to the merchants, or of both, is the necessary 
 effect of the augmentation of the government deposits, and 
 it is to the largeness of these deposits, that the increased 
 profits ought to be referred. 
 
CHAP. II.] OF THE BANK OF ENGLAND. lo9 
 
 bills he has, before they become due ; and the 
 bank discounts them : but if a bill is at a 
 
 The g^n which the bank have derived from the issue of 
 one or two pound notes, amounting to £4,217,960. on the 
 1st of February hist, may be expected to cease whenever the 
 payment of cash shall have been resumed. 
 
 It is a principle in all trade, and especially in that exe- 
 cuted as commission, that, within certain limits, thjergreater 
 the quantity of business done, the lower is the rate per cent 
 which is esteemed a fair compensation for the trouble, &c. 
 of conducting it. Government, then, dealing at all times 
 very largely in money, has a right to expect that its money 
 transactions should be more favourubly executed at the 
 bank, than those of any other customer, whose accounts, in 
 comparison, could not be other than trivial. On the same 
 principle when the accounts of government were tliemselves 
 small, as ten, twenty, fifty millions : for adjusting these 
 accounts a greater premium per cent, was fairly demanda- 
 ble, than when they rose to three, four, or five hundred 
 millions. The rate of allowance originally was £562. 10s. 
 for each million : this, in 1786 was reduced to £450 for 
 each million. The same allowance was made to the bank 
 of Ireland : the debt of that country being no more than 
 twenty-two millions ; whereas the debt of Britain, has varied 
 as follows, viz. 
 
 On Jan. 5th. 1786, it was £224,102,424, and the charges 
 of management were then {according to the reduced scale of 
 allowances) £100,846. Jan. 5th, 1797, the year in which the 
 committee on finance reported, the principal of debt unre^ 
 deemed was £272,892,444, the charges of management 
 upon which, so far as concerned the bank, were £115,543. 
 
 Jan. 5th, 1800, the year of the renewal of the bank char^ 
 
160 OF THE BANK OF ENGLAND. [bOOK II, 
 
 longer date than 60 days, they will not dis- 
 count it. The reason for this is evident : the 
 
 tcr, the principal of debt unredeemed was £375,185,801, 
 and the charges of management, received by the bank, 
 were £170,053. 
 
 The debt unredeemed, Jan. 5th, 1807, was £550,441,314, 
 and the charges of management, received by the bank, were 
 £265,818; to which must be added £5,687, on account of 
 the Austrian loan, according to the same rate of commis- 
 sion. The allowance of £4,000 towards the expenses of the 
 house, and also the original allowance of £1,898, on 
 £4,000,000 purchased from the South Sea Company, are in 
 addition to the before-mentioned sums. 
 
 The increase in the establishment of the bank, which has 
 been rendered necessary bj"^ the progressive augmentation of 
 this branch of their business, consists principally in a large 
 addition to the number of clerks ; of whom the whole num- 
 ber employed in the public business, exclusively, or prin- 
 cif ally, was in 1780, 243 ; in 1796, 313 ; and in 1807, 450 ; 
 whose salaries, it is presumed, may be calculated at an 
 average at between £120 and £170 for each clerk ; taking 
 them at £135, which exceeds the average of those employed 
 in the South-Sea House, the sum is £60,750 
 
 at £150 the sum is 67,500 
 
 at £170 the sum is 76,500 
 
 cither of which two last sums would probably be sufficient 
 to provide a superannuation fund, 
 
 Thevery moderate salaries received by the governor, de- 
 puty governor, and directors, amount to between £7 and 
 8,000 ; and only a part of these must be considered as com, 
 pensation for the trouble of superintending the public bu» 
 $ines». 3 
 
CHAP. II,] OF THE BANK OF ENGLAND. l6l 
 
 security upon which such bill stands, is 
 purely mercantile. The nearer, therefore, the 
 
 Incidental expences and sundries may be esti- 
 mated at about £15,000 
 Buildings additional, and repairs, at about 10,000 
 Law expences, and losses by frauds and forgeries, 
 
 at about 10,000 
 
 The whole increase of the officers who actually transact 
 the business, in the last eleven years, is only 137, whose 
 annual expence may be from £18,449 to £23,290; the ad- 
 dition to the other permanent charges being probably about 
 one-half, or two-thirds of that sum; but the additional 
 allowance for management in the last ten years, is more 
 than £155,000. This general conjectural estimate of the 
 expences actually incurred by the bank, exhibits, if it be 
 near the truth, tjje charge which would have attended the 
 management of this business by government, if previous to 
 the arrangement which took place in 1786, it had been 
 thought advisable to adopt the suggestion formerly made 
 by the auditors of public accounts, when this matter was 
 referred to them by the treasury. 
 
 Their report, already printed in XIV. 30. well deserves 
 the consideration of the House; and particularly the esti- 
 mate they formed of the real value of the service, which they 
 supposed might be executed at less than one-third of the 
 charge at that time incurred, that is, at a rate of allow- 
 ance under £187. 10s. for each million, when the debt was 
 no larger than has been before stated. 
 
 The committee of finance so far agreed with the auditors 
 of the public accounts, as to intimate an opinion in favour 
 of the reduction of the existing rate of allowance for ma- 
 M 
 
162 OF THE BANK OF ENGLAND. [boOK tlrf 
 
 payment is, the less risk the bank incurs from 
 the failure of those who are bound in it. The 
 
 Tiaging the public debt. They state " that the bank, over 
 and above the charges of management, are accustomed to 
 receive allowances from the public, at the rate of £805. 15s. 
 lOd. per million, for receiving contributions for loans ; and 
 £1,000, or sometimes more, for contributions to the lottery; 
 and that they have the benefit of holding all the money for 
 half-yearly dividends, besides having the custody of cash 
 lor the navy and army services; 
 
 "Upon reviewing, therefore, these circumstances in the 
 present times (1797), and without questioning the propriety 
 of the arrangement made in 1786, when the public debt 
 was so much inferior in amount, your Committee cannot 
 forbear to state it as a question still deserving the attention 
 t>f parliament, whether a further deduction of expence can«i 
 nOt, and ought not, to be made upon this branch of public 
 expenditure ?** 
 
 Besides the managenient of the debt, the bank have large 
 transactions with the public, affording a considerable profit 
 to the corporation ; into the nature and amount of which, 
 it is proper to enter. 
 
 1. Average balance of cash kept at the tank, during 
 the three months, ending Jan. 1807, under the head of 
 customs, excise, and stamps, about £457,000 
 
 Under the head of post-office, during several months in 
 1807, in which year that account was first opened 20,500 
 
 2. Average balance of sundry other accounts, 
 during a similar period ef 3 months, to Jan» 
 
|?liAP. n.] OF THE BANK OF ENGLAND. l63 
 
 Jntention of this operation of discounting bills 
 
 is, plainly, to employ the cash of the bank to 
 
 draw an interest for it. 
 
 £477,500 
 1807, viz. under the head of paymaster general 
 
 of the forces, treasurer of the navy, treasurer 
 of the ordnance, barrack-master general, trans- 
 port ofiice, agent general of the volunteers, 
 treasurer of Chelsea hospital, surveyor general 
 of woods and forests, accountant general of the 
 court of chanceiy, and commissioners for re* 
 duction of land tax £1,531,974 
 
 3. Average amount of unclaimed dividends in 
 the hands of the bank, during 1806, 1,341,154 
 
 Deduct lent to government on that account 
 
 t\-ithout interest 370,739 
 
 964,415 
 
 4. Average balance daring three months, to 
 
 Jan. 1807, in the hands of commissioners for 
 reduction of national debt, arising from the di'- 
 vidends received by the commissioners on stock 
 purchased by them, and from the issue of sink- 
 ing fund money 1,488,073 
 
 £4,461,962 
 
 5. Further balance of cash to a very large 
 
 amount, consists of sums lying nominally in the 
 exchequer, which, nevertheless, actually accu- 
 mulate for the benefit of the bank, and are for 
 the most part applicable at the end of each 
 quarter, to the payment of dividends. It is the 
 established usage of the bank to draw daily from 
 the exchequer the several sums in question as 
 they accrue, depositing indeed exchequer bills 
 in return for their own notes, which are thus 
 receivad as money. This deposit is to be con- 
 
164 OF TJIE BANK OF ENGLAND. [bOOK II. 
 
 14. The bank is constantly receiving cash 
 from every person who keeps his cash with 
 
 £4,461,962 
 sidered simply as a security for the public mo- 
 ney drawn away, as the growing interest on the 
 exchequer bills belongs entirely to the bank ; 
 and in case all the exchequer bills possessed by 
 the bank, which they think fit to apply to this 
 purpose, prove insufficient for the whole sum, 
 the surplus remains in the exchequer in the 
 fehape of bank notes — ^The notes thus taken out 
 of circulation amount occasionally to several 
 millions, and by their detention in the ex- 
 <^hequer, both . the bank and the public are 
 placed in circumstances substantially the same 
 as if the notes in question were carried to the 
 bank, and constituted a balance due to the 
 public on a deposit account, differing in no re- 
 spect from other deposits* 
 
 Total average amount of exchequer money, 
 by which the bank may thus have profited, 
 wai, from Jan. 10, 1806, to Dec. 19 6,167,928 
 
 £10,629,890 
 To this may be added a balance, of a tempo- 
 rafy nature, which has remained for no incon- 
 siderable time in the bank, on account of the 
 commissioners under the convention with the 
 United States of America, which is part of 
 £600,000, originally deposited . 475,029 
 
 Total average balances £11,104,910 
 
CHAP. II.] OF THE BANK OP ENGLAND. 165 
 
 it. This occasions a constant fluctuation of 
 payments, which of course must leave, at all 
 
 The committee is aware, that in exhibiting average ba- 
 lances ©f cash in the bank, instead of actual balances, it 
 may possibly be considered as presenting an unfair view 
 of the subject ; but it must be observed, that however fluc- 
 tuating many of the individual balances may be, the aggre- 
 gate is never likely to vary materially, which are moderate 
 in the early part of each quarter, and extremely large to- 
 wards the conclusion of it, are compared with the balances 
 of the commissioners for the sinking fund, and those on ac- 
 count of unpaid dividends, both of which are large in the 
 beginning of each quarter, and small towards the end, the 
 aggregate sum under these principal heads will be found to 
 furnish a stationary balance of a most important amount. 
 
 The documents from the bank, and the exchequer, which 
 could conveniently be furnished, give the following results, 
 viz. that on October 11th, 1806, the time immediately 
 preceding the payment of the dividends, the sums in the 
 bank, were 
 
 1. Customs, &c. £176,974 
 
 2. Paymaster general, &c. £1,378,900 
 
 3. Unclaimed dividends, Oct. 9 £1,033,175 
 
 Deduct 376,739 
 
 £656,436 
 4. Commissioners for the sinking 
 
 fund, Oct. 11 389,197 
 
 ^. Exchequer money, Oct. 10 9,121,700 
 
 10,167,333 
 
 Together 11,723,207 
 
 1 
 
166 OF THE BANK OF ENGLAND. [bOOK JI. 
 
 times, a considerable sum of other people^s 
 money in the bank ; because it never is in ad- 
 
 £11,723,207 
 Add the money vested ki the American com- 
 
 missioners £ 475,026 
 
 Total actual balances £12,198,236 
 
 Nov. 10. a period of about three weeks subse^ 
 quent to the payment of the dividends, the ba- 
 lances were 1. Customs, &c. 608,133 
 
 2. Paymaster, &c. 1,356,051 
 
 3. Unclaimed dividend^ 1,559,144 
 Deduct as before 376,739 
 
 1,182,405 
 
 4. Sinking fund 2,217,171 
 
 5. Exchequer money, November 
 7th. (£4,270,000 exchequer bills, and 
 £1,517,800 bank notes) 5,782,800 
 
 9,112,376 
 
 11,148, 160 
 Money of American commissioners 475,029 
 
 Total actual balances, Nov. 1. and 7, 1806 £11,623,189 
 
 And it appears that at other times, as on Nov. 8. the ba- 
 lance was £11,461,200, and on Dec. 1. it was £12,018,324, 
 so that the fluctuation of the aggregate balances was iucoH-* 
 siderable. 
 
 The magnitude of these balances, and of the profit which 
 inust be derived from them (a profit which is likely to iii»» 
 
CHAP. II.] OP THE BANK OP ENGLAND. 16? 
 
 vance to any one. By long practrce in the 
 trade, this sum of money becomes determinate ; 
 
 crease during the war, but which may be subject to dimj^ 
 nution on the return of peace) has attracted the attention 
 of the committee no less than that of the allowance for the 
 management of the national debt. The annual interest caU 
 culated at 5 per cent, upon them amounts to between 
 £500 and 1)00,000. 
 
 Whenever an addition is made to the amount of these ba- 
 lances, it is effected in general by a payment into the bank 
 ^f their own notes. The notes s«o paid in are cancelled. 
 Thus a reduction takes place in the circulating notes, and 
 these notes are a fund, whjch supplies, in the same manner 
 as the government balances, the means of lending at in- 
 terest. Every such reduction of notes, however, must 
 be considered as temporary, because the maintenance of 
 the circulating bank paper at the accustomed, or nearly 
 the accustomed point, is felt by the bankers and mer- 
 cliants of the metropolis to be necessary to the regula- 
 rity of current payments. Bills of exchange are therefore 
 offered to the bank to be discounted, in such quantity as 
 to restore the amount, or nearly the amount of notes can- 
 <:elled by means of any increase of balances, unless the 
 bank itself, by delivering out notes in payment for ex- 
 chequer bills which they may have bought, or for loans to 
 government, should have rendered the application for ad- 
 <iitional discounts, unnecessary. This application for ad- 
 ditional discounts, on the occasion of an increase of ba- 
 lances, must indeed ordinarily precede such increase, and 
 furnish the means of effecting it^, 
 
 That the great augmentation of government balance* of 
 
168 OF THE BANK OF ENGLAND. [bOOK IT. 
 
 let US call it the average-money in thp hands of 
 the bank. It is then with this average-money 
 
 the bank, which has taken place since the year 1797, {an 
 augmentation amounting probably to seven or eight mil- 
 lions,) has not permanently diminished the notes in circu- 
 lation, is proved by the amount of notes in circulation be- 
 tween Feb. 7, 1795, and Feb. 1, 1807, by which it ap- 
 pears that the notes, exclusive of £1 and £2 notes, were on 
 
 7 Feb. 1795 12,870,500 
 
 6 Feb. 1796 11,215,000 ' 
 
 1 Feb. 1806 12,856,770 
 
 1 Feb. 1807 12,333,430 
 
 The fluctuation in those twelve years (with the exception 
 of a short period preceding the suspension of the cash pay- 
 ments) w^as only between the sums of £11,589,380, and 
 £13,845,800, to which last-mentioned sum they amounted 
 on the 25th January, 1801, a period not long subsequent to 
 the day of paying the dividends, when a more than ordi- 
 nary issue of paper must be supposed to have taken place. 
 Since, therefore, each augmentation of the government ba- 
 lances, though it may be at first attended by a diminution 
 of bank paper, is followed by a proportionate re-issue of 
 that paper, and since, in return for the paper so re-issued, 
 additional bills are discounted, additional exchequer bills 
 are bought, or additional loans are furnished to goveru- 
 ment, (all articles equally yielding interest,) it follows that 
 those additions which are made to the balances must be 
 considered as producing a corresponding increase of inter- 
 est. The proportion will be exact, whenever the notes sup-, 
 pressed are exactly restored, provided the quantity of cash 
 and bullion continues precisely the fcame. 
 
CHAP. II.] OF THE BANK OF ENGLAND, 169 
 
 alone, that the bank can discount bills. Now 
 if the trade of London afford bills to be dis- 
 
 Such being the general state of the connexion between 
 the public and the bank, it becomes an object of consider- 
 ation, in the last place, what have been the transactions 
 between them since the year 1786. These are, first, the sta- 
 tute of 1791 ; secondly, the renewal of the charter in 1800; 
 and thirdly, the agreement for the loan of £3,000,000 m 
 1806. 
 
 First, The ^ct of 1791 , c. 33, authorized the bank to ad- 
 vance £500,000, without interest, for the service of tl:ie 
 public, which came, in fact, as has been already explained, 
 out of the unclaimed dividends ; but in consequence of the 
 second clause for repayment, in case of a deficiency, the 
 sum remaining in thejhands of the public is no more than 
 £376,739, there being no provision for increasir^ after tli^ 
 diminution had once taken place. 
 
 It was a further enactment of this statute, that the al- 
 lowance for managing the debt should continue at the rate 
 of £450 per million; and it is observable, that this is the 
 only statute which contains any distinct stipulation upon 
 that point. 
 
 Secondly, By the act, 40 Geo. III. c. 28, the bank 
 charter was continued until 1st August, 1833, on condition 
 of three millions being advanced for the public service, 
 without interest, for six years, ending 5th April, 1806. 
 
 Thirdly, The last agreement with the bank which it will 
 be necessary to notice was in 1806, 46 Geo. III. c. 41, when 
 the three millions, which ought to have been repaid on the 
 5th April, were continued as a loan to the public until six 
 
170 OF THE BANK OF ENGLAND. [bOOK II. 
 
 counted at different dates within sixty days, 
 sufficient to absorb the whole average-money 
 
 Bionths after the ratification of a definitive treaty of peace, 
 at an interest of £3 per cent, which is to be considered as a 
 gift of £60,000 per annum so long as the war continues. 
 This transaction is most material, as it evinces, that the 
 agreement made in 1800 was not considered, either by those 
 nho acted upon the part of tlie public, nor by the bank di- 
 rectors themselves, as a bar aijaiust farther participation, 
 whenever the increase of their profits derived from the 
 public, and the circumstances of public affairs, might, upon 
 similar principles, make such a claim reasonable and ex* 
 pedient. 
 
 After a summary recapitulation of the advantages which- 
 the bank derive fiom their charter, and from their con- 
 nexion with the public, it will be proper to enumerate the 
 benefits which the public receive from them in return^ 
 
 1st. A large profit on the management of the public debt 
 is enjoyed by the bank : and 2dly, the interest arising fron» 
 l>€tween eleven and twelve millions of government balances 
 lying in their hands, 3dly^ They have whatever profit is to 
 Ite tlerived from their paper circulation, amounting to 
 £16,621,390, the issue of which results from the exclusive 
 powers given to them by their charter, 
 
 1st. The capital (£11,680,000) of the bank is lent to the 
 public at the rate of £3 per cent. The benefit derived fr cm 
 this loan amounting at present to ^233,720. 
 
 2d. Advances are made to the extent of .£2,750,000 upon 
 the annual land and malt taxes, or the duties substituted, 
 at an interest of ^4 per cent. 
 
CHAP. 11.1 OP THE BANK OP ENGLAND, 171 
 
 of the bank appropriated for discounting, this 
 branch of business would not go forward with 
 
 3d, A sum of three millions was lent to government, as has 
 been already stated, without interest, for six years from 
 1800, as the price of the renewal of the bank charter ; and 
 it was agreed in 1806, that the same should be lent at 3 
 per cent, during the continuance of the war. 
 
 Another direct advantage derived to the public consists 
 in the receipt at the bank of the property tax upon the di- 
 vidends, and the prompt payment of it into the exchequer, 
 without any charge or additional allowance ; by wliich means 
 all delay is obviated in the collection of a large portion of 
 the war taxes , and the expense of officers is saved. The 
 stock transferred to the commissioners for reducing the na- 
 tional debt, and on account of the redemption of land tax, 
 is not charged by the bank with any allowance for manage- 
 ment, which two sums amount to about ,f 134,000,000, ex-i 
 elusive of South Sea annuities. 
 
 The practice of making advances upon certain instal- 
 ments of the public loans, on the security of the receipts 
 is u considerable accommodation to the subscribers, and 
 enables the government to contract for loans upon terms 
 somewhat more advantageous than could be done if that 
 facility were not afforded. The bank, however, receive in 
 return the legal rate of interest, as they do also upon all 
 transactions with the government, except those already 
 stated. The accommodations derij^ed by the public from 
 its connexion with the bank, have been carried, in some 
 yejirs, to a very large amount ; and it must always be con- 
 sidered as an object of the greatest consequence to main^ 
 tain the permanence of an estabhshment of such opulence 
 and credit, which, by the judicious conduct of its own af- 
 fairs, has contributed so jaaterially to extend the commer- 
 
172 OF THE BANK OF ENGLAND, [bOOK II. 
 
 the celerity required for the trade of London, 
 if the bank were to indulge merchants so far as 
 to discount at a longer date. 
 
 cial prosperity, and to maintain the public faith of tlie 
 country. 
 
 The bank proprietors have received, in addition to their 
 usual dividend of 7 per cent, the following bonus's; — 
 
 In June 1799., 10 per cent., .in 5 per cents. 1797. 
 May 1801 . . 5 per cent. . .in . . navy 5 per cents, 
 Nov. 1082.. 2i per cent. ..in., ditto 
 Oct. 1804. . 5 per cent. in. . cash 
 Oct. 1805. . 5 per cent, increase of dividend 
 Oct. 1800.. 5 percent, increase of dividend 
 April 1807 . . permanent increase from 7 to 10 per 
 cent, per annum, 
 
 Our readers are now enabled to judge for themselves, as 
 to the equity of the public" s demanding a bonus of some 
 kind from the bank. This is capable of being taken under 
 different shapes. If the bank diminish the rate per million 
 at which it does the public business, that is a gain : if it 
 diminish the rate of interest, on any determinate sum, 
 which the public might otherwise borrow elsewhere, that is 
 a gain : if by leaving smaller balances in the hands of the 
 bank, the public, on the faith of the nation to answer all 
 demands, should use its own money, that also would be a 
 gain. And something of this nature the committee has re- 
 commended, by which a profit of -=^50,000 might accrue to 
 the nation. This would demand nothing nfiore than the 
 simple operation of paj itig to the commissioners for redeem- 
 ing the nation ^d debt, that money every six v^ceks, which 
 they now receive quarterly. 
 
CHAP. II.] OF THE BANK OF ENGLAND. 173 
 
 15, From this we learn another reason why 
 the bank of England discounts no bill which 
 has more than sixty days to run. The first, 
 mentioned already, is for the greater security 
 of payment; and the second, which we now 
 discover, is in order to be able to discount 
 more bills than otherwise they could do, did 
 they discount at a longer day. 
 
 16. Besidesi foreign bills, which the bank of 
 England discounts, they also discount inland 
 bills, and notes of hand between merchants in 
 London, at five per cent, but the inland bills 
 
 It is not credible by any but those accustomed to calcu- 
 late interest, what is the power of simple interestybr days 
 on a large sum ; or that of compound interest, wluch is still 
 greater. By way of instance, we shall merely observe, that 
 » person having £\^ to pay on Saturday,' might gain two 
 shiliings by paying it on the preceding Monday. This is a 
 trifle; but if the sum were ^£100,000 he would gain a thou- 
 sand times as much, i. e, ^100 by such anticipation ; and 
 in proportion were it a million. W'^e should advise, there- 
 fore, that whatever cash the nation could conveniently 
 spare, should be paid monthlt/ to the commissioners for 
 redeeming the national debt ; the profit would soon ex- 
 ceed the double of that stated by the committee in their 
 report. 
 
 It is to be observed that no blame attaches to any person 
 for suffering these accumulations to have increased at the 
 bank : it was a circumstance not of a nature to be foreseen 
 and guarded against. 
 
I74i OF TH$: BAKK OP ENGLAND. [bOOK tt, 
 
 to discount at the bank, must all be payable 
 in London. 
 
 17. As the discounting of notes of hand 
 between London merchants might operate the 
 same effect, as if the bank should advance 
 them money upon personal security, which 
 would be the case, were the notes of hand 
 drawn for obtaining credit, instead of paying 
 money really due between the merchants, in 
 the course of business ; the clerks of the bank 
 keep a watchful eye over this branch of ma- 
 nagement, and, by examining the reciprocal 
 draughts of merchants between themselves, 
 they easily acquire a knowledge of the state of 
 their affairs, and are thereby enabled to judge 
 how far it is expedient to launch out in dis- 
 counting either the notes or bills v/herein they 
 are concerned. 
 
 13. We come next to the circulation be- 
 tween the bank and the exchequer. The 
 bank of England is to the exchequer, what a 
 private person's banker is to him. It receives 
 the cash of the exchequer, and answers its 
 demands. 
 
 19* Cash comes to the exchequer frotn the 
 amount of taxes. The two great branches of 
 which are the excise and customs. The ex 
 cise is computed to bring in annually from 
 
 J 
 
CHAf , II.] OP THE BANIt OF ENGLAND. 17^ 
 
 London> and the fifty-two collections over aii 
 England, nett into the exchequer, above four 
 and a half millions sterling*. The fifty.two 
 collectors send the amount of their collection^ 
 to London eight times a year, almost mtirel^ 
 in bills ^ drawn payable to the commissioners 
 of excise ; they indorse them to the receiver-^ 
 general ; he carries them to the bank as they 
 fall due^ and gets a receipt for the amount; 
 this receipt he carries to the exchequer, who 
 charge it in their account with the bank, and 
 delivers tallies to the receiver-general for the 
 amount of his payments ; these tallies he de- 
 livers to the commissioners of excise, who enter 
 them in their book of tallies. This operation is 
 performed once every week, and serves as a dis- 
 charge from the commissioners to the receiver. 
 general. The bank, again^ keeps an account 
 with the exchequer, which is settled once 
 every day, by two clerks, who go from the 
 bank to the exchequer for this purpose, Whea 
 coin is wanted by the exchequer, for payments 
 where bank notes Will not answer, the coin is 
 furnished by the bank ; when paper will serve 
 the purpose, paper is issued* 
 
 20. Besides this operation in the receipt of 
 taxes, the bank advances to government, that is 
 ' to the exchequer, the amount of the land, or 
 
 * The produce of the excise, A. D. 1812, is «^1&,768,167. 
 I2s,4d. and of the customs, ^3,974,732. Is. lOxd. 
 
176 OF THE BANK OF ExN'GLAND. [bOOK IT* 
 
 Other taxes imposed, which are to be levied 
 within the year. Thus the whole amount of 
 taxes is poured into the bank, in the manner 
 we have been describing. 
 
 21. The bank also keeps the transfer books 
 of all the funds negotiated at the bank; and 
 out of the public money in its hands it pays 
 the interest of these funds, for which govern- 
 ment allows to the bank a sum proportionate 
 to the expence of this branch of management. 
 When the bank, as a company, lends to go- 
 vernment upon a permanent fund, the capita^ 
 whereof is not demandable, this operation is 
 foreign to their business as a bank, and is con- 
 ducted by the company as an article of ma- 
 " nugement of their private property. 
 
 22. Let us now examine by what channels 
 their notes enter into circulation, and the se- 
 
 *^curity upon which they stand. When issued 
 in the discount of bills, they stand on the prin- 
 
 V ciples of mercantile credit, and depend upon the 
 goodness of the bills discounted. When is- 
 sued upon the faith of taxes, to be paid within 
 the year, they stand upon the security of this 
 payment, which is that of the public. 
 
 23. The greatest risk the bank runs, is in 
 discounting bad bills : but by the extent of 
 
CKAP. ri.] OF THE BANK OF ENGLAND. 177 
 
 their business in this branch, and by circulat- 
 ing the cash of all the merchants who keep ac- 
 counts with them, they acquire so perfect a. 
 knowledofe of the state of their affairs, that it 
 rarely happens that any one can break for very 
 considerable sums, without the bank having 
 a previous notice of it. A sudden loss may, no 
 doubt, happen, without a possibility of being 
 foreseen ; but the matter of fact proves, that 
 their losses upon bad bills are inconsiderable. 
 
 24. We come tiow to the last branch of their 
 management, to wit, their gold and silver. Fof 
 the circulation of bank notes, coin is neces- 
 sary. In times of peace, and a favourable ba* 
 lance of trade^ the bank suffers little by the 
 obligation it is under, to pay in coin, ex- 
 cept as far as the great confusron of cur- 
 rency affords an occasion to mo© ey -jobbers 
 to melt down the tiew guineas. But when 
 large payments are to be paid abroad, 
 the distress of the bank is, no doubt, very 
 great. The exportation of the heavy guineas in 
 time of war, and during a wrong balance on 
 the trade of England, leaves circulation pro- 
 vided with a light currency only, in which the, 
 bank is obliged to pay their notes : and the 
 intrinsic value of the gold in which they pay 
 regulates the price of the metals they are ob- 
 liged to buy at market. If they provide them 
 
i?8 OF iHE bXkk of EN^tANDi [bOOK II. 
 
 themselves from abroad, they must pay the 
 price of them in bills of exchange. But then 
 the lightness of the currency at home, sinks 
 the value of the pound sterling, as it raises the 
 value of the ounce of gold and silver. J 
 
 25. Let us now examine how far the paper 
 of a mercantile bank, like that of England, 
 tends to supply the demand of circulation. 
 Were no bank established at London, all bills 
 would be paid, or discounted in coin. The 
 bank, therefore, melts down into paper money, 
 all the bills discounted by them, and throws it 
 into circulation. It also melts down into paper 
 all the sums it advances either to government, 
 or to the great trading companies. In this re- 
 spect it acts upon the principles of banks upon 
 mortgage. It also melts down into paper, all 
 the interest on the public funds paid at the 
 bank. All this sum of paper issues from the< 
 bank into the city of London, and propor- 
 tionally supplies the circulation of that great . 
 capital. 
 
 ^6. Let us next examine how this paper can 
 lind Its way into the country of England, there 
 to supply the use of coin. The whole consump- 
 
 J 'the opinions stated in this chapter f.om Sir James 
 Stewart, are not adopted wholly by the avithor. 
 
tJHAP. II.] OF THE BANK OF ENGLAND. 1^9 
 
 tion of London for meat, beer, fire, and an in- 
 finity of articles of manufacture, for domestic 
 use, and foreign exportation, comes from the 
 country of England. Did the country owe no- 
 thing; to London, the sums due for those com- 
 modities would be sent into the country, iu 
 the current circulation of London, which, by 
 what we have seen, absorbs a very large quan- 
 tity of paper. 
 
 57. But we have said above, that the whole 
 amount of taxes, almost, is remitted to Lon- 
 don in bills : this could not be the case, were 
 not the capital constantly indebted to the 
 country. This cirfcumstance confines the cir- 
 culation of bank notes chiefly to London, and 
 some other cities, to which the inhabitants of 
 London resort, and whither they carry, in their 
 pockets, the money of the capital, viz. bank 
 notes. For these reasons bank notes can never 
 be common in the country : and if at any- 
 time, a scarcity of currency there, proves 
 hurtful to industry, the defect cannot be re- 
 medied but by establishing banks of circulation 
 upon mortgage, or otherwise, in the principal 
 towns of England. This new bank paper com- 
 ing in place of the coin, would no more be 
 sent to London than coin is sent now. The 
 
 N 2 
 
Ift6 6F THE BAKK 6F ENGLAND. [BOOK H. 
 
 debt* due by the country for taxes, would be 
 compensated by the reciprocal debts due by 
 London for subsistence, &c. and the compen- 
 sation would go on as at present, by bills. 
 But were the case otherwise, and did a change 
 of circumstances oblige the country to make 
 delivery in coin to London, the holders of the 
 country banks would constantly have recoui^se 
 to the bank established in the district, for the 
 coin wanted to be sent to London. 
 
CHAP. III.] BANKING EXPLAINER. 181 
 
 CHAP. Ill, 
 
 Some of the leading Principles of Banking 
 explained, 
 
 1. After the detailed account of the practice 
 of banks of circulation, in the last chapter, it 
 will be easy to comprehend the principles 
 upon which they proceed, and how their notes 
 obtain circulation, 
 
 2. With respect to all banks connected with 
 government, it is plain that, while that con- 
 nexion lasts, the circulation of their paper is 
 certain. For, as the government agrees to re- 
 ceive their paper in payment of taxes, it must 
 of necessity circulate to a very great extent; 
 because every man, having taxes to pay, will 
 have a certain demand for this paper, and as 
 it were, a certain vent for it: and wi^l, there-^ 
 fpre readily take it. 
 
 3. In like manner, as it is the interest of 
 every bank, formed upon these principles, to 
 keep as much of its paper as possible in circu- 
 lation, fox which it receive^ an interest, at the 
 
182 *rHfi PRINCIPLES OF [bOOK II. 
 
 rate of five per cent, and upwards, it will endea- 
 vour to discount as many bills as it can with 
 safety. All persons, therefore, who can em- 
 ploy money in trade to a greater advantage than 
 five per cent, will be e^ger to discount their bills 
 at the bank, paying that interest, and will, of 
 course,have an interest in supporting the credit 
 and the circulation of the bank. 
 
 4. While the bank is bound to pay its notes, 
 upon demand, in cash, there is, however, a 
 constant check to the extent of this circula- 
 tion ; which, being supported entirely by cre- 
 dit, can be maintained only so long as the bank 
 can preserve its credit, by the faithful per- 
 formance of its contract, in paying upon de- 
 mand. 
 
 5. It must, therefore, always keep such a 
 dtie proportion between the stock of its cash 
 and the quantity of its notes in circulation, 
 that if a sudden demand for cash to a greater 
 extent than usual were made, it could readily 
 meet the demand, and pay to the full extent 
 of it. , .^ ' 
 
 - (5. To hope to pky suddenly all demands upon 
 it in cash, it will be seen hereafter, is impos- 
 sible. For, if it were to keep such a quantity 
 of coin as would be equal to the whole num- 
 
€HAP. III.]. BANKING EXPLAINED. 183 
 
 ber of its notes in circulation, it must be obi^ * 
 vrous," that it would lose as muchc;by the 
 hoarding of the cash, as it would gain by the 
 circulation of its notes. It would be merely 
 a bank of deposit ; and would be restrained to 
 a profit of five per cent. ; with a considerable 
 abatement for expences, reducing it probably 
 to three per cent. ; on its origirjal capital^ 
 Whereas the bank of England has, for some 
 years, divided a net profit of ten per ce^t. ou 
 its original stock of eleven jnillions, 
 
 7. Smithy the author of the justly admired 
 Avork " the Wealth of Nations^'* has detailed, at 
 considerable length, the principles of banking, 
 and endeavoured to prove, that, when the, 
 bank is bound to pay in cash upon demand, a 
 greater quantity of paper could not circulate, 
 than would equal in amount the coin that 
 would naturally circulate in its place : but 
 with all deference to so great an authority, 
 there $eems no just foundation for this opinion, 
 as far as it is really definite and intelligible. 
 Since the very object of instituting such banks 
 is to supply the want of coin ; to extend the 
 circulation. And when money, or apy article, 
 hatri'ng the false semblance of money, can be 
 created rapidly, the demand for it increases 
 ^'ith its increase ; and there is no fixino' a limit 
 
 ^>i^ OF, THE ^'^A 
 
 i UNIVERSITV 1 
 
184 THE PRINCIPLES OP [boOK II, 
 
 to the possible extent of circulation : where its 
 supply is as rapid as the demand, which is in- ^ 
 cessant. Without, therefore, entering into a 
 full discussion of this subject, which will be 
 found to be practically inapplicable, wher^ 
 payment of the notes in cash cannot be en- 
 forced, as is the case in England at present, 
 we may venture humbly to doubt the justness 
 of this doctrine, 
 
 8. With respect to the process of banking,. 
 it is obvious to remark, that the issuing of 
 notes upon the discounting of s,ho.rt bills, is, of 
 all other modes of circulation, the most advan- 
 tageous, for many reasons. Firsts By such 
 short loans, the security is rendered piore safe, 
 Secondly^ The discount being taken before- 
 hand the profit of banking is encreased. Third- 
 hj. The bank, by such short advances, is enr 
 abled to adjust its circulation to its credit and 
 state of immediate solvency, with greajtcjr^acr 
 curacy, and to call in its notes v;.itli more cer-. 
 taiflty and regularity, 
 
 9. By this^ means it will be found, that 
 very few of its notes, comparatively, are.^ver 
 paid in cash; or can ever require to be paid \^ 
 cash. For, as it never advances a note, vvith^ 
 qut some security, such as a bill of exchange, 
 
CHAP. III.] BANKING EXPLAfK-ED. M^ 
 
 the real process of the circulation may be thtis 
 described. Upon the iirst ^f Jamiaji/ we will 
 suppose a person borrows of the bank e^lOO in 
 notes, upon the security of a bill of exchange: 
 upon which, the bank, deducting IJs. 9 id. for 
 interest for sixty-five days, w^ill deliver out 
 ninety-nine pounds in notes, and some odd 
 shillings: and, at the end of the two months, 
 or 68 days, (allowing three days' grace,) will 
 be entitled to receive of tlie acceptor of the 
 bill of exchange, one hundred pounds in its 
 own notes. In the intermediate time, should 
 cash be demanded for any of these notes, >the 
 bank, by the frequent payment of discounted 
 bills, and new demands for discounts, wiU;j3e 
 enabled to draw in, or shorten its circulation::at 
 pleasure, 
 
 JO. Should, however, any sudden demand 
 fpr ca$h occur, apd the bank be in danger of 
 not being able tp meet that demand, it should 
 stop payment; entirely ; for, in less than two 
 months, all its notes will be returned by ^he 
 acceptors of the bills of exchange : who will 
 J^ave to take them up v\^ith the notes of the 
 bank. ' Ti^iisq/Tin- 
 
 il. It would be absurd in such a qas6,^to 
 ^prQseed^jto pay in'^^'cash 2 for the notes will 
 
186 THE PRINCIPLES OF [bOOKII, 
 
 be constantly returning, at the expiration of 
 its short credits. Thus its stock of cash is, iq 
 reality, merely an instrument of trade : a sort 
 of delusive decoy, to keep up its credit only ? 
 which it would not be right to part with upon 
 the mere expectation of its returnipg in pay-s 
 ment of the bills of exchange, when the value 
 of bank notes will be depreciated and abso- 
 lutely discredited, 
 
 ]i^. These principles apply to all banks 
 existing now in England^ as well private as 
 public ; to the bank of England^ as well as 
 to the countrij bankers: and will readily ex- 
 plain haw properly the former proceeded, when 
 upon the run which was made upon it in 
 3797, it applied to the government to allow of 
 a temporary suspension of J3ayments : and 
 will evince how absurd must be the fear of those 
 who doubt the solvency of the bank of Eng^ 
 land. For little more than two months are 
 necessary to call in the whole of its present 
 issue of twenty- three millions of bank currency; 
 unless, indeed, it shall be supposed, that for 
 want of some immediate supply for the cur- ^ 
 rency so diminished, the greater part of the per- 
 sons, indebted to the bank upon bills of i^tx- 
 change should become insolvent. This, how-- 
 
iJHAP, 111.3 BAKKINQ EXPLAINED, 187 
 
 ever, would greatly establish the credit of the 
 bank, and raise its notes to a very high value» 
 in exchange for all commodities. 
 
 13. These principles, which also clearly 
 shew, that all the country hankers, who have 
 stopped payment^ have failed chiefly through 
 the most imprudent personal extravagance, or 
 through unsuccessful and injudicious specula- 
 tion in other trades. Since as lenders. of notes, 
 upon ordinary good security, they can besubject 
 to very few losses, which will not in the end be 
 made up to them, where they have had the 
 caution to have several names upon their bills ; 
 as, out of many bankruptcies, they will receive 
 all, or nearly all their advances from the dif- 
 ferent assignees of the different indorsers upon 
 any one bill. They will also explain why, 'in 
 reality, the personal wealth of a bank is the 
 last security that the note holders should re- 
 gard. Whatever may be the real or personal 
 |i>rtune of any man, extravagance and injudi- 
 cious speculations will ruin him : whilst par- 
 simony, prudence, an4 skill, by keeping a 
 bankers expenditure within his profits, and 
 f?mploying his advances of notes upon good bills 
 pnly, will always afford ample security for 
 their payment. Even should a run upon hiqi 
 
188 THE PRINCIPLES OF [bOOK I?, 
 
 oblig-e him to stop, he will be enabled to pay 
 twenty shillings in the pound, in two months 
 after ; notwithstanding he should never have 
 had any capital or his own, but have carried on 
 his business entirely with borrowed money. 
 
 14. A penurious miser is, therefore, of all cha^ 
 racters, the fittest person for a banker; and a 
 dashing speculator, a jobber in loans, a gambler 
 in the funds, or an adventurer at elections, the 
 Yery worst. A truth which, as bankers are 
 probably growing more plentiful every day, it 
 would be well to fix steadily in the mind of all 
 those who come within the vortex of the cir- 
 culation of a country bank. In the present 
 slate of the currency it would be well to write 
 up in every counting-house, " Take no paper 
 of any persons who keep dashing establish- 
 ments and splendid equipages." Upon the 
 »ame principles as the trade of a banker, is one 
 ofjhe easiest which can be conceived, it would 
 be well to allow of a number of corporate 
 banks, the clerks of which would be bound, as 
 the governors of the bank of England are, to 
 adhere to certain strict rules in their advances i 
 and where it would be certain that the issue of 
 notes would not be made to supply funds for 
 private extravagance, but upon the discounting 
 of orood bills. 
 
CHAP. III.] BANKINGEXPLAINEDi 189 
 
 15, These principles will also explain whr, 
 upon the present system, on which the bank 
 of England is placed, there is a greater temp- 
 tation than at other times, to discount bills 
 upon somewhat doubtful security : that is, to 
 extend its circulation almost without limit. 
 For, as it is, in reality, debtor to the holders 
 for every note which is outstanding, if it issues 
 ^100 on a bill of exchange, which is not paid, 
 the only difference which this occasions will 
 be, that, at the end of the two months, it will 
 remain debtor in one hundred pounds to the 
 .holder of the notes, who receives no interest, 
 and can make no demand of cash. Whereas 
 the parties to the bill of exchange, are all liable 
 to pay interest for the notes which have passed 
 through their hands ; and by having time given 
 them will commonly, in the end, be enabled 
 to pay : that is, to take up the bill, by restor- 
 ing the notes to the bank, and thus takincrofl 
 its debt of *glOO to the holders of it. 
 
190 BULtldN TRADE OF LCJJ^DON. [bOOK 11. 
 
 CHAP* IVw 
 
 Of the TSullion Trade in London^ as carried on 
 principallif through the Agencif of the Bank 
 of England, 
 
 1* Having explained the dealings of the 
 hank of England^ which respect the supply of 
 currency for the circulation of trade^ it will be 
 necessary now to consider more attentively the 
 nature of the dealings in bullion, as th6y are 
 carried on in London ; whicb are effected^ 
 principally^ through the agency of the hank of 
 England, 
 
 2. This company may be said to have had 
 the complete monopoly of such dealings for 
 a considerable time ; and, it is said, that it 
 is found to be so much their interest to keep 
 this trade entirely to themselves, that they fre- 
 quently buy bullion at the same price at which 
 they sell it. 
 
 3. The term bullion is, in England^ ap- 
 plied to all gold and silver not manufactured 
 into plate, or jewellery, which is saleable, or to 
 
 1 
 
tHAP. IV.] Btfti5i6lJ TRADE OF iONDOK/lDi 
 
 &11 coins, as well domestic as foreign, which 
 iare not current within the realm : and the fol- 
 lowing particulars concerning the trade in 
 this article, have been extracted from the evi- 
 dence taken by the committee of the house of 
 commons to enquire into the high price of 
 bullion. 
 
 4. Gold is sold in bars, called ingots, in fo- 
 reign coin, in light guineas, or in pieces of 
 Standard plate, of broken jewellery.. The in- 
 gots and foreign coin are sold principally for 
 exportation: the rest for home consumption, 
 
 .5. The price of foreign coin r's somewhat 
 higher in proportion than that of gold in bars, 
 from the conveniency of exchanging it abroad ; 
 and different coins bear diiferent prices, ac- 
 cording to the demand created by the ex- 
 changes required with the places where they^ 
 are current. When light, and not fit for circu- 
 lation, this coin is melted into bars. 
 
 6. The gold in bars consists either of Spa- 
 nish ingots, or gold, professedly melted from 
 gold dust, and foreign bars or coin. This fact 
 of their being so melted must be verified by 
 the oaths of two witnesses, before a court of 
 
 1 
 
19^ BULLTON TRADE OF LONDON. [booK it. 
 
 aldermen in London, in order to obtain a li- 
 cence for the exportation* 
 
 7. The greater part of the sales for exporta- 
 tion are made through the agency of a broker, 
 employed for the bank of England. And from 
 these sales chiefly the price of gold bullion is 
 fixed as it is published in WettenhalV^ tables 
 of prices current. For this transaction the 
 broker, Mr. Goldsmid, whose house has acted 
 many years for the bank, charges two shillings 
 and six-pence per cent, to each party. 
 
 S. The bullion office at the bank was, for- 
 merly, called the warehouse, and the business 
 employs three clerks, w ho enter the sales and 
 purchases for the bank, and report the amount 
 to the cashiers. With respect to private sales, 
 they make no report, and only a loose entry 
 in a waste book. 
 
 9. The bullion is deposited by the master^ erf 
 ships of war and packets, for the owners ; and 
 the bank receives the account of the fineness 
 from the assayers, and acts, gratuitously, as 
 an umpire between the parties. By which 
 means it obtains a general knowleflge of the 
 dealings in bullion. The office was established 
 in 1668. 
 
HAP. IV.] BU-LLiON CRADB OP LONDON. 193 
 
 10. A licence being necessary for all gold 
 exported, unless it be foreign coin, the reports 
 of this office will ascertain the quantity ex- 
 ported ; and the foreign coin being more va- 
 luable as currency than for melting, is, of 
 course, generally exported. 
 
 1 1 . The bullion is received in packages mark- 
 ed and numbered, and deposited for safe custody 
 till the sale, when the packages are opened 
 in the presence of both the sellers and buyers.' 
 
 12. In some instances, bullion is brought by 
 private persons for sale, and it is uncertain 
 whether such sales may not be repeatedly 
 made ; but it appears, from the evidence of the 
 broker, that the dealing is entirely for ready 
 money, and by no means on speculation. It is, 
 therefore, probable that all the sales are for 
 immediate consumption or e3{:portation, 
 
 13. The average amount of s^l^s is from 2000 
 to 5000 ounces at a tjme, and to the value of 
 
 ^80,000 a month, according to the loose guess 
 of Mr. Goldsmid^ the broker. 
 
 14. The purchases are now generally made 
 by foreign houses trading with Holland, Hmn- 
 
 o 
 
194 tVlLiOS TRADE OF LOKDOX. [booK If. 
 
 burgh, and France : and ift the purchase of gold 
 for ope principal, supposed to be the bank, Mr. 
 Goldsmid has been limited to £4 per ounce, 
 during several years. On the part of the seller 
 he has generally had a discretionary poWef, 
 which is guided by the price in foreign mar- 
 kets and the exchange. 
 
 15. The hometradfe for bullion is conducted 
 by refiners, who purchase it in various forms 
 of coin, bars, light guineas, and trinkets, and 
 at all standards, from four pounds twelve shil- 
 lings, and three pounds twelve shillings, to two 
 pounds ten shillings per ounce. These pur- 
 chasers take the market price from the brokers. 
 
 16. Portugal coin is valued at 2s. or 3s. an 
 ounce higher than foreign bars exportable. 
 Bullion is therefore thus classed : 
 
 .V. d, 
 
 Portugal coin standard gold 92 per ounce. 
 Bars standard foreign 90 ditto 
 
 Ditto ditto English from >^g ditto 
 
 light guineas or plate 5 
 Light guineas in tale So 9 ditto 
 
 17» Three pence are allowed for melting, 
 or three pence halfpenny, which gives a pro- 
 fit of three halfpence per ounce ; and the fair 
 
CHAP. IV.] BUfLIOK TRADE OF LONDON. 195 
 
 profit of buyers is from about ten to twenty 
 shillings per cent. 
 
 18. The average deficiency in the weight of 
 ligfht guineas is about half a grain, and their 
 sterHng value one pound and nine pence. Some 
 persons buy them, expressly for melting, at the 
 market price; oth'ers, more scrupulous, pro- 
 fess not to do so*. 
 
 19. The gold imported is chiefly from the 
 West Indies and South America: but gold is 
 actually exported to the Brazils, on account of 
 our connexion with Portugal, which remits 
 money for the use of the court of the Prince 
 of the Brazils, 
 
 * Most of the witnesses examined would be called pro- 
 fessionally unwilling witnesses, and seem very ready to de- 
 preciate their own understanding, to preserve the character 
 of bank notes. One gentleman, who professes great anxi- 
 ety, lest he should be supposed to buy a light guinea for 
 more than twenty ^one shillings, or melt any gold into bars 
 for exportation, which consisted of light guineas, or plate, 
 or trinkets, or any thing but foreign gold, falls into the 
 following iaconsistency. He say^, latterly the quantity of 
 exportable gold which he received has been less than for* 
 merly, yet lie ha? sold more latterly /or exportation. His 
 reason is, — 1 am compelled to swear it off to get the price, 
 which is higher than I can get for home consumption. 
 
 02 
 
196 BULLION TRADE OF LONDON. [bOOK II: 
 
 SO.The ordinary freight from the West Indies, 
 5s from four to five per cent, and the expence 
 from Carthagena, or Vera Cruz, to Jamaica, 
 including risk, three and a half per cent. ; freight 
 to ports in Europe, is about one and a half 
 per cent, and the insurance varies from three 
 per cent, and upwards. 
 
 21. The jewellers melt the light guineas, 
 and many are clandestinely exported. Bankers 
 receive no guineas in the course of their col- 
 
 ection of money, 
 
 22. Exchange with Portugal was, in 1810, 
 67^ sterling par for 1,000 rees. A six mill 
 four piece, or 6,400 rees, weighing 9 dwts. 
 6 grs. 
 
 23. Louis d'ors and Napoleon d'ors have an 
 extrinsic value of l| per cent, as coin, above bul- 
 lion ; doubloons and Portugal gold above 
 two per cent, 
 
 24. A guinea is not taken, as of due weight 
 for currency at the bank, which falls short of 
 five penny-weights eight grains; and guineas, 
 when issued from the mint, weigh five penny- 
 weights nine grains and a fraction. Guineas, 
 
 I 
 
HAP. IV.] BULLION TRADE OF LONDON. 197 
 
 when below the above weight, may lawfully 
 be melted down and sold as bullion. 
 
 25» By an experiment made by the officers 
 of the mint, by order of the lords of the com- 
 mittee for coin, dated April 18, 1807, to as- 
 certain the deficiency in weight of the gold 
 coins of the average quality then in circula- 
 tion, it appeared that out of 100 guineas, 
 there were 6S6 pieces of the current weight, 
 and 314 below the current weight. That upon 
 the whole mass they had lost 1 grain and 22^ 
 parts out of a thousand, 1.222 below the full 
 standard ; making a loss of 18s. lid. or 18s. 
 lOd. per cent. ; and that the loss below the 
 standard of currency was about 786 parts out 
 of a thousand parts of a grain, making a loss 
 percent, of 12s. 2d. But in another experi- 
 ment on some guineas collected from a retail 
 shop, the proportion of current guineas to 
 light was as .54 to 46 in the hundred, the loss 
 on the standard weight grains 1.^1. or 
 s^l :Js. 4d. percent, and on the current weight, 
 one tenth of a grain, or 16s. 8d. per cent. 
 
 Q6, From a similar experiment on half gui- 
 .neas, the current pieces bore the proportion of 
 23 to 77 in the hundred, the deficiency in stan- 
 dard weight was grains 1.441? by the piece, or 
 
1§6 lMt>6flTfe AND fiXPOHTS [bO^K IT* 
 
 si. ^s. 7cl. per cent, and in current weight 
 grains 1.23 or ll. 17s. per cent, 
 
 27. From a similar experiment on seven shil- 
 ling pieces, the current pieces were 84, and the 
 light pieces 16 in the hundred. The loss on each 
 piece of the first w^^ grains 0.5(73, or I7s.3d. per 
 cent, and on the latter, as a loss from the cur- 
 rent weight, grains 0.196, or 10s* 7d. per cent. 
 
 28.It appears by the same reports^ thatfrom the 
 years 1801 to 1810, both inclusive, there were 
 exported of gold coin and bullion £975^330 
 ounces and four penny-weights, which, at four 
 pound per ounce, may be valued at j^ 1,1 13,720; 
 and that there were also exported 37,303,9^51- 
 ounces and 17 dwts. of silver in bullion, which, 
 at OS. per ounce sterling, make ^9532v5,988. 
 
 29. That in the same period, the quantity of 
 wrought plate exported was 942,161 ounces 
 lo dwts. and of wrought gold plate only 3 LI 
 ounces and 4 dwts. And that from the year 
 1804 to 1809 exclusive, were exported to 
 Ireland 187,690 ounces of silver coin and bul- 
 lion, together with 1,044,694 ounces 2 dwts. 
 of silver plate, and a very few ounces of gold 
 plate. 
 
CHAP. IV.] OF BULLION AND PLATP. H9 
 
 SO. It also appears, that the total amount of 
 silver exported through or by the East Indic^ 
 Company, is ^9,730,381 ounces, 8 dwts. froi^ 
 the year 1788 to 1809, both inclusive. 
 
 31. That the sales of silver pieces of eight 
 and ingots by the bank of England, from th^ 
 first of February, 1797, to the first of March^ 
 1810, inclusive, amount to 7l574'l,028 ounces. 
 
 ,09. That the old and new standard gold as- 
 sayed in London, from and including the year 
 1800, to the end of January, 1810, was 18,215 
 lbs. 4 oz. 5 dwts. 6 grains ; of which *5,504lbs. 
 10 oz. 9 dwts. were of the old standard ; and that 
 the silver so assayed amounted to 1,322,298 lbs. 
 and 15 dwts. ; and that the net weight assayed 
 in Scotland from 1801 inclusive, to the 5th 
 of January, 1810, was 55,446 oz. 2 dwts. 
 7 gr.; and in silver 9,997,562 o;?. 19 dwts. 
 of which latter were exported 1,044,694 oz. 
 2 dwts. leaving 8,952,868 oz. 17 dwts. silver 
 jissayed in plate for the home consumption. 
 
 33. That from the ^ear 1797 inclusive to the 
 1st of March, ISIO, there were coined at the 
 mint to the amount of ^8,960,113, lis. 
 in gold coins, no silver current money having 
 been coined during that period. 
 
200 ANKUAL QUANTITY OF BULLION [bOOK It. 
 
 34. That the value of the gold brought into 
 circulation, and added to the commerce of the 
 world/rom the various mines, from 1790 to 1802 
 amounted to 10,719,883 dollars and a fraction ; 
 and in the same time the value of the silver 
 brought in like manner into circulation was 
 3.5,049,920 dollars : which allows a value of 
 45,762,803 dollars annually for the totalamount 
 of gold and silver, of which the value of 
 40,713,39.3 dollars is produced by America, ^nd 
 36,096,736 dollars by the Spanish colonies. 
 
 35, From these data some calculations may, 
 hereafter, be made of utility in the science of 
 political economy ; but, at present, these re- 
 main as insulated facts, from which no poli- 
 tical inference has been made by the committee 
 which has drawn up this highly useful and in- 
 teresting report. In the consideration of ex- 
 change, it will, however, afford very instructive 
 information to know, that the quantity of bul- 
 lion continually added to the commerce of the 
 world, has been correctly as,certained, since 
 from that fact many important consequences 
 may be drawn. 
 
 3(^1 In speaking of the price of bullion, 
 much use is made of the term Me mint price, 
 and the high or low prices are said to be above 
 
CHAP. IV.] ADDED TO COMMERCE. 201 
 
 or below mint price. To explain which it is 
 only necessary to observe, that, when an ounce 
 of bullion in gold or silver is delivered to the 
 mint to be coined, a certain quantity of coin 
 will be returned by the mint to the owner of 
 the bullion. This is called the mint price, 
 and ascertains the quantity which the master 
 of the mint deducts for the price of coinage. 
 
 37. Bullion, in the raw state, can scarcely 
 ever vary much above or below this price, in 
 exchange for new or good coin ; except upon 
 certain principles which are easily explained. 
 The coin and the bullion being in substance 
 the same thing, allowrng for the difference of 
 their purity, they should exchange, weight for 
 weight, just as any other commodity, such as 
 lead, copper, or iron, which one merchant 
 might lend to another, to be repaid weight 
 for weight the next day. But the coin being 
 useful for circulation at home, and not being 
 exportable; and the bullion being exportable, 
 and not prepared for domestic circulation," 
 some small difference in their value may natu- 
 rally arise, when either of these uses becomes 
 the motive for dealers to exchange them. 
 
 38.That this circumstance, however, cannot 
 create a great difference in the price is clear, 
 
202O]^ THE MINTPRICEOFBUl.LI0>:.[B00Kir; 
 
 because whatever may be the prohibitions 
 against exporting coin or bullion, they are ea- 
 sily evaded, and persons will be always found 
 ready to convert coin into bullion, or export 
 it in specie, whenever there is a temptation 
 to do it : as appears by the practice of the 
 Spaniards, from whom nearly all the bullion 
 employed in Europe is procured, although 
 by their laws the exportation of it is prohi- 
 bited by severe penalties, even amounting to 
 death. 
 
 39. One cause of an increase of the price of 
 bullion above the mint price, will necessarily 
 be found in the wearing and diminution in 
 weight of the circulating coins. For the mint 
 price of bullion is its price in new coins, weight 
 for weight. But if the coin be at all wore or 
 debased, it must of course exchange for a less 
 quantity of bullion in weight than a new coin ; 
 for otherwise the seller of the bullion would 
 take it to the mint and get new coins, by which 
 means he would lose nothing of his weight in 
 bullion. 
 
 40. Supposing the current coin to be of an 
 excellent purity, the bullion will be rather 
 below mint price, because no person will ex- 
 change money for builion, without having 
 
CHAP. IV.] CAUSES OF VARtAXCE 203 
 
 some allowance for the time which will elapse 
 before he can procure it to be coined into mo- 
 ney at the mint. 
 
 41. On the accession of his present majesty 
 \o the throne, the gold coins of this country 
 were in a very debased state. Their deficiency 
 in weight increased so rapidly, that, in the year 
 1773, the government found it necessary to 
 take the subject into consideration ; the result 
 of which was, the recalling of all the light 
 coins from circulation, which were re-coined 
 in the years 1771^, 6, 6, and 7- From this 
 period the goltj coins were in a state of great 
 perfection, and were maintained in this state 
 by frequent new issues from the mint. 
 
 42. It is a fact wortby of particular notice, 
 that for several years before the reformation of 
 the gold coins, the market price of gold was 
 considerably higher than its mint price. From 
 17.57 to -1773, a period of sixteen years, its 
 average price was £3 I9s. 2|d. per ounce. But 
 immediately after the re-coinage in 1774, the 
 market price of bullion fell below the mint 
 price ; and, during a period of twenty years, 
 from 1777 to 1797, the average price paid by the 
 bank directors for gold, was only £3 17s. 7i.d. 
 which is 2|d. under the mint price. 
 
204 CAUSES OF VARIAKCE [bOOIC ;t# 
 
 43. From this fact the conclusion cannot be 
 considered doubtful, that the high price of gold 
 bullion was occasioned by the defective state of 
 the gold coins ; that £3 19s. 2|d. of these coins 
 did not contain more than an ounce of standard 
 gold ; consequently, it would not exchange 
 for its nominal value, but according to the 
 quantity of standard gold which it contained. 
 And this fact is fully proved by the reforma- 
 tion of the coins. When every ^3 17s- 10|d. 
 contained an ounce of gold, the market price of 
 gold immediately fell to its mint price ; an 
 ounce of standard gold bullion could be rea- 
 dily obtained for £3 17s. lOjd. in coins. 
 
 4i. Lord Liverpool states another fact worthy 
 of notice, that during the period already men- 
 tioned of the defective state of the gold coins, 
 the price of silver was influenced by their defi- 
 cient or perfect state. From 1757 to 1773, the 
 average price which the bank directors paid for 
 dollars, was 6i\d. per ounce, equal to 66-|-d. 
 for standard silver. But immediately after the 
 recoinage of the gold coins, the price of dol- 
 lars fell, so that, on an average of twenty-four 
 years, ending 1797, the bank directors have 
 paid for dollars 6]^d per ounce, equal to 63-ld. 
 per ounce, for standard silver, and less than 
 
CHAP. IV.3 IN THE PRICE OF BULLION. ^ > 
 
 the average price for sixteen years, previous' to 
 the recoinage by Id, per ounce or .ViV P^r 
 cent. 
 
 4.5. The extraordinary difference between 
 the market price and the mint price of bullion, 
 stated in the commencement of this chapter, 
 can only be explained upon the principle of 
 exchange, and the fact of the circulating me-, 
 dium being no longer fiionet/, or coin, but a 
 bank paper, which being used as a substitute 
 for coin, has now entirely usurped its place. 
 Owing to which there is now no corresponds 
 ing intrinsic value between the currency and 
 bullion ; for they are articles of a very dif- 
 ferent nature. The one is paper, and the other 
 gold or silver metal. While the paper was con- 
 vertible into a certain quantity of gold or silver 
 at the option of the holder, he who possessed 
 a bank note, might be said to possess as much 
 gold as it purported to represent; and by trans- 
 ferring it, gave an order to the receiver to ob- 
 tain a pure and good coin at the bank, on the 
 instant. There could then be no conceivable 
 difference between the exchange of notes and 
 money, each at their nominal value, and bul- 
 lion must, of course, bear the same price in bank 
 notes as in money. But when they no longer 
 became convertible, either by applying to i\w 
 
206 CAUSES OF VARIANCE [bOOK II. 
 
 hank of England^ or procuring change from 
 private persons, a material alteration in the cir- 
 cumstances was effected. The currency, con- 
 sisting of paper, was the only measure of va- 
 lue, by which bullion, as well as all other ar- 
 ticles, must be estimated. 
 
 46. It has been shewn that this paper has 
 a necessary value, in respect of its circulation, 
 in payment of all the demands of the state in 
 taxes, and may so far be considered as a com- 
 modity ; but the circulation for this purpose is 
 by no means to be compared with the extent 
 of its circulation for other purposes: and paper 
 currency being increased at the pleasure of the 
 hank of England^ according to the demands of 
 the government, and persons discounting bills 
 at the bank, is in a constantly progressive 
 state of increase, bearing no proportion to that 
 of gold or silver. It therefore can have no cor- 
 responding fixed ratio to the price of bullion, 
 which must consequently vary in value, as all 
 other commodities, by the variations of its 
 quantity and demand ; which depend so en- 
 tirely upon the state of foreign exchanges, 
 which occasion its importation and exporta- 
 tion, especially where there is no demand for 
 bullion for the purpose of circulation, as coin^ 
 
 I 
 
CHAP. ly.] IN THE PRICE OF BULLION. 207 
 
 that the price of bullion must, in that case, 
 be sought for entirely in the state of foreign 
 exchanges. 
 
 47. In order the better to direct us in esti- 
 mating the comparative value of gold and sil- 
 ver, and all coins thereof, it will be necessary 
 to attend to the following tables, which appear 
 to have been supplied to the committee of the 
 House of Commons, by Mr. Greffalhe^ a foreign 
 merchant, and also a table of the relative va- 
 lue and silver, according to the mint regula- 
 tions of the different countries of Europe, as 
 estimated by Dr. Kelly, The letter and the 
 tables we place below in a note.* 
 
 * Letter received from Mr. Greffulhe, 14th March 1810 : 
 With two Enclosures marked (A.) and (B.) relative to the 
 Weight and Standard of Gold and Silver, 
 
 Sir, 
 According to your desire I have the honour to enclose 
 a statement of the prices of gold and silver at Hamburgh 
 and Amsterdam since the commencement of the year 1804, 
 fihewing also the respective standards and weights of those 
 places compared to the English standard and weights. The 
 quotations at Paris, 1 am sorry to say, I find it impossible to 
 procure here for any length of time back ; but I have 
 made the enquirj^ by letter in France, and hope to be soon 
 enabled to transmit that information to you, together with 
 the prices of com during the same period. 
 
SOS ON FOREIGN TRADE. [bOOK II. 
 
 CHAP. y. 
 
 On ForeigVf Trade, Foreign Expenditure, and 
 Exchange, 
 
 1. Few subjects of really a simple nature 
 appear to be so ill understood, as the prin- 
 
 With respect to an agio npon gold against silver, I find 
 it regularly quoted at Paris at from 15 to 25 centimes per 
 cent. (i. e. T <i T per cent.) 
 
 At Hamburgh and Amsterdam there is no such esta- 
 blished difference : but it may perhaps be worth your no- 
 tice, that in the latter ])lace the principal gold coin, viz. 
 the ducats, intrinsically worth guild. 5, 5. stiv. sell at the 
 rate of g. 5. 12 a 14 stiv. 
 
 The rate of such agio at Paris, prior to 1785, I have not 
 yet succeeded in ascertaining ; but the difference produced 
 by the coinage of that year in the Louis d'or was, I under- 
 stand, exactly in the proportion of 30 to 32, i, e, 32 Louis 
 were coined in 1785, out of a mark of gold of 22 carats 
 purity, which before that year was coined into 30 Louis. 
 
 There is no difference of value between the gold coin? 
 prior and subsequent to 1803, 
 
 I also take the liberty of annexing a statement of the 
 present value of gold and silver at the said places of Hara^- 
 burgh, Amsterdam, and Paris in English money, at th^ 
 ourreat rates of exchange, and for the English standard 
 
CHAP, v.] EXPE.'^DITURE, &C. 
 
 209 
 
 ciples and theory of foreign exchange, which 
 is absolutely necessary to all foreign com- 
 merce. In truth, it is a science, the practi- 
 cal operations of which lie in few hands, and 
 are out of the ordinary observation of the mul- 
 
 and weight ; which may, perhaps, be useful for occasional 
 reference, or for a comparison with similar calculations 
 already before you. 
 
 Pall Mall, 14th March,1810. 
 
 I have the honour to be. 
 Sir, 
 Francis Horner, Esq, Your most obedient Servant, 
 
 Chairman of Bullion Committee, J. L» Greffulhe* 
 
 House of Commons. 
 
 PRICES OF GOLD x\ND SILVER AT HAMBURGH AND 
 AMSTERDAM. 
 
 
 HAMBURGH. 
 
 AMSTERDAM. 1 
 
 GOLD. 
 
 SILVER. 
 
 GOLD. 
 
 SILVER. 
 
 
 lowest 
 
 lowest 
 
 lowest 
 
 lowest 
 
 
 price, highest. 
 
 price, highest. 
 
 price, highest 
 Adv. oa ^ SSb. 
 
 price, highest 
 
 1804! 97f - 991. 
 
 27.10.27. 12. 
 
 10§. p. cent-llj. 
 
 25 24. 26. 0. 
 
 1805' 98^. - 10U.;27. 10. 27.11. 
 
 1% - 18i 
 
 26. 0. 26. 3 
 
 1806 
 
 98. - 103 . 27. 10.27. 10. 
 
 9. — 1 1|- 
 
 24 17-25. 14- 
 
 1807 
 
 98|. - lOlf. 27.10.27.10. 
 
 9. — 13. 
 
 24. 4. 25. 4. 
 
 1808 
 
 102. . 106. 127. 6. 27. 12. 
 
 10. — 17. 
 
 24. 18. 25. J8. 
 
 1809 
 
 lOlf. - 104|. 27. 10.27. 12. 
 
 i4i. _>. 20. 
 
 26- 0. 26. S. 
 
 18L0 
 
 101. 27. 10. 
 
 12. -- la. 
 
 25- 16.26. 8. 
 
210 ON FOREIGN TRADE, [bOOK II, 
 
 titude. The arts of the merchant, though 
 founded principally on the simple rules of 
 
 Comparative STATEMENT of Weights and Standards of 
 
 Gold and Silver. 
 In England, Gold is sold by the ounce ; the standard is 
 22 carats. 
 Silver is sold by the ounce ; the standard i& 11 oz. 2 dwts. 
 
 In Hamburgh, gold is sold by the ducat in stivers lubs 
 banco, (1(3 to a marc banco) — 67 ducats are a marc J 
 60 marcs are equal to 451 ounces English troy weight ; 
 the standard is 2S^ carats. 
 
 Silver is sold by the marc in marcs banco. — Standard ab- 
 solute purity. 
 
 In Amsterdam, Gold is sold by the marc at a settled price 
 of 355 current guilders, with an agio or per-centage 
 upon that price ; 80 marks are equal to 633 ounces 
 English troy weight. 
 Silver by the marc in current guilders, — ^Standard of both 
 absolute purity. 
 
 In France, gold is sold by the ounce in francs ; 63 ounces 
 English troy weight are 64 ounces French. 
 Silver is sold by the marc ; the marc is 8 ounces. — The 
 standard of both absolute purity. 
 
 VALUE of Gold and Silver at Hamburgh, Amsterdam, and 
 
 Paris. 
 
 An ounce of Gold, English weight and standard, is worth 
 
 {the foreign money reduced into sterling) ^ s, d. 
 
 At Hamburgh - Price 101--Exch. 2^, . 4 17 
 
CHAP, v.] EXPENDITURE, &C. 211 
 
 arithmetic, are almost as mysterious to others 
 as the practices of the most refined processes 
 
 At Amsterdam -Price 14^ — Exch. 31 G, Bank agio, £ s, d, 
 
 1 per cent. 4 18 6 
 
 At Paris - - Price 105 —Exch. 20 - - 4 19 
 
 An ounce of silver, as above, 
 
 AtHamhurgh - Price 27. 10 — Exchange as above 6 3 
 
 AtAmsterdam- Price 2G. 8— Do. - 6 5 
 
 At Paris - -Price 53. 60— Do. - - 6 4| 
 
 Relative VALUE between GOLD and SILVER, in England 
 and in foreign countries, according to their respective mint 
 regulations; and according to assays. — By Dr. Kelly. 
 
 England. The relative value between gold and silver in 
 England, is 15-^^^^, or 15 -i-/ to one, making no allow- 
 ance for remedy, wliichl)y the trials of the pix has never 
 been taken. 
 
 Amsterdam. The relative value of those metals cannot be 
 permanently determined^ because the current value of 
 the gold is not fixed. Taking the ducat at five guilders 
 five stivers, the price which it most commonly bore, the 
 proportion is 14-i^^ to one, according to the mint regu- 
 lations, and 14 -^^ to one, according to assays. 
 
 II AMBU RGH. The relative value between gold and silver can- 
 not be fixed here, for the same reasons as in Amsterdam, 
 the price both of gold in currency and silver coin in 
 banco being variable ; but taking the mean prices as 
 follows, 6 marcs banco per gold ducat, and 27f marks 
 banco per Cologne mark of fine silver, the proportion will 
 then be as 14^*^ to one. 
 
 P 2 
 
212 ON FOREIGN TRADE, [bOOK IU 
 
 of chemistry; and each, when the facts and pro- 
 ceedings are examined, are equally simple. 
 
 Paeis. (Old system) 15 td one, per mint regulatians, allow- 
 ing for the remedy, which was considerable, and of which 
 the coiners fully availed themselves. 
 
 Per assays 15 ^ to one. 
 
 (New system) l^-^^-^-y to one, according to mint regu- 
 lations, without allowance for remedy. 
 
 Per assays 15 /^to one. 
 
 Cadiz, &c. sixteen to one by mint regulations, without tjb* 
 remedy. 
 
 Peas savs ^ ^^^'^ *^ ^^^ ^^^ doubloons of 1772.) 
 ^ 06 V»^ to one {by doubloons of 1801.) 
 
 Lisbon. 15 -j^ to one, per regulations, 
 15 -^-^ to one, per assays, 
 
 Naples. 14 ^^ to one, per regulations. 
 
 14 "j^ to one, per assays. 
 
 CiENOA. 15 -^^ to one, per regulations, 
 
 15 .^ per assays. 
 
 Leghorn. 14 -^^ to one, per regulations. 
 14 -5^ to one, per assays. 
 
 Yen ICE. 14 -j^ to one, per regulations. 
 
 14 tVo ^^ ^^^f P^^ assays. 
 
 The reports here of the silver coins vary considerably, and 
 have undergone several depreciations of late years. 
 
 Palermo. Fifteen to one, per assays. 
 America. Fifteen to one, very neaHy, per regulations, with-* 
 out allowance for remedy, 
 
 15 -^nfe to one^ per assays. 
 
CHAF.-V.] EXPENDITURE^ &C. 213 
 
 Mystery consists in secrecy ; and every thing 
 narrowly inspected, within the compass of 
 human practice, ceases to create surprise, or 
 involve uncertaintv. It is so with commerce 
 and exchange. We require only to be ad- 
 mitted behind the desk, and to the ware- 
 house, and we shall find that there is no art 
 more simple than that of buying and selling 
 goods, and exporting them in return for bul- 
 lion or other goods, which is the sole business 
 of foreign commerce and exchange. 
 
 2. It is the business of a merchant to attend 
 to the prices in foreign markets, and at home, 
 and to send various articles to various places 
 where he finds that the difference in the money 
 prices will afford him a profit ; that is, will en- 
 able him to buy with one sum of money, and 
 sell for somewhat more, after paying all neces- 
 sary charges. In this consists all the art of 
 commerce ; but yet in the detail it requires con- 
 stant attention and sedulous activity ; without 
 which, all arts of gain become the means of 
 failure. 
 
 3. The charges of receiving and shipping 
 goods depend upon many contingencies ; on the 
 distance from the manufacturer, or the grower 
 
214 ON FOREIGN TRADE, [bOOKJI. 
 
 to the port of exportation ; on the package 
 or repackage ; and on the quantity shipped at 
 a time, particularly on goods entitled to a 
 drawback or bounty on exportation ; on the 
 duties, drawbacks, and bounties on exporta- 
 tion ; on the allowances on the weights, the 
 waste, and discounts; which last depend on the 
 different modes of purchase, the quantities 
 bought at a time, the times of payment, and 
 the quantities of the goods subject to waste. 
 On the freight and primage which are paid on 
 the weight or measure, or by the piece ; and 
 which depend on seasons, the accidents of war 
 and peace, and the value of the article ; on 
 the insurance, depending on the like accidents, 
 and the commission. But neither freight, com- 
 mission, insurance, nor any other charge are 
 paid in detail by the purchasers of cargoes, 
 deliverable over the ship's side, free of freight 
 and insurance at the port of sale, which is fre- 
 quently the case in cargoes of rice, tobaccp, 
 corn, and other articles of that kind. In con- 
 formity with which other articles are often sold 
 to be delivered in proper packages by the buy- 
 ers at a price free on board ship, to avoid the 
 inconvenience of the trouble and difficulties 
 attending the shipment and paying of duties 
 on different articles, which must be better un- 
 
 J 
 
CH^VP. v.] EXPENDITURE, &C, 215 
 
 derstood by the particular dealer than by the 
 general merchant. 
 
 4. The expenses attending the importation 
 of goods at the place of sale, are also contin- 
 gent and variable. These are the duties of 
 importation, the charge of lighterage, which 
 depends on the distance of the ship from a 
 wharf; the conveyance from thence to a ware- 
 house, depending on its distance ; and the cus- 
 ^toms of a place, and the rent of a warehouse, 
 depending on the bulk of a commodity, and 
 the continuance of it there. The allowance 
 of weights and discounts, the freight, the in- 
 surance and commission, all variable as before. 
 And all these circumstances must be taken 
 into the account, in order to compare accu- 
 rately the current prices at which each article 
 of goods may be bought in one country, with 
 the prices it may be sold at in all others. 
 This, however, requires a minute acquaintance 
 with the mode of conducting business in each 
 country, and a correspondence in each place with 
 persons, who will inform the merchant of the 
 price of the ^oods, and the exact charges which 
 he will incur. Upon which he will be enabled 
 to ascertain, when an article is to be purchased 
 at various places, which is the place from 
 
216 OK FOREIGN TRADE, [bOOK if. 
 
 whence, all things being considered, he can 
 import it to the greatest advantage. 
 
 6, As every thing is best taught by example 
 and practice, we will give a specimen of a mer- 
 chant's transaction at Hamburgh, in the year 
 1762; on the purchase and sale of one chest 
 of linens, containing one hundred pieces at 
 five rix dollars and 4-ths the piece; making 
 in rix dollars, banco 562, and 24 sols ; which 
 at ^three marks of Lubeck, of 1 6 sols of Luheck 
 each make 1687, 8 marks banco, 8 schillings. To 
 which add, for expences, as follows : 
 
 Cost price B.M. 1687 8 
 
 Charges to be added 
 Refitting the chest 1 4 
 
 Carrying on board and ship- 
 ment 2 
 Duties of export and transit, 
 and those of Schaumbourg 1 8 
 
 4 12 
 Marks currency at 152 per cent. 3 14 
 
 Marks banco 1691 6 
 Commission, 2 per cent. 33 13 
 
 1725 3 
 
CHAP, v.] EXPENDITURE, &C. 217 
 
 Insurance of R. 1726, at 3^ per 
 
 cent B. M. 60 6 
 
 Brokerage thereon at j; per cent. 4 5 
 
 B. M. 1789 14 
 W'hich, at two for each dollar cur- 
 
 rency^ makes D. 894 30 
 
 Bill of exchange drawn on Amsler^ 
 
 dam, at 33 sols the dollar, make 
 
 of money of Holland in florins, 
 
 banco banco, Fl. 1476 13 
 
 Redrawing on Cadiz for the 
 
 same banco Fl. 1476 13 
 
 Commission on the bill, 
 
 -J per cent 7 8 
 
 Brokerage thereonat^ per mil. 1,5 
 
 Postage 2 4 
 
 Banco Fl. 1487 
 Banco fl. 1487, drawn upon Cadiz 
 
 at 95 d. the gross, make in 
 
 ducats 616 S 1 
 
 Thus the chest of 100 pieces of 
 
 linens at Hamburgh, making the 
 
 payment through Amsterdam on 
 
 Cadiz, has occasioned the drawing 
 
 from Amsterdam on Cadiz, in 
 
 ducats, of 626 2 1 which was 
 
i>18 ON FOREIGN TRADE, [bOOK II. 
 
 paid in Reals of Plate 6905 
 9 quartos 
 
 Cadiz, A.D. 1763, Account of sales 
 and net produce of the above 100 
 pieces of linen, say 400 — 4 whch 
 were sold as follows: 
 80 pieces, at 90 reals R. PI. 72OO 
 
 16 Ditto, inferior ditto, at 86 1376 
 4 Ditto, damaged, at 80 .^^20 
 
 
 8S96 
 
 Charges to be deducted. 
 
 Freight and average R. 30 
 
 
 
 Dues of entry of 100 pieces, 
 
 
 bocadillos making 4004 — 
 
 
 at 2 1 Reals Vellon, the 
 
 
 quarter piece making 
 
 
 R. V. 1000 
 
 
 Small charges R. V. 8 
 
 
 r637 
 
 9 
 
 Warehouse room and bro- 
 
 
 kage, at -1 per cent. 66 
 
 11 
 
 Commission, 3 per cent. ^66 
 
 14 
 
 
 — oni n 
 
 
 — * i/U I ii KJ 
 
 Net produce of sales in reals of ^ 
 plate 7994 14 
 
CHAP, v.] EXPJENDITURE, &C. 219 
 
 Deductions from net produce of 
 
 R. P. 7994 14 
 
 Amount of the cost price 
 
 paid in advance R. P. 6905 3 
 
 Interest on advances from 
 the falling dueof the bill 
 to the return of the pro- 
 duce, for a period of six 
 months, at three per 
 cent. 207 2 
 
 7112 11 
 
 Remains a gain of R. P. 882 3 
 One chest of fine linens, therefore, 
 gives a profit of 12-|- per cent. 
 Without any abatement, say 
 R. P.t 882 5, Which remitted 
 on Amsterdam, at 96 f, gross 
 for each ducat, makes banco, 
 Fl. 19 3 9 
 
 , 6. This example is taken from a French 
 work, published in Amsterdam, in the year 
 1760, entitled Comptes Simules, and with others 
 of the same kind w^ould explain the mysteries 
 of commerce better than any other treatise, 
 were it perfect. The author possesses only two 
 numbers of the work, of which six were pro- 
 mised by the editor, and one of them was 
 
220 ON FOREIGN TRADE, [bOOK II. 
 
 designed to contain accounts of exchange and 
 dealings in bullion, as well fine as alloyed; 
 by means of which he has no doubt that the 
 subject would have been most clearly eluci- 
 dated ; but the present account will open to 
 view many considerations in merchandise, and 
 particularly the different calculations which 
 ,must necessarily be made concerning the dif- 
 ferent species of money with which the goods 
 are bought and sold ; and the most advantageous 
 mode of paying the cost of goods, or obtaining 
 the returns for them by means of bills on a 
 third place. This belongs entirely to the art 
 of exchange, which is not only the calculation 
 of the value of the different monies in each 
 country, but also of the current price of bills of 
 exchange between one country and another. 
 
 7. In all transactions of merchandise, either 
 the goods must be paid for on the sale, or 
 the delivery, or after a credit allowed, and 
 they may be paid with or without the in- 
 tervention of a bill of exchange; but gene- 
 rally it is most convenient that a bill of 
 exchange should be created, which is drawn 
 payable in the sum agreed upon for the price 
 of the goods, calculated in the money of the 
 place where it is due. It is drawn, for instance, 
 from London on Paris, in so many livr^s^ and 
 the drawer through the means of the bill 
 
CHAP, v.] EXPENDITURE, &C. S2I 
 
 is to receive payment of his debt. If he 
 waited to have the payment in money he- must 
 remit the bill to an agent in Paris, who would 
 charge commission for presenting it, and h^ 
 would be put to an expence in the freight, 
 carriage and insurance of the money, which 
 when received in the coin of France must be 
 either converted into English money to be 
 circulated in England, or else kept to pay some 
 bill drawn upon him from Paris, payable in 
 French livres ; which we see is not the custom 
 of merchants, who draw their bills payable, 
 and make their sales on prices estimated in the 
 coin of the place of the delivery of the goods 
 or the payment of the bill. The expence of 
 freight and insurance on money passing from 
 France to England would vary occasionally ; 
 and if the trade were considerable, and the 
 <;irculation of money quick, not only would a 
 great quantity of coin be required for this pur- 
 pose, but the expense would be so great as to 
 be a considerable burthen upon trade. 
 
 8. To remedy this inconvenience there is 
 dways an internal traffic carried on in every 
 commercial town in bills of exchange ;■ bf' 
 means of which' as little money as possible ill' 
 gold and silver is suffered to pass from one coun-' 
 1?ry to sfhother, or that exact sum only which' 
 
222 ON rOREIGN TRADE, [boOK II. 
 
 it is convenient for the one to part with, and 
 the other to receive ; or rather the limit lies in 
 the capacity of disbursing conveniently, since 
 gold and silver is a commodity of such general 
 demand that it rarely fails to find a vent. 
 
 9. This traffic is like all others carried on for 
 gain or convenience, and is conducted either with 
 views of speculation, or to satisfy an immediate 
 demand. The former is when the purchaser 
 can make a profit by the purchase, the latter 
 when he has a debt to pay abroad, and wishes 
 to avoid the expense of remittance. For 
 which purpose he must consider what money 
 it would cost him to obtain livres to pay his 
 debt in France, and what would be the expense 
 of freight and insurance, and he will of course 
 not much exceed the cost or expense which 
 he must be put to in receiving or paying his 
 own debt in France, 
 
 iO. The bills of merchants are drawn upon 
 sales of goods, or on bankers and correspon- 
 dents, for the purpose of money negociations. 
 When the bill is drawn for payment of goods 
 sold, value has already passed, and the drawer 
 will not sell for less than he would receive by 
 waiting the remittance of the money through 
 his correspondent in Paris. When it is drawiji. 
 
 2 
 
CHAP, v.] EXPENDITURE, &C. 223 
 
 upon credit, there must be some small specu- 
 lative profit to induce the drawer of the bill to 
 engage with the acceptor to make good his 
 payment, or it will not be created. There are 
 therefore various circumstances which affect 
 the 'price of bills, and make them fluctuate and 
 vary between certain points of value which 
 are nearly fixed. 
 
 11. The first thing to be considered is, how 
 much gold and silver the bill will produce in 
 the country when paid ; and the next conside- 
 ration is, the cost of receiving it : these be- 
 ing ascertained, the price of a bill cannot 
 vary much in the ordmary course of trade ; be- 
 cause of all articles, money is the most certain 
 of sale, and the quickest in its returns, and 
 therefore all dealings in money are conducted 
 at small profits, upon the detail, though to 
 considerable advantage in the aggregate of 
 many transactions. And by this price of bills, 
 when ascertained, merchants are very much 
 guided in their purchase of goods abroad; 
 for if they can gain three percent, on a bill, 
 it will be an advantage to remit the bill in 
 payment for goods, upon which they may ob- 
 tain six or eight more clear profit. All trade 
 must be in some sort speculative ; but the ba- 
 Jauce of receipts and payments between two 
 
Sg^ ON FOREIGN TRADE, [bOOK lU 
 
 countries, must in the end be equal. In every 
 account between merchants, the vendor charges 
 the buyer with goods, and the buyer charges 
 the seller with money : which must be ac- 
 quitted to complete the payment in some way 
 or other. The goods are an equivalent fc»the 
 money, and the money for the goods. Com- 
 merce can proceed upon no other principle : 
 for commerce and trade are an exchange of 
 one thing for another upon a due sense of 
 equality. The one takes place between the in- 
 habitants of the same country, the other be- 
 tween foreigners. 
 
 12. Every transaction in foreign commerce, it 
 is seen, gives rise to a bill of exchange, which 
 may be called the first medium of commerce, 
 and ^ it is now transacted, a bill of exchange 
 flfiaybe considered as the principal circulating 
 medium of commerce. But each bill of ex- 
 change must finally be liquidated; which is 
 done either by the transmitting of bullion or 
 goods; and either will in general suffice, or may 
 be made to pay the bill mediately or imme- 
 diately In this view the equahty of com- 
 merce is clear ; for every transaction passes on 
 a bill of exchange, for which an equal value 
 is remitted in bullion or goods. In other 
 words, the debts and credits are all equal and 
 
CttAP. v.] EXPENDITURE, &C.' ^^6 
 
 balance each other; if they do not, one party 
 must lose, and the trade cannot be continued. 
 
 13. Thus if the balance, of trade were, as 
 it is supposed, in favour of England to the 
 amount stated in the public accounts, the ex- 
 ports being from the year 1/8 J to the year j80^, 
 to the value of ^5^9,216,000, and the imports 
 to the value of ^i99,14LOOO, making a dif- 
 ference or surplus of ^60,07^,000, that sum 
 must have been remitted to England in gold 
 and silver, which must have been absorbed in 
 the manufacture of plate for home consump- 
 tion, or locked up in the coffers of the bank, 
 or dissipated by the government, or destroy- 
 ed by some power unknown, or else the rest 
 of the world must have been defaulters to that 
 amount. Had it remained here, and got into 
 circulation, in the mean time, it will be seen 
 by this work in the end, and may be well un- 
 derstood by the perusal of Humes Essai/ on 
 Monei/, how little it could have added to the 
 real wealth or comfort of the people. Some- 
 thing therefore is deceptive in this notion of 
 the balance of trade : for if the goods imported 
 are to be considered as payment for the 
 goods exported, the>iaequality is to the dis- 
 advantage of the exporter, and that nation is 
 really the richest who commands the most 
 
 I 
 
226 ON FOREIGN TRADE, [BOOK II. 
 
 goods for home consumption. The nation 
 which exports more than it receives a return 
 for, must upon the ord.nary supposition be 
 very bountiful to its neighbours. 
 
 14. Mr. Blake^ a writer of great acuteness 
 and experience on the subject of exchange, and 
 some others, have conjectured that this excess 
 of exports beyond the imports, may be ac- 
 counted for by the remittances which are 
 necessary to be made in the discharge of the 
 bills drawn by the agents of government, for 
 foreign expenditure and for subsidies. In con- 
 firmation of this supposition it appears that in 
 179«5, when a loan was granted to the Emperor 
 ofGermani/fn 4,600,000]. Mr, Boj/d, instead 
 of remitting money for the whole sum, paid it 
 through the intervention ofbillsto the aipount 
 of 3,400,0001. negotiated in Germany and 
 Holland, which were afterwards sent here in 
 payment for goods, and 1,200,0001. only in bul- 
 lion. And upon examining the accounts of 
 the exports and imports, it will be found that 
 the balance of trade, as it is falsely called, is 
 greatly more favourable in years of war than of 
 peace ; the average excess of seven years of 
 peace, as quoted above, from 17 85 to 1791, 
 being only 354,0001. annually, and the average 
 cess from 1799 to 1S05, years of war, being . 
 
CHAP, v.] EXPENDITURE, &C. 227 
 
 a^ 6,161,000 annually, which is next to a de- 
 monstration that the excess was created by the 
 war, which could only, in a commei-cial view, 
 occasion the drawing of bills which must be 
 discharged by some means or other, and for 
 the convenience of all parties, gave occasion 
 to the export of goods. 
 
 15. It has been observed that the traffic in bills 
 of exchange is an internal traffic; and, generally 
 speaking, the gain or loss, if any, by the ex- 
 change, passes entirely between the natives of 
 the country where the bills are sold. The 
 payer and receiver of the bill must, the one 
 discharge, and the other receive the debt fully. 
 It is the previous negociator who gains or loses 
 by exchange ; and it will be seen by a very slight 
 examination, that from the constant compe- 
 tition which must arise, the gain or loss on bills 
 cannot be very great for a long continuance. 
 It is true, when bills are cheap, that is, when 
 exchanges are low, or as it is called adverse at 
 any place, foreigners by their agents may nego- 
 tiate or purchase bills for their gain ; but the 
 competition which they introduce, of course 
 raises the market and brings all to an equality, 
 which is the very essence of all exchange 
 whatsoever. The necessary limit must be the 
 expense of remitting the money to pay thS 
 q2 
 
 I 
 
228 ON FOREIGN TRADE, [bOOK It, 
 
 bill; for otherwise the trade which must gi-v^e 
 occasion to the bills must very soon cease. 
 Since unless the profit on the sale of the 
 goods purchased is very high, the drawer of 
 the bill cannot afford to sell it at a great loss, 
 and consequently the number of bills must 
 diminish, and the exchange vary. 
 
 16. Circumstances may occiir in which bills 
 still continue to be drawn in great quantities, 
 or greatly to exceed the^bills on the other side, 
 although there is no trade ; as in the present 
 circumstances of this country ; when no trade 
 is allowed with France, but yet there is a 
 necessity of making remittances to persons 
 detained in France. In this case, to trans- 
 mit goods without a licence is impos- 
 sible, and to convey money must be very ex- 
 pensive : the exchange must therefore be 
 greatly increased in its rate above par or the 
 true equality of exchange ; and this must be 
 greatly increased where there is a demand for 
 some commodity of great necessity, as corn, 
 and the owner of the corn will be paid for it 
 only in money ; or rather, where the government 
 of the country will not allow of any export 
 except corn and wine in exchange for gold. 
 The gold will then become very dear, and bills 
 on France must rise in price very high. 
 
 d 
 
CHAP, v.] EXPENDITURE, &C. 929 
 
 17, Commerce is said to be the exchange of 
 one sort of surplus commodity against another, 
 and where gold is remitted, that may be consi- 
 dered also as a surplus commodity exported, the 
 bill of exchange being the first medium of the 
 commerce. It is injurious to commerce then, 
 as it must, when very high, throw some dif- 
 ficulty in the way to impede the exchange of 
 commodities ; but exchange always implies ah 
 equality, and must be left to its own course ; 
 and whether coin or bullion is exported or not, 
 can be very little material. But w hen paper 
 money is the only circulating medium, it is 
 obvious, that it is quite unnecessary to regard 
 the high price of bullion, or whether foreign 
 goods are paid for in bullion or commodities ; 
 for the bullion must have been previously 
 purchased with commodities, and it is abso- 
 lutely of no use, unless it is exchanged again, 
 
 18. Exchange is of two sorts, th€onethe ex- 
 change of money for money, coin against coin; 
 ^nd the other the exchange, technically so cal- 
 led, which consists in the sale of a foreign 
 bill of exchange for a sum of money current in 
 the place where it is drawn. The exchange 
 of money for money, is invariably conducted 
 upon the consideration of the relative quantity 
 of bullion in each ; and, with a very small al- 
 
230 ON FOREIGN TRADE, [boOK II. 
 
 lowance, any coins of equal purity may be 
 purchased in any commercial country by giv- 
 ing some other coin for them weight for weight 
 in the like metal. Thus at Paris twenty 
 shillings new from the English mint would be 
 equal to twenty-four francs and ninety-one 
 cents of the new coins of France. If more or 
 less were given in exchange it could only hap- 
 pen from the defect of some of the coins not 
 being perfectly fresh, and of the standard weight 
 and purity. This is called the intrinsic par^ or 
 the ratio of equality between the two coins 
 or monies of foreign states. To furnish a 
 complete view of the intrinsic /)ar the follow-, 
 ing table is extracted from the Report of the 
 Bullion Committee, See the next page. 
 
CHAP 
 
 EXPENDITURE, &C. 
 
 231. 
 
 O U) 
 
 a; ~ o 
 
 a: 
 
 
 
 3 
 
 EC * 
 
 s - 
 11 
 
 
 
 
 
 a 
 
 
 
 E 
 
 c 
 
 s 
 
 ^ 
 
 « .5 
 
 
 u 
 
 
 
 09 
 
 
 
 >> •-• 
 
 e sterii 
 45,92 
 46,25 
 41.3 
 69,5 
 39 
 
 
 yj 
 
 t W 
 
 X '"' 
 
 -XS r- 
 
 M " 
 
 Oa» 
 
 
 
 _5 
 
 
 t- 
 
 —• 
 
 
 . in o 
 
 «& 
 
 e 
 
 t .s 
 
 
 
 «o* t~ 
 
 cc 
 
 S ^ 
 
 *i*fi 
 
 t- c» « 
 
 ■«t 
 
 (U 
 
 f~l 
 
 > 
 
 re 
 
 
 o 
 
 rj 
 
 iO'^ 
 
 CO 
 
 
 c< 
 
 Q. 
 
 
 < 
 
 
 
 
 
 
 
 
 
 
 
 
 S 
 
 
 
 B 
 
 s. den. 
 
 10 3 
 
 11 6 
 
 
 ^ 
 
 iJ -S^ 
 
 
 2 
 ^ 
 
 
 
 
 
 s 
 
 «o o- O t^ t- 
 
 CJ « ; .= .S .= 
 
 
 ts cT 
 
 M 
 
 'fe ^ 
 
 
 »•♦•*■♦«« 50 
 
 '-^« O — -' 
 
 
 ^ 
 
 
 
 
 .J"^^ 
 
 i 
 
 c 
 
 2 15:^''=' 
 
 
 
 H ^ 
 
 t- 
 
 3 — 
 
 «4 •* 
 
 .i CN c< 
 
 iO 
 
 4* 
 
 ;3 o 
 
 
 
 « 
 
 o 
 
 W-. 
 
 CO 
 
 
 o 
 
 fi. 
 
 P< 
 
 
 ■ a 
 
 . QO 5 ^ vs -o ■* c* 
 
 ) r- *" ij< 'o (tT <7» oT 
 
 . o) •* -♦ « CO 
 
 
 S 
 
 E 
 
 • CO 
 
 ^ 
 
 <o 
 
 W 04 
 
 oo» 
 
 v^-i^^co 
 
 ifj 
 
 ■ o. o» t~ I- 
 
 . « .^-* ^ «0 CO 
 
 •jr o» o» o» B, 
 
 ^ o o» 
 
 ti!] 
 
 i 
 
 u 
 B 
 
 'S -2 
 
 t« Hi 
 
 tn w 
 
 a a 
 
 o 
 
 % 
 
 § a 
 
 o c 
 
 •^ ^ 
 
 ^ S <*: e« 
 
 C to CI.J3 no 
 
 «j « « .2 «» 
 
 -^ 
 
 .2 « 
 
 «* o 
 a To 
 
 ^ 10 
 
 « "^ 
 » i 
 
 • n 
 
 «« 1 
 
 > a 
 
 IS c 
 "Si «« 
 
 '2 § 
 •3 «> 
 ho •*« 
 
 *^ ^ 
 
 ■^ 3 
 « o 
 
 s o «« 
 
 2 S « 
 
 «> Q g 
 
 .5 ^' S 
 § Is-- 
 
232 ON FOREIGN TRADE, [boOK II, 
 
 19. A billof exchange maybe considered as re- 
 presenting the precise sum of money which it 
 imports upon the face of it ; and if that be on- 
 ly an imaginary money or money of account, it 
 yet has some actual coin with which the money 
 of account corresponds or is synonymous, and 
 this effectual or real money must be put in the 
 place of the nominal money ; as a bill, for £50 
 sterling, corresponds with 1000 shillings new 
 from the mint, and ought to produce a full 
 equivalent for them. If by any change in 
 the currency by wear, or otherwise, the bill 
 will either not produce so many shillings, 
 perfectly good, or gold of equal value with 
 so many shillings ; which can only hap- 
 pen from the wearing and deterioration of the 
 coin, or from the legal tender being in some de- 
 gree violated or neglected, . and a paper cur- 
 rency being paid in place of the shillings; in 
 this case, aii allowance must be made for the 
 loss, in order to make the exchange at the true 
 orintrinsic j9ar. 
 
 20. When there is no currency in coin, and 
 the bill is to be paid in bank notes, or paper 
 currency, the drawer abroad, when he is to 
 estimate the value of it, must consider w^hat 
 quantity of bullion the bill will produce, with- 
 out regard to the nominal value of it. This 
 
CHAP, v.] EXPENDITURE, &C. «33 
 
 he will estimate entirely by the paper price of 
 bullion where the bill is payable, lie will then 
 consider the value ofthe bill at its destination as 
 settled by the bullion in ounces and gra.ns 
 which the paper will purchase, and comparing 
 this with the money of his own country, he will 
 be enabled to form a new par or ratio of 
 equality, by which to estimate the value of his 
 bill. Thus ev6ry thing exchangeable is to be 
 valued in money, and every coin, and every 
 substitute for money must beultrmately valued 
 in gold and silver, which is the material of 
 every coin in the commercial world. What- 
 ever passes for money must be either some- 
 thing material, or something representing an- 
 other article, which is material or converti- 
 ble into a material substance at the in- 
 stant at which it is valued. Immaterial es- 
 s^ices can never be exchangeable in com- 
 merce ; abstract qualities can be weighed in no 
 commercial scale of value, and an abstract cur- 
 rency is an abortive conception of metaphy- 
 sical absurdity. A pound sterling is synoni- 
 mous with twenty shillings in silver, twenty 
 parts in twenty-one of a guinea, 12.3.273 
 grains of gold, and 1858 060 grains of silver; 
 but a pound note, no longer in fact exchang- 
 ing for a pound sterling, is worth only 1513 
 
234 ON FOREIGN TRADE, ScC. [BOOK II. 
 
 grainsofsilverofthestandardoftherix dollar, from 
 which the Bank of England tokens are coined. 
 While therefore a pound note will readily ex- 
 change for dollars at this rate, there will con- 
 tinue a ready and fixed standard of value, for 
 the present currency of England^ which it is 
 quite absurd to consider as composed of the 
 ancient pound sterling, or of guineas, or half 
 guineas, or even of legitimate shillings. The 
 currency is a bank currency composed of 
 circulating credit, and of silver tokens of the 
 standard of the Spanish rix dollar, which 
 differs considerably from the true English 
 standard. 
 
CHAP. VI.3 VIEW OF EXCHANGED, T3S 
 
 CHAP. VI 
 
 Practical View of Exchanges. 
 
 1. The price of bills of exchange is go- 
 verned by exactly the same laws and neces- 
 sities, as the price of every species of goods, 
 
 9. How can it be otherwise ; (says a practical 
 writer from whom we extract here largely,) 
 seeing that bills, and bullion must form one 
 side of the account of each particular trans- 
 action of business with ibreign parts: one of 
 these must be debtor for all goods imported, 
 and creditor for all goods exported: and it 
 rarely happens, that the imports and exports 
 are the same to any one country. 
 
 3. The exports of Great Britain of goods 
 to, are either more or less valuable, than 
 the imports from a given country. This na- 
 turally produces a greater or less demand 
 for bills of exchange in each country, so 
 trading with us. Therefore, as it is with 
 gooda of all sorts ; if a greater quantity be 
 
236 PRACTICAL [BOOK II* 
 
 brought to market than is wanted for its natu- 
 ral consumption, it must fall below its natural 
 price, for the purpose of either increasing its 
 consumption, or encouraging speculators to 
 lay it up, against a time when a smaller quan- 
 tity shall be brought to market than the 
 natural consumption will take off, in order 
 that all may be sold that is brought for that 
 purpose to market: — so it is with bills of ek- 
 change. When bills to a greater amount 
 are brought to be sold in the market, for goods 
 exported to any certain place, than there are to 
 be found buyers of bills for goods imported from 
 the same place ; before a sale can be made of 
 all bills in this predicament, the prices of 
 them must be sufficiently lowered to encou- 
 rage the speculator in exchanges to buy. Of 
 the regulation of such speculations in exchan- 
 ges, we shall have occasion to treat hereafter ; 
 suffice it here to add, to what we have said, that 
 when any course of exchange is come down, 
 (as of goods) to a speculative price, there are no 
 bounds to the demand ; and that when large 
 purchases are made, they naturally raise the 
 price again above the common course.-— For 
 these reasons, as it is with the most speculative 
 articles of goods ; we see the courses of exchange 
 in every part of Europe continually unequal 
 and fluctuating ; and that, very considerably* 
 
CHAP. VI.] VIEW OF EXCHAXGES. 237 
 
 The author then siipposes that a merchant 
 tvantin^to remit to Amsterdam according: to the 
 most advantageous exchange, finds good bills 
 at London, and the quotations at Amsterdam 
 also as follows, viz. 
 
 Bills On Ilambro* 
 
 at 37 10 quotations 334 
 
 Cadiz 
 
 o3 90{ 
 
 Leghorn 
 
 43i 86 
 
 Lisbon 
 
 66i 521 
 
 And Amsterdam 39s. 6d. at sight 
 
 tie enquires which of those bills will be most 
 profitable for him to remit, and by how much 
 per cent each will be better than the other. 
 
 Then he finds that to remit 
 bills on 
 
 Harahro will produce 39 . 7^ 
 Cadiz do. - 39 . lOi 
 
 Which i< more advanlajreous than 
 bills on Amsl. at 39s. Gd. 
 
 •^ .26 perccati 
 
 -f. 1.00 
 
 Ii»-hora do. . 39 . P^' - -4- 'SS 
 Lisbon do. . Si) . 8 ' - - + .42 
 
 5. Having thusreduced these differences to so 
 much per cent, it will be easy to deduct from 
 them the expences that will attend the extra 
 negociation of such bills at Amsterdam : which 
 are more or less to different persons, according 
 to their diflcrent connexions, and the extent of 
 their business in this way. Then by combin- 
 ing all these circumstances together, the mer- 
 chant determines at once to make this remit- 
 tance in bills on Cadi;s. The obtaining there- 
 
238 PRACTICAL [BOOK II. 
 
 fore these differences by the per cents, is the 
 grand object of enquiry in the business of ex- 
 change. 
 
 6. Another object of trade is, when a merchant 
 sends goods or effects of any sort, on his own 
 account, to foreign parts, and wants remittances 
 made to him in return : great advantages may 
 frequently be made by desiring his co-respon- 
 dent to remit him such good bills as he may 
 have an opportunity of getting cheapest; and 
 which, at the same time, may be most in 
 demand at his own place, and consequently 
 may be sold best there ; and this may be seen 
 by the quotations of exchanges of both places 
 compared together in a manner similar to the 
 above. 
 
 7. For instance, suppose a cargo of goods were 
 sent to Hambro', to get returns from thence, 
 in the most advantageous way by bills of ex- 
 change : when the correspondent quotes, that 
 he can buy satisfactory bills as under : 
 
 viz. At Hambro* And that at London 
 
 On London at 
 
 sight at 37 
 
 10 
 
 the exchanges are 
 
 Am sterol am 
 
 33^ 
 
 
 at 40 
 
 Cadiz 
 
 85-1 
 
 
 33 
 
 Lisbon 
 
 50^ 
 
 - 
 
 (50V 
 
 Paris 
 
 2li 
 
 
 22 
 
 Hambro* 
 
 
 
 38 Z 
 
CHAP. VI.] VIEW OF EXCHANGES,. 239 
 
 8. In this case the property lies in banco marks 
 at Ilambro ; and the enquiry is, how to obtain 
 a pound sterling in London for as few of these 
 marks as possible: or whether by any circula- 
 tion of exchanges, a pound sterling can be got 
 for less than 37 10 Fl. the exchange, at which 
 he could remit bills on London, at sight, or 
 in proportionate time, without the trouble of 
 any such circulation — For this purpose, by 
 enquiring what bills will do best, it will be 
 found, that one pound sterling will be 
 
 On LoiKJon - - 37 10 
 
 Amsterdam - - - 37 9| 
 
 Cadiz - - - 37 7 
 
 Lisbon - . - 37 PI 
 
 Paris - - - 38 Sf 
 
 Hambro' - - • Londontodraw 
 
 on Amsterdam 
 at 38. 
 
 9. But there are numerous mercantile opera-' 
 tions, by investments, accommodations, and 
 speculations, by means of which, a merchant 
 may have to remit large sums of money to 
 Amsterdam and Paris ; and it may be con- 
 venient for him, to appropriate the money 
 which he has in Hambro', to reimburse his 
 friends, in either or both of these places, as 
 the exchange may be the most favourable. 
 
240 VIEW OF EXCHANGES. [bOOK IT. 
 
 10. A further question here arises, to which of 
 the three places. London, Amsterdam, or Paris, 
 will it be most for his interest, to order his 
 Hambro' friend to remit, and in bills, upon 
 what places? To enable him to make the most 
 advantageous remittances to Amsterdam and 
 Paris; he must have recourse to the Amster- 
 dam and Paris quotations, on the places quoted 
 fjTom Hambro', and therewith form the follow- 
 ing table of quotations altogether, viz. 
 
 Quotations from 
 
 On 
 
 
 Ha ml). 
 
 
 London 
 
 
 Am St. 
 
 
 Hnris. 
 
 Huriihio' 
 
 
 
 
 liSs -2 • 
 
 
 O.Jy 
 
 
 •'»i 
 
 l^OlKlOll 
 
 
 31 10 
 
 
 
 
 ;ii,s Sd 
 
 
 •^•^T 
 
 Amsterd. 
 
 
 3bi 
 
 
 40 
 
 
 
 
 43 
 
 t^aris 
 
 
 2'4 
 
 
 2-2 
 
 
 44 
 
 
 
 Lishon 
 
 
 601 
 
 
 ()(i| 
 
 
 o2| 
 
 
 3-i() 
 
 C:i<nz 
 
 
 H.)4 
 
 
 33 
 
 1 
 
 MO^ 
 
 
 92 
 
 11. To effect this comparison, he must state 
 the following positions to find the most profit- 
 able bills for this purpose. 
 
 1. To be remitted from Hambro' to London. 
 
 2. idem - London to Amsterdam, 
 
 3. idem - - London to Paris. 
 
 4. idem - Hambro' to Amsterdam. 
 
 5. idem - - Hambro' to Paris. 
 
 IS. And then by comparing the different ex- 
 
CHAP. VI.} VIEW OF EXCHANGES. 241 
 
 changes that will be produced by such bills ; 
 he will find the most advantageous course to 
 take. For the 1st — We have already found, that 
 bills on Cadiz are most profitable to be re- 
 mitted from Hambro' to London, producing 
 37 7. ' 
 
 13. To render this more clear: it will be ne- 
 cessary to draw together the issue of these five 
 positions, as follows : viz. the best bills for 
 
 1. Hambro' to remit to London, are on Cadiz 37 7 
 
 2. Loudon do. to Amsterdam, do Paris 40 
 
 3. London do. to Paris, do. Lisbon 21^ 
 
 4. Hambro' do. to Amsterdam do. Cadiz 331|- 
 
 5. Hambro* do. to Paris, do. Lisbon 20 J^ 
 Which proves that bills on Lisbon are best yield- 
 ing 20 ^V 
 
 14. Yet, before we can come at the solution 
 of the whole question, there still remains to be 
 asked, 
 
 Sixthly, which is the most advantageous, for Ham- 
 bro' to remit direct to Amsterdam at 33 4|-; or for 
 Hambro' to remit to London at 37 7, and London to 
 remit to Amsterdam at 40s. as above ? 
 It will be found by stating. 
 If iDr. : 64d.FI. 
 
 45ld. Fl. : 11. sterl. 
 
 11. sterl. : 4S0d.Fl. 
 
 2d.Fl. : Is.of Amst,lDr.willbe34f 
 
 Consequently better than 33 ff- by tV 
 
 R 
 
242 OF THE COURSE OF EXCHANGE [BOOK 11^ 
 
 And likewise, Seventhly, which is most profitable, 
 for Hambro' to remit to Paris, at 20 jV> ^i* ^oi' Ham- 
 bro' to remit to London at 37 7, and London to 
 remit to Paris, at 21^? 
 
 This will be found, in like manner, by stating, ' 
 
 If lEcu : 2 4dst. 
 
 240d St. : 451d Fl. 
 
 2d Fl. : Is iub. then 1 Ecu will be l.n|| 
 
 And consequently better than 20 ^V by 2V 
 
 15. Thus the whole question is solved, that it 
 will be most profitable to receive in London 
 remittances 
 
 From Hambro' by bills on Cadiz, - - as per 1st position. 
 
 And to remit to Amsterdam, bills on Paris - as per 'id do. 
 
 And to remit to Paris, bills on Lisbon - - as per Sd do. 
 
 16. Such calculations as these, of the circula- 
 tion of exchanges, are in general neglected by 
 all but brokers, as being too tedious, but 
 it is said would be very profitable.* 
 
 17. The effect of the competition which must 
 
 * '^ee A New System of Mercantile Calculation^ &c. (Leigh 
 and Sotheby, 1795.) from which the above is entirely ex- 
 tracted. We have omitted the calculations as too extensive 
 for the present work ; but must observe,that these calculations 
 are usually made by what is called the chain rule, or conti- 
 nued proportion as above, sect. 14. The subject is now 
 admirably treated by Dr. Kelly ^ in his excellent work, the 
 Universal Cambisiy to which we must refer; and could have 
 wished to have extracted all that he has said on the various 
 items which form the par of exchange ; as he appears to have 
 explained them better than any other writer extant. 
 
CHAr^.VI.] IN THE Y£AllS ISll AND 18H. 245 
 
 arise from the general knowledge of exchange 
 is obviously to reduce the profits and equalizethe 
 exchange ; but of late, the exchange has been 
 very unfavourable w^ith England and France : so 
 that on the 1.5th ofMarch 1 SI 1, it was stated that 
 the exchange being at seventeen livres for the 
 pound sterling, and gold at four pounds sixteen 
 shillings the ounce, which sells at Paris foi* 
 ninety-six livi-es, a merchant by exporting 
 bullion would gain clear thirteen per cent, in 
 bank of England money. For he would give 
 four pounds sixteen shillings for the gold, and 
 about four shillings for the expense of freight, 
 insurance, and other charges, which altogether 
 amount to five pounds ; and the gold being re- 
 mitted to France w ould give him a right to draw 
 for ninety-six livres ; then, by selling his billon 
 the exchange at London^ at the rate of seven* 
 teen livres for the pound bank of JEng land cut- 
 rency, he would receive five pounds and -H-t^^s 
 of a pound, or about 13s. bank currency: that 
 is, he w^ould have given one hundred shillings 
 bank currency for his French bill, and sold it 
 for 113, which is exactly thirteen per cent. 
 Exchange has since risen to twenty livres for a 
 pound bank currency ; and the same bill which 
 costs five pounds of like money, if ^bullion is 
 remitted for it, will sell only for four pounds 
 
 n 9 
 
244 OF THE COURSE OF JEXCHANGE [bOOK II. 
 
 sixteen : whence it is clear, that the bullion i* 
 not remitted ; that the exchange between 
 Paris and England is at its real and intrinsic 
 par, and that a shilling bank currency, i^just 
 equivalent to a French livre, or somewhat more 
 than ten pence sterling. It should seem also 
 from this statement, that when the exchange 
 had appeared to have fallen from ^5 livres to 17, 
 which was the difference of the par between 
 the pound sterling and the livre, it had only 
 fallen from twenty, which was the true par of 
 the bank currency. 
 
 18. To account for the high price of gold in 
 England, many fanciful causes have been as- 
 signed, such as that the great want of gold 
 abroad to pay the armies, made gold dear there ; 
 but it will appear, that the French currency 
 being in coin, gold could not be of higher value 
 than the coin, or it would not be converted 
 into French coin to pay those armies. It 
 is also apparent that the real high price of gold 
 is paid in England, and the loss by exchange 
 suffered in England ; w^hereas, if the dearness 
 of gold occurred in France, from any difference 
 in the currency there it would occasion an 
 adverse exchange in France, and an exporta- 
 tion of gold from that country ; a fact ^hrch 
 
Chap. vi.]in the years 1811 and 1812. 245 
 
 the reasoners upon this subject frequently 
 overlook. It is demonstrable, therefore, that 
 the real cause of the high price of gold in 
 England^ is the predominant and almost ex- 
 clusive, not to say excessive, currency of bank 
 money ; and the steady rise in exchange to a 
 par of 20 livres for the pound bank currency 
 probably arises from the issue of the dollar 
 tokens which afford an obvious and certain 
 estimate of the value of a bank note in silver 
 bullion ; wherefore we see that the same par is 
 preserved between the bank note and the livre^ 
 as between the bank note and the third part 
 of a three shilling token ; or that the Frencli 
 and English silver currency are exactly equal 
 in value. 
 
 19. A question here naturally arises after 
 settling the intrinsic par between two nations in 
 any given quantities of currency, what is the 
 ultimate cause of the fluctuation in that ratia 
 which constitutes the commercial par in the ex- 
 change ; what constitutes the true cause of the 
 frequent variations in the course of exchange ? 
 and it is a question of no small difficulty. 
 The ordinary writers upon this subject, includ- 
 ing all the arithmeticians, the practical mer»» 
 chants and calculators, and even the great 
 
24^ OF THE TRUE THEORY OF THE [bOOK II, 
 
 Montesquieu have a ready answer, and pro- 
 nounce in a sort of trite apophthegm, that 
 the course of exchange proves the excess 
 of the bills drawn by one country against 
 the other; and that the> country which has 
 the greatest sum to pay, will find the ex- 
 change against it, because the greater quantity 
 of bills must render them cheaper, as increase 
 pf quantity lessens the price of all commodities. 
 But an inquisitive theorist would wish to gQ 
 further; and will immediately inquire what 
 make^ the quantity of bills greater against the 
 one country than the other? The answer is 
 again prompt and short; namely, the one 
 country has a greater surplus produce to dis- 
 pose of than the other ; or, in a different phrase, 
 the quantity of commodities which ai'e im- 
 portable into the countrj% paying the excess of 
 the bills and losing by the exchange, is greater 
 than that which can be purchased to ad- 
 vantage by the country having the exchange, 
 as it is called, in its own favour ; that is, con- 
 verting the terms once more, there is a greater 
 variety of goods relatively cheap between the 
 one country than the other. And here again, 
 the inquirer is met by another question, what 
 causes the relative cheapness and dearness of 
 commodities between two countries ? To 
 
CHAP. VI.] COURSE OF EXCHANGE. 247 
 
 which it may be answered, varieties in pro- 
 duction, greater or less progress in manufac- 
 tures in the particular instances, and in 
 general, the greater or less relative quantity of 
 money in circulation, which must alternately 
 affect all prices, and has, as we before observed, 
 a general tendency to produce a level of prices 
 every where. The course of exchange is there- 
 fore the direct means by which this level of 
 prices is preserved as far as possible, and for 
 the most part, will explain the comparative 
 value of money in either country. 
 
 20. In this view of the case, we must consider 
 the whole exports and imports of the two 
 countries, including the bullion remitted, and 
 perhaps the foreign expenditure which has 
 been vested in goods and bullion, to be set 
 mutually against each other, as the exact equiva- 
 lents placed in a commercial scale, balanced and 
 trucked one against the other, in exchange, 
 upon a due and mutual sense of equality. For 
 the wealth, the commodities, the bullion, t)r the 
 labour, can alone be etfectively exchanged be- 
 tween the two nations ; the bills merely serve to 
 keep the accounts, and if they did not repre- 
 sent commodities or valuables of some kind, 
 would have no existence. Here is no coin 
 passing between the two nations, for they 
 
248 OF THE TRUE THEORY OF THE [bOOKII. 
 
 have no common mint^ and the medium of their 
 exchange has been the bills which in this re- 
 spect perform the office of abstract currency 
 and ideal units. The things actually ex- 
 changed are the equivalents that are equal in 
 exchangeable value, for this purposie ; however 
 unequal in weight, quantity and utility, 
 and however unequal in the nominal value, 
 when estimated in the currency of either of 
 the two nations, as they always are in tables 
 of imports and exports. The bills have on 
 each side exactly balanced the goods on the 
 other, and having performed their office, .are 
 mutually destroyed ; for like all abstract quali- 
 ties and ideal units, they exist only for the 
 purpose of calculation : come like shadows, so 
 depart. 
 
 21. But before the process of mutual destruc* 
 tion can be performed on the bills, they also 
 must be exchanged and pass from nation to 
 »ation : for the destruction does not take place, 
 till they are paid by the transmission of the 
 goods or valuables, whether in labour or bul- 
 lion which they have represented. Whatever 
 may be their nominal amount the bills must 
 be exchanged as equivalents, for the goods 
 have generally gone before them, or will fol- 
 
CHAP. VI.] COURSE OF EXCHANGE. 249 
 
 low soon after ; and as the goods balance the 
 goods, the real exchangeables the real ex* 
 changeables, so must the bills in foreign com- 
 merce balance the bills upon a fair sense of 
 equality, notwithstanding the inequality of their 
 reputed value in currency. In order to do this, 
 the bills are set off against each other, by the 
 repeated operations of exchange-brokers, and 
 in each country respectively the bills of both 
 are trucked against the other. In each coun- 
 try there is a buyer and a seller of a bill, who 
 give and receive a price for it, which is call- 
 ed the rate or course of exchange, and by 
 this dealing which passes in the creditor coun- 
 try, as to each bill, the account is adjusted, and 
 the gain and loss by exchange occurs. Thus 
 A. in England draws on B. in France for 1000 
 livres, the exchange being at 20 ; A. then 
 sells it to C. in London, who gives him 50 
 pounds in bank notes for the bill , and C. re- 
 mits it to D. in Paris for a credit, or in payment 
 for some commodity ; but before C. had 
 occasion to remit, he had ordered that com- 
 modity, and agreed to pay to the pecuni- 
 ary value of 1000 livres^ or 50 pounds for it in 
 some shape or other. Thus we readily perceive 
 how the equality of exchange or barter is pre- 
 served by the intervention of bills, money and 
 the course of exchange. For ^^0 pounds mul- 
 
950 OF THK TRUE THEORY OF THE [bOOK II. 
 
 tiplied by 20 livres, give 1000 livres on one 
 side of the account, and 1000 livres divided 
 by 20 livres give 60 pounds on the other ; 
 so that each bill which formed the estimation 
 o^ the money price on the credit side of the 
 account in the ledger of each trader is found to 
 be equivalent ; and the goods or whatever the 
 CO? pus debiti may originate in, are of course 
 equivalent ; because they are each equal in com- 
 mercial value to the bills by which they were 
 balanced. The difference, in the quantities, or 
 the nature or character of these valuables, is a 
 thing wholly foreign to commerce. On the one 
 side it may be a draft for a subsidy, and on the 
 other a quantity of grain : on the one it may be a 
 ransom for a captive prince, and on the other 
 a cargo of sugars ; things which have no si- 
 milarity or point of comparison in nature ; but 
 which by the intervention of money and by the 
 arts of exchange are reduced to a perfect 
 equivalency in commerce. 
 
 22. It has been seen that the cause of exchange 
 rising and falling is the greater or less number 
 of bills, which are increased or fall by the 
 greater or less number of purchases ; and they 
 must increase or diminish by the greater 
 or less quantity of goods which are cheaper 
 in the creditor than the debtor country: 
 
CHAP.VJ.] COURSE OF EXCHANGE. Q51l 
 
 wherefore it is clear that the variations 
 of exchange arise from the relative value of 
 money, and its relative quantity, that is,* the 
 quantity of real money; for no other money 
 is considered as fixing the par between nations; 
 whose standard of currency in exchange is 
 invariably the mark of refined silver or gold. 
 Hence also by the effect of exchange the relative 
 power of money is rendered nearly equal all 
 over the world, as far as is consistent with the 
 facilities and the freedom of commerce, and 
 bullion is madfe the universal equivalent. 
 
 23. Do we wish to know how the balance of 
 trade is preserved, therefore, we must not look 
 to the tables of the custom house, but to the 
 desks of the exchangers ; and we shall there find 
 every debt credited by a bill, and the bills 
 drawn on each country will shew the com- 
 merce or actual trade and dealings with each 
 country. As these are unknown quantities, call 
 the one set of bills ^, and the other// : put 
 a for the money unit of account of one coun- 
 try, and b for the money unit of the other. Then 
 will X and i/ represent also the real imports and 
 exports, or amount of bullion, commodities, and 
 debts exchanged on each side ; for it is the 
 amount of the bills in the monies of each coun- 
 try. Also put c for the course of exchange which 
 is used as a multiplier on one side and a 
 
252 OF THE TRUE THEORY OF THE [eOOK IT. 
 
 divisor on the other. Then, by the supposi- 
 tion X is given in exchange for ?/, and x is equal 
 to y' in exchange ; so also is the total of the 
 bills expressed in the money or currency a, 
 to the bills expressed by b, and they may be 
 expressed by any coefficients as 60 a, and 
 1000 5, according to the nominal value of 
 the bills on each side ; and by the course of 
 exchange a = b c and b = "- , Now 60 a is 
 the value of x expressed in one coin, and 
 1000^ the value of j/ expressed in another 
 coin ; therefore c or the course of exchange, 
 is equal to 20,and expresses the relative value of 
 money, which fluctuates with the rate of prices 
 in either countr}^ 
 
 24. Thus we have attempted a brief demon- 
 Ktration of that theory which Mr. Wheatlet/ has 
 with such persevering labour more thoroughly 
 discussed in his Essay on the Theory of Money ^ 
 and Principles of Commerce; a work which 
 has established the philosopher Hume's curious 
 theory of money' upon the most convincing^ 
 principles and conclusive evidence. 
 
 25. This theory we have already alluded to *^ 
 but as Mr. Wheatley^s doctrines will require oc- 
 casional reference throughout this workJ^veshall 
 
 * Book I, Oiap. IV. § 93. p. 54, 
 
CHAP. VI.] COURSE OF EXCHANGE, 253 
 
 briefly state what he considers to be the true 
 functions of money, namely, that an increase of 
 the national stock of specie is an increase of 
 currency and not of capital ; that an increase of 
 currency is not an increase of wealth ; and that 
 no one nation can possess a greater relative 
 currency than another : which latter position 
 must be considered as applicable so far only 
 as the currencies consist or are estimated in 
 metallic coin. These he considers the pecu- 
 liar functions of money, and they will deserve a 
 brief inquiry in our next chapter : although 
 thev have been at least enunciated if not 
 strictly proved and rigorously adopted in our 
 previous chapters. * 
 
 * See Book I. Chap. VTII. p. 77. 
 
2o4 MONEY XOT CAPITAL [bOOKII. 
 
 CHAP. VII. 
 
 The three Functions of Money taken as naiional 
 Currency and not national Capital^ augment^ 
 ing itself without increasing wealthy and tiot per- 
 manently possessing a greater effect in one place 
 than another ; considered according to the prin- 
 ciples of Mr, Wheatley, 
 
 1. The first of the principles just stated 
 in the last chapter may be otherwise expres- 
 sed, that money is not a part of national capi- 
 tal ; but the currency which circulates in 
 the exchange of capital labour and com- 
 modities ; a truth which is perfectly obvious 
 when the money or the currency consists of 
 paper, the increase of which is plainly no in- 
 crease of wealth. But it has been said that 
 in ancient nations when cattle were money,they 
 were certainly valuables and a part of capital. * 
 They were for the greater part capital as being 
 consumable commodities ; and so is gold 
 capable of becoming in some part an useful and 
 
 ♦See Brit. Crit. Vol. 23. p. 119. an article in which the 
 reviewer, who signs himself J. B. has displayed considerable 
 skill and knowledge of calculation. 
 
CHAP. VII.] AS REGARDS THE NATION. 255 
 
 consumable commodity; but whilst either of 
 these circulated as money they were not con- 
 sumable commodities ; and even cattle might, 
 though notvery easily, be so increased forpurpo- 
 ses of exchange as to be really less valuable as 
 commodities. What is true however as to 
 cattle is not true in an equal degree as to coin, 
 and by no means applicable as to paper cur- 
 rency, not representing an actual deposit of 
 money. 
 
 2. The money in a country, as money, repre- 
 sents only that part of the capital, and other 
 exchangeable articles of the country which at 
 the time are in the market, and in process of 
 being exchanged. It is, as money, a mere 
 symbol of these things ; a measure and unit 
 to estimate their reciprocal values ; and there- 
 fore adds nothing to them any more than the 
 symbols, or the measures, or the units employed 
 in any other purposes add to the things them- 
 selves. Notwithstandingit is true that the quality 
 of money passing in exchange is originally de- 
 rived from its intrinsic value as bullion, in which 
 shape only it is capital, either useful and con- 
 sumable at home, or capable of being exchanged 
 fornew capital from abroad. But the money of 
 an individual it is argued is part of his capital ; 
 which is true, because he can exchange it for 
 goods ; but while it circulates in the nation, the 
 
266 MONEY -SOT tAPllAh [bOOK It. 
 
 nation gives up its use in exchange for goods 
 as regards the national stock; and its property 
 as capital, in this sense is lost, just as niuch ai^ 
 when the miser turns his guineas in his pockety 
 or shakes them about in his box. That part 
 of the gold and silver of the nation, however, 
 which is applicable to the purpose of foreign 
 exchange is capital ; and hence arises an ad- 
 ditional reason why in the order and according 
 to the law of nature no restraint should be laid 
 on the exportation of coin and bullion. 
 
 3. The second principle, that the increase of 
 currency is not an increase of wealth, appears 
 to be sufficiently established by Hume ; who 
 puts a supposition that each man in the nation 
 should suddenly find his money doubled at the 
 same instant, when, immediately as this should 
 be discovered, the price of every thing would 
 be doubled. It must be admitted however 
 that as money can only be increased by foreign 
 trade, which cannot occur unless commodi- 
 ties are relatively cheap, money has not gene- 
 rally increased, except in Spain without an in- 
 crease of wealth ; but by no means in an equal 
 proportion. Nay even with respect to paper mo- 
 ney in England, as it has increased m great 
 measure by the arts of commercial men who 
 employed it for the aid of commerce and manu- 
 
CHAP. VII.] OX wheatley's theory. 257 
 
 the increase of wealth with the increase of cur- 
 rency is not wholly to be overlooked; but 
 this, though inconsistent with Wheatley's 
 theory, is not so with that o^ Hume, 
 
 4. The former on this subject advances the 
 following positions, namely, that all persons 
 retain the same relative wealth in society un- 
 ^der whatever increase of currency ; that a nation 
 is just as rich with fi\e as with fifty millions ; 
 that an increase of money has no other effect 
 than to cause a depression of its own value ; 
 a result which was sensibly experienced in the 
 reign of Queen Elizabeth; and that money is 
 the effect not the cause of wealth, and therefore 
 no stimulus to industry independently of wealth. 
 
 6. The third principle, that no one nation can 
 permanently possess a greater relative currency 
 than another, must be understood with the sup- 
 position that all nations are connected by a 
 free commerce ; which is in great measure 
 practically true, and would conduce to the 
 mutual advantage of all mankind, if it were more 
 completely effectuated. But it is impeded 
 by the absurd views of foreign policy, commer- 
 cial restrictions, and fiscal exactions amongst all 
 
fiS THE FUKCTIOKS OP MONEY [bOOK II. 
 
 the nations of the world. For statesmen have yet 
 to learn that the natural end of all true govern- 
 ment is to preserve the peace of society and of 
 the world, and to leave commerce as much as 
 possible to its natural course; or in other words 
 to leave the actions of all men free in every thing 
 which does not tend to introduce violence and 
 fraud. 
 
 6. To establish this last principle, however, 
 Mr. Wheatley argues that nations make the same 
 exertions as individuals to preserve equality in 
 the measure of value, by dealing where goods 
 can be bought cheapest, or sold dearest ; and 
 that no particular town or district can possess 
 a greater relative currency than another, except 
 what arises from the difficulties of conveyance 
 in bulky and perishable commodities. Com- 
 petition operates in the case of nations as 
 much as in different districts or counties, 
 and against this there are only two princi- 
 pal impediments, namely the difficulties of con- 
 vevance and commercial restrictions. As an 
 example of the impossibility of retaining more 
 money than is necessary to circulate the ex- 
 changes at the ordinary level of prices, he men- 
 tions the instance of 5/>am, where money is as 
 scarce as in any other part of Europe ; although 
 there is an annual importation of at least four 
 
CHAP. VII.] ON WHEATLEy's THEORY. 259 
 
 millions in specie, the exportation of ^vhich is 
 strictly prohibited. He then endeavours fur- 
 ther to establish it by inductive evidence ; 
 shewing by the authority of Yoimg, and others 
 that prices are nearly upon a level all over Eu- 
 rope ; and that, where it may appear that la- 
 bour is cheaper, the labourers and the military 
 class also really submit to greater privations 
 than the labourers in jEno^/anc? ; the earnings of 
 labour being greater by seventy-six per cent, in 
 this country than in France ; a difference which 
 also appears in the pay and actual alimentary 
 subsistence and clothing of a British and a Se- 
 poy regiment. 
 
 * 
 7. Thus Mr. Arthur Young states the aver- 
 tige prices of Europe in 1790 as follows. 
 
 
 Beef, per lb. 
 
 Breac 
 
 England 
 
 4 
 
 l| 
 
 France 
 
 3* 
 
 1 
 
 Spain 
 
 44 
 
 11 
 
 Italy 
 
 3 
 
 H 
 
 8. Mr. Young indeed considers the prices as 
 really equal, because of the differences in the 
 quality, in favour of the higher prices ; and 
 by comparing the prices of labour in France 
 and England with the relative prices of foocj 
 
 s2 
 
260 wheatley's theory [book ir, 
 
 it will appear that the labourer in France pos- 
 sesses a smaller portion of the means of suste- 
 nance than in England^ in the same degree 
 as his labour is rated lower. Thus labour in 
 JFrance was 9\^' a day, and bread and meat toge- 
 ther 4^d. while in England labour was Is. 4-|^d. 
 and meat and bread were 6^d. From all 
 which he clearly deduces that the increase of 
 money in a country, is no increase of wealth : 
 since had the wealth of Europe declined in 
 articles of production instead of increasing, 
 while the money augmented as it has done, 
 prices would have been really much higher. 
 However, we must not omit to repeat that the 
 increase of real money has been constantly at- 
 tended with an increase of commodities, by the 
 necessary operations of foreign commerce and 
 domestic manufacture, and the increased pro- 
 duction of every branch of industry requisite 
 to support commerce. And we should also 
 suggest that by the effects of commercial inter- 
 course, since the price of labour influences 
 greatly the price of goods, the price of labour 
 itself, and consequ-ently the condition of the 
 labourer, in a free state of commerce, would 
 have a tendency to equality all over the world. 
 
 9. In conformity to these principles he con* 
 ;6iders that the course of exchange is the practi- 
 cal means by which the equivalency of money 
 
CHAP. VII.] OF EXCHANGE STATED. 261 
 
 is maintained ; and its fluctuations are propor- 
 tionate to those in the value of money. That 
 merchants distinguish the variation in the 
 value of money by the variations of prices; 
 which is self-evident from the definition of the 
 term price; and that a relative excess of curren- 
 cy occasions a premium, and a relative scarcity 
 a discount on a foreign bill ; wherefore the 
 course of exchange between any two countries 
 is nothing more than the amount of the differ- 
 ence in their respective prices. As, for in- 
 stance, if, by a partial augmentation of curren- 
 cy in this country, lOOl. in London v^ere worth 
 no more in corn or other goods generally than9il. 
 in Hamburgh ; then, as all produce which sold 
 in Hamburgh for 9^1. would in this country sell 
 for lOOl., the holder of a bill upon Hamburgh 
 would naturally refuse to sell it in the London 
 market for less than lOOl.; because the invest- 
 ment of its amount in Hamburgh produce, for 
 importation into this country, would from the 
 superiority of British prices return lOOl. 
 
 10. The course of exchange, therefore, he 
 contends, affords an accurate criterion of the re- 
 lative value of money all over the world, and en- 
 ables merchants to deal upon a fair equality, by 
 affording them a standard or rather a measure 
 of that equality ; without which their inter- 
 
262 wheatley's theory [book ii, 
 
 course would receive frequent interruptions. 
 But the credit which each exporter receives 
 in a foreign country for the commodity trans, 
 mitted is always equalized by the course of 
 exchange; as for instance,if money at Hamburgh 
 is as 100, and at London 2ls96, the credit allowed 
 to the Hamburgh merchant for lOOl. in Ham* 
 lurgh produce, is by the exchange at £5 
 per cent, equal only to ^9^. And when bills 
 are by this means reduced to a discount be- 
 yond the charge of the transit of money, they 
 are purchased by the bullion merchants for in- 
 vestment in specie, and thus the surplus spe- 
 cie is imported into other countries to restore 
 the level. 
 
 11. This relative excess of currency, he says, 
 may be occasioned by paper as well as specie; 
 and the conditions upon which the paper is 
 issued, are of no avail to check this equaliza- 
 tion of money. For, if the paper is convertible 
 at option into specie, the paper is, when exces- 
 sive, returned upon the bank which issues it; 
 and, if the paper is not so convertible, it is re- 
 duced to a discount proportional to its excess. 
 Again, upon a reduction of the value of money 
 to any extent, beyond the charge of transit, 
 by the relative excess of the paper, specie be- 
 comes of a different value, or, as he terms it^ 
 
CHAP. VII.3 OF EXCHANGE STATED. 263 
 
 separated from the paper, and is restored to its 
 level by the annexation of a premium. The 
 paper of course is then reduced to a relative 
 discount, two prices, one in paper and the other 
 in specie, are introduced, and two rates of ex- 
 change for the bills drawnby foreigners; in which 
 last case the rate for the orders in specie does 
 not vary considerably from the real par^ and the 
 rate for the orders payable in paper is lowered 
 as the quantity of paper increases. 
 
 12. The discount on the paper he proves to 
 correspond with the discount on the bills drawn 
 fi'om abroad ; and the same real uniformity of 
 prices is maintained by the course of exchange, 
 notwithstanding the excessive utterance of 
 paper. This he establishes by examin- 
 ing the state of the circulation in France 
 ^nd Ireland, during the currency of the assig- 
 nats, and the excessive issue of paper. For 
 he proves by tables, which give in one co- 
 lumn the value in specie ©fan assignat for ^100 
 in London ; that is of a French bill payable 
 in assignats; and of a like assignat, or bill in 
 Paris; that between August 1789 and April 
 179s, they fell from the price of ^94 to £^\ 
 sterling, gradually in London^ and from ^98 to 
 ^43 sterling in Paris \ afibrding an average 
 difference in each place of about £^ per cent. 
 
264 wheatley's theory [book it. 
 
 which, though it was little above the charge of 
 transit, .produced a great remittance of specie 
 from Paris to London^ and a very lucrative 
 traffic to the bullion dealers. 
 
 13. In like manner the premium in Dublin on 
 English bills from January 1799 to December 
 1803 gradually rose from 15s. lOd. to £7. 18s. 
 4d. while the premium in Dublin on specie also 
 rose from 15s. to £9; making the estimate on the 
 bills exclusiveof and in addition to the ^8. 6s. 
 8d. per cent, on British money or the- actual 
 par. But the statement of the exchange be- 
 tween Belfast and Londoji^during the same pe- 
 riod, satisfactorily attests that the rate for spe- 
 cie never fluctuated from par to any extent 
 beyond the charge of transit, which is about 10s. 
 or one half per cent. In like manner, when 
 the rate of prices is affected by the alteration 
 of the standard or debasement of the coin, the 
 courseof exchange speedily shews the difference. 
 Thus when in 1767 the Turkish piastre contained 
 the same quantity of silver as 2s. 6d. English, 
 the par of exchange between London and Con- 
 stantinople was 800 piastres for ^100 sterling ; 
 but, the piastre now containing no more than 
 half the same quantity of silver, the par is aU 
 tered to 1600 piastres for lOOl. 
 
 14. Hence, he says, it is manifest that to 
 
CHAP. VII.] OF EXCHANGE STATED. ^6S 
 
 whatever variety of artifice a partial variation 
 in the value of money is owing, the course of 
 exchange will not only announce the differ- 
 ence, for the purpose of preventing the inequa- 
 lity that would otherwise ensue in the inter- 
 changes of trade, but it will instantly apply the 
 appropriate remedy. If it arise from excess 
 of specie, the redundancy will be removed ; 
 if from excess of paper, it will be returned to 
 the banks, and reduced ; or if not convertible, 
 the course of exchange will cause it to be at a 
 discount proportioned to its excess. If it arise 
 from an alteration in the denomination or 
 purity of the coin, the course of exchange will 
 strike a new par, correspondent with the differ- 
 ence : and thus exchange operates in every in- 
 stance to make the same sum or specific grains 
 of gold or silver measure the same value. 
 
 1.5. He then argues that the course of ex- 
 change is not connected with the favourable 
 or unfavourable balance of trade, or that it does 
 not vary as the difference of imports and of 
 exports. If, for instance, at the time that a con- 
 siderable balance was due from Hamburgh to 
 London f or that Hamburgh had imported more 
 goods from London than she had exported 
 thither;^ 100 sterling in coin, in London, were, 
 from the difference of currency, worth no more 
 
266 wheatley's theory [book ii. 
 
 in goods than £95 in Hamburgh; and, in con- 
 formity with the principle of exchange depend- 
 ing on the balance of trade, the course of ex- 
 change should he £6 per cent, against Ham» 
 burgh, then it would appear, contrary to the 
 fact, that ^100 in London was worth £ 106 in 
 Hamburgh, and a merchant there would give 
 ^5 per cent, premium for a bill upon this 
 country, which ought to be at five per 
 cent, discount, and vice versa. But if a^lOO 
 in London were really worth no more 
 than £96 in Hamburgh, what cost a^]00 in 
 London would really sell for no more than 
 £96 in Hamburgh; and no Hamburgh merchant 
 would give ^105 for a bill on this country, 
 which when vested in produce would returu 
 only £96. 
 
 I6.1n other words and pursuing Mr.Wheatley's 
 argument in our own manner, suppose the ba- 
 lance of trade is against ifamZ^wroAi'^ per cent, 
 that is Zowc?ow has exported of:5 per cent, more 
 in value, estimated in pounds sterling, than she 
 has received from Hamburgh; but commodities 
 are dearer by £6 per cent mLondon than iuHam- 
 burgh ; the commodities exported will have 
 given rise to bills to ^6 per cent, more in amount 
 than the bills for the imported goods, and the 
 money amount in bills will then be ^6 per 
 
CHAP, VII.] OF EXCHANGE STATED. 267 
 
 cent, against Hamburgh ; therefore convert the 
 goods into bills, and the bills into money, reck- 
 oning in each by the same currency, and the 
 vslue of the goods, or the amount of the bills, 
 or the money in the bills, will be £o per cent, 
 against Hamburgh ; according to the theory of 
 the balance of trade, or difference ofexports and 
 imports. But, suppose the value of money or 
 the difference of prices as above, then, by the 
 reverse process, calculate the money amount 
 of the bills which have been drawn, and mea- 
 sure the value of the money which they ex- 
 press, by the quantity of the goods which they 
 willpurchase,and then the exports from London 
 must of course be less than the imports from 
 //amZ^wrg/i, which is contradictory and absurd. 
 
 17.These two things, therefore.cannot depend 
 upon each other; but it is evident that the 
 difference in the value of money would natu- 
 rally create a premium on bills in favour of tliat 
 country where the like quantity of money 
 would purchase the most of comniodities ; and 
 therefore the premium and discount upon fo- 
 reign bills, or the rate of exchange, must depend 
 upon the rate of prices, or the value of money 
 or relative state of currency, estimated in gold 
 and silver. 
 
 18. Mr. Thornton considers that a low value of 
 
253 wheatley's theory [book ii. 
 
 money, or high prices, necessarily conduces to 
 an unfavourable balance, by encouraging im- 
 portation; and thence occasions an unfavourable 
 exchange, by causing the bills that are drawn 
 upon the debtor state to be reduced to a dis- 
 count from their consequent excess ; and vice 
 versa, 
 
 19. It was upon this supposition that we 
 made our calculations in the last chapter ; but 
 Mr. Wheatley contends that no such encourage- 
 ment on either side can take place from any 
 variation in the general state of their prices ; 
 as the course of exchange announced the dis- 
 parity, and prevented the necessity of a casual 
 interruption to reestablish their correspondence. 
 We will therefore re-examine this position, and 
 see if there is any real difference between us in 
 opinion. First, then, we must observe that a 
 bill is never created, but upon the exportation 
 of goods or money, or with a view to the fu- 
 ture exportation of one or other of these 
 articles, since mere credit will never satisfy a 
 bill ; and that the course of exchange is always 
 a multiplier on one side of the equation, 
 and a divisor on the other, or operates in 
 an opposite way ; and tftat in effect it goes for 
 nothing in the accounts as between the two 
 nations, because it is always added to the 
 amount in drawing or making the bill, and it 
 
CHAP. VII.] OF BXCHANGE STATED. 269 
 
 is deducted in selling it, as far as the mere no- 
 minal value is concerned. Thus A. in Morlaix 
 is directed to send a cargo of corn to B, iniow- 
 don^ and to value on him for it, which 
 he does by calculating the price, and all the 
 charges of shipment and the duties in livres, 
 drawing a bill according to the exchange 
 at 17 or f2(), as the case may be, and the next 
 day sells his bill to C. at the same rate of ex- 
 change, who remits it to D, in London to pur- 
 chase broad cloth. D.also calculates at the very 
 same rate of exchange, or a very small fluctua- 
 tion, and sends broad cloth at the London pricej 
 after allowing for the exchange, which is either 
 atpar or otherwise, and C. will receive more 
 or less broad cloth as exchange is high or low. 
 Money is more or less valuable as it purchases 
 more or less goods ; and if bills or nominal 
 sums of money purchase more or less goods, as 
 exchange is high or low, exchange w^ill ex- 
 press the relative value of money : and it is 
 apparent that C. the owner of the bill, and then 
 of the broad cloth, can get nothing by his ex- 
 change purchase, except by selling his broad 
 cloth in France ; whither he would not import 
 it, if broad cloth were not dearer than in Eng- 
 land. Or if he takes his return in bullion, it will 
 be, because the amount of the buUion which his 
 bill expresses, will not purchase so much of 
 
270 wheatley's theory [book II. 
 
 commoclities as it would in France. If, on the 
 contrary, it would purchase as much or more, 
 he must conduct his business ill if he did not 
 convert his English bill into Ens:lish commodi- 
 ties and turn them into bullion by importation to 
 France, Whatever be the cause of the bill when 
 created, whether a foreign subsidy, the pay of 
 an ambassador, or an army, or the support of a 
 prisoner, it is created at first by credit; but must, 
 in the end, be paid, as between the two coun- 
 tries, in specie or in merchandize. It should seem 
 therefore that the difference of exports and im- 
 ports^ arises from calculating the values of the 
 goods without reference to exchange, without 
 estimating the bullion which passes, independ- 
 ently of the custom house, and without reck- 
 oning the money or its equivalent, which must 
 be paid at home to the merchant w^ho transmit* 
 goods or money, in exchange for the bill; which 
 though drawn by the agent of government 
 abroad, is accepted and paid by the agent here. 
 
 21. Thus we see that on either supposition the 
 course of exchange expresses the ratio of prices 
 or the value of money ; for thejoar of exchange 
 is absolutely as nothing on either side : because 
 in the progress of traffic or commerce it means 
 identically the same quantity of bullion reck- 
 oned on each side of the account. And thus 
 
CHAP. VII.] OF EXCHANGE STATED, 971 
 
 also we may perceive that the balance of trade 
 is altogether a fallacy, and that bullion passes 
 only just where it is needed; and goes from the 
 place where it could no longer be of service, 
 but would tend to destroy the equality of 
 the measure of value, were it not by the course 
 of trade instantly attracted elsewhere, 
 
 29. There is only one case in which bullion is 
 constantly increasing, and of course constantly 
 tending to disturb the measure of value. That 
 is in its production at the mines ; from whence 
 it is attracted by the exchange of commodities, 
 and thus dispersed all over the commercial 
 world. But as population and manufactures, or 
 production, must go on increasing also, it is 
 probable that it will very gradually increase 
 the relative stock and decrease the relative va- 
 lue of money. In other words the depreciation 
 of money from this cause is now likely to be 
 very slow. \ 
 
27S THE AMOUNT GP [BOOK II. 
 
 CHAP. VtIL 
 
 Of the Amount of the circulating Medium^ and 
 how far Bills of Exchange maybe considered 
 as circulating Medium^ with an Estimate of 
 the total Amount of the Money Transactions 
 in Great Britain, 
 
 I.Tn the fifth chapter of our first book, in 
 treating on credit and bills of exchange, we have 
 stated that " the effect of these instruments is, 
 greatly to increase the apparent quantity of 
 money ; and to render a very much less quan- 
 tity of coin necessary to carry on the ex- 
 changes."* This is of so much importance 
 tliat by some persons, private bills of exchange 
 have been considered as a part of the circu- 
 lating medium. In our opinion, however, 
 it must be taken with a considerable limitation; 
 for that article only is a true circulating me- 
 dium, or money ,which supplies the place of coin, 
 passes from hand to hand in all exchanges, 
 for money, and isultimately paid as the considera- 
 tion upon the discharge of any debt. Asjhowever, 
 
 * Ante page 61. 
 
CHAP.VIII.] THE CIRCULATING MEDIUM. 273 
 
 the circulation of bills of exchange, facilitates 
 commerce greatly, and renders less money neces- 
 sary, it may without prejudice to our inquiries 
 be considered in some measure as blended 
 with the circulating medium, and as rendering 
 a less sum of money actually necessary to carry 
 on the same extent of dealing ; as hath already 
 in part been explained, in Chapter the Seventh, 
 of Book the First, on Circulation and Prices.* 
 Wherefore it will appear obvious that the 
 same rate of prices may obtain in two countries 
 where the masses of money are very different, 
 the stocks of commodities and circulation being 
 equal, provided the state of credit and of bills 
 of exchange in each country differ inversely 
 as the masses or aggregate stocks of money. 
 
 2. Some estimate of the circulating medium 
 in Great Britain will become necessary in 
 many parts of our future inquiry, and as we find 
 it already made by an author of considerable 
 acuteness and ability, we shall adopt for the 
 most part his account ; guarding the reader not 
 to consider bills of exchange strictly as circu- 
 lating medium. t 
 
 * Ante, p. 73. 
 
 t See Observations on the Circulation of individual Credit, 
 &c, (Longman and Co. 1812.) 
 
 T 
 
 li 
 
974} AMOUNT OP CIRCULATING £b06K II. 
 
 3. Mr. Rose* says nothing of country bank 
 notes, and states the circulating medium of 
 Great Britain to be, 
 In 1798, Coin . , . w^35, 000,000 
 Bank of England Notes 11,278,000 
 
 46/278,000 
 
 In 1811, Coin . . 3,000,000 
 
 Bank of England Notes 23,000,000 
 
 26^,000,000 
 
 Mr. Johnstone points out this omission, and 
 shews, f that Mr. Rose should, on his own 
 grounds, make our currency to be. 
 In 1798, Coin . . ^30,000,000 
 Bank of England Notes 11,000,000 
 Country Bank Notes . . 7,000,000 
 
 48,000,000 
 
 and at this time, 
 
 In 1811, Coin . . . 5,000,000 
 Bank of England Notes 23,000,000 
 Country Bank Notes , 32,000,000 
 
 •60,000,000 
 
 Mr. Bosanquet J calculates the medium. 
 In 1810, Gold . . o£:2,000,000 
 
 Bank of England Notes 21,000,000 
 Country Bank Notes . 27,500,000 
 
 50,500,000 
 
 4. Mr. Johnstone considers the country bank 
 
 • Rose's Speech, p. 95, 96. 
 f Johnstone's Speech, p, 50, 51. 
 % Page 125, 
 
CHIP. VIII.] MEDIUM IN ENGLAND. 275 
 
 notes ©f 11. and 2l. to amourit to 12 millions, 
 * and he thinks all the country bank notes cur- 
 rent to be 
 
 In 1807 
 
 i:2(>,500,000 
 
 1808 . 
 
 . 24,500,000 
 
 1809 . 
 
 . . 29,500,000 
 
 1810 , 
 
 . . 33,000,000 
 
 And Mr. Richardson says they are 30,000,0001, 
 including Scotland, -f At the same periods 
 were current, Bank of England notes. 
 In 1807 . o£:i7,500,000 
 ISOS . . . 17,500,000 
 
 1809 . . 80,000,000 
 
 1810 . . 23,000,000 
 
 5. The number of country banks, including 
 those in London and Scotland, in 1810, is 
 shewn, by particular enumeration, to be 79^; 
 and, reckoning the circulation of each at an 
 average of 40,0001., their notes would amount 
 to 31,840,0001. 
 
 6. Mr. Johnstone, founding his calculation on 
 the number of stamps issued, makes the sum of 
 the circulation of these banks to be 32,000,0001. 
 By the same calculation, Mr. Johnstone con- 
 sidei^ the sum circulated by country banks in 
 J 808 to have been 24,500,000/. The num- 
 
 * Page 12. 
 
 t Rep, Bull. Committee, p. 149. 
 T 2 
 
276 NATURE AND AMOUNT OF [boOK II. 
 
 ber of such banks in 1808 was 600 and up- 
 wards :* and as the calculation at 40,0001. 
 each, brings a similar result, it is reasonable 
 to believe that the circulation may be safely 
 assumed to be in that ratio, 
 
 7. Mr.Tritton, in his evidence before the Bul- 
 lion committee, states his opinion to be, that 
 the average of each bank might be 30,0001.; but 
 Mr. Johnstone-)* appears to go on stronger 
 ground ; as will appear from the following cal- 
 culation of the amount^ estimating by the num- 
 ber of banks, viz. 
 
 £ 
 In 1793 . . 260at 40,000/.each=:U2,00,00O 
 
 1797 .. 230 . . 5= 9,200,000 
 
 1805 . . 517 . . =20,680,000 
 
 1808 . . 600 or more =^24,000,000 
 
 i ISOS . . 796 exactly =31,840,000 
 
 8. Mr. Johnstone says, " combining the issues 
 of the bank of England with the issues of pri- 
 
 * See the Report of the Bullion Committee, p. 214. 
 
 t Evid. Secret Com. 1797, fol. 121. 
 
 % See the Report of the Bullion Committee, p. 214, 
 
CHAP. VIII.] BILLS OP EXCHANGE, 277 
 
 vate bankers, the whole paper circulation of 
 the kingdom will be, 
 
 InlSOT . . ^£44,000,000 
 
 1808 . . 42,000,000 
 
 1809 . . 49,500,000 
 
 1810 . . . 56,000,000 
 
 but he omits to consider any other description 
 of paper circulation. 
 
 9. In 1797, it was stated, on good evidence, 
 that few bank of England notes circulated 
 more than SO miles from London.* It would 
 follow, that, at that time, bank of England 
 notes did not afford the convenience of circulat- 
 ing medium to 1-lOth part of the empire ; and, 
 with the exception of ll. and 2l. notes, which 
 did not then exist, the same circumstances con- 
 tinue.f 
 
 10. These references will sufficiently shew, 
 that the circulating medium of England ha« 
 been understood by high authorities to include, 
 in its utmost latitude, coin, bank of England 
 notes, and country bank notes only. 
 
 11. Mr. Blake considers bills of exchange, in a 
 
 * Evid. Secret Com. 1797, p. 137, 127, 54. Thornton, 
 p. 74, &c. 
 t Bull. Com. p. 04. 197, &;g. 
 
578 KATURE AND AMOUNT OF [bOOK IIJ 
 
 very limited degree, as circulating medium ; 
 but the amount of " paper circulation pro- 
 " vided for, independant of bank notes/* 
 will apppear deducible by calculations from 
 the evidence before the bullion commit- 
 tee. In this report* it is shewn, that every 
 day a sum of four or five millions of paper in 
 circulation is paid, with the use of only 
 220,0001. of bank of England notes^ in fractional 
 sums and balances, by forty-five bankers 
 living in London ; and that, there are twenty- 
 one bankers in London, with the bank of 
 England, who separately discharge their engage- 
 ments without attending at the clearing house. 
 But if the daily balances were carried forward 
 to one annual settlement ; these bank notes could 
 only be necessary for a single day in the year ; 
 and, it might happen, that the balances of de- 
 mands would be of themselves equal. The whole 
 sum of this private circulation may therefore 
 become, in fact, wholly independent of the bank 
 of England notes ; and the following calculation 
 will afford some proofs of the importance of this 
 medium. 
 Calculating 300 days in the year at 4| 
 
 millions, the sum of paper eagage- 
 
 inents discharged daily at the clearing 
 
 bouse by 45 bankers, will be annually 1,350,000,000 
 * Page 236, 
 
CHAP. VIII.J BILLS OF EXCHANGE. 979 
 
 Amount brought forward 1,350,000,000 
 
 These 46 bankers will pay at their coun- 
 ters, . . . 130,000,000 
 
 The 21 bankers who do not attend, will 
 
 pay ... . 400,000,000 
 
 The bank of England,which had in 1810, 
 as generally believed, 13 millions of 
 discounted paper at or under 65 days* 
 date, will receive back from indi- 
 viduals about 230,0001. per diem, or 
 nearly per annum, 70,000,000 
 
 The different traders in London, who 
 have no bankers, and all the acceptors 
 in the country ,which last in some parts 
 of England, the city of Bristol particu- 
 larly, are numerous, will pay very 
 considerable sums, to be computed 
 at 100,000,000 
 
 The bills drawn and made payable at the 
 bank of England, by the agents of go- 
 vernment, &c., and circulating till 
 their maturity may be* . 10,000,000 
 
 Other sums in bills paid at the bank 
 on acceptances at their house, for 
 the banks of Scotland, and their pri- 
 vate customers, may be . ... 5,000,000 
 
 ^2,085,000,000 
 
 * It appears by the Evid. Com. 1797, that from Jan, 1, 
 1795, to Feb. 26, 1797, the bills paid by the bank, by orderf 
 •f the Treasury, were 13 laiUions. C^ppen, No, 12.} 
 
280 NATURE AND AMbUNX OF [booK II. 
 
 This amount, say 2,000,000,000, comprehends 
 all bills of exchange paid in Great Britain, 
 foreign and inland, and at all dates, from a few 
 days to several years. But if farther calcula- 
 tion would be desirable, it may be grounded 
 on the issue of stamps for bills of exchange 
 and promissory notes, not payable on demand. 
 In the Appendix to the Bullion Report, there 
 is an account of the town duty paid on bills and 
 notes not re-issuable for the years 1806, 1807, 
 1808 and 1809. From this document has been: 
 formed the following table, (see the next page)> 
 which is sufficiently correct for the purpose 
 of a calculation like the present ; which can 
 never aim at perfect accuracy. The chief 
 object of it is to shew the proportional increase 
 or decrease of the circulation of such bills, 
 and for the purpose of comparison, the stamp 
 duty is supposed to have remained unaltered. 
 This table will establish also the increase 
 or decrease of our home trade, since the 
 bills represent the greater part of all our 
 domestic transactions in trade, and will give a 
 clear and accurate view of their relative amount^ 
 In this table, it should be observed also, that 
 it is probable many of the bills of five pounds 
 were issued for country bank notes, and that 
 the bank discounts are granted only on bills of 
 lOOl, value and upwards. 
 
€HAP. VIII.] BILLS OF EXCHANGE. 
 
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f89 KATURE AND AMOUNT [boOK II. 
 
 11. These stamps do not iuclude those sold 
 in the courttrj, of which there is not la parti- 
 cular statement ; but as the nett amount of 
 country duty received, considerably exceeds 
 the town gross receipt, we may conclude that 
 the duty is paid annually on bills and notes 
 of this description amounting to more than 
 1000 millions. But we must add to this, all 
 foreign bills of exchange, drawn from foreign 
 parts, but remitted for payment, and circulating 
 till paid, in England without stamps. Goods 
 imported are in general paid for, in such bills; 
 and the bills drawn on government, and on the 
 East India Company, together with Exchequer 
 bills, are mostly of a like description : we may 
 therefore calculate upon 200 millions of such 
 paper, circulating in the year, without any 
 payment of duty.* An inland bill of ex- 
 change of sufficient credit to be discounted 
 at the bank of England is, 'therefore, at the 
 present day, a circulating medium for almost 
 every commodity in commercial dealing ; and 
 in the county of Lancaster, the population of 
 which is equal to London, it is among the mer- 
 cantile part of the community, nearly the only 
 respectable medium in use. 
 
 * Mr. Vansittart rated the sums circulating on individual 
 credit in 1793, at 200,000,000, and i,t is prtbable that 
 imouiitis not now diminished. 
 
 i 
 
CHA?. VIII.] OF BILLS OF EXCHANGE*. 285 
 
 12. The whole of the circulating medium, is 
 calculated to serve two different purposes; 
 first, in the transfer of land, or real property, 
 and financial business, which required formerly 
 a medium of coin, and now of bank notes: 
 secondly, in commercial transactions,which re- 
 quire chiefly, and in many parts entirely a cir- 
 culation by bills of exchange. In the payments 
 to government, however, the concerns of which 
 may have been considered too many, and in 
 those of the landed proprietor, whose concerns 
 are perhaps too few, to admit of bills of exchange, 
 they have not hitherto come into general use* 
 
 13. Assuming, that the landed and finan* 
 cial circulating medium and the commercial are 
 kept each distinct, the daily circulating medium 
 of this country will be divided by the follow- 
 ing round numbers : — 
 
 First, commercial medijun, consisting 
 of billsof exchange and paper,circulat- 
 ing on the credit of individuals . . .£200,000,000 
 
 Bankers' notes not privileged, pay- 
 able at different fixed dates or on 
 demand, . . . . . , 30,000,000 
 
 Second, landed and financial circulation 
 sale and rent of land, with hire for 
 labour^and collection of taxes, consist- 
 
9S4? NATURE AND AMOUNT [bOOK II. 
 
 Amount brought forward 20^,000,000 
 ing of bank of England notes as a 
 
 substitute for gold . . . 20,000,000 
 
 Gold and other coin . . . 5,000,000 
 
 ,£255,000,000 
 14.1n certain instances,even government taxes 
 are received in inland bills of exchange ; and, in 
 payment of labour, and generally in payment 
 of small amounts, the use of notes is common 
 alike to all. 
 
 1 .5.TheReport of the BulIionCommittee says, 
 that " 4^ millions of bank of England notes 
 " and country notes vi^ere, in 1809, added to the 
 " circulation of Great Britain, an amount little 
 " short of all the circulating coin added in all 
 " Europe in any year since the discovery of 
 ** America,"(/t<?/?or/,70) — Mr. B osanquet inhis 
 Practical Observations, &c. contests the opinion 
 of the committee, which is founded upon the 
 calculation, (see Report, p. 69) of the amount 
 of the number of the stamps in 1808 and 1809. 
 Accordingly it makes the number of stamps for 
 the former year exceeding two, and not exceed- 
 ing five guineas 666,071? and of the higher class 
 1 98, 47.'3, making a total of 854,544 stamps, and 
 it estimates the smaller stamps for 1809 at 
 922,07:3, and the larger at 380,006 to which it 
 adds of stamps exceeding 201. and not exceed- 
 
CHAP. VIII.] OF Bir.tS OF EXCHANGE. 2S5 
 
 ing 30l. 2,425 ; those of 50l. 674, those of 50L 
 and upwards 2611. It therefore makes the 
 excess of country bank notes of the latter years 
 above the former ^3,095,340 excluding entire- 
 ly the country bank notes under two guineas, 
 the amount of which must be very great. Mr. 
 Bosanquet^ however, observes, that these notes 
 are reissuable every three years, and. therefore 
 the account should be taken by a comparison 
 of each third and not each successive year. 
 He, therefore, makes the following calculation : 
 
 Notes exceeding 1805 1806 1808 180J> 
 
 j£2.2and not j^5.5 ^623.460 . 832,940 . 006,001 . 922,073 
 5,5 and not 20 302,100. 323,100. 138.473 . 380,006 
 
 From which it appears that the excess of 
 1809 beyond that of 1806 is only £5UfiOO in- 
 stead of .£3,09.^,000. We cannot now enter 
 very minutely into these calculations, but 
 must observe that it is probable the great in- 
 crease of currency was made in the country 
 banknotes for one pound; which do not appear 
 to be taken into either calculation. But 
 we are enabled accurately to state, that in the 
 same vear, so far from an addition to the cir- 
 culation of inland bills of exchange, there was 
 a very considerable diminution. This will clear- 
 ly appear by a comparison of the duties on 
 stamps taken from the official documents pub- 
 
556 NATURE AND AMOUNT [BOOK II.' 
 
 lished from the stamp office of the gross receipt 
 of town duty, and already mentioned. 
 
 Amount of all Banlt ofEng- 
 
 ThcNumber of Stamps was Amount of Bills drawn on lard and other Bankers* 
 
 Town Stamps. paper, accordinsj to Mr. 
 
 Johustone's calculation. 
 
 In 1806 1,556,000 .£505,640,530 
 
 1807 1,492,000 516,162,835 44 millions 
 
 1808 1:568,791 534,4l7/24a 42 ditto. 
 
 1809 1,716,091 368,042,255 4 9f ditto. 
 
 Whence it follows, that in 1809, the circula- 
 tion by bills of exchange decreased 166,374,985/. 
 in the bills drawn on stamps sold in town only ; 
 upon which is grounded the greater part 
 of the advances of the Bank by discounts; 
 yet, while the total amount of bills of exchange 
 thus decreased, the sum employed in discount- 
 ing bills, or, in other words, that portion which 
 was required to be discounted, was greatly 
 bigher than it ever was before. The exact sum 
 of the Bank discounts, is, for no very obvious 
 reason, concealed ; but the scale of discount 
 in 1797 was represented by 241 ; in 1799, by 
 251, and in 1810 by 688 ; and in the Monthli^ 
 Magazine^ vol. IV. p. 250, it is shewn that the 
 number 241 means 4, 176,0801 
 
 16. That the circulation of bills of exchange 
 diminished, while that of Bank of England 
 notes and other bank notes increased, in the 
 year ISO^^ is probable ; and the sum of 
 
CHAP. VIII.] OF BILLS OF EXCHANGE, 28? 
 
 the discount of mercantile bills by the Bank of 
 England, although its amount is not precisely 
 known, has increased rapidly in 1809, when the 
 total amount of such bills rapidly diminish- 
 ed. Any evils arising from the excess of paper 
 circulation, cannot, therefore, be attributed 
 to the excess of inland bills of exchange, which 
 are not supplied " as means of extensive and 
 general circulation" in a greater degree than is 
 required by prosperity and thriving trade ; but 
 are naturally at all times supplied as far as they 
 are so required. Of this medium it may be 
 truly said, that, when unadulterated, it is, in 
 the ordinary course of business, incapable of 
 excess ; and if, in the several stages through 
 which ySlw materials pass into manufactured 
 articles, property is, in certain instances, con- 
 verted, so as to admit of its being represented 
 by more bills than one, the advantages of the 
 system are still such, as much more than to 
 counterbalance the objection. Let us suppose 
 a merchant in Liverpool to receive from 
 America, on commission, a bale of cotton, and, 
 that for the value, a bill of exchange is drawn 
 upon him at 60 days* sight. That bill and the 
 cotton which it represents, will arrive, if not 
 by the same vessel, nearly at the same time. 
 The cotton, says our author, is sold to a 
 dealer, who in ten days gives for it his bill 
 
f85 OF BILLS OF EXCHANGE. [BOOK II. 
 
 on London, at three months date, or a bill 
 the value of which has been received there, 
 not in this bale of cotton, but in a former 
 transaction ; or if not so absolutely regular as 
 this, the bill, to say the least of it, has twa 
 securities. The dealer sells- the cotton to a 
 manufacturer, and gives him two months* 
 credit, during which period no bill exists on 
 account of this stage in the progress. At the 
 expiration of the credit, he receives from the 
 manufacturer a bill at two months ; which, if 
 the manufacturer has been successfully expedi- 
 tious in manufacturing the cotton into goods 
 and selling them, might undoubtedly represent 
 the cotton so converted. Most probably the 
 fact will however be, that the goods if sold, are 
 sold to the exporting merchant at a credit of 
 four months ; and as during this period there 
 is no bill in the transaction, the manufacturer's 
 bill to the dealer at two months will, equally 
 with the dealer's to the importer, represent 
 other property. The merchant sends the cotton 
 again to sea, exporting the goods manufactured 
 from it, and receiving after the stipulated 
 credit, a bill from his customer in payment; 
 which bill, if drawn upon this country, will 
 represent other property also. 
 
 IZ.These transactions form a short and simple 
 
 I 
 
CHAP. VIII.] OF BILLSOF OF EXCHANGE. 289 
 
 history of the regular bill circulating medium. 
 The exporter has at the close paid the importer 
 virtually, as if the transaction had been only 
 between two parties ; and the useful machine 
 of bill currency has filled up an intermediate 
 chain of dealing, which has given profit to a 
 numerous class of tiaders, manufacturers, la- 
 bourers, bankers, and others. 
 
 IS.Each party had,says ourauthor,a different 
 banker; but by the transfers at the Clearing House 
 the whole is conducted as it would have been 
 if managed by a single bank ; and the result is, 
 not that the bills are paid in cash, but the ba- 
 lances, or the amounts by which each suc- 
 ceeding bill exceeds the preceding, and which 
 consist of the expences and profit of the busi- 
 ness done. It would be the literal fact, that 
 not one of these bills would be paid in cash, 
 if, becoming due at the same date, they could 
 appear together at the Clearing House, But al- 
 though the identical bills do not so appear, the 
 operation is the same substantially ; for other 
 bills, though not belonging to the same parties, 
 yet in the hands of the same bankers, answer 
 the purpose as completely on any given day, 
 and produce eventually the same effect to the 
 parties, as would have been accomplish- 
 ed by their own bills balancing each other. 
 
^90 OF ACCOMMODATION BILLS. [bOOK II; 
 
 19. And whileone individualis ready to receive 
 in exchange for goods a regular bill of exchange, 
 payable at a future time, with which he can 
 buy goods from another person, the medium 
 of circulation is created. As long also as bills 
 paid on bona Jide transactions are allowed to 
 remain in circulation, and the profit of discount- 
 ing does not lead to the fabrication of them, 
 there must be a circulating medium in due pro- 
 portion only to the prosperity and increas- 
 ing wealth of the country. 
 
 20.But it appears by the cases decided in the 
 courts of law, that abundance of accommoda- 
 tion paper is fabricated, and that crimes nearly 
 allied to forgery, coining, and swindling, occur, 
 so that the good, whatever it may be, is not un- 
 mixed. 
 
 21. We hear, also, of various sums, in one in- 
 stance 100,0001. being lent by the bank of 
 England, not on bills for bona fide transactions, 
 but on bills avowedly originated for the pur- 
 pose of borrowing, without any transac- 
 tion of real business.* Individual traders raise 
 money upon such bills, and carry on great 
 speculations without capital ; and in one day, 
 in July 1810, five houses connected together in 
 
 * See Mr, Huskisson's pamphlet, p. 129. 
 
CHAP. VIII. ]0F ACCOMMODATION BILES. 991 
 
 this mode of raising money, stopped payment 
 for 1,766,6021. 
 
 22.Thisincrease of discount certainly does not 
 grow with the growth of trade, nor strengthen 
 with its strength : on the contrary, it exists in 
 the greatest degree, during commercial distress 
 and national calamity. In proportion as the 
 demand lessens, and the goods are. less valuable 
 ,bi Us should decrease, notwithstanding which 
 they are still forced into circulation, by a mis- 
 taken notion that the bank should by their 
 discount support the credit of merchants ijx 
 times of difficulty. But they do not stop here ; 
 the discount of such bills begets a gambling for 
 -time, which requires them to be renewed inde- 
 finitely, to put off the evil day. 
 
 23. If indeed bill discounters, like the bank, 
 give credit, when others will not, and prop up a 
 vitiated excess of paper currency, there will 
 be a periodical return of the interruptions 
 to trade. Thus as there were convulsions 
 in the mercantile world in 1772, 1788, 1793, 
 1799, ^nd 1810, they may be expected to visit 
 it again,, so long as the improvident trader is 
 injudiciously befriended by this system.* 
 
 * See Observations on the Circulation of Individual 
 Credit. (Longman.) 
 
 v2 
 
S9^ OF ACCOMMODATION BILLS. [boOX II* 
 
 24'. As the foregoing statement appears to 
 come from one who is well acquainted with 
 the practice of commercial dealings, as well as 
 with the law of England concerning inland 
 bills, which, he truly observes, were for a long 
 time viewed with much jealousy by the courts 
 of law, we have ventured only to abridge it 
 without alteration ; but in addition to our 
 former observations, we must remark that the 
 chief effect of an increased circulating medium, 
 whether of coin or of paper, supplying the 
 place of coin, and called paper money, is to 
 increase prices. As we have said, increase of 
 bills and of credit, has a tendency to increase 
 the apparent mass of the money in circulation, 
 and under the existing circumstances, with re- 
 gard to the bank of England and the country 
 banks and their discounts, it is now obvious 
 that these bills of exchange actually increase 
 the quantity of paper money or bank notes, and 
 must have a more than ordinary effect upon 
 the prices of all commodities; and that,as trade, 
 speculation and accommodation bills increase 
 under the present system, prices must rapidly 
 increase, as bank discounts, and bank paper 
 circulation are augmented, in a degree which 
 could by no means take place while the cur- 
 rency remained in coin. 
 
CHAP. VIII.] OF ACCOMMODATION &ILLS. 295 
 
 Q6s 111 the case of accommodation bills, this is 
 more mischievous than upon real transactions 
 of business, because, in the latter case, there 
 is a greater certainty of increasing wealth and 
 commodities, by which the effect of, increased 
 circulation upon prices, may be counter- 
 balanced; whereas accommodation paper, 
 like the sums raised in advances to govern- 
 ment or upon exchequer bills, tends, directly 
 and without check or remedy, to augment 
 prices ; that is to diminish the value of the cir- 
 culating medium or currency in exchange. 
 
 26. The author of the Wealth of Nations has 
 clearly established, as in our first chapter we 
 have already noticed, that in the estimation of 
 price it is the demand and ability to pay, or the 
 effective demand,on the part of the purchaser,by 
 which ultimately the price is fixed. It is, 
 therefore, that part only of the currency which 
 circulates as cash among consumers that 
 constitutes effective demand ; and this explains 
 the reason why credit amongst traders, and 
 the circulation of individual credit on bills 
 amongst the manufacturing and commercial 
 part of the community, set loose more circu- 
 lating medium amongst the consumers and 
 thus raise prices. It will also shew how 
 the impediments to circulation, caused by 
 
294* OF ACCOMMODATION BILLS. [BOOK II. 
 
 new taxes and imports, must affect prices, 
 arid render an increase of money necessary, 
 at least for a time, to sustain the circulation 
 at an equal rate, although possibly it might 
 happen that some counterbalance would be 
 found to this, in the end. However, it is most 
 probable that taxation, especially on commodi- 
 ties, has a general tendency at present to raise 
 prices and to increase the demand for currency, 
 which when introduced must have an effect 
 upon prices ; or if on the contrary new curren- 
 cy were not introduced, taxes would be raised 
 %vith greater difficulty, prices fall, and circula* 
 tion and commerce languish. 
 
 27. That taxes must have an effect upon cir- 
 culation is clear ; but the full extent of that 
 effect must be referred to future investigation. 
 Canard^ a modern French writer, has, indeed, 
 examined this subject with great ability ; and 
 has demonstrated that the burthen of any new 
 species of taxation upon commodities ceases 
 altogether, after a time. This opinion is con- 
 firmed by considering the operation of depre- 
 ciated currency ; but we must observe that it 
 is probable a tax on income is a burthen which 
 must be continually oppressive. 
 
CHAP. IX.j AMOUNT OF COIN- 295 
 
 CHAP. IX. 
 
 0n the Amount of Coin circulating in England^ 
 during the greater part of the Eighteenth iJen^ 
 tury, 
 
 1, It is a point of considerable importance to 
 ascertain the actual amount of the coin or 
 specie in this country at any given time, be- 
 cause many calculations with regard to money 
 hinge mainly upon this question. 
 
 2. The Earl of Z2Wrj90o/ and Mr. Ttose estimate 
 this entirely from the returns of the mint, 
 and make the amount either 44<,000,000l. 
 or 50,000,0001. But this is a vague calculation, 
 without due attention to the particular cir- 
 cumstances which regulate the continuance of 
 coin in circulation. Mr. Wheatley however 
 has stated these with great accuracy, and 
 arguing from them has reduced the amount to 
 a much lower estimate. But it is obvious that 
 at no former time could so great an amount 
 have been circulating in England ; for 
 the circulating medium must have equal- 
 led or exceeded its amount at the present 
 time, and it is then absolutely certain 
 that with the increase ofpopulation, of agri- 
 
^96 AMOUNT OF COIN [bOOK II. 
 
 culture, of commodities, and of taxation 
 which has since occurred, the price of all 
 Commodities must hare fallen greatly, instead 
 of having risen so enormously. It is morally 
 certain, therefore, that the amountof specie andof 
 currency formerly must be rated much lower. 
 
 5. Mr. Wheatlei/ m ex^mmmg the evidence of 
 Mr, New land before the lords in 1797 observes, 
 that in the payment of 14,000.0001. of divi- 
 dends, about 1,300,0001. or a tenth part, was 
 employed in gold; while 100,0001. was found 
 sufficient to make all the payments at the 
 Treasury. Also that in 3,000,0001. paid by the 
 customs, the bank did not receive above 
 ^,0001. cash;andoutof 7,000,0001. by the ex- 
 cise, not more than 60,000,0001. ; while in the 
 instalments of a loan to a much larger amount 
 it did not receive 11. per cent, in cash, 
 and the payments at the banking-houses in 
 London did not afford an average of ll. in 
 ten : so that if the paper issued by the bank 
 amounted to 20,000,0001., and were confined 
 to the circulation of the metropolis, the specie 
 could not exceed 2,000,0001. But it is obvious 
 that both of these sums are too large to be 
 confined to the circulation of the metropolis. 
 
 4. With respect to the country bank notes he 
 
CHAP. IX.] CIRCULATING IN ENGLAND. 297 
 
 estimates the numbers of banks in 1806 at 
 549 ; and their average profits at 2,000l. a 
 year each, would give an issue of 22,000,0001.; 
 Vi^hereas Lord King states it at 40,000,0001: 
 Mr. Wheatley, however, concludes that their 
 average gains are more nearly at 8001. or yOOl, 
 a year; and the total profit, being 400,0001., 
 would give only 8,000,0001. ; which is a very low 
 estimate of their paper, compared with the 
 documents we have already produced. 
 
 ^.Taking the proportion of coin to paper in 
 1806 at one fifth instead of one tenth, it 
 would amount in the metropolis to 1,500,0001., 
 and the aggregate amount, by the same com- 
 putation in the whole kingdom, would be 
 3,500,0001. which would allow lOOOl. forthe 
 stock of coin in the hands of each country 
 banker, and 40001. to each of the London 
 bankers. To this Mr. Wheatley would add the 
 deposit in the bank, which some precipitately 
 haveestimated atnine or ten millions, butwhich 
 we have seen was in 1796 only 1,27^^,0001.; 
 and in Nov. 1797, from the same authority, 
 the New Annual Register for 1797, w^e may 
 state it at about 6,000,0001. 
 
 6. To explain how the coin has vanished 
 from circulation through the agency of the 
 
S93 AMOUNT OF COIN [bOOK II, 
 
 melters and the bullion dealers,he observes that 
 Sl. 17s. lO-jd. the twelfth part of 44 guineas 
 and a half, constitute one ounce of gold, and 
 lOOl. or 95 guineas and ^s. constitute 2 lb. 1 oz. 
 13 dwts. \5 /gr. which the bank previous 
 to 1796 were compellable to give for an lOOl. 
 bank note ; and whenever the price of gold was 
 above mint price, which it was frequently as 
 high as4l. and 4 guineas an ounce, the gold- 
 smith by melting them and selling them to 
 the bank could obtain 1071. 17s. or a profit of 
 71. 17s. per cent, as was stated by the bank 
 to Mr, Pitt in 179^. In consequence of 
 this it appears that 32,000,0001., out of 
 57,000 0001. coinedduring the present reign, have 
 been coined from ihgots melted from guineas, 
 and only 25,000,0001. from Portugal gold. 
 Therefore as the three proclamations of 
 1773, 1774, and 1776, brought in only 
 15,563,6931. in light guineas, it is obvious, 
 that 16,000,0001. have been recoined by the 
 confession of the officers of the mint from 
 guineas so converted into bullion by the gold- 
 smiths ; and, great as this sum is, it is neces- 
 sarily much underrated. Although much gold 
 is said to be melted from light guineas it is 
 more probable that on all such occasions it is 
 made from the heaviest pieces ; or, what is 
 equally probable, one class of dealers having 
 
CHAP. IX. J CIRCULATING IN ENGLAND. 299 
 
 fraudulently reduced the coin, another class 
 purchases it, at an underrate, of the persons 
 whom they have defrauded ; so that in all 
 states of the bullion market, the coining and 
 remelting of guineas may proceed with con- 
 siderable regularity. It appears, indeed, that 
 the greater part of the 15,563,5931. of light 
 guineas were coined for the purpose of taking 
 advantage of the liberality of government, 
 which allowed new guineas of full weight to 
 be given for them, 
 
 7. The 25,000,0001. of Portugal gold is pro- 
 bably overrated, and great part has been 
 withdrawn during unfavourable exchanges, 
 perhaps by the remittance or connivance of 
 the government. The necessity to which the 
 bank has been driven of purchasing gold to 
 make into coin above the mint price could 
 not have happened, except for the purpose 
 of preserving the proportion between the 
 coin and their paper ; which had been altered 
 by such exportations of coin withdrawing 
 it from circulation. And this is very much 
 confirmed by the fact that, although 
 62,945,8661. have been coined during the 
 present reign, in gold, no more than 63,4191. 
 6s. 8d. or 1,268,386s, and 8d. have been 
 coined in silver; of which sum 55,4591.5 
 
300 AMOUNT OF COIN [bOOK II, 
 
 or more than 1,000,000 of shillings were coined 
 in 1785, and immediately disappeared, by being 
 reduced to a debasement equal to the value 
 of paper. Hence it should appear that the gold 
 coin has been repeatedly in a state of alternate 
 change from gold coin to bullion, and from 
 bullion to gold coin again ; from all of which 
 arguments Mr. Wlteatley concludes that the 
 stock of coin in 1806 was not more than 
 5,000,0001. Mr. Rose expresses great sur- 
 prise at this, as he had the mint returns before 
 him ; but it is obvious that the knowledge of 
 the mint returns has afforded Mr. Wheatley the 
 very ground of his argument ; and if we con- 
 sider that the bank have supplied the entire 
 circulation of coin as well as the greater 
 part of that of paper, and that their profits 
 during the low price of bullion have not pro- 
 bably exceeded their loss during the high 
 price, it will be obvious that the whole of 
 their coinage has been occasioned by the per- 
 petual drain of coin from circulation, and 
 has afforded no accumulation to the coin. In 
 fact it was only as paper drove the coin out, 
 that the bank has been compelled, in order to 
 sustain their own credit, to coin probably a 
 much less quantity, to support the appearance 
 of a circulation in coin rather than the reality. 
 
€HAP. IX.] CIRCULATING IN ENGLAND. SO! 
 
 This as it was their interest was the proba- 
 ble course of their practice. 
 
 8. It appears that the average price of gold 
 from 17^57 to 1773, being 16 years, was 31. 9s. 
 S^d. peroz. or lLl4s.6-|<l. per cent, above mint 
 price; and from 1777 to 1797,Sl.l7s.7id.or2^d. 
 below mint price ; but Mr. Wheaiie^ ca\cu\?Ltes 
 that at 3l. l6s. 6d. a price which does not 
 appear to have occurred in practice, and silver 
 bullion at 68. the bank would gain only ll. 15s. 
 1 l-f-d. per cent, on the gold ; which, allowing 
 6s. or 8s. for loss of interest per cent, would not 
 make above 10s. But purchasing silver at 5s. 
 and issuing it at 5s, 2d. the bank would gaift 
 about 6s. clear per cent, after allowing 2l. per 
 cent, for coinage, and ll. for loss of interest, the 
 gross profit being only 3l. 6s. per cent. This is 
 not a profit to induce the bank to become the 
 principal agents of coinage, and therefore it is 
 obvious that their being so has arisen wholly 
 from necessity, and not from views of profit. 
 
 9. It may not be improper cursorily to re- 
 mark on this subject, that all the statements 
 of the price of bullion in Mr. Vamittart's 
 resolutions, as adopted by the House of Com- 
 mons, 1811, apply very ill to the argument for 
 which they were adduced ; because in all the 
 
502 AMOUNT OF COIN [BOOK II, 
 
 instances given they were attributable to 
 known and obvious causes, and were of so 
 trifling a nature as to constitute no rule of 
 comparison with a rate of price continually 
 increasing, and a state of exchange constantly 
 adverse, to an extent wholly unparalleled, but 
 which is easily to be accounted for as above 
 upon fair principles of exchange and the known 
 properties of exclusive paper currency. 
 
 . 10."It is.evident," says a critic on Mr.Wheat- 
 ley's work, (see Brit, Crit. vol. 23, p. 120.) 
 *' that from the revolution to this time, pro- 
 duct, currency, and prices have been each on 
 the increase, but with several degrees of cele- 
 rity. At the Revolution we had a population 
 of about 6-^ millions; and in 1800, o.f 
 9,300,000 nearly. Our quantity of specie was 
 also, by the best authorities, 14~ milhons in 
 the year 1688; and, as the credit of paper, of 
 which there was a great quantity before, ac- 
 cording to Davenant, was, in a manner anni^ 
 hilated by the events of that time, this was 
 then nearly the total amount of our currency. 
 Suppose it, in any period of time, to have been 
 augmented in the great proportion of 4'2423 
 to unity, or to have become 61,514,0001. if 
 the national product had continued fixed, it 
 must be admitted that the average price of 
 
CHAP. 15C*] CIRCULATING IN ENGLAND. 303 
 
 commodities would have increased in the same 
 proportion : and if, in the first period, it had 
 been as 224, the rate to be deduced from the 
 table of Sir Geo. S. Evelyn, in the latter, it 
 would have been as 950, But this de- 
 duction is true only in the case assumed, 
 that the product of such a country remains 
 absolutely fixed : if it increase or diminish, 
 •the prices will be directly as the currency, and 
 inversely as the product. Let it be now taken, 
 •that, in this period, the product had increased 
 in the ratio of 1,69 to unity ; the ratio of the 
 prices at two periods will become that of 224 
 to 9^0+ 1-69 ; or of 224 to 662, the ratio of 
 prices in 1688 and 1800 by Sir G. S. Evelyn's 
 table; and, if the average consumption of the 
 people of this nation per head had been nearly 
 the same during that period, the total increase 
 must have been derived from the circumstance, 
 that the number of the people had been increased 
 in the above ratio of 1*69 to unity, or that of 
 S^ to 9'To^ which is the proportion in which 
 it appears that our population increased from 
 1688 to 1800. It is, however, tacitly sup- 
 posed, in this reasoning, that our currency, at 
 both periods, performed the same number of 
 functions in equal times ; or, as it is com- 
 monly expressed by an ill-chosen metaphor 
 (which, being too literally understood, has 
 
1104 AMOUNT OF COIN [fiOOK II, 
 
 produced much unintelligible discussion ) that 
 it has circulated with the same celerity." 
 
 11. " King and Davenant particularly dis- 
 tinguished the reputed balance of trade, 
 paid annually in the metals, from the 
 yearly addition to the coin^. The former was 
 estimated by Mr. King, in 1688, to have 
 amounted to 700,0001. and the latter to 
 9,401,2001. We contend not, however, that 
 the yearly balance of the ledger of the inspec- 
 tor general, with all th« corrections which 
 have been recently made to apply it to actual 
 use, will enable us nearly to approach to the 
 annual import of the precious metals into 
 Great Britain ; but it is evident, that we do 
 annually acquire some part of the yearly product 
 of the American mines. Now this receipt i« 
 divisible into four parts ; the augment of coin, 
 of the trading stock of bullion, of plate, and 
 the precious metals wasted in the arts and the 
 manufactures. If it be supposed, that our 
 gold and silver money amounted in 1798 to 
 45,450,0001. and the computation of Mr. King 
 for 1688 be admitted, its increase will be 
 S0,950,000l. in 110 years, or barely 281,0001. 
 a year. The beauty and elegance of our por- 
 celains have much restrained the increase of 
 plate in opulent families ; and an annual ad- 
 
CHAP. IX.] CIRCULATING IN ENGLAND. 305 
 
 dition to the stock of 100,0001. is as much as 
 can probably be made. Adam Smith says 
 it is very small. The same writer states 
 the waste of the precious metals at Birming- 
 ham to have been, in his time, ^0,0001. a year ; 
 it is now increased ; and may probably be 
 taken always to exceed one half of that of the 
 kingdom at large : whence that waste may be 
 now taken at 1^0,0001. a year. Our total 
 yearly balance of bullion does not, therefore, 
 probably exceed 6:31,0001. and the annual 
 augment of our stock in plate, bullion and 
 coin 481,0001.'* 
 
 12. In addition to the above, we may state from 
 Anderson's History of Commerce, the follow- 
 ing general account of the coinage : by which it 
 appears that the coinage of England from the 
 registers of the mint for 100 years, viz. from 
 156S to 1659, was, according to DWvenant's 
 Dials. (1711) p. 71, as follows: viz. 
 
 Of gold in the reign of Queen Eliz. . . o£^l, 200,000 
 Ditto, James 1st. . . . 800,000 
 
 Ditto, King Charles 1st. . . 1,723,000 
 
 Carry forward 3,723,000 
 
306 AMOUNT OF COIN [bOOK II. 
 
 Brought forward .£3,723,000 
 Of silver in the reign of 
 
 Queen Eliz. . 4,632,93-1 
 
 Ditto, Jac.l. . 1,700,000 
 
 Ditto, King Charles . 8,776,544 
 Commonwealth . 1,000,000 
 
 16,109,476 16,109,476 
 
 ^19,832,476 
 
 13. But this coin was not co-existent at the 
 same time, for Elizabeth called in all the silver 
 of the three preceding reigns, but varied the 
 standard frequently, and the same bullion was 
 coined over and over again. So that in 1600 
 there were not more than four millions, and in 
 171 1 about 12 millions existing in the total; 
 and Anderson estimates that in 1762 there 
 might be about \6 millions in circulation. He 
 also gives the following estimate for the year 
 1675; videAnderson, vol. ii. p. 633.; and states 
 the coinage thus, viz. 
 
 19 I years 1599 to 1619 money coined 4,779,314 13 4 
 
 19 years 1G38 6,900,042 11 1 
 
 19 years ^ — 1657 7,733,521 13 4^ 
 
 18 1 years . 1675 2,238,997 16 Of 
 
 Total in 76 years 21,651,876 13 10 
 
 , 14. Sii' W. Petty says at the restoration the 
 
€HAP. IX.] CIRCULATING IN ENGLAND. 307 
 
 money coined during the usurpation amounted 
 to 800,0001. or one-seventh of the whole, or 
 *5,600,OOOl. or allowing for hoarded money six 
 millions. 
 
 \5. In the year I696, (see page 620 of vol. ii. 
 of Anderson's History,) the coin is there esti- 
 mated at 4,600,0001. of which 4,000,0001. were 
 clipped ; so that although lOOl. in silver ought 
 to weigh 32lbs. 3oz. 1 dwt. 22 gr. it was found to 
 weigh at a medium l61bs. 8oz. 8 dwts. being 
 only one half, and the actual loss was found to 
 be 2,200,0001. sterling instead of four millions 
 as was expected. Silver was then 6s. 3d. per oz. 
 Guineas were at 30s. and all commodities were 
 raised in price. They were then gradually re- 
 duced to the same value as in foreign parts, 
 and sunk from 30 to 29, 28, 25, and lastly to 
 22 shillings, at a costto the nation of 3,000,0001. 
 
 16. D* Avenant however says there were 
 0,000,0001. of clipped money, and 4,000,0001. 
 of guineas current. 
 
 17. And it appears that in I696 there were 
 recoined 5,725,9331. 
 
 18. The old broad pieces and jacobuses of 
 gold, and the fine silver money of Car. 2. &c, 
 was at that time about 10,276,0001. 
 
 X 2 
 
303 AMOUNT OF COIN [BOOK 11. 
 
 19. In the year 17^6, there were coined 
 of gold l,o42,155l.and of silver 7,000l. and two 
 kinds of gold were melted down from French 
 louis d'ors. This happened soon after Law's 
 scheme. In 1717 there was a great scarcity 
 of silver, the gold being rated too high : Sir 
 Isaac Newton advised guineas to be rated at 
 21s. instead of 21s. 6d. and at this time it is 
 stated that 3,000,000 ounces of silver were in 
 one year exported to the East Indies. 
 
 20. In the same work, under the date of 1723, 
 it appears that between 1701 and 172:3 there 
 were coined of silver 175,464lbs. weight, or in 
 sterling money 526,3921. 
 
 21^ And under the same date, 1723, the gold 
 coined from 1701 is stated to have been 
 241, 183lbs. which at 44 guineas per lb. make 
 10,612,05^1. This vast coinage of gold was 
 o^ving, it is said, to the putting of too high a va- 
 lue on the gold in England, viz. 6d, in a guinea ; 
 and gold was therefore imported in exchange 
 for silver ; to which as a principal acuse 
 must be added also, the effect of Law's 
 scheme in France, which tended to banish the 
 coin. In the same w^ork, under the date J 734, 
 it is stated that from 1727, the accession of 
 King Geo. U,. were coined 43,540lbs. of gold 
 
CHAP. IX. J CIRCULATING IN ENGLAND. 309 
 
 or at 44l. each, 1,955,3301. sterling ; add to 
 which of silver 8,742lbs. at 62s. which gives 
 27,1001. 4s. 
 
 22. In the 1774 it appears that deficient gold 
 money in the bank was S48,960l. ; and in 1775 
 that the gold coined between that time and 
 1772 was 13,000,0001. 
 
 23. In 1778 it is stated that the gold coin 
 brought into the mint from Great Britain and 
 Ireland was,in 1773,3,806,4351. 7s. 2d.;inl774, 
 4,876,1711. 18s. 3d. and in 1776, 6,880,9861. 
 5s. 3d., making a total of 15,563,593^ 10s. 8d. 
 
 24. Mr. Wheatley extracts from Mr. Chalmers 
 a chronological table, by which the great in- 
 crease of the commerce of this island will be 
 found to have kept pace nearly with the in- 
 crease of money and of the coinage ; although it 
 is by no means necessary to consider them as 
 operatinglike cause and effect; for co-existence 
 does not prove the relation of cause and 
 effect. By this table it appears that from 1663 
 tol6695the tonnage outwards was only 142,9001. 
 which in 1800 amounted to l,92i,942l. But 
 as our chief concern here is not so much with 
 tlie increase of commerce as of coin, we shall 
 observe that it appears that Charles II. coined 
 in his reign 7,524,1051.; James II. 2,737,6391 ; 
 
310 AMOUNT OF COIN. [bOOK II. 
 
 Will. III. 10,511,9631.; Anne, 2,691,6261.,- 
 George I. 8,725,9211. ; George II. 11,966,5761.; 
 and George III. 62,945,8631., of which 
 32,480,9321. were coined between the years 
 1780 and 1800; and during this latter period 
 it will be curious to see the progression, as 
 well of commerce as of coinage ; for which pur- 
 pose we have extracted the following table. 
 
CHAP.IX.] CIReULATIKG IN ENGLAND. 311 
 
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 <0 CN (T) O) 
 
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519 OF THE MUTUAL VALUE [bOOK II, 
 
 CHAP, X. 
 
 Of the mutual Value of Coin and Credit Notes, 
 
 1. Coin, it has been seen, is money or bullion 
 weighed and stamped by authority of the state, 
 to ascertain its real quantity and purity ; and 
 therefore the value of coin in exchange, at home 
 and abroad is, in a fair state of things, as 
 the value of bullion. 
 
 2. It is also as the price of commodities,which 
 can be ascertained only by exchange, and can- 
 not be fixed by law ; for prices vary as demand 
 and the quantity of money. 
 
 S. Credit notes are acknowledgments of an 
 obligation to pay a sum of money in coin, and 
 therefore the value of a credit note in coin is, 
 as the expectation of its payment. That is, as 
 the expectation that the thing which it pro- 
 fesses to represent is forthcoming, and this 
 value ma}^ be called the convertibility of a note 
 into money. But as the increase of money is 
 definite, and the increase of credit notes inde- 
 finite, notes may be so increased as to render 
 
CHAP. X. 3 OF COIN AND CREDIT NOTfiS. 313 
 
 this expectation or convertibility almost null 
 or imppssible ; for the credit notes may bear 
 such a proportion to the actual quantity of the 
 coin, that the coin may be comparatively as 
 nothing to the credit notes. 
 
 4. This convertibility, however, for any given 
 time, may be expressed by a fraction ; of which 
 the quantity pf coin forthcoming at the given 
 jtime is the numerator, the quantity of coin ex- 
 pressed in the credit nptes is the denominator. 
 And from this datum^ in order to ascertairi 
 tl^e real value of credit notes in coin, we may 
 put some cases, by which that value will be de- 
 monstrated n^athematicaljy and by the rule of 
 tliree. 
 
 5. Thus-r-if the credit notes existing in any 
 ^tate represent 50 millions, and the actual coin 
 forthcoming is only two inillions pf pounds 
 sterling, (as is now the case in England, omit- 
 |;ing the coin in the bank,) the proportion of 
 convertibility to credit is found thus ; as pne 
 pound credit note is to one pound sterling, sp is 
 the si^m of credit notes to the sum of pounds 
 sterling, in existence or forthcoming, at any 
 given time, or within a given period. Call $i 
 pound stealing P ; a pound note p ; then, 
 
314? OF tH£ MUTUAL VALUE OB* [bOOK II. 
 
 AsP. : p :: 50,000,000 : 2,000,000. 
 
 P^ ^ 50^000^000^ _ 50 _ 25 
 p. 2,000,00<J ""■ 2 ~ 1 
 
 6; The proportion of credit notes existing in 
 England it) ISll, with respect to pounds ster- 
 ling, is, therefore, upon the above supposition, 
 as twenty-five to one. 
 
 T".' The value of a credit note or its actual 
 convertibility is found thufe, upon the same 
 sti'ppbsition : 
 
 A»p : P.:: 2,000,000 : 50,000,000, = ^=zJL 
 
 50 25 
 
 8. The intrinsic value of such credit note^, 
 iij^on these data, will, therefore, be as one 
 twenty-fifth part of a pound sterling, or some- 
 what nK)re than ninepence halfpenny ; or, cal- 
 culating the coin at five millions, it will be a^ 
 tv,'o shillings. 
 
 For,«s p : p :: 5,000,000 : 51,000,000=:^ = Jl, 
 
 50 10 
 
 9. The real intrinsic value of a credit note isj> 
 therefore, directly as its convertibility* But 
 the real value of a credit note is not publicly 
 ascertained, till the faith which has been given 
 to it is destroyed, and it is discredited. For 
 credit notes are exchanged, either at their nomi- 
 nal value, . or full credit ; or at their intrinsic. 
 
CHAP.X.] COIN AND CREDIT NOTES. 315 
 
 value ; which may either be, when at a full 
 value, or at a discredit. 
 
 10. While they are exchanged at a fall ere- 
 dit, they increase the apparent quantity of coin 
 and money ; but when discredited, to the 
 actual convertible value only, they do not in- 
 crease the apparent quantity of money. For 
 they are valued by their actual convertibility, 
 and represent money forthcoming, but not in 
 circulation. When discredited partially, how- 
 ever, they increase the apparent quantity of 
 money. 
 
 1 1 . No profit, it has been seen, can be gained 
 by the issue of a credit note, which is imme- 
 diately and actually convertible, at all times. 
 For the money which it represents must, in that 
 case, lie dead and useless ; while the note is 
 employed as its substitute. And where a duty 
 is imposed upon the issue of a note, the issuer 
 must lose the amount of the duty ; if the notes 
 are constantly convertible. Or where no duty 
 is imposed, the loss of the individual or com- 
 pany issuing such note will be equal to their 
 expence in trade. 
 
 12. The expence of a banking establishment 
 being ll. per cent, on all issues ; if it main- 
 
316 OF THE MUTUAL VALUE [boOKII. 
 
 tained a circulation of twenty million of notes 
 per annum ; which 20 millions would be issued 
 and reissued in loans on discount, at two 
 months periodically ; the amount of issues 
 would be 1,200,000,0001. : the interest gained 
 one million, at 5l. per cent. ; the expence of 
 the trade, 1,200,0001.; and the loss would be 
 200,0001. sterling, per annum. Hence it is 
 obvious, that the convertibility of any bank 
 paper, at any given moment of time, is impossi- 
 ble ; unless the bank is founded upon the basis 
 of the Hambro bank ; and is a mere place of 
 safe custody. Bnt the more notes any banker 
 can circulate, w ith the least deposit of coin, 
 the greater profit he will necessarily make. In- 
 deed, the profit of a banker being gained by 
 lending his notes at 5l. per cent, per annum ; 
 the excess of his circulation beyond his capital 
 may be ascertained by his profits. 
 
 13. Thus if his expence of trade is ll. per 
 cent, on his circulation, and he divides lOl. per 
 cent, as profit, his notes must exceed his capital 
 stock, in the proportion of five to two ; 
 and their value, would be as two to five; 
 or two-elevenths of a pound sterling; or about 
 eight shillings. Whence it is clear that whilst a 
 bank divides a profit of lOL per cent, the imme- 
 
CHAP.X.] OP COIN AND CREDIT NOTES. 317 
 
 diate convertibility of its notes, or their intrinsic 
 valu6, cannot exceed eight shillings in the 
 pound. 
 
 14. The assets of any trader or banking com- 
 pany are the property which he possesses, and 
 his credits, to be set off against his debts ; such 
 as commodities, land, bills of exchange, book 
 debts and cash or money.* And the converti- 
 
 * The assets of the bank of England were stated in 1797, 
 as follows : 
 
 Dr. 
 
 Bank notes in circulation 8,640,250 
 
 Drawing^ account audit , ^ , 
 
 "" J. 5,130,140 
 
 Roll and other debts 
 
 13,770,390 
 Balance 3,826,8C0 
 
 17,597,280 
 
 Cr. 
 
 Advances on government security 10,670,490 
 
 Other creditsjincluding cash, bullion, 
 
 bills discounted, &c. 6,924,790 
 
 17,597,280 
 
 In the New Annual Register for 1797, will be found the 
 particulars of this account, and also the state of their dis- 
 counts, and an estimate, by which it will appear that the 
 «a8h and bullion in the bank was 1,272,0001. Therefore^ 
 
318 OF THE MUTUAL VALUE [bOOK II. 
 
 bility and value of the notes in money depend 
 upon the convertibility and immediate value of 
 the assets in money. 
 
 had tlie bank been compelled to divide its bullion amongst 
 its creditors immediately^ its first dividend would have been 
 as 1,272,000 is to 8,640,250, or not quite one-eighth, or 
 2s. 6d. in the pound. The creditors must have waited till 
 its assets of other kinds were converted into coin. The 
 actual value of the bank note was then 2s. Gd. in the pound 
 nearly ; with tlie addition of the expectation of converting 
 about fifteen millions of credits into gold and silver money. 
 The intrinsic value of this expectation depended upon the 
 quantity of coin in circulation in England at the time, and 
 tiie demand which would be created for bullion upon the 
 stoppage of a circulation of 8,640,2501., in bank notes. This 
 would have created a great difficulty in making their pay- 
 ments amongst all the debtors of the bank of England, and 
 caused manj^ failures. 
 
 The actual value of their notes in coin it is quite impossible 
 fo calculate; but by the month of November 1797, they 
 had raised about six millions in coin, and issued eleven 
 minions of notes. The notes were then worth somewhat 
 irore than 10s. 6d. in the pound. The mode of collecting 
 this quantity of coin may be easily explained. 
 
 In the payment of taxes coin and paper were received. 
 The bank, after the restrictions, issued no coin, or a very 
 small quantity ; but paid the dividends on the funds in their 
 paper. By this means, in a few years, nearly all the coin 
 might be collected in the coffers of the bank. It is therefore 
 
Chap. x.]op coin and credit n^tes. S19 
 
 15. While any bank issues notes payable dhi 
 demand, and is compellable to pay all notes 
 immediately on demand, in coin, it must either 
 lose money, or be in continual apprehension 
 of failure ; which may happen either by an 
 actual failure of credit, or an accidental or 
 malevolent run.* All credit notes are, there- 
 fore, insecure and dangerous to the issuers and 
 the holders ; as the value of them may be 
 reduced below par considerably, by the causes 
 stated above ; whether they arise through fear 
 or malevolence. And it is, therefore, clear, 
 that a bank which is not liable beyond its 
 capital, and pays lOl. per cent, profit, may 
 have its notes, by malevolence or fear, reduced, 
 at any time, to an immediate discount of twelve 
 shillings ; or a value of eight shillings in 
 the pound ; or to ten shillings at the highest 
 value. 
 
 probable, that tlie bank possesses, at present, the greatest 
 quantity of gold coin ever collected, and this is a circum- 
 stance which must be most satisfactory^ to the nation ; as it 
 will enable the state, by declaring an equal dividend upon 
 the pound note previous to the funding of its new debt to the 
 bank, to restore coin generally at a lower standard, and avoid 
 the inconvenience and confusion which would arise from the 
 partial distribution of coin amongst individuals. 
 
 * A sum of 10,0001., vigilantly applied, might be made 
 to ruin a bank possessed often millions of money, • ' 
 
320 OF THE MUTUAL VALUE [BOOK IT. 
 
 16. As it is impossible for any prosperous 
 or profitable bank to pay its notes on demand ; 
 either at anyone day,or in an\ given number of 
 successive days ; should the desire of leaving 
 ofT business occur, it must cease to issue notes, 
 and wait for the return of the issues ; until 
 the stock of notes in circulation equals the 
 cash in hand. But as money can only be pur- 
 chased with commodities, or labour; or ob- 
 tained by credit, by notes or loan ; or by taxa- 
 tion, or plunder in war ; and as a banking com- 
 pany has only the means of credit notes, to 
 raise money ; it follows, that, when its original 
 stock of coin is gone, it can only raise money 
 by credit notes. And, as increase of credit 
 notes increases the apparent quantity of money, 
 th^y mlist increase prices, and the price of 
 bullion as well as of other commodities. 
 
 17. In order, however, to convert all the 
 notes of a bank into coin, at their nominal 
 value, it should seem that the following process 
 must be adopted. The bank must issue notes 
 in exchange for coin or bullion, at /?a?;, and, 
 at the same time, in the like quantity, reduce 
 its issue and notes on loan. For every hundred 
 it raisesof money in exchange at par, it must 
 diminish its issues on discount, or on loan, by 
 pne hundred. By which process gradually 
 
CHAP. X.] COIN AND CREDIT NOTES. 321 
 
 and slowly it may reduce its issues, till thev 
 equal its assets in money; And then, and 
 not till then, it may safely offer to pay all its 
 notesin cash, on demand. 
 
 18. Before any bank can pay its notes thus 
 gradually, they must circulate, at par with 
 bullion uncoined, or be above par. But, bullion 
 being the measure of value, and value 
 depending on demand, the circulation of notes 
 2X par is not possible; while there sball be a 
 great competition for bullion to be paid for n 
 bank notes. For, upon a sudden demand, the 
 holders of bullion will take advantage of it and 
 raise the price. Now the demand for bullion 
 consists in a demand for home consumption in 
 plate and watches, and other articles, with the 
 like for foreign trade; and also in a demand for 
 home circulation as coin.But,where credit notes 
 have long circulated at par, with coin and bul- 
 lion, the credit nptes will wholly, or almost 
 wholly, occupy the circulation ; and there 
 will be at first little demand, then less and 
 less, and at last no demand for coin in domestic 
 circulation. The coin will therefore gradually 
 be melted into bullion, as occasion may require ; 
 and be used in consumption at home, or export- 
 ed, in exchange for commodities. At length the 
 credit notes, will noi^ circulate at par with bul- 
 
 Y 
 
322 OF THE MUTUAL VAl-UE OF [bOOK II* 
 
 lion ; and a credit note for a pound sterling, 
 will not purchase a pound sterling in bullion. 
 
 19. The ratio of the difference between the 
 sum given in credit notes, for a pound sterling, 
 or other nominal quantity of bullion, is the 
 ratio of the discount of such note ; which is 
 wholly different from discredit, and on the con- 
 trary arises from the credit of the note, and its 
 being considered a measure of value. 
 
 20. The ratio of the discount depends on 
 the value of commodities in foreign countries, 
 and the profits of commerce. For, as credit 
 notes wholly occupy the circulation, or nearly 
 so, and are considered the measure of value 
 in domestic trade : bullion is a commodity, the 
 value of which rises and falls by its commercial 
 demand, as an object of commerce in foreign 
 trade and hom6 consumption, and must be 
 affected by the ordinary profits of commerce. 
 
 21. Whatever, therefore, may be the price of 
 commodities in the home trade,they will not be 
 exported, generally, to be sold at a loss. And 
 when commodities are exported for bullion, in 
 exchange, which is the only mode of procuring 
 bullion, or any other article of foreign produc- 
 tion; the commodities being purchased in notes ; 
 
CHAP. X.] COIlf AND CREDIT NOTES. 323 
 
 on the return of the bullion, the importer must 
 add his profit, together with his charge of freight, 
 when he converts his bullion into notes again. 
 
 22. The same thing happens also, when bul- 
 lion is measured with commodities and coin. 
 For, if one hundred yards of broad cloth are 
 exported, at twenty shillings per yard cost 
 price, the merchant must add to this cost price 
 the charge for freight and profit, say five per 
 cent, each ; and must receive one hundred and 
 ten pounds in bullion. But he will add to his 
 charge on the cloth the price also of the freight, 
 and insurance of the bullion ; and receive, pro- 
 bably, a profit of twenty-four pounds sterling 
 in bullion. He will import, therefore, onehun- 
 dredand twenty-four pounds sterhngin bullion, 
 for one hundred yards of cloth. The hundred 
 yards of cloth, at one hundred pounds, are thus 
 converted, by commerce, into one hundred and 
 twenty-four pounds, in bullion ; and if the mer- 
 chant buys cloth again at the same price, he con- 
 verts, by the operations of commerce, h stock 
 ij^ cloth from one hundred into one hundred 
 and twenty-four yards. If, indeed, he purchased 
 the hundred yards of cloth, with a note for one 
 hundred pounds, he must of course convert his 
 bullion, imported in exchange for his cloth, first 
 into one hundred and twenty-four pounds ia 
 y2 
 
S24f OF THE MUTUAL VALUE, &C. [boOK II. 
 
 notes, affording a profit of twenty-four pounds ; 
 whichsurplus orprofit will purchase twenty- four 
 yards of cloth, at hisfirst cost price. Butunless this 
 return and profit is made to an adequate extent 
 to bear the charges and profits of trade, com- 
 merce must wholly fail : and it is quite imma- 
 terial whether the returns are made in bullion 
 or sugar, or any other article. 
 
 24. Whilst a paper money is the only money 
 in circulation^ and continually increasing, 
 bullion is a mere commodity, and notes are the 
 measure of value, in domestic exchange; 
 therefore, as conimodities cannot be imported 
 without payment of freight, insurance, and 
 other charges, and the ordinary profits of com- 
 merce; bullion cannot be imported, as a com- 
 modity, without paying these charges, and a 
 profit. 
 
 
CHAP. XI.] PRICE OF BULLION* 3^5 
 
 CHAP. XI. 
 
 Of the Price of Bullion, as a mere dommodityy 
 ichen it ceases to be Money, 
 
 1. Paper money, being the measure of value, 
 under the circumstances mentioned in the hist 
 chapter, the profit on importing ,bullion is the 
 excess of the nominal value of the note, beyond 
 the real quantity of bullion given for it. Thus, 
 if three pounds seventeen shillings and sixpence 
 be the real value of an ounce of gold, in ster- 
 ling money ; and an ounce of bullion sell for 
 four pounds seventeen shillings, in bank paper; 
 nineteen shillings and sixpence make the differ- 
 ence. And the real value given for notes, of 
 the amount of three pounds seventeen shillings 
 and sixpence, will fall short by nineteen and 
 six-pence of the nominal value; which is also 
 the profit upon bullion, as a commodity, com- 
 puted in this new measure of value. 
 
 2. For bullion being a commodity, and paper 
 notes the measure of value ; then bullion not 
 
89§ PRICE OF BULLION [bOOK II 
 
 being imported, except on the ordinary profit 
 of trade, the price of bullion, measured in any 
 commodity, must exceed the nominal value of 
 the bank note, by the amount of freight, insur- 
 ance, and the ordinary profit of trade. This 
 will probably not be less than three or five per 
 cent, on the freight and insurance of the bul- 
 lion ; to w^hich add five pounds per cent. 
 freight and insurance on the goods, and \five 
 or seven percent, on the profit or commission ; 
 and it cannot be less than fifteen per cent, in 
 the gross. It seems therefore probable that what- 
 ever be the quantity of paper money in circula- 
 tion ; where there is no coin, and the paper 
 money is still increasing ; the value of bullion, 
 in exchange for goods, must exceed it by fifteen 
 per cent, or thereabouts. Whence it follows that 
 coin being once driven out of circulation, it 
 can never be restored, except at a loss ; with- 
 out repeated reductions of paper currency. 
 
 3. The impossibility of keeping notes and 
 bullion at par, is, therefore, demonstrable from 
 the nature of foreign trade ; since the notes in 
 circulation in any increasing quantity must 
 measure the value of all the goods, and other 
 articles on sale at home ; and it is obvious, from 
 what has been already stated, the bullion must 
 
CHAP. XI.] AS A COMMODITY. 327 
 
 bear a higher price than the goods, the value of 
 which the notes still continue to measure.* 
 
 4. As bullion is made into coin by coin- 
 age or minting, and coin is reconverted into 
 bullion by melting the coin ; they are in reality 
 the same thing, and of the same intrinsic value. 
 But vv^hen coin circulates at par with notes, the 
 value of the coin varies as the notes, in ex- 
 change for all commodities: although, coin being 
 instantly convertible into bullion it can only 
 differ in its real value, in exchange for bullion, 
 naturally, by the price of melting or conversion. 
 And as laws are easily evaded in the melting of 
 coin ; it will always be melted into bullion, 
 when a profit is to be made. Now the quan- 
 tity of bullion contained in any coin is the 
 exact quantity for which it exchanges with 
 coin, at the mint ; and is called the mint price 
 of bullion : which in England is 3/. 175, \0\d. 
 peroz. for gold bullion, paid in silver; while the 
 mint price of silver is 6s, ^d. per oz. paid in 
 
 * In the whole of the foregoing argument, bullion is taken 
 for a commodity, purchased and imported in commerce. In 
 truth it ordinarily comes in by exchange for money ; and it 
 will be seen under the head of exchange how its price is 
 ordinarily affected. In the present inquiry, a novel view 
 of it is introduced; from considering that,paper being money, 
 bullion is a mere merchandize. 
 
52S PRICE OF BULLION, &C. [BOOK II* 
 
 gold. When, therefore, gold bullion exchanges 
 at a higher rate than 31. IJs. lO-^d, per oz. and 
 silver bullion than ds.^d, per oz. in credit notes, 
 the coin will be melted into bullion ; the 
 melter of bullion constantly obtaining guineas 
 for notes, at 3l. i7s. 10-^c?. per ounce, or 44 
 guineas and a half to the pound. Thus a 
 note for one hundred pounds would, at the 
 mint price, purchase of the bank of England, 
 before the year 1797, the quantity of 95 
 guineas, and ^s.; orSlb.lO oz. 1 3 dwts. Ingrains, 
 in weight, of pure standard gold ; and when 
 the market price of bullion was 4/. 4,y. the 
 owner could convert it into bullion, and re-sell 
 it to the bank in ingots for 107/. 17^-, obtaining 
 a profit of 7/. 17^. per cent. Whenever, there- 
 fore, the market price of bullion rose, the bank, 
 being obliged to pay in gold, was frequently 
 compelled to submit to this loss. And were 
 it now to pay in coin, gold being at 4/. 17^- 
 per oz. (in !81l) ninety- five guineas and 5s., 
 paid by the bank in dividends, at 100/. va- 
 lue^ in the month of July, would produce 
 5?lb. 10 oz. 13 dwts. 15 grains of gold, or 
 about 24/. per cent, profit to the bullion dealer. 
 
 5. While, therefore, gold bullion is at a 
 higher price in notes than the mint price, 
 (whatever the price may be) it will be im- 
 
OHAP. XI.] AS A COMMODITY. 329 
 
 possible to renew the circulation at par with 
 paper money. For, no sooner will the bullion 
 be coined, than it will be melted, and re-con- 
 verted into bullion, and again sold to the bank 
 company, which is compelled to issue it in 
 exchange for its paper, at the mint price. 
 
330 RIGHTS or THE STATi [^BOdk in 
 
 CHAP. XIL 
 
 Of the Rights and Duty of the State over Taper 
 Money ^ as correlative with its Bights and Duty 
 concerning Coin ; with Considerations on the 
 Nature of various Contracts^ and their due 
 Performance; particularly with regard to Rents, 
 Also of debased Currencies, 
 
 I. The duty of the state in coining, we 
 have previously observed, is to ascertain the 
 quantity of bullion in a given quantity of ^ 
 coined money, and adapt the number of its 
 pieces to the demand of circulation and fre- 
 quency 'of payments; for the facility and 
 justice of exchange. In providing for large 
 payments, it therefore forms large pieces of 
 great value and few in number: while for the 
 purpose of small payments, it forms small 
 pieces of small value, and many in number. 
 But, although some variations may occasionally 
 be required in these coins, and their relative 
 value, the state having once ascertained the 
 standard, will have few just occasions for alter- 
 ing it. It may be observed also, that out of this 
 
CHAP. -XII.] AS TO PAPER MONEY. 531 
 
 duty arises the authority of the state over its 
 coins or monies, and the criminality of coun- 
 terfeiting or debasing them : and as the true 
 limit of the authority of the state is to be found 
 in the nature of its duty, so when the duty is 
 similar, the legitimate authority is equally 
 limited by it. Indeed exercise of power, be- 
 yond the limits of duty, constitutes injustice in 
 one degree, and in another tyranny. And 
 when the duty is known, and the deviation 
 from its limit palpable, abuse of power and 
 tyranny is imputable; although where the devia- 
 tion from duty is not palpable, it may arise 
 from error, and, notwithstanding some injustice 
 ensue, tyranny is not imputable. 
 
 2. The state, therefore, though it may by its 
 authority, alter the nominal value of the coin, 
 doing no injustice, should never alter the real 
 value of the coin in payments, where it may 
 work any injustice.* Now value, in money, 
 varying as the weight of bullion, the value of 
 a coin, in exchange, is obviously varied, by 
 altering its weight of bullion. And as stipula- 
 
 • A slight deviation from justice may be tolerated : repa- 
 ration should, however, be immediately attempted, and the 
 injustice should not be continued ; for the maxim, summum 
 Jus, summa injuria^ is not to be applied often. 
 
332 RIGHTS OF THE STATE . [bOOK 11* 
 
 tions for payment of a given sum in money, in 
 tale, are stipulations for a given weight in bul- 
 lion, estimated by a given value and number, in 
 tale, of the coin ; justice requires, that, when 
 the coin is varied in weight, between the stipu- 
 lation and payment,the weight of bullion and the 
 value of the sum in coin, and not the number 
 of pieces, in tale, should be observed, and 
 payment made accordingly ; as is noticed 
 by PufFendorff, in his Treatise on the Law of 
 Nature and Nations, book ^,chap.7, § 6. Other- 
 wise indeed the rule of the English courts, 
 that ' equality is equity ^^ which is a rule of uni- 
 versal justice, will be violated, and inequality 
 in the exchange of the money paid for the 
 money lent or stipulated, will be introduced ; 
 whereas equality is essential to exchange. 
 
 i 3. Now, coins are diminished in value by 
 preserving their weight and nominal value, 
 .diminishing the weight of bullion, and increas- 
 ing the alloy ; yet we have already seen that 
 frequent diminutions in the value of the coin 
 in all countries have taken place ; sometime? 
 with injustice, and sometimes without. Of 
 this many instances occurred during the time 
 of the Edwards and the Henrys, and down to 
 queen Elizabeth, by which great injustice was 
 wrought; payments, by the Enghsh law, being 
 made in new upon stipulations in old coin. For 
 
CHAP. XII.] AS TO PAPER MONEY. 333 
 
 which reason such debasements have wholly 
 ceased in modern times : it being apparent that 
 when a state debases its coin to pay its debts 
 with, it gains little ; because ihe unjust con- 
 sequence is palpable and cannot be continued. 
 The knowledge of the means of defeating 
 power here is the counterpoise of authority; 
 and the knowledge of the true value of money 
 defeats all attempts of power to introduce 
 unequal exchanges : for, exchange can never 
 take placeexceptonasense of equality; and where 
 the inequality is known the exchange necessa- 
 rily ceases.Monies which are unequal, therefore, 
 cease to be exchanged at par, and one of them 
 becomes of a less value in exchange or at a 
 discount. But if the discount between unequal 
 monies is prohibited by law, they will cease 
 to be exchanged, or the law be secretly 
 evaded. In this case all unlawful exchanges 
 transacted secretly are made for great gain 
 by both parties, as happens always in the case 
 of contraband trade; the risk of detection in- 
 creases the profits of the contrabandist; and 
 the trade is carried on by a distribution of the 
 gain, in proportion to the division of the risk'. 
 
 4. Restraints upon the equality of exchange, 
 therefore, operate as premiums upon secret 
 exchanges ; and money unexchangeable at its 
 
554 RIGHTS OF THE STATE [bOOK II. 
 
 true value, must be hoarded or converted into 
 bullion. In truth therefore the destruction of 
 the equality of exchange in any two monies 
 nominally equal, becomes by lapse of time, 
 the destruction of the money of a superior 
 value. For, as hoarding is a loss of the use 
 of money and interest, hoarding, long conti- 
 nued, terminates in melting, if exchange con- 
 tinues to be prohibited: otherwise, by the loss 
 of the use of money, at any given per centage, 
 the possessor, in process of time, would lose 
 the whole value of the money. So that, if, by 
 compulsion of law, exchange is prevented, and 
 the use of any money, in effect, prohibited, 
 the state itself is deprived of the value of the 
 money. 
 
 » 
 
 5, The injury done, in this case, may be 
 estimated by the quantity of money lost 
 from circulation : and if the state drives mo- 
 ney out of circulation, without supplying its 
 place, a public injury is effected. But if the 
 money so driven out is replaced by other 
 money, private injury is effected ; in every case 
 where the party is compelled to hoard, his 
 money, 
 
 6. Wh^n the state diminishes the value 
 of coin, prices immediately rise. If the altera*- 
 
CHAP. XII.3 AS TO PAPER MONEY. 3S.i 
 
 tion of money is periodical, prices must rise 
 periodically, or rather continually ; and if the 
 alteration of money is periodical, and the al- 
 teration of prices continual, and old stipula- 
 tions are performed by payment of the same 
 number of pieces, and not by the equality of 
 their weight and value, creditors are injured, 
 
 7. Thus, if any stipulation is made for a rent 
 or annuity, and debasements occur periodi- 
 cally, during the payment, each payment is 
 lessened in value, and the creditor repeatedly 
 injured. So if changes in money repeatedly 
 occur, sums borrowed at one amount are paid 
 i^ a less. Stipulations for prompt payment, 
 indeed, are not affected by changes in the 
 value of money ; because there is no interval 
 between the sale and payment to allow of any 
 material alteration in the value of money. 
 Trade and commerce, therefore, s.uffer little or 
 not at all by changes in the value of money : 
 commercial payments being short, and al- 
 lowing no interval for repeated changes. Be- 
 sides, in commerce, what is lost by the credi- 
 tor side of the account is gained by the 
 debtor : and the balance of profits is therefore 
 little, if.at all, affected. 
 
 8. When, however, repeated c^iianges occur 
 
336 RIGHTS OF THE STATE [booK II. 
 
 in the value of money, stipulations for rent or 
 annuities must naturally cease, or rents and 
 annuities be reserved in some commodity. For, 
 a stipulation for rent, is an exchange of land, 
 for rent for years : and an annuity is an exchange 
 of one sum of money in gross, for payment of 
 a smaller sum for years ; which is in great mea- 
 sure the case with loans at interest. Equality 
 being essential to exchange, exchange will not 
 occur, where equality is not preserved, and in- 
 equality palpable. Such grants and reservations 
 in exchange will not therefore be made ; or 
 otherwise a true equality will be preserved, by 
 the terms of the stipulation. As, for instance, 
 -when stipulations in monies numbered, or in 
 tale, become liable to inequality and injustice, 
 the equality may be preserved by making the 
 stipulation for a payment in so many ounces 
 of pure silver or gold bullion, or in foreign 
 coin; which will be valued differently in courts 
 of law from the current coin of the realm. 
 
 9. The contracts or stipulations in which 
 such inequality and injustice can alone take 
 place are those in which payments occur 
 periodically, at distant times, such as those 
 for rents, annuities, and interest upon long 
 loans. Now a rent is defined in law a sum of 
 money or other consideration (as spurs, capons,,, 
 
CHAP. XII.] AS TO PAPER MONEY. 337 
 
 horses, corn,) ' issuing yearly out of lands 
 or tenements; and may be reserved in ser- 
 vices, as to plough land. But, when money 
 rent is uncertain in value, rent in corn, or 
 services becomes necessary to preserve equa- 
 lity: indeed such a rent is always most equi- 
 table on long leases ; owing to the necessary 
 and perpetual change in the value of money. 
 For which reason college leases are by stat. 
 18 Eliz..c.6.tocontain a reservation of one third 
 of the rent in corn ; a wise provision which 
 was introduced by Sir Thamas Smith, to ob- 
 viate the inconvenience of the repeated de- 
 basements of the coin How just and neces- 
 sary this was will appear, not only from the 
 fact, that such rents exceed the money 
 rent nearly as four to one ; but from consider- 
 ing, that by law the rent is regarded as issuing 
 out of the lands, and as produced out of the 
 profits of lands and tenements, as a recompence 
 for being permitted to hold or enjoy them ; and 
 the reason, that it ought to be reserved yearly 
 is, because these profits, as Lord Coke has it, do 
 annually arise. All rents are, therefore, sti- 
 pulations for the whole use, or all the profits 
 of lands, in exchange for a part of the profits, 
 for a term of years ; in consideration of the la- 
 bour and expence of cultivating them. There- 
 fore, if the rentpaid bears not a fairproportioa to 
 
 z 
 
338 RIGHTS OF THE STATE [boOK II. 
 
 the due share of profit, the exchange is une- 
 qual ; and by the laws of equality, exchange 
 must cease or be restored to equalit}^ or be 
 continued by unjust force, or some strange 
 delusion. Hence, if a rent be reserved in 
 money, bearing a certain proportion to the 
 profit, on the day of the grant, payment should 
 be made in the same money, or injustice will 
 ensue. In confirmation of this we must ob- 
 serve that the profits of land are sold by the 
 farmer for prompt payment, and ready money 
 articles are not altered in real value by the 
 rise in the price of commodities, through legal 
 debasement of money by the state ; so that the 
 farmer's produce keeps its value under all such 
 changes ; but, the rent of land stipulated in mo- 
 ney, being paid at stated times and at a distant 
 period from the original agreement, is altered 
 in value by a legal debasement of money. To 
 preserve, therefore, the due proportion between 
 the rent, as a share of profits received by the 
 lessor, and the remainder of the profits granted 
 to the lessee, equality in the value of the re- 
 served rent should be maintained : and, if ei- 
 ther by law or collusion, directly or indirectly, 
 the legislature interferes to prevent this 
 equality, injustice is done. More especially 
 where a court of law or equity interferes to sup- 
 port an unequal division of the profits of land, 
 
CHAP. XII.] AS TO PAPER MONEY. 339 
 
 and one not according to the spirit, or law of the 
 contract^ it departs from the law of exchange, 
 which is founded on equality, and violates its 
 own principle, that " equality is equity, "Where- 
 fore such a court must justify itself upon the 
 strict observance of the rule, summumjus, sum- 
 ma injuria, and prove universal right to be, in 
 the particular case, wrong. 
 
 10. From this review of the ill effects of any 
 alterations in the value of money which the 
 state can prevent, it w\\\ appear obvious, that 
 the duty of superintending the money of the 
 state, in every particular, belongs to the state 
 itself, essentially, and should be performed 
 strictly: and, being essential to justice and the 
 equality of exchanges, cannot be delegated to 
 irresponsible persons, over whom the state has 
 no controul ; for to delegate power, without 
 responsibility, is to desert an essential duty. 
 In performance of this its duty, as superin- 
 tendent of all coins and money, the state there* 
 fore affixes a standard for their purity and 
 weight; and enacts severe laws upon the coun- 
 terfeiting, debasing, or diminishing of the 
 coin. Also, to facilitate exchanges and the 
 payment of debts, and performance of money 
 stipulations, it enacts, that pieces duly stamped, 
 
 2 2 
 
540 RIGHTS OF THE STATE [booK II. 
 
 and of the due standard, shall be accepted in 
 payment, which is called, as we have seen, the 
 lawful tender. To provide a standard and 
 lawful tender, is likewise the necessary duty 
 of the state, which cannot be justly neglected. 
 
 11. Neither can such standard be justly de- 
 stroyed, or such tender impeded, or altered, 
 without providing new ones. By which is 
 meant a tender and standard, strict and definite ; 
 and not one, which is a tender to one purpose, 
 and not to another ; for when the standard and 
 lawful tender, by which money stipulations 
 are legally regulated, become uncertain, the 
 performance of contracts is uncertain, and the 
 law itself rendered imperfect and uncertain, 
 vague and insecure.* When, therefore, the 
 standard is unsettled, exchanges will be imped- 
 ed or prevented, as equality in exchange is 
 either wholly and irremediably, or partially 
 destroyed. 
 
 12. It is also the essential duty of the state, 
 to declare, as part of the legal standard 
 and tender, what quantity of one coin shall 
 be given for another, and to settle the equality 
 
 ♦ There is no maxim more frequently enforced by the 
 best law writers, than the following-^" Miserable is th^ 
 *' servitude y^'here law i$ vague and tmc&rtain.'* 
 
CHAP.XII.J AS TO PAPER MONEY. Sil 
 
 of coins in exchange. But, if this equality be 
 settled arbitrarily, and without regard to real 
 value, measured by a given standard, the ex- 
 change will not be observed, but will be either 
 violated, impeded, or finally stopped. 
 
 13. Now, the rights and duties of the state as 
 to coin being thus clearly established, it will be 
 easy to deduce from thence its rights and duties 
 as to paper money, which is a substitute for 
 real money. For it must be obvious, that, when ^ 
 paper is introduced to supply the place of real 
 money, the powder and duty of the state over it, 
 is the same as its power and duty over the 
 coin. 
 
 14-. Thus, while this new money is issued by 
 the state, its duty is to preserve the lawful 
 standard, and maintain the legal tender and 
 equality in exchange ; and, when issued by 
 private persons, on private credit, the duty of 
 the state is to enforce the performance of the 
 contract by which credit is obtained. For by 
 enforcing payment of paper money in coin, it 
 is converted into coin, and the standard pre- 
 served ; which would also happen by allowing 
 it to circulate at a discount, by which means 
 it is reduced to equality in exchange with the 
 coin. But it cannot be maintained on an equality 
 
J4^2 RIGHTS OF THE STATE [bOOK II. 
 
 with coin, while gold is above mint price, 
 without a discount upon paper and two prices. 
 
 ■ 15. The most certain preservation of the 
 standard is effected by enforcing payment of notes 
 in coin, or by their circulation at a discount. 
 But if notes are not payable in coin, equality in 
 exchange can be produced only by the means 
 of reducing notes and paper money periodically, 
 as is shewn already, according to the fluctuation 
 in exchange and the price of bullion. If how- 
 ever these precautions are not observed, "the 
 standard is violated, a legal tender is not, pre- 
 served, and the duty of the state runs into neg- 
 lect. And if notes public or private be reduced 
 to a standard of value in real exchange below 
 the standard of lawful coin, while they circu- 
 late nominally at par, the state acts unjustly; 
 whether it connives at, or enforces the tender 
 of them, upon equality with the standard coin. 
 So if, by delusion, the equality is not observ- 
 ed, the state ought not to assist the delusion. 
 
 I6, As it is obvious, that two standards of 
 unequal value cannot consist with the equality 
 of exchange, no laws can enforce their equality. 
 The superior standard must give way to the 
 inferior, in all tenders and stipulations, and 
 
CHAP. XII.] AS TO PAPER MONEY. 313 
 
 depart from circulation. It is therefore im- 
 possible to enforce the exchange of dollar 
 tokens and guineas, at 6s, 6d. per dollar; be- 
 cause of the inequality of their real value. They 
 will cease gradually to be exchanged, and it is 
 obvious, when a dollar token exchanges at 
 5s, 6d. with a pound note, this is an acknow- 
 ledged standard of value; and, as it differs from 
 the value of 20s. sterling ; or -f-f of a pound of 
 silver, or -f^ of a guinea ; neither the gui- 
 nea, nor |-f of a pound of silver, will be justly 
 and bonajide given for a pound note, while 
 the due sense of value is observed. Persons 
 interested in paper credit will boast of exchang- 
 ing them at equality, upon the same principle 
 that a starving garrison would offer a peck loaf 
 to a besieger, for a quartern loaf; but the 
 principleof such exchange is mere bravado^ or 
 banter. 
 
 17.The statute of exchanges was in the begin- 
 ning, and so has remained ever since, a dead let- 
 ter. For laws to produce universal injustice,caii 
 never be fully enforced : and all departure from 
 the principles we have j ust stated,must be justifi- 
 ed by some pressing necessity, and must bespee- 
 dilyremedied.Thishappensinthe case of a town 
 besieged, when obsidional money is issued, and 
 
344- RIGHTS OF THE STATE [book II.' 
 
 may justly be said to happen now, when, to 
 avoid a pressing evil in the conflict of paper 
 currency with coin, statutes have been enact- 
 ed, which, although necessary for the occasion, 
 can justly be considered as founded only in a 
 complete neglect of the equality of exchange, 
 and can only operate to drive all the real money 
 out of the country. Upon this subject we 
 may again observe, that debasement of money 
 consists essentially in the mere diminution of. 
 its intrinsic value, in a fair exchange, below 
 its nominal value ; that the evil of counterfeit- 
 ing money, with debasement, essentially con- 
 sists in the diminution of value, in fair exchange, 
 with the fraud of concealing the real value ; 
 and that by whatever arts the intrinsic value, 
 of money, in fair exchange, is diminished, and 
 the nominal value preserved, the evil of coun- 
 terfeitirig money is produced. The subject is 
 equally injured, therefore, by the issue of an 
 artificial money, bearing a nominal value greater 
 than its value in fair exchange, as if a debased 
 or counterfeit money were imposed upon him. 
 Now, in the regulation of money it is the 
 duty of the state to superintend the issue of 
 paper money, so as to avoid the tendency which 
 an increased issue may have to produce effects 
 similar to those of counterfeit and debased 
 money; and this can only be effectuated by 
 
CHAP. XII.J As TO PAI>ER MONEY, 34i 
 
 enforcing the strict performance of all credit 
 stipulations, and preserving the single standard 
 of coin, and the legal tender, 
 
 18. We have already argued, that a 
 debased and counterfeit coin, and a paper 
 money not immediately convertible into 
 coin, are essentially the same thing, and 
 equally injurious to the subject ; and we may iU 
 lustrate thijs further, by supposing, that by the 
 art of a fraudulent comer, all the coin w^ere 
 debased, at the mint, one tenth ; the exchange- 
 able value of the coin would then be diminished 
 one-tenth. So if coin were deposited in a bank, 
 asatHam^ro, and, by a dereliction of its duty, 
 the bank were to allow of nominal entries to 
 one tenth beyond its real deposits, the effectof 
 fraud would be the same. If, also, by false 
 credit, or any artifice, credit notes are brought 
 into circulation, to the amount of one tenth 
 beyond the sum which it is possible to turn 
 immediately into coin, the effect and deception 
 will be the same, although the fraudulent 
 intention should not appear. Indeed all cre- 
 dit beyond the actual possibility of performing 
 its stipulation, is a delusion, and mischievous 
 in its effects, though not accompanied with the 
 intention of fraud, and should be restrained by 
 the state. 
 
34€ EVIDENCES OF THE [boOK II, 
 
 CHAP. XIII. 
 
 Evidences of the Depreciation of Money^ and 
 its Effects, 
 
 1. As prices can only be increased by in- 
 crease of money real or nominal, while popu- 
 lation, effective demand, and production con- 
 tinue the same, or increase; the rise of prices, 
 in that case, is evidence either of the increase of 
 money, or its debasement, or the excess of 
 credit, beyond the actual convertibility into 
 coin. Indeed by a table of the value of 
 money estimated in the increased price of the 
 necessaries of life, and some other commodi- 
 ties, the progressive debasements of coin, or 
 excess of credit may be ascertained ; for it has 
 been seen already, that the real increase of 
 money by commerce, can have but a very slow 
 operation upon prices in the regular course of 
 commerce; since population and production will 
 probably more than keep pace with the intro- 
 duction of money by commerce. Such a table 
 lias been constructed with great labour and 
 ability, by the late Sir George Shuckhurgh 
 Eveli/n^ from which it appears, that during the 
 last century, and from the year 1700 to 1806 
 
GHAP. XIII.] DEPRECIATION OF MONEY. 347 
 
 prices have increased, and money has fallen in 
 value in the proportion of 23S to GSO ; that is 
 to say, that two hundred and thirty-eight 
 pounds, in the year 1700, would purchase as 
 many of the necessaries and conveniences of 
 life, as the sum of six hundred and thirty pounds 
 would purchase in the year 1806. This is an enor- 
 mous alteration in the value of money, which, 
 considering the great increase of manufactures 
 and population is not to be accounted for, 
 except by the unnatural increase of currency, 
 by debasement ; or its equivalent, the neces- 
 sary depreciation of an extended paper currency, 
 and abundant circulation of credit.* 
 
 2. When the amount and progressive in- 
 crease of paper money is known, its real and 
 comparative value, in exchange, is immedi- 
 ately discoverable ; and as this happens, when 
 such paper is issued at the immediate direction 
 
 * This table of Sir George Shuckburgh Evelyn has lately 
 beene^amiiied with great critical severity hy Arthur Youngs 
 the secretary to the Board of Agriculture ; and as he affords 
 a new view of prices, we shall discuss his pamphlet in a 
 •eparate chapter, after we have concluded our elements. 
 Till then it is sufficient to repeat what every one must admit, 
 that prices are continually rising ; and as Puffendorff say a^ 
 it is easy to know whether the rise is attributable to increase 
 of money, by comparing it with the prices of laijd and itfr im- 
 mediate produce. 
 
54Sr . r^"^ EVIDENCES OF THE [bOOK II. 
 
 of the state, the effect of such issue is nearly 
 similar to that of an issue of coin debased by 
 the state. Persons making new contracts in 
 trade may, in that case, estimate the value of 
 the credit money, nearly at its just rate, and 
 raise their prices in the first instance accord- 
 ingly. But all the servants of the state, and 
 other creditors receiving annual or other pay- 
 ments, on stipulations previous to such in- 
 crease, are deceived or obliged to take the paper 
 at its nominal value. And hence it has been 
 found extremely difficult in all countries to 
 support the credit of a paper money, issued 
 directly by the state. But when the state does 
 not issue paper, but permits credit notes to 
 be issued by public companies on private faith, 
 and by individual credit, the amount of the 
 paper money not being truly known, its true 
 value is concealed, until it has circulated 
 completely and increased prices. The only 
 check, therefore, to the undue increase of such 
 paper money, is to enforce the strict perform- 
 ance ofthe stipulations contained in the credit 
 notes and require payment in coin on demand. 
 
 3. By the admission of credit notes without 
 compulsion of payment in coin, any quantity 
 of artificial money may be created, notwith- 
 standing any pledge or security required. For 
 
CHAP. XIII.] DEPRECIATION OF MONEY. 349 
 
 when the security of a real bill is required 
 for the issue of a credit note on demand, the 
 real security is either mere credit or goods 
 sold, and in the possession of one of the par- 
 ties ; but, upon every successive sale of goods, 
 a bill may be given and discounted according 
 to the mercantile credit of the parties, and 
 this may be repeated twelve or twenty times 
 over, and the goods not remain in the posses- 
 sion of any of the parties on the bill, so that 
 the security is in these instances mere credit. Or 
 should even land be demanded as the security, 
 notes might be issued for the present value of 
 all or any part of the land ; but the increase of 
 paper money would speedily,if not immediately 
 as it obtained circulation, raise the value of 
 the whole land in such money, and the land 
 would then become an, available security for 
 a greater quantity of such money. 
 
 4. By an issue of credit notes, not imme- 
 diately convertible into coin on demand, there- 
 fore, money might be created to any amount. 
 So that, suppose a globe equal to the earth of 
 solid gold, then by the natural effects of increas- 
 ed currency, a nominal quantity of money 
 might be circulated, in any insular state, 
 to equal, in nominal value, 300 or any assign- 
 able number of times its amount, in pounds 
 
3.30 EVIDENCES OF THE [BOOK 11 
 
 weight or in pounds sterling; although the 
 impossibility of converting such notes into 
 real money is obvious. Credit notes not con- 
 vertible into coin on demand, are therefore in 
 effect mere counters, having no definite actual 
 value ; and are as capable of denoting any ac*- 
 tual value whatsoever, as the nine digits and 
 their repetitions and multiples. 
 
 5. In any insular state or besieged town, 
 there is no necessary limit to the circulation 
 of paper money not convertible into coin. For, 
 the state can assume the entire controul, and 
 expel all coined money for a time ; and demand 
 for money will for ever increase, whether it is 
 in paper or gold. But in a continental state, it 
 should seem that paper money cannot be quite 
 so universally adopted ; for it will not pass ir; 
 foreign exchange or in neighbouring states ; 
 and, on the borders communicating with other 
 nations, there must be some interchange of j 
 coined money, which will gradually circulate 
 at its real value further within the state, and, 
 in the end,expel the paper money or reduce it to 
 its true discount or below it» This will ac- 
 count for the absolute impossibility which the 
 French government met with in attempting to 
 prevent the discredit of the assignats and man- 
 dates, which were founded upon national seen- 
 
CHAP. XIII.] DEPRECIATION OF MONEY. 3v5l 
 
 rity and slandard property; whereas, in Eng- 
 land^ there is no limit to the currency of a 
 paper wholly founded on personal credit. 
 
 6. In an insular state the limit to the issue of 
 credit notes upon thesecurity of thegovernment 
 and of merchants is the actual demand for cir- 
 culation, in the payment of the excise, customs, 
 and taxes, and the demand for circulation in the 
 making of mercantile payments. Thus the 
 issue on the security of the government is 
 limited only by the demand to meet the excess 
 of the annual expenditure above the actual 
 receipts of the revenue, and the occasional an- 
 ticipation of those receipts. This demand is 
 increased by one-twentieth, being the neces- 
 sary interest paid on all those issues at 5l. per 
 cent, and is in fact without limit. 
 
 7. By an increased issue of credit notes or 
 paper money on government securities, as navy 
 and exchequer bills, a new quantity of money 
 is thrown into circulation ; by which, the 
 actual land stock, trade and consumption re- 
 maining as before, the rate of prices must ne- 
 cessarily be increased; for it is most obvious 
 that these articles which constitute the remain- 
 ing elements of price cannot be so rapidly in- 
 creased as this apparent and unreal money. 
 
S52 ETIDENCES OF THE [bOOK II, 
 
 But by increase of prices the exchangeable 
 value of commodities is increased, and also the 
 demand for money ; whereby the mercantile 
 securities rise nominally in value, and paper 
 issued on mercantile security increases with 
 the increase of the government paper. Be- 
 sides which, in order to meet the increasing 
 demand for money, which makes men necessi- 
 tous, the spirit of speculation and adventure is 
 universally increased, goods are more frequent- 
 ly exchanged, and discounts procured. By this 
 means also apparent or unreal money in paper 
 is further increased. 
 
 8. Whilst, however, the issue of paper mo- 
 ney not convertible into coin is limited by 
 the regular demands of the merchants, thus 
 acted upon and increased by those of the go- 
 vernment, it cannot be denominated excessive, 
 under all the existing circumstances. Excess 
 can only occur in the demand created by the 
 expenditure of the state, which is limited only 
 by its wants ; for the wants of a state are li« 
 mited only by the extent of its ambition and 
 the necessary demands for war and foreign ex- 
 penditure. But the excess created by over 
 speculation has some tendency to correct 
 itself by the frequent failure of speculators. 
 
 I 
 
CHAP. XIII.] DEPRECIATION OP MONEY. 353 
 
 and the consequent depression of the value of 
 their saleable property. 
 
 9. If, under such circumstancGS, the issue of 
 a paper money be diminished, in any degree 
 below the effective demand, prices must fall : 
 whereby revenue will be diminished and taxes 
 fail, and much embarrassment ensue to com- 
 merce and the state. For, when the taxa- 
 tion and expenditure of the state are calculated 
 upon any given ratio of prices, and value of 
 national stock, capital and currency, in paper 
 or real money, the support of the rate of 
 prices and extent of currency is necessary to 
 the support of revenue. Because, the revenue 
 being estimated by the general measure of the 
 value of all the stock of commodities, that is 
 to say by the value of the whole currency, 
 the altering of the measure of value, renders it 
 necessary to alter the revenue. 
 
 10. The supply of real money being limited 
 by the annual produce of the mines, and that 
 produce being estimated at 45,682,803 dol- 
 lars annually, the true limit to the increase 
 of real money in any state, is its due pro- 
 portion of that sum, or so much thereof 
 as it finds means to purchase by its surplus 
 produce; but this is limited by other causoi 
 
 A A 
 
354 EVIDENCES OF THE [BOOK II* 
 
 inentioned already, and by the state of its 
 prices as relates to other nations. 
 
 1 1. Direct taxes, for a time, take money out 
 of circulation, but the expenditure of the state 
 returns money again into circulation to 
 an equal amount; and the circulation is pre- 
 served in nearly an equable state, except where 
 it is affected by foreign subsidies, and expendi- 
 tures* 
 
 12. Imposts or duties upon foreign goods 
 raise the prices in the market, but cannot raise 
 them beyond the price of the like goods of 
 home produce ; because foreign goods cannot 
 be imported unless the importer can sell them 
 at as low a rate as the home productions. But 
 when they are re-exported^ unless the draw- 
 back -equals the original impost, increased de- 
 mand for circulation is created. Imposts upon 
 goods of domestic production raise the price 
 of all such goods, and also of foreign goods of 
 the like kind, by allowing the importation of 
 them with a profit at h?gher prices than before 
 the impost. Imposts or duties upon all goods, 
 therefore, raise prices ; and, circulation remain- 
 ing the same, the expenditure of the non pro- 
 ductive members of society must be reduced 
 tfl-oth^r articles, the vendors of which seeking 
 
CHAP. XIII.] DEPRECIATION OF MONE Y. 355 
 
 to raise their prices, the non-productive 
 members and persons of fixed income must 
 diminish expenditure. By re-action, however, 
 on the expiring of leases, rents are raised, w^hen 
 a new tendency to the rise of prices is given, 
 as repects the owners of land ; while mere an- 
 nuitantsj who have nothing of which to raise 
 the price, can only diminish their expenditure, 
 and sink in the scale of society. 
 
 13. Circulation and money continuing the 
 same, prices how^ever can never rise generally. 
 But circulation and money continually in- 
 creasing, taxes and imposts on goods, by con- 
 stant action and re-action, perpetually in- 
 crease prices, and the demapd for currency. 
 This, by constant circulation, divides the bur- 
 then equally ; except as to those persons who, 
 from poverty, the effect of severe laws and w^ant 
 of combination, are impeded in their just de- 
 mands for the rise of the price of labour. 
 The price of labour ought, however, to bear 
 a constant proportion to the necessary support 
 of a man and his family ; since it may be con- 
 sidered as a decree of nature, to adopt the 
 notion of a late margrave ofBaden^th^t the right 
 of subsistence is invariably connected with the 
 duty of labour. " Le droit de subsister 
 A a9 
 
556 EVIDENCES OP THE, &C. [BoOK It i 
 
 '' est invariablenient lii^par Vcrdre nature^ «w 
 
 " DEVOIR DETRAVAILLER*/^ 
 
 * See ** Dictionnaire Universel, par jRobinet, Art. Ecq* 
 nomie Politique,^* torn. 17» 
 
CHAP. XIV.] PEPRECIATION, &C. $6J 
 
 CHAP. XIV. 
 
 Of the Moral and Political Effects of the rapid 
 Depreciation or Debasement of Money. 
 
 l.The increase of prices is the depreciation of 
 money, which, if it occurs rapidly, either by the 
 debasement of real money, or the increase of 
 credit notes, injures all persons whose income 
 consists of a mere annuity or stipend, and, by 
 reducing the effect of their expenditure, re- 
 duces them in the scale of society. 
 
 2. Such persons consist, principally, of 
 annuitants in the public funds, servants of the 
 public, together with all officers of the excise 
 and customs, oflficers in the army and navy, 
 soldiers and sailors; except, in as much as some 
 of these are, partly, supplied with food and 
 clothing in camp, quarters, and garrisons, or 
 in hospitals and at sea. Add to these all cler- 
 gymen living on small benefices, perpetual 
 curacies, and rectories, supported either b^ 
 tythes, under a modus, or a fixed stipend. 
 
 ,^.This depreciation of money, however, does 
 
959 EFFECTS OF THE [bOOK II. 
 
 not much affect traders of any kind, particu- 
 larly the greater merchants ; for the reasons 
 stated already. Nor does it much affect those 
 officers of state, whose salaries are accompanied 
 with fees of office, and a per centage upon 
 taxation. 
 
 4. It affects owners of land also, during the 
 continuance of their leases. But they have 
 a partial remedy, at the end of the lease, and> 
 by reserving rents in corn or produce, will 
 constantly be placed on an equality with all 
 dealers in agricultural produce. It is probably,in- 
 deed, with the view of preserving to themselves 
 the fair share of such produce, that so many gen- 
 tlemen have been compelled by the continual 
 and rapid increase of prices, to become culti- 
 vators of land themselves. This will sufficiently 
 account for the increase of agricultural pur- 
 suits amongst the gentry, and is a circum- 
 stance of no small importance. 
 
 5. This increase of prices occasions also an 
 universally increasing demand for money, 
 since every man finds his income daily less 
 and less effective for the purpose of providing 
 him with a supply for his support. It is 
 in effect universal necessity, and brings with 
 it all the virtues and all the vices of necessity. 
 
CHA.P. XIV.]] DEPRECIATION OP MONEY. 3.59 
 
 The latter probably far outbalance tfie former; 
 for this increase of prices and of necessity 
 breeds disquiet in every mind, and engenders 
 speculative adventure in commerce, arts, war, 
 politics, letters and religion. 
 
 6. It may indeed be well conjectured that 
 such an increase of prices and disquiet disturbs 
 the calm retirement of the religious establish- 
 ments,which can exist only in tranquil and phi- 
 losophic habits. For, by depressing the state of 
 the clergy, it diminishes their influence, and 
 gives encouragement to the innovation of more 
 adventurous sectarians, who are frequently 
 paid by contributions, and generally earn a 
 decent subsistence, while many of the regu- 
 lar clergy are reduced to a state of great pover- 
 ty. How much the depreciation of money 
 must have effected this, will appear from the 
 simple fact, that the value of 501. a year at the 
 reformation, calculated in our present prices 
 would be as 100 to 600 nearly, or perhaps 660; 
 and, allowing 501. a year for each living, which 
 was the actual value of the majority of them 
 at that time, it follows that, in order to main- 
 tain the clergy in their relative rank, no living 
 or curacy should be. below SOOl. a year. That 
 it is almost impossible to defend the church 
 establishment against the influence of the great 
 
360 EFFECTS OF THE [bOOK II. 
 
 class of dissenters called methodists, will ap- 
 pear from considering the diminished value of 
 church livings, and the activity of persons who 
 •with the fervour of zeal, or enthusiasm, con- 
 bine in some instances, habits of gainful specu- 
 lation. 
 
 7. It isclcar,that this rapid increase of prices, 
 by producing universal necessity, must operate 
 many political and moral changes in the state. 
 Its effects are, indeed, most severely felt by 
 those who have the least means of increasing 
 their incomes, by productive labour ; such as 
 the female part of society, the aged and the in- 
 firm. And hence arise not only the increase of 
 poor rates, but that disquietude, restless- 
 ness and repining at our condition, which pro- 
 duce extravagance alid luxury, gambling and 
 adventure, in a greater degree, perhaps, than 
 atiy. other known cause. 
 
 g. In such an increasing state of prices la* 
 bourers and workmen demand more wages ; 
 fend, as they cannot meet upon equal terms 
 with their masters ; w^ho have a capital to sup- 
 port them,while their manufactories stand stilly 
 they enter into combinations, or form mobs 
 and commit violences, which always give 
 
CHAP. XIV.] DEPRECIATION OF MONEY. 361 
 
 occasion to severe laws against such combi^ 
 nations, or laws to maintain a maximum of 
 prices in labour. 
 
 9. For, it may be remarked, that such laws 
 are found to have occurred, chiefly, when 
 the currency was undergoing perpetual debase- 
 ments ; particularly, in the reigns from 
 Edward I. to the 43d year of the reign of Queen 
 tlizabeth. And now, when money is, in 
 effect similarly debased, by the issue of paper 
 and the alloy of excessive credit, beyond the 
 possibility of its convertibility into coin, their 
 necessity and severity will increase. * The 
 
 * The above predictions were written in the month of 
 August 1810, long previous to the breaking out of the 
 disturbances in the manufacturing counties in the north, 
 and the ver}'^ severe laws which have been since passed, 
 against the hungry and riotous mechanics, who, by the stop- 
 page of commercial intercourse with Europe, have been de- 
 prived of bread, and driven by famine to depredation and 
 rebellion against the laws. 
 
 It is a lamentable consideration tliat the severity even of 
 martial law is rendered necessary to subdue that violence 
 which nothing but a disordered state of the common wealth, 
 seud an interruption of the regular course of tJie exchanges 
 pf society, arising out of the calamitie* of a long protracted 
 war could have produced. 
 
S6^ EFFECTS OF THE [boOK II. 
 
 evil is corrected in some measure, however, by 
 the demand of men for the army and navy, par- 
 ticularly the former.These are the depositories of 
 ' all the necessitous and turbulent spirits amongst 
 the lower classes, who, in other states of society, 
 would form private bands of plunder, and be 
 driven to absolute depravity. The more degra- 
 ded, ho wev^^er, necessarily become infamous in 
 society, and make up in all states the gangs of 
 robbers and petty thieves. 
 
 10. The increasing necessity of the times, as 
 it is justly called, or the unnatural deprecia- 
 tion of money, offers temptations to clerks and. 
 persons in offices of trust, of all ranks and con- 
 ditions public and private, to commit frauds. 
 These are driven to great necessities, by hav- 
 
 Statesmen, before they commence any wars, should look to 
 their end,and consider whether it is possible for war and com- 
 merce long to subsist in union together. At the moment in 
 which we are writing, it is publicly stated that rebellion 
 amongst the starving manufacturers is marshalling itself for 
 nightly trainings on the moors of the north; (see the Times, 
 June 22, 1812,) and that to prevent these infuriated bands 
 from procuring arms, government has authorised the ma- 
 gistrates to seize all the arms belonging to peaceable indi- 
 viduals. It is not difficult to predict how such a state of 
 things must terminate. 
 
CHAP. XIV.] DEPRECIATION OF MONEY. SGS 
 
 ing at first agreed to accept a bare sufficiency 
 for support ; necessity then increases and fre- 
 quently overcomes the sense of duty ; added 
 to which, by having the confidence and use of 
 large sums, their estimate and measure of vakie 
 is very deceptive, as to their own affairs. 
 
564 
 
 DEP1RECIATI0N OF MONEY [boOK. II. 
 
 CHAP. XV. 
 
 Of the Depreciation and Debasement of Money 
 as it affects Agriculture, 
 
 1 The effect of the depreciation of money on 
 agriculture is plainly perceptible, and requires 
 to be detailed particularly. 
 
 2. By the law of equality in exchange and 
 commerce, money prices rising in any state, 
 importation from abroad will take place, 
 when the prices are above the due level of 
 prices in other nations • and this importation 
 will occur chiefly in respect to articles of ne- 
 cessity, when they afford a profit. 
 
 3, Corn is the first of these articles ; and the 
 other produce of land, as butter, cheese, eggs, 
 poultry, sheep, wool, and all kinds of meat,follow 
 in their order. Now in order to encourage mer- 
 chandize and manufactures, strict restraints are 
 very easily enforced to prevent importa- 
 tion of manufactures ; but, of necessity, no such 
 restriction is applied to corn, and of course corn 
 will be imported or exported freely, as the real 
 
CHAP. XV.] AS IT AFFECTS AGRICULTURE. S65 
 
 money price affords a profit on the export or 
 import of it, in the ordinary course of com- 
 merct . But,findmg prices increase,and corn to 
 be imported to the prejudice of agriculture, corn 
 laws have been framed, prohibiting importa- 
 tion, except at certain prices, and allowing 
 bounties on exportation. 
 
 4. By the depreciation of money, through 
 credit notes, however, these prices are no 
 longer a just criterion of the actual increase of 
 price from scarcity ; but merely a nominal 
 price from increase of paper money, which 
 is not current amongst foreign states: 
 and, by this means, corn is imported in com- 
 petition with English corn, in years of no ac- 
 tual scarcity, and the profits of agriculture are 
 unequally depressed. But some indemnity is 
 made to the farmer on the profit on breeding 
 stock and other commoc^ities, which cannot 
 be imported. Hence, the loss by corn, is laid 
 on the stock, and arable converted to grazing 
 land ; bread corn is kept at a moderat-^ level, 
 but the country more and more diverted, as 
 far as possible, from tillage, and rendered 
 tributary to other nations for support. 
 
 S» Thus, also barley, wheat, and oats, being 
 
S66 DEPRECIATION OF MONEY [bOOK II. 
 
 necessary to be raised in alternate successions, 
 and the price of barley being frequently depress- 
 ed by the necessity of distillation from sugar, 
 of course, tillage is proportionably injured. 
 Hence, the just complaints of the landed pro- 
 prietors and their farmers : for these consi- 
 derations will sufficiently account for all the 
 occurrences by which it has happened, that, 
 during the last fifty years, wherein the debase- 
 ment of money by excessive credit has operated 
 so extensively, England has been compelled to 
 import corn ; instead of exporting, as formerly, 
 and raising an extensive, or indeed excessive 
 supply to provide against occasional deficien- 
 cies of the harvest. 
 
 6. To explain our views upon this subject, we 
 must premise, that by the, 44 Geo. 3, c. 109. 
 foreign wheat is not importable when at a price 
 less than 63s. per quarter, and then a duty is. 
 added of 24s. 3d., naaking the price at which 
 it can be sold here 87s. 5d. ; but, that when it is 
 66s«. per quartern, it is allowed to be imported 
 at a duty of 6d., making the price only 66s. 6d. 
 Now, while these prices are calculated on both 
 sides, in real money, no deception can occur. 
 But, the moment that the real value of moneys 
 dififers, as it long has done from the value of 
 
CHAP.XV.] AS IT AFFECTS AGRICULTURE. SSj 
 
 notes, whether it appear in the price of bullion 
 or not, it will soon be felt in the price of such 
 articles of necessity as corn; and, though the 
 exchange, while gold continues to circulate, 
 will not betray the true cause of the rise of 
 prices, these commodities will sensibly bear a 
 nominally higher price in this country, though 
 possibly not a really much higher price in true 
 money, than in other countries. Hence, while 
 probably the productive state of the agriculture 
 of the country has been equal to that of 
 any in Europe, it has appeared to us, that 
 the price of wheat has been more than usually 
 rising, and the importation of grain has been 
 allowed, when in reality it should have been 
 checked ; and, on the contrary, the exportation 
 has been checked, when it should have been 
 allow edi 
 
 7. The price of 66s. is obviously now a 
 price which offers no correspondence with the 
 reasonable price of wheat, which cannot be 
 expected to be below five pounds, or produc- 
 tion must cease for want of encouragement. 
 
 8. In our opinion, all restrictions on commerce 
 are in the main injurious. The whole world 
 should be considered as one garden, and one 
 manufactory for the use of all its inhabitants ^ 
 
36S DEPRECIATION OF MONEY [bOOK IT. 
 
 and then,by the mutual exchanges of commerce 
 left free to itself, the deficiency of seasons in 
 one place would regularly be supplied by the 
 excessive bounty of heaven in another ; and 
 the arts vi^hich are most peculiarly fitted for 
 each particular region, would find encourage- 
 ment where they were most wanted, and could 
 be pursued with the greatest advantage. Thus 
 would every nation afford a surplus of exchange- 
 able commodities, without which commerce 
 cannot be supported ; for, as Chaptal has 
 said in his C hemic applique aux Arts, the 
 nation which would possess, within its own li- 
 mits, all varieties of productions and of 
 manufacture, must have nothing to receive in 
 exchange, and may shut itself out from all the 
 commerce of the world.* 
 
 9.But upon the principles which we have es- 
 tablished, in order to give due encouragement 
 to agriculture, so long as commerce or manufac- 
 tures are encouraged by restrictions on im- 
 portation, it is necessary that the productions 
 of agriculture, should bear a relative price 
 with regard to other commodities, or it must 
 
 * On the subject of the corn laws, see ** an Essay on the 
 •« Impolicy of a Bounty, ^c^ (Baldwin, 1804.) 
 
CHAP.XY.] ASIT AFFECTS AGRICULTURE. §(59 
 
 languish ; we should advise, that, to ascertain 
 the true price for the importation of corn, since 
 1797, we should convert paper money into 
 bullion, at the price of bullion; assume the 
 average rate of prices for three years; and add 
 10 or 1^1. per cent, to tha price for a profit; 
 which will give the true price, at which impor- 
 tation may be allowed, without danger to 
 agriculture. 
 
 H B 
 
d79 DEBASBMENT OF [bOOK 11^ 
 
 CHAP. XVL 
 
 Effect of Debasement of Coin and Paper Monetf 
 as an Engine of the State, and of its supposed 
 Cheapness. 
 
 I. It having now been proved, in the course 
 of the foregoing discussions, that a paper 
 money raised upon credit, beyond its actual 
 convertibility into coin in a short time, is, in 
 effect, a debased money, and operates by the 
 same cause of general deception ; it follows, 
 that no more advantage can be immediately 
 gained by the state, from having a supply of 
 paper at hand, than would be gained by the 
 use of a mint for debasing money ; and that the 
 advantage thus given, whatever it may be, will 
 be temporary. The advantage gained by debas- 
 ing the coin, at thegovernment mint, would how-j 
 ever be wholly counteracted, if, at the same 
 time, other private mints were allowed to be 
 set at work, without controul, in every city 
 and market town in the kingdom. For the 
 private minters would, by their debasements, 
 raise the prices of commodities perpetually 
 against the government. 
 
CHAP. XVI.] PAPER MONEY, &C. "S?! 
 
 2. In like manner, the creating of paper 
 money upon the discount of government secu- 
 rities, exchequer and navy bills, at the metro- 
 politan bank, is wholly counteracted as an 
 engine of state, by the creation of paper on 
 mercantile discounts not only in London but 
 at every town in England; except as it fa- 
 cilitates the negotiation of loans and coun- 
 tenances an increase of the national debt, In- 
 deed,wbile the metropolitan bank creates about 
 12 millions of paper money for the use of the 
 state and 8 millions on mercantile discounts, 
 (May 1811,) the country bankers, at a mo- 
 derate computation, create from 30 to 40 mil- 
 lions of paper money on mercantile discounts 
 merely. Whatever effect, therefore, the creation 
 of such money at the bank of England has upon 
 prices, the same effect must be produced, 
 in a greater degree, by the country paper. 
 
 3. The disproportion is evidently in this case 
 against the state, and will,by the operation of mo- 
 ney and increase ofdemandjthrough the paper of 
 the state, be always kept at and have a ten- 
 dency to rise above the present rate. Indeed, 
 this disproportion, there being no controul over 
 the country banks, may be raised beyond any 
 assignable limit, within the demand for circu- 
 lation, created by taxes, excise, and customs, 
 
 B B 2 
 
57^ DEBASEMENT OK [boOK II. 
 
 and circulation employed in trade; and, hence, 
 the obvious disadvantage of such a system is 
 in this respect, clearly established. If it have 
 any advantages, they must arise from some 
 other causes, which we will explain hereafter, 
 but which have been slightly noticed above. 
 The principal advantage is indeed, that paper 
 currency affords an immediate means of bor- 
 rowing an unreal and deceptive money, which 
 afterwards is funded with great facility. 
 
 4. It must not, however, be supposed that 
 in the present state of things we would com- 
 plain, in strict justice, of the issue of coun- 
 try notes; for they are necessary to give 
 the country traders an equal facility of obtain- 
 ing a capital with the London merchants. And 
 this will explain the cause of the general pros- 
 perity of trade throughout England^ so long as 
 either through Germany or America^ she could 
 procure a mart for hercolonial produce and do- 
 mestic tnanufactures in ^wrope, and particu- 
 larly in France. 
 
 5. Were it not for these country bank notes, 
 those of the bank of England must be enor- 
 mously extended by means of agents, clerks 
 
 •or discount brokers; the issue of which would 
 be absolutely without controul. Whereas at 
 
CHJLP. XVI.3 PAPER MONEY, &C, 373 
 
 present, the country bank notes being payable 
 on demand in bank of England notes, they 
 are checked in their issues by the necessity of 
 payment on demand, and also by that competi- 
 tion which they afford against each other. It 
 however may be suspected that the individual, 
 restraint becomes, by general competition, a 
 general increase, if not an universal excess. 
 
 6. The temptation that arises to increase 
 this circulation, may be efJtimated from the 
 profit that attaches to it. This we shall 
 endeavour briefly to illustrate, by considering 
 the nature and amount of it ; and as in 
 estimating the capital of a bank of circu- 
 lation, we deduced it from its profits compared 
 with its circulation, so we may deduce the 
 probable profit from the probable capital, com- 
 pared with the probable circulation. 
 
 7. Thus we may establish as a first principle, 
 that the profit on capital employed by a country 
 banker, or other bank of circulation on dis- 
 count, may be estimated by the proportion 
 which the capital bears to the circulation, 
 
 8. The capital of such a banker in England 
 is bank of England notes. The proportion of 
 these cannot be supposed to belone to tli^ 
 
l374? ' PAPER MONEY NOT ([ BOOK II. 
 
 country bankers, in a greater amount than as 
 one-fifthof the whole issue, or about 4,000,0001. 
 and the whole issue of the country bankers 
 united is .^>0,000,000 or 40,000,0001. This pro- 
 duces invariably ^1. per cent, per annum ; for, 
 although the profit of discount is somewhat 
 more than 5l. per cent, the excess probably 
 only pays the ex pence of trade, wholly or in 
 great part. Now 4 is to 30 in the proportion 
 of one-seventh and a fraction, and to 40 in the 
 proportion of one-tenth. Of the whole discount 
 received, the interestofthe capital sum therefore 
 is one-seventh ; the profit of trade, by repeated 
 exchanges, is also, as 6; and 6x^^=^^' 
 This gives a clear profit of from 30 to 35 
 per cent, on the capital, according to the first 
 supposition ; but on the supposition that the 
 issue of these banks is 40,000,0001. the profit is 
 45 per cent. 
 
 9. The inducement, therefore, to increased 
 speculations in banking is very great. Yet 
 all these banks are at the mercy of any one, 
 who with a few thousand pounds worth of 
 their notes should create a run upon them. 
 Damages might perhaps be obtained for mali- 
 cious proceedings ; but malice might proba- 
 bly shelter itself behind impenetrable secrecy, 
 and ruin to thebankerand neighbourhood might 
 immediately be produced. Perhaps even the 
 
CHAP. XVI.] SO CHEAP AS COIN. 37-5 
 
 emissaries of a foreign government might ef- 
 fectuate this mischief, and escape before they 
 were prosecuted civilly. 
 
 10. It is asserted by the great political eco- 
 nomist, Adam Smith, that paper is a cheaper 
 commodity,as money,than gold, and that, where 
 stipulations on credit notes are enforced by lav;r, 
 no more paper can circulate, than there would 
 be money, if coin alone were in circulation. 
 This appears, in all respects, a fallacy ; since 
 from the known effect of credit, and the increase 
 of value and prices by increase of money, and 
 from the considerations, stated in this work 
 znd by My. Wlieatlej/, p.285,it is more than pro- 
 bable that money might be increased beyond 
 this limit ; but whether it may or may not is 
 immaterial to our present consideration. For 
 the prime cost of the money is the goods by 
 which it was purchased at the mines,andits an- 
 nual cost is its wear and tear, which are estima- 
 ted by Mr. Hatchett* at a very inconsiderable 
 
 *Mr. Wheatley says, p. 153, that as an assertion was made 
 by the dealers in bullion that guineas became light by wear, 
 it was thought necessaiy to investigate the fact ; and Mr. 
 Haichett and Mr. Cavendish by a train of masterly expe- 
 riments have fully proved its utter impossibility. Sec 
 Transactions of the Royal Society for 1803. Not having 
 the original paper^ we suppose they did not prove that gold 
 
 y\b\E UBfif^ 
 
 >^ OF TH 
 
 'f''^ 
 
S76 OF THE GREAT COST OF [bOOK II. 
 
 portion. Now if tlie money i.' only displaced by 
 paper, its original cost is rot saved : but, if a 
 greater quantity is introduced, that is, if it is 
 created anew, prices are only lowered, the value 
 of m y diminished, and the owner of any 
 CO n is, at the ssme time, deprived of so much,in 
 value, as paper credit has taken from the value 
 of his money. 
 
 II. The cost of coinage paid by the na« 
 tion, is about 11. per cent., and is not neces- 
 sary to be repea ed in 100 or even 300 years. 
 Twenty shillings divided by 100 give 
 about nine farthings per annum, per cent, 
 or one in ten thousand; that is, the coinage of 
 10,0001. will be aflbrded for one pound per 
 annum. But the circulation of paper is made 
 at a discount of l in 20, or 6l. percent; 
 ]0,OC0l. will therefore cost in papeF 5001. per 
 annum ; and .o0,000,000l. will cost 2,500,0001. 
 per annum. Whereas, in coin it will cost only 
 50001. 
 
 12 If It is contended that this supposed cost is 
 interest,and money beais an interest also; it must 
 be answered, that money pays no interest in the 
 
 would not wear, but tVt it would not, in many years, lose so 
 much of its substance, as to render a guinea below its cur- 
 rent weight. 
 
CHAP. XVI.] PAPER MONEY, &C. ^77 
 
 hands of the real possessor ; but that notes are 
 continually issued and renewed on loan, and 
 sre never created without a loan : w^hereas, in 
 fact, the interest paid on a credit note is paid 
 for the credit and not the real money, 
 
 13. It must also be observed that a loan 
 is, in law, the withholding of a present de- 
 mand; but a note is itself a promise to pay on 
 demand. Now as the person into whose hands 
 it passes, withholds a present demand, the 
 process of circulation is the means by which 
 the demand is withheld. 
 
 14. Interest also is payable by law, and 
 usury or unlawful interest is received upon, 
 the Ibrbearance, or the withholding of a present 
 demand. 1 he circulators of all notes, payable 
 on demand, therefore, are the actual lenders of 
 the money payable on them. And these, by for- 
 bearance of money, are, in the true spirit of 
 interest and use of money, though not by law, 
 entitled to the interest ; since, by forbearing to 
 demand the pasment, they lose the use or in- 
 terest of their money. 
 
 1.5. The borrowers on credit are the bankers 
 and tradesmen; the first of whom take the in- 
 terest on credit notes ; while the lenders are that 
 part of the community who are not engaged in 
 
S78 DEBASEMENT OF, &C. [BOOK lU 
 
 trade. And all these persons are injured by th« 
 increase of prices through credit notes ; their 
 real money, or their share of the money which 
 would actually circulate, and may be called pop 
 tential coin, being depreciated thereby. Some 
 palliative is indeed found in depressing the 
 lawful share of the other part of the commu- 
 nity; and, in the end, while perhaps no one else 
 gains much, the bankers divide the 2,500,0001. 
 at the lowest computation, as the profit oftheit 
 trade. 
 
CHAP. XVII,]tAXATION AND PRICES, &C. 379 
 
 CHAP. XVII. 
 
 Of Taxation and Prices during a State of 
 Currency in Coin. 
 
 1. Paper money increases prices and de- 
 preciates itself, as does all increasing currency; 
 except inasmuch as the effect is checked by 
 increased production and the diminution of the 
 rate per cent, of profits by the effect of com- 
 mercial credit on the actual price of a commo- 
 dity, 
 
 2. Taxation would not so highly increase 
 prices if currency did not increase : while it 
 would occasion state expenditure amongst th^ 
 subjects of the state ; which is in the end the 
 circulation of money from one to another, by 
 the interchange of labour, stipends and com^ 
 modities. So that, in a settled currency, the 
 state would be merely the hand which circu- 
 lated the money so raised ; provided it should 
 raise within the year, or by previous accumu- 
 lation of one year's taxes in advance, just as 
 much as it expended. 
 
 3. By foreign expenditure, also, trade would, 
 
380 TAXATION AND PRICES OF [bOOK II, 
 
 in some measure, be promoted and manufac- 
 tures encouraged ; while by the importation of 
 bullion, the cost of foreign expenditure and 
 also the necessary quantity of bullion would 
 be supplied and prices kept on a level. 
 Foreign expenditure cannot indeed be long^ 
 maintained, without foreign as well as domestic 
 trade, or conquest and plunder. 
 
 4. War and taxation would, then, have not so 
 unequal an effect, if it were not for the increase 
 of circulation, or of taxes ill devised and un- 
 equally assessed. 
 
 6, But, by the increase of circulation through 
 war and taxes, and by means of excessive credit, 
 the burthen is thrown upon all annuitants 
 merely, who are without remedy, and upon 
 stipendiaries, labourers and others, who cannot 
 raise their incomes, but must diminish their 
 real expenditure in commodities. 
 
 6. As also the interest of money is,by law, fixed 
 at one-twentieth or 61. per cent, .those who 
 live on the interest of money have no means 
 of increasing their incomes, except by savings. 
 
 7. By depreciation of currency, however, 
 interest of money is lessened in value, and 
 capital on loan diminished in value daily. 
 
CHAP. XVII. J CURRENCY IN COIN. S81 
 
 8. The capital which is advanced on loan is 
 .^dvancedon short securities, such as on the dis- 
 countof bills of exchange, or on the purchase of 
 annuities or on mortgage ; or on the state se- 
 curities by exchequer bills, navy bills and an- 
 nuities ; which latter are either terminable and 
 irredeemable, or perpetual and redeemable at 
 par. 
 
 9. When a private debtor pays interest at 
 ^1. per cent, for 10 years, if, as hath happened 
 for the last 10 years, the value of money falls at 
 least one-tenth, this interest is diminished from 
 5l.to4'l. lOs.per cent.*and what the creditor loses 
 the debtor gains. In like manner, he repays at 
 the same rate, and gives back 901. for each 
 lOOl.f: by which private injustice is effected. 
 So, when thestate borrows and pays interest,and 
 money depreciates, the repayment is made to 
 the injury of the creditor. The receiver, in this 
 latter case, is the part of the community which 
 
 * By the income tax it will be reduced to 41. 1«, Od. 
 
 + Mr, Thornton, in hisspeech (1811) says that depreciation 
 since the war is estimated at 60 to 701. and is at least 40 or 501. 
 per cent. By borrowingl0001.inl800,and paying back inl810 
 a debtor would pay 5001. interest ; But by investing it 
 in land or suCLCSsf ul commercial speculation, and selling his 
 land or goods in 1810, he would find that he borrowed at 
 two flr three per cent, his land selling at 1200 or 13001. 
 
382 TAXATION AND PRICES OP [BOOK II. 
 
 has placed confidence in the state and assisted 
 its necessities ; while the payer is the same 
 part of the community, together with that part 
 from whom also the taxes are raised. But 
 public injustice is thus effected by depriving 
 the state creditor of his real due, and it ap- 
 pears also that all taxes upon the public funds 
 directly are distressing to persons, who, being 
 mere annuitants, are rendered daily more ne- 
 cessitous by the depreciation of money. For 
 they are held permanently by the widow, the 
 helpless orphan or the wife ; who has perhaps 
 little aid from her husband, and many children 
 to support. These persons cannot sell their 
 stock5and taxes on stock are, therefore, unequal 
 and oppressive upon those who, by deprecia- 
 tion of money, are in time, made to bear the 
 greater part of the burthen of the state. 
 
 10. To estimate the extent of the injury 
 produced to persons who have advanced money 
 on long loans, we must observe that, from the 
 table of Sir G. S. Evelyn, it appears that eight 
 and sixpence in 1770 was worth as much as ll. 
 in 1800.* And that this has happened 
 
 * The same table gives the following comparative valuer 
 of the pound currency of 1800, as Cbtimated by the price 
 of commodities at different times. In other words, thfe 
 following sums are equal to each other, in real value> at the 
 respective periods foUowiug, \iz» 
 
CHAP. XVII.] CURRENCY IN COIK* 383 
 
 entirely by depreciation of money, through in- 
 crease of pa})er currency is plain ; because popu- 
 lation and manufectures have at the same time 
 increased. 
 
 11. Also we find that 12s. 2d. in 1760, or 
 the commencement of the present reign, is 
 equal to il.; wherefore it is obvious that ll. adr 
 vanced at interest at either of those periods, be- 
 ing repaid by a nominal ll. of 1800, will ia 
 fact be repaid by 8s, 6d. in the one case, and 
 12s. 2d. in the other ; and to this extent are 
 all those persons injured, who have advanced 
 money in the funds, or who under wills or set- 
 tlements possess money locked up for that length 
 of time. This is indeed peculiarly the casewith 
 many charities which have had money so invest- 
 ed, by their original institution. The original 
 capital ofthebankalso,amounting tol 1,000,000U 
 
 
 
 
 £ s. 
 
 d. 
 
 Iq1700 
 
 
 
 8 
 
 55 
 
 10 
 
 
 
 8 
 
 H 
 
 20 
 
 
 
 9 
 
 I 
 
 30 
 
 
 
 9 
 
 8 
 
 40 
 
 
 
 10 
 
 2 
 
 60 
 
 
 
 12 
 
 ^ 
 
 70 
 
 
 
 13 
 
 75 
 
 80 
 
 
 
 15 
 
 2i 
 
 90 
 
 
 
 17 
 
 7 
 
 1800 
 
 
 
 1 
 
 
 
384 TAXATION AKD PRTCE* OP [boOK IT. 
 
 was so advanced, first at '1. per cent, and after- 
 wards at 3\ per cent, interest : hut, by the pro- 
 fits which have been made, what has been" 
 lost to the holders of bank stock in the one 
 way has been gained in another, so that a» 
 traders they have been very successful. But 
 money belonging to infants or other suitors is^ 
 always ia vested by the court of Chancery tp 
 remain at interest in the public funds, in pre- 
 ference to any other security. In this there i^^ 
 great, though unintentional and unavoidable in*: 
 justice : for it would be the same if laid out on 
 mortgage. However, in future, it would be well 
 worthy of consideration, not so much by the 
 court as by all those who have the settlement 
 of property on marriage or by will, Vhether 
 the interest oforphans, widows and others does 
 not demand that, in order to settle their an- 
 nuities, with any thing like a fair equality, 
 land, to be let on a corn rent, should 
 be purchased and transferred, instead of stock.* 
 
 • The amount of these sums has increased amazingly,sincc 
 a regular inveitment of them in the bank has been required. 
 This appears by the following: statement of the amount 
 ofthe balances in the hands of the receiver general of the 
 court of Chancery, at the following periods, viz. 
 
 1730 
 
 . . . iei ,007,298 
 
 I 1790 . 
 
 . . £10,948,770 
 
 1740 
 
 . . . 1,295,251 
 
 1800 . 
 
 . . 17,5C5,912 
 
 1750 
 
 . . . 5,153,901 
 
 1810 . 
 
 . . 25,162,430 
 
 1789 
 
 . . 7,120,537 
 
 
 
<;HAP. XVII,] CURRENCY IN COIN. 
 
 38, 
 
 It is, therefore,, obvious that those who would req^ard the 
 interests of a large and, in a great measure, unprotected 
 class of persons, would do well to consider the effect of a very- 
 rapid depreciation upon so vast a fund. 
 
 In like manner, it appears, that large sums belonging to 
 suitors are vested. in stock and funds by the registrar of the 
 high court of Admiralty and of prizes, Lord Arden; the ac- 
 count of which stood as follows for the years 1810, 1811, and 
 1812; 
 
 
 1810. 
 
 
 ISll. 
 
 
 1S12. 
 
 
 £ s. 
 
 d. 
 
 £ s. 
 
 d. 
 
 £ s. d. 
 
 Cash 
 
 346 '264 
 
 
 
 139,555 14 
 
 2 
 
 84,150 7 
 
 Exch. bills 
 
 19 J, 730 C 
 
 
 
 80,4«) 
 
 
 
 102 300 
 
 Navy 5 per cent. 
 
 102,641 11 
 
 8 
 
 82J31 3 
 
 5 
 
 66,US 13 2 
 
 4 per cent. 
 
 15,478 11 
 
 ;o 
 
 49,3HG 13 
 
 9 
 
 3,137 5 6 
 
 3 per cent. 
 
 15,629 9 
 
 6 
 
 42,976 10 
 
 
 
 ^,523 19 11 
 
 The floating balances of both these funds, as well as 
 the purchases of the commissioners of the sinking fund, 
 must tend greatly to keep up the price of stocks. 
 
 cc 
 
5S6 OF USURV AND INTEREST. [BOOK H. 
 
 CHAP. XVIII. 
 
 Of Usury and Interest. 
 
 1. The real use of money is like that of land, 
 a capital to be employed to advantage and im- 
 provable by labour. For the possessor of mo- 
 ney on loan, on bond, may purchase land, 
 or houses, or goods, and may raise the money 
 again by mortgage of land, or pledge of goods, 
 and with care constantly deal at a profit. If he 
 fail, the lender loses his security, and is obliged 
 either to imprison him without advantage^ 
 or receive a composition for his debt. The 
 risk of loss is therefore divisible between 
 the borrower and lender, either wholly 
 or in great part ; and by the bankrupt laws., 
 which compel an equal division amongst cre- 
 ditors, wholly so. The profit by the use of 
 money should, therefore, be divided fairly ; 
 as the rent of land^ which is described as issuing 
 out of the land. 
 
 ^. The rent of land is about 3 or 4l. per cent, 
 upon the improved or real value, though some- 
 times moreorless upon the purchase money, and 
 
CHAP. XVIII.] OF USURY AND INTEREST. 3&7 
 
 is as well as money lent on mortgage always 
 secure. The rent paid for land is, therefore, 
 the bare produce of capital employed without 
 risk, and both the profit of land and the rent 
 might reasonably be expected to be greater, 
 were it not for the checks given to agriculture, 
 by importation of foreign corn, 
 
 3. Money is now not generally lent upon 
 mortgage, but very frequently upon annuity 
 Secured on land, which, by means of insurance, 
 affords a sure return of capital, but is not re- 
 deemable at the will of the purchaser. This per- 
 manency of the loan is a disadvantage of j>er- 
 haps one or two per cent. ; but the money is lent 
 at a clear profit to the lender of about 7t or 
 8 per cent, at the lowest, the borrower pay- 
 ing most frequently 10 or 121. per cent. Loans 
 might also be afforded on personal security 
 at a high ptr ceniage, half on annuity, half on 
 bond payable on demand. By this means the 
 interest might be equalized and the loan in ef- 
 fect redemanded by calling in one half. For if 
 the whole is not repaid, the other half continues 
 as on annuity at high interest. Thus annuity at 
 1^1. and loan at 6\. give loL per cent, interest se- 
 curely; which sufficiently proves that the laws 
 against usury, or unlawful interest, derived from 
 the law oi Moses ^ are in effect easily evaded, 
 
 c c2 
 
388 OF USURY AND INTEREST. BOOK II. 
 
 because they oppose the law of nature, and are 
 founded in absurdity.* 
 
 :>tm Mr. Sugdentoxt eminent conveyancer of the present day, 
 who has iUustrated the science of that branch of the profes- 
 sion by several very able and learned treatises, has recentljr 
 published " a Cursory Inquiry into the Expediency of re- 
 pealing the Annuity Act, and raising thQ kgal Rate of In- 
 terest ;" which is well deserving of the attention of thelegis- 
 I at ure. 
 
 It is inconsistent with our own views of the perfect free- 
 dom of all contracts without fraud, between persons of ade- 
 quate capacity, to admit of the legaHty in natural jurispru- 
 dence of any restraint upon the fair profit of money on loan, 
 and we could wish that the learned writer had gone to the 
 same extent as Mr.Bentham, and argued for the repeal of the 
 statute of usury, as well as that of annuities. But in steering 
 the middle, he has probably adopted the more prudent and 
 practicable course,which may we hope lead him to his end. 
 No one is better able to expose the futility of the act practi- 
 *?illy than Mr. Sugden, who shews clearly that it has pro- 
 duced, in his extensive experience, little else but extravagaiit 
 charges, cruel frauds, and oppressive exactions from those 
 ^-ho, possessing only life estates, could afford no Adequate se- 
 curity on mortgage, and, by the advantages which it affords 
 to the lender, has almost entirely destroyed the practice of 
 mortgage security. An enquiry at the insurance offices for 
 lives would, as we are credibly informed, expose the necessi- 
 ties of most of the first men in the state. 
 
 Mr. Sugden has also pviblighed a small tract, which for its 
 
CHAP. XYIII.] OF USURY AND INTEREST. S89 
 
 * 4. Loans on bond would probably also bear 
 justly a higher per centage than 5l. per cent, 
 which is the interest allowed by law; but iu"* 
 terest is fixed at this maximum, merely for the 
 convenience of securing for the state the payment 
 of a low interest. For all the other reasons 
 which have been given are palpably absurd, as 
 hath been most ably demonstrated by that 
 truly excellent reasoner and admirable jurist, 
 Jeremy Bentham^ in his Treatise on the Law of 
 Usury. 
 
 6. By fixing interest of money at a maxi- 
 
 gcneral utility we arc happy to notice. It is entitled " Let- 
 ters to a Gentleman of Landed Property ;" and as it is written 
 in a pleasing and easy stile, and is veiy concise, deserves the 
 attention of all persons who have leases to let or to take ; 
 Ijindsto spUor to purchase ; estates to devise or to inherit, 
 and what will doubtless attract the attention of the fair :»ex 
 earnestly, marriages to contract, or families to provide for. 
 His object, he expressly declares, is to enable all persons to 
 doubt a little of their own self-sufficiency to direct their 
 affairs, in matters where a little law is dangerous, and a great 
 deal generally unknown, and where it is of no small conse- 
 quence to know properly how to give instructions, as they 
 are strangely called, to our legal advisers. 
 
 When a man of really great skill devotes his leisure hours 
 to such undertakings, he condescends to do much sertrice 
 vithout the ostentation of abstruse erudition. 
 
miim, in order to monopolise the borrowing of 
 money, the state, however, does injury to all 
 capitalists, and gives no aid to the industrious 
 borrower, who might wish to employ it for useful 
 purposes. By the discounting ot large sums the 
 bankers, however, afford great facilities to th(5 
 greater merchants ; but if money could be fair- 
 ly advanced on loan at just rates, according t6 
 the risk run, there would be greater induce- 
 ments to small savings, and more facilities to' 
 borrowing small sums for useful purposes. 
 But no law" can protect spendthrifts, un- 
 less like the Roman laio, it considers them 
 as insane, and appoints curators of their pro* 
 peity, 
 
 6. The state, by laws against usury, not only 
 checks the use of money; but, as in the case 
 6f all contraband trade, affords a high pre- 
 mium on the evasion of a law, which is 
 liot founded in equity. And by the interven- 
 tion cf annuities lawful means of evasion are 
 discovered, and the whole law is actually frus* 
 trated. 
 
 7. Thenotion that it was immoral to make in* 
 terest of money has happily long been exploded. 
 Pale?/ justly sraiks at a provision in a statute 
 
CHAP. JCVIII.] OP USURY ANI> INTEREST. 391 
 
 of James I. which, having prohibited interest to 
 be taken beyond acertainrate and consequent- 
 ly allowed it under that rate, adds that this 
 statute shall not be construed or expounded 
 to allow th<3 practice of usury in point of re- 
 ligion or conscience *Jere7ni/Be7itham?iho, in his 
 able defence of usury, is very facetious on the 
 passage usually quoted from Aristotle, that all 
 money is in its nature barren. He justly observes, 
 that there is a consideration which did not hap- 
 pen to present itself to that great philosopher, 
 but which, had it presented itself, might not 
 have been altogether unworthy of his notice. 
 It is, that though a daric would not beget 
 another daric, any more than it would a ram 
 or an ewe, yet, for a daric which a man bor- 
 rowed his might get a ram and a couple of ewes, 
 and that the ewes, were the ram left with them 
 a certain time, would probably not be barren. 
 Again at the end of the year he would find 
 himself master of his three sheep, together 
 tvith two if not three lambs ; and if he sold 
 ftis sheep again to pay his daric, and gave 
 one of his lambs for the use of it in the mean 
 -time, he would be two lambs, or, at least, on« 
 
 » Paley'8 Mor. Phil book 3. part 1. c. 10. 
 
$92 OP USURY AND INTEREST. [bOOK It 
 
 lamb -richer than if he had made no such bar- 
 gaift,*^ 
 
 't. The precept in the law of J/o5^^, which 
 had long been considered to stand in the way 
 of taking any interest, was at length discover-' 
 ed to have related to transactions between 
 J^ws alone, and not to affect the barterings of 
 Christians Ij* It is strange, however, that 
 the Jews, towLom this law is promulgated;^ 
 as the absolute law of God, have in all ages; 
 been most ready to violate it. Thus clearly 
 do they establish that all laws must be evaded 
 wjhich are not sanctioned by the real law of 
 nature founded in reason, equity, and justice.' 
 And this will happen whether they are inforced 
 by human sanction or the pretended decrees 
 of deity; for such, without questioning the' 
 general authority of Moses, truth and rea^on^ 
 must consider the law against usury. The legis- 
 lator of the Jews, as by the command of God, 
 forbids all lending at interest ; yet all nations 
 now practice it, no church holds it sinful^ and 
 4^ dam Smith declares that to reduce it below 
 
 * Defence, p. 101. 
 , t r^. Vide SvgderCf Carsory Inquirj-, p. 10* 
 
CHAP. XVXir.} OF USURY AND INTEREST. 39S 
 
 tbe lowest ordinary market price is impossible. 
 It is not so witli the laws which the same au- 
 thor has promulgated against theft, robbery, and 
 murder. No pne doubts their application, no 
 one has the impiety to declare them iiiitpossi- 
 ble in general execution, 
 
 9. The ancient law of usury is thus laid down 
 by GlanviUe : who wrote in the time of Henry 
 
 III " All the effects of a usurer (whether 
 be make a will or not) belong to the king.* 
 
 * The ancientiJomawj punished usury with more severity 
 than they did theft. (Cato de re Rustica Proem.) The 
 f^i>rman code imposed a forfeiture of all the offender's pro- 
 perty, provided he had been guilty of usury, within a year 
 and a day before his death. (Grand Custum. de Norm. c. 20. 
 By a law of Edward the Confessor, usurers were banish- 
 ed the kingdom, and a person convicted of the crime for- 
 feited all his substance, and was to be treated as an outlaw, 
 
 • If the reader feel any desire to penetrate into the motive* 
 that dictated this law, these are the concluding words of it. 
 Hoc autem usserebat ipse Bex se audiisse in Curia Regis 
 JFrancorum, dum ibidem moraretur,quod usura radix omnium 
 titiorum esset. (LL. Ed. Conf. c. 37.) The doctrine, M 
 laid down by the Mirror, is, that the goods and chatitels of 
 •usurers should remain, as escheats to the lords of the fee. 
 {Mirror, c.lO. 8.3.) The reader will also find some curious ^ifr- 
 4juisitions on the subject of usury in the Ancient Dialog, de 
 Scaccario. (L. 2. s. 10.) 
 
SOi) OF USURY AND INTEREST, [bOOK II» ^ 
 
 But it is not the custom for anv one, whilst 
 living, to be appealed or convicted of the crime 
 of usury— but, among other regal inquisi- 
 tions, it is usually inquired and proved, who 
 have died in this offence, and that by the oath* 
 of twelve lawful men of the vicinage : which 
 being proved in court, all th-e moveables and 
 chattels which belonged to the deceased usurer 
 shall be seised to the king's use, without any 
 regard to the person in whose hands they may 
 be found. His heir is for the same reason 
 deprived of the inheritance according to the* 
 law of the realm, the inheritance itself revert- 
 ing to the lord. It should, however, be ob- 
 served, that if any one has, during a certain 
 period of his life, been guilty of this crime, and 
 be pubhcly accused of it in the community 
 where he lived, if he desisted from his error 
 before his death, and was penitent, neither 
 he, nor his property, shall after his death be 
 liable to the penalties of usury. It ought, 
 therefore, to be evident, that a man has died 
 a usurer, in order that he may be so adjudged 
 'after his death, and his effects disposed of as 
 those of a usurer."* 
 
 * We cite from n recent edition of this writer hy Mr, J, 
 J^eames^ whose elegant translation of one of our earliest 
 text writers on the law excites in us a itrong de&ire to sees 
 
CHAP. XVIII.] OF USURY AND INTEREST. 395 
 
 10. The modern law of usury fixes the rate 
 of interest at 6\, per cent, per annum, and is 
 too generally known and evaded to require that 
 we should state it here. 
 
 an edition oWracton and /'/c'f a, executed with equal fidelity 
 and skill. At the same time, we cannot but recommend to 
 the student to draw his knowledge of the foundation of our 
 law from these pure sources, rather than from the garbled 
 extracts of pedantic, prejudiced and confused reporters, ' 
 or fromsu, erficial and unskilful abridgements. The penalty 
 of studying a barbarous Latin is now removed, andGlwtviUe, 
 %t least, hits appeared in an elegant English style. 
 
;■ V ;■ 
 
 ELEMENTS 
 
 OF THE 
 
 SCIENCE OF MONEY. 
 
 BOOK THE THIRD. 
 
 Introduction, 
 
 INour First Book we have considered the pro- 
 perties of money as the medium of exchange in 
 the natural course of money transactions, and as 
 consisting of a real commodity actually given 
 and transferred from one to another, in ex- 
 change for some other commodity. In this 
 sense money is, in truth, the commodity byway 
 of excellence, and is itself the representative of 
 all commodities. 
 
 In the second book we have considered the 
 operation and effects of the substitution of 
 credit in place of money, in exchange. Further 
 we have shewn that there are many inconve- 
 niences necessarily arising from the use of this 
 representative at second hand, and that the 
 
393 INTRODUCTION. [bOOK III. 
 
 same advantages which arise from the adoption 
 of real money do not accompany the use of a 
 circulating credit. 
 
 In a general view it might be thought that 
 the inquiry would now close, but circulating 
 credit is so necessarily connected with the 
 system of national debts, without which credit 
 would not be allowed to circulate to the ex- 
 pulsion of the real medium of metallic money, 
 that it becomes necessary to enter also fully 
 into that subject. Without it an inquiry into 
 the science of money Avould be imperfect; 
 and it will therefore form the subject of our 
 third and last book. 
 
 It was our intention to have added a fur- 
 ther inquiry concerning the various characters 
 gf war and of hostile armaments, as they 
 affect the pecuniary system. For the present 
 however we shall withhold our opinions upon 
 that head, considering them not sufficiently 
 complete* 
 
CHAP I.] OF PUBLIC DEBTS. 399 
 
 CHAR I. 
 Of Public Debts. 
 
 1. All the injuries arising from debased or 
 depreciated curency are produced by the necessi- 
 ty of supporting a forced state of money circula- 
 tion, arising from the anticipations of the stat«i 
 upon its revenue, by means of a public debt. 
 
 2. Credit notes on demand appear, as we 
 have seen, to have been first circulated in Eng- 
 land in the reign of Charles II. when the 
 goldsmiths or bankers issued notes for the 
 sums lodged with them, and at the same time 
 employed the money at use. And of the ex- 
 tent of their business an opinion may be form- 
 ed, from the fact, that when King Charles II. 
 s-topped the payment at the exchequer, one 
 goldsmith alone was found to have obtained 
 credit for 1,320,0001. They appear also to 
 have had some effect upon the coin and the 
 price of bullion in the succeeding reign. But 
 it is certain,* although the true cause was not 
 
 * ^ce Wheatky on Money and Conimerccw 
 
4-OQl OF PUBLIC DEBTS. [bOOK IIt# 
 
 developed till lately, that in the reign of Wil- 
 liam III. partly by clipping and partly by the 
 eiTect of these credit notes, bullion was raised 
 far above mint price. 
 
 3. In 1693 the bank of England was insti- 
 tuted, and it has since continued to issue 
 credit notes upon the security of exchequer 
 and navy bills, and also upon private bills, on 
 discount at 5l. per cent.; receiving likewise a 
 compensation for the payment of interest on the 
 debts of the state; and being not only the 
 principal dealer in bullion, but the only me- 
 dium through which money has been coined 
 at the mint. 
 
 4. When the debt due from the govern- 
 ment to the bank of England had arisen to a 
 considerable amount, William III. created a 
 fund, as it is called, and converted the debt into 
 annuities, perpetual or for years. Of these the 
 former were made redeemable at par, and sub- 
 ject to various rates of interest : which was 
 levied in taxes and paid, through the agency of 
 the bank, to the owners of the different funds 
 or stocks and their assigns. 
 
 5. By this means a debt was progressive- 
 ly created in the following proportions, making 
 
Chap, i.] of bublic debts. 
 
 401 
 
 allowance for some re-payments, and estimat-. 
 ing the debts in round numbers for easier cal- 
 culation ; viz. 
 
 
 
 
 
 
 Value of the 
 
 Value «f^l 
 
 
 
 
 increase in 
 
 jnonei 
 
 ' of I BOO. 
 
 Amount of 
 
 . 
 
 itoney of 
 
 £ s. 
 
 d. 
 
 A.D. 
 
 debt. 
 
 Increase. 
 
 1800. 
 
 8 
 
 4 
 
 1700 - 
 
 - 16,000,000 - 
 
 - 16,000,000 
 
 - ^,000,000 
 
 8 
 
 10 . 
 
 - 44,000,000 - 
 
 - 28,000,000 
 
 - 63,100,000 
 
 U 
 
 4 
 
 50 - 
 
 - 72.000,000 - 
 
 - 28,000,000 
 
 ' 50,100,000 
 
 12 
 
 2" 
 
 60 - 
 
 - 88<ooa,ooo - 
 
 . 10,000,000 
 
 -. 26,OJ0,0OO 
 
 l3 
 
 71 
 
 70 - 
 
 126,000,000 - 
 
 . 58.000,000 
 
 - 55j60OOO0 
 
 0,15 
 
 n 
 
 80 - 
 
 142,000,000 - 
 
 - 16,000,000 
 
 - 21,000,000 
 
 (ri7 
 
 H 
 
 90 
 
 238,000,000 - 
 
 - 96,000,000 
 
 - 108,700.000 
 
 I 
 
 
 
 1800 - 
 
 451,000,000 - 
 
 213,000,000 
 
 - 213,000,000 
 
 
 451,000,000 
 
 576,000,000 
 
 6. To pay the interest of the debts and 
 supply the other expence of the state, the per- 
 manent revenue of the state, as it is called^ or 
 average amount of money levied annually' in 
 taxes, stood at the several periods above men- 
 tioned, in round numbers, as follows : 
 
 
 
 Value in 
 
 Proportion of the 
 
 
 
 money of 
 
 value of mone y 
 
 Years. 
 
 Interest. 
 
 1800. 
 
 in each year. 
 
 1700 . 
 
 . . 4,000,000 . 
 
 . 94,000,000 
 
 . , 238 
 
 10 , 
 
 . . 5,500,050 . 
 
 . 12,500,000 
 
 . . 247 
 
 50 
 
 . . 7,500,000 . 
 
 . 13,700,000 
 
 . . 314 
 
 .60, . 
 
 . : 8.500,000 . 
 
 .' 13,400,000 
 
 . . 342 
 
 '70 , 
 
 . . 9,500,000 . 
 
 . 13,900,000 
 
 . . 384 
 
 80 . 
 
 . . 12,000,000 . 
 
 . 15,700,000 
 
 . . 427 
 
 90 . 
 
 . . 15,000,000 . 
 
 . 17,500,000 
 
 . . 496 
 
 1800 . 
 
 . 30,000,000 . 
 
 . 30,000,000 
 
 . . 5C2 
 
 vZrQilu which it.may, incidentally, be observed. 
 
402 OF PUBLIC DEBTS. [boOK Iff* 
 
 that the total expenditure of Queen Anne's 
 reign was 122,000,0001.; which is equal to 
 277,000,000L in 1800; and the average annual 
 expenditure of that reign to i 0,000,0001. , which 
 is equal to 23,000,3001. of the money of 1800- 
 Indeed upon the principles of the science of 
 money contained in this work, it would be 
 easy to predict, that such a progressive in- 
 crease of revenue in a state must be attended 
 with the obvious consequence of increasing 
 the relative quantity of money, and decreasing 
 its value in exchange. For it is not to be sup- 
 posed, that the state revenue bore a very small 
 proportion to the real mpney of the state ; and 
 in truth, at each of the given periods, the 
 state and its subjects were impressed with a 
 sense of "burthen, and exclaimed against the 
 increasing necessity of the times. It, therefore, 
 follows, that either the extent of territory sup- 
 plying the revenue must have been increased, 
 which has not been the fact, or the relative 
 proportion of money has increased and its value 
 fallen. Indeed it is apparent that the burthen 
 of taxes was, at each successive period, 
 equal to the powder of the state ;^ and that as 
 revenue increased, money increased relatively 
 and fell in valuer 
 
 S. The consequences of this are also ap- 
 
CHAP. I.] OF PUBLIC DEBTS. 403 
 
 parent from a table which we shall give at the 
 end of our work, shewing at different periods 
 the income of the crown and its real value ; 
 the comparative value of lOOl. annuity, whether 
 produced by 3l. per cent, stock or mortgage of 
 land, or by a pension : with the like value of a 
 501. curacy and of a captain's pay in the army 
 and navy, i nd also the money value of the 
 pay of a common soldier, in its progressive 
 fall, from 1700 down to 1800. 
 
 9. The mischievous consequence to all 
 pensioners.and annuitants is obvious : to whom, 
 and to the army and navy it is irreparable. 
 But stockholders have the opportunity of 
 buying and selling, and otherwise disposing of 
 their stock ; and they who sell at short periods 
 are little affected. Lenders on mortgage are 
 m6stly accumulators of savings, who dispose 
 of them at their real value, and continue for a 
 short time to receive 6\, per cent, interest. 
 But all nioney out at interest, for five or ten 
 years, is lent and redemanded at great loss. 
 Widows, orphans, aged annuitants, public 
 charities, supported by money at interest, or 
 by stated contributions, as the chest at Chatham, 
 are in general, reduced to great distress ; be- 
 cause they cannot change their securities arid 
 
 DPS 
 
404 OF PUBLIC DEBTS. j^BOOK II!. 
 
 are daily impoverished by the unnatural depre- 
 ciation of money. 
 
 10. The crown also and many of the minis- 
 ters of state are equally impoverished. But 
 the crown has found some relief by the appro -» 
 priation to itself, in part, of the droits of Admi- 
 ralty, and repeated applications to parliament 
 for payment of its debts. Ministers also have 
 increased their fees of office, and indeed by 
 the new inventions of fees for licences, and 
 other means, endeavoured to alleviate as much 
 as possible their own difficulties. 
 
 1 1. From our view of the science of money 
 it is plain that the state borrows notes of the 
 bank, which, in their first circulation, pass, in 
 exchange, at the value of the day, with a ten- 
 dency to increase, by the known augmentation 
 of effective demand from the increase of state 
 expenditure. But when the notes issued are to 
 be funded by the operation of loans, the increase 
 of money is perceived and prices have risen, 
 and at the same time, in order to meet the 
 increase of prices created by the issue on go- 
 vernment securities, a similar increase of 
 credit notes is made by the country bankers. 
 
CHAP.I.] OF PUBLIC DEBTS. 
 
 405 
 
 By this means money is further increas- 
 ed, and this process is repeated annually : 
 so that prices are, in reality, affected by the 
 constant operation of 760 mints, perpetually 
 active in the secret debasement of money, as it 
 may justly be termed. The effect indeed is the 
 same as debasement, though the intent is pro- 
 bably very different; and certainly the opera- 
 tion is not dictated by the same dishonest 
 and unjust views which give rise to national 
 debasements of coin. 
 
 19. Paine, a writer of strong intellect, but 
 great irreligion and violent revolutionary prin- 
 ciples,* first announced to the public, that the 
 
 * His works are more spoken of by name than thoroughly- 
 known. It was with great difficulty that we have lately 
 procured his pamphlet on the funds ; which is a very 
 curious production, and an evidence of very great talent. 
 Should it appear to those who are acquainted with Paine's 
 works, that much of the present argument is founded upon 
 similar principles, they should be informed that it was 
 unknown to the author, when in the summer of 1811, du- 
 ring a long vacation, he framed the analysis of this treatise, 
 and actually composed the whole of the work from Book 
 II. Chap. III. to the end of the Book. This fact which will 
 not appear strange wlien he informs his reaflers that the 
 income tax, imposed by Mr. Pitt^ may be traced to the in- 
 vention of the same author, in his celebrated Rights' of Man» 
 Paine was, however, more studious of equality in the 
 
406 OF PUBLIC DEBTS. [bOOK III. 
 
 State debt of England increased in a certain 
 ratio every war, doubling the debt and adding 
 one half more to it, the expence of each war 
 being one and a half on the amount of the last 
 preceding. Thus the increase was, as 8, 12,18, 
 27, 40, 60, 90, 135 ; forming a series in which 
 the second number is produced by the preced- 
 ing number 8 and half 8 ; and the third num- 
 ber is, in like manner, produced by the preced- 
 ing number 12 and half 12 ; and so on for the 
 rest. This alone, if it be the fact, leads to the 
 proof, that such regularity arises not from 
 accident, but a fixed principle ; which, it is pre- 
 sumed, is, that the power of the state, in each 
 war, was fully exerted, and its expenditure 
 was in effect equal: so that the addition 
 was, either wholly or in great part, nominal. 
 It is also a curious fact that, upon this prin- 
 ciple, Paine calculated the expenditure of 
 six successive wars, the expences of which 
 were known, and from that formed a calcula- 
 tion of the probable expenditure of six future 
 wars. And in this he seems to have been well 
 founded : if we may judge by the experience 
 of the tw^o first terms of his series, the second 
 of which, though not completed, has amounted 
 to his estimate very nearly, 
 
 €fFect of his plan than the eloquent son of the great Lord 
 Chatham* 
 
CHAP. I.] OF PUBLIC DEBTS. 
 
 407 
 
 
 First series of six wars. 
 
 
 Second series of six wars. 
 
 
 
 1 
 
 243 miliionf. 
 
 1 
 
 21 inillions. 
 
 2 
 
 . 364 
 
 2 
 
 33 
 
 3 
 
 . 546 
 
 ,3 
 
 48 
 
 4 
 
 • 849 
 
 4 
 
 72 
 
 5 
 
 . 1228 
 
 6 
 
 . 152 
 
 G 
 
 . 1842 
 
 
 444 millions. 
 
 
 Total 5042 
 
 13. This table was compiled in the year 
 1796, and, though in 181? we have not reached 
 the end of the first war of the second series, 
 the expence has considerably outrun the esti- 
 mate. To our readers it will be unnecessary 
 to explain the enormous apparent amount of. 
 debt at the end of twelve years of war ; they 
 will readily understand that such sums ar^ 
 merely nominal, and that the great evil of them 
 is not their actual amount, but their 
 unequal distribution, their imperfect unba- 
 lanced .pressure, and the rapid depi:eciation of 
 money, which such'^n increase of debt and of 
 currency must produce. 
 
 14. Mr. Daniel Wakefield, m a letter to Tho- 
 mas Paine, fRivington, 1796, ) has endeavoured 
 to correct some errors in the above statement, 
 and gives thefollowing view of the national debt; 
 on which we shall remark, that the present 
 amount of the national debt exceeds Paine*s 
 predictions.* 
 
408 
 
 OF PUBLIC DEBTS. [boOK III. 
 
 .2 
 *■*-» 
 
 CS 
 
 IS 
 
 O 
 
 Oh 
 
 •S 
 
 CO 
 
 CC 
 
 
 n 
 * r^ 
 
 O 
 
 o 
 
 2. 
 
 60 
 
 'S 
 
 o 
 
 CI 
 
 
 
 00 
 
 ^ (N »?D' Aft 
 
 S 
 
 ,». 
 
 <N 
 
 
 QD 
 'GO- 
 O 
 
 
 " J- 
 
 OIj 
 
 
 
 
 
 
 
 cT"' 
 
 1 
 
 J 
 
 0) 
 
 o 
 
 
 • 6" 
 
 00 
 
 cf 
 
 00 
 
 1 
 
 00 
 
 o 
 
 1 
 
 I-* 
 
 s 
 
 Iff 
 
 
 
 00 
 
 j^? 
 
 5 
 
 : ^ 
 
 - c 
 
 
 
 1-4 
 
 
 
 <M 
 
 ^ 
 
 ■3 
 
 o 
 
 t^ - ^ 
 
 c n 
 
 l> 
 
 CO 
 
 00 
 
 i> 
 
 CO 
 
 f-< 1[^ p- 
 
 5? cj ri 
 
 n3 
 
 a* 
 
 CO 
 
 O) 
 
 (/} 
 
 .a 
 
 "a 
 o 
 
 Si 
 
 xn 
 
 00 d 
 
 © o 
 
 (1) e0 V 
 
 eg 
 
 
 c; 
 
 ^ O 
 
 
 
 3 5 
 
CHAP. I.] OF PUBLIC DEBTS. 409 
 
 lo.The terms stock and fund, made use of in all 
 references to the debt oi England and of other 
 nations, are very deceptive, for they imply a 
 heap of money or of 3l. per cent, capital. But 
 a heap of money, wherever it lies, is dead 
 lumber; and may be returned to the mines, 
 since in that state it is,in the words of Aristotle^ 
 truly barren and breeds nothing. 
 
 16. A loan, on the contrary, is the transfer 
 of money from one man to another : from one 
 who has not employment for money to another 
 who has ; and the use or interest of money is 
 a part of the profit gained by laying it out. But, 
 in funding, the state takes money, on loan, from 
 persons who, having no immediate employment 
 for it, have accumulated it; and distributes it 
 amongst its debtors in circulation. For its own 
 part, it accumulates no store of money, and 
 would act indiscreetly, not to say with great 
 tyranny, if it did so. 
 
 17. In raising the interest by taxation, the 
 state also acts differently from individuals who 
 borrow money for their own use. They 
 do so occasionally, for pui:poses of lucrative 
 employment, which enables them to return 
 the loan with interest upon it, for profit. 
 
410 OF PUULIC DEBTS. [bOOK III* 
 
 28. The state, on the contrary, having no 
 use for money, but for mere expenditure, 
 can only assume to itself a power over 
 the production and future savings of its own 
 members. This constitutes the part of 
 the currency which would be laid out at use 
 upon future loans; and this the state seizes 
 and pays over to its debtors, who circulate it 
 for consumption, or employ it, either wholly or 
 in part as capital. 
 
 19. Borrowing therefore, whether by the state 
 or individuals offers no great check to circu- 
 lation ; for it only changes the hands and the 
 object.This it does, in some measure,by violence, 
 and thus alters or impedes somewhat the na- 
 tural course of circulation. Indeed by borrow- 
 ing first of those who have to spare, and 
 then spending money, the state, it should seem, 
 would do no violence to circulation, but would 
 be very limited in its expenditure. The chief 
 evil would then arise from checking, for some 
 time, the frequency of private loans ; but no new 
 circulation nor additional currency would be 
 produced. 
 
 20. On the contrary, by expending large 
 sums, and then borrowing at some interval 
 afterwards it necef-sarily increases the quantity 
 or effect of the circulation. This either 
 
CHAP. I.] OF PUBLIC DEBTS. 411 
 
 by increase of money or credit, diminishes the 
 value of money : and to supply this diminu- 
 tion of value, more money is created, or credit 
 further enhanced ; which have the same effect. 
 
 21. Public debts of all kinds are mere 
 anticipations of real revenue, and being found- 
 ed on credit, increase the effect of circulation 
 and depress the value of mone3% They there-' 
 fore create a demand for more money in 
 prompt payment; which must be required, 
 notwithstanding it appears that credit ends to 
 save the immediate use of money; for by that 
 saving it is only meant, that money exchange^ 
 are performed with greater facility, througn 
 the means of a set-off, and paying balances 
 after long credits, instead of repeated sums in 
 prompt payment. 
 
 « 
 
 22. In theBritishCritic for the year 1804, vol, 
 
 23. p. 127, is a very able review of Wheatley on 
 Inoney ; which from the signature of J.B.may be 
 suspected to come from the pen of the Rev. Mt. 
 Brandy who is said in a note to the same 
 critique, to be the first who, in 1776, applied 
 the depreciation of money to the refutation of 
 Dr. Price's arguments on the augmentation of 
 the national debt : and who, in observations on 
 Mv.Giibert's bill, 177 1?, is said also to have deter- 
 
412 OF PUBLIC DEBTS. [boOK III. 
 
 mined this depreciation from the quantity of 
 commodities of thefirst necessity consumed in 
 eight weeks. From public accounts, and a table 
 of their prices for seventeen years of great detail, 
 laid before parliament, a decrement and a law of 
 decrement appeared to take place, which in the 
 opinion of the reviewer was assumed too great. 
 This opinion militates against our suggestion 
 that Mr. Brand and the reviewer are the same 
 person ; but he appears hov\^ever to be far better 
 versed in mathematics than Mr. Wheatley^ and 
 has afforded some elucidations of a material 
 question in political arithmetic, which ought 
 not to be overlooked. 
 
 S3. He states, truly, that supposing the value 
 of money equal at any- two given periods, and 
 population to be increased, the pressure of 
 any equal revenue will be inversely as the po- 
 pulation, that is, greater in a less population, 
 and less where population is increased;in other 
 words, 1000 men can pay lOOOl. as easily as 
 500 men can pay 5001. 
 
 24. To determine the effect of the decre- 
 ment of the value of money, and the increase 
 of population on the burthen of taxes, at all 
 times, the value of money is first to be taken 
 as constant, together with the quantity of com- 
 
€HAP.I.3 OF PUBLIC DEBTS. 415 
 
 modi ties consumed by the individual onf an, 
 average in any country. The value of this set 
 of commodities, at their fixed rates, is w^ hat 
 King and Davenant call the yearly expence of 
 the people per head, which, multiplied by the 
 number of the people, will give the national 
 expence. Let a tax of two shillings in the 
 pound be laid on that great total, producing a 
 determinate sum. Suppose now the popula- 
 tion of such a state to have been, at any assign- 
 ed time, five millions. Let it, in a following 
 period be increased to seven and a half, the 
 prices of commodities, the consumption of 
 each individual, and the total sum collected 
 remaining the same ; the charge on every single 
 person, which was before measured by one 
 tenth of his income, shall now be reduced in 
 the proportion of five to seven and a half, or 
 ten to fifteen ; the measure becoming one fif- 
 teenth, or Is. 4d. in the pound only. If the 
 population had become ten millions, the charge 
 and burthen would each have been reduced to 
 half its former amount, or to one twentieth, 
 that is, to a shilling in the pound ; therefore 
 the amount of a tax, or aggregate system of 
 taxes, the consumption of the people per head, 
 and the price of commodities remaining con- 
 stant, the burthen or charge in the pound will 
 be reciprocally as the number of the people ; 
 
414 OF PUBLIC de'bts. I^book lit, 
 
 and their expence per head continuing the 
 same, if the population of such a state, after 
 having been initially as 100, shall, in the lapse 
 of certain periods, have successively become as 
 110, 120, &c. &c. and ultimately as 169 ; that 
 is, shall have increased in the proportion of 
 the population of England from 1688 to 1800;* 
 
 * We may from these elements determine the ratfo of 
 population in any two years, between 1688 and 1800. For 
 ^he yearly births and deaths in a state being here taken, 
 upon the average, to bear respectively a fixed proportion to 
 the whole existing population, which is the constant assump- 
 tion,their diffeience shall hear a fixed proportion to the whole 
 population likewise ; or it will be augmented by a con- ^ 
 stant rate per cent, or in successive years, form a series of 
 geometrical progressionals ; and our population having in- 
 creased in the last 112 years in the proportion of i'C9 to 
 unity, its annual increment was 47, lOOdthsper cent, and 
 between the years 1700 and 1800, it had increased in the 
 proportion of 1*5983 to unity. Therefore, had the value of 
 money continued constantly equal, one pound would have 
 been raised in the more populous period, 1800, with the 
 same facility as 0'02561. or 12s. 6d. in the less, the year 1700 : 
 or inversely, 1'59831. or 11. lis. 5d|. raised in 1800, would 
 not have exceeded in burthen one pound mised in 1700. 
 Each of these forms of stating the proportion has its separate 
 use. If it be inquired what payment in the year 1700 was 
 equal in burthen to a charge ol one million incurred in 
 1800,recourse is to be had to the first form ; the sum is to be 
 multiplied by 0-62565 the reciprocal of l*598^i, tire product 
 
CHAP. I.] OP PUBLIC DEBTS. 415 
 
 the burthen of the tax having been at first re- 
 ciprocally as 100, shall become at the end of 
 the first, second, and last periods, reciprocally 
 as 110, 120, and l69, respectively ; the commo- 
 dities consumed by equal numbers of people 
 in the different periods being taken to re- 
 main the same in kind and quantities, and their 
 prices constantly equal. 
 
 25. If the population and amount of the taxes 
 be taken as constant, and the prices of commo- 
 ns 625,0001. the sum required ; such multiplication by its 
 reciprocal, being the same as an actual division by 1.5983 
 and the easier operation ; and if we want conversely to in- 
 quire, what payment in the year 1800, was equal to one 
 million in 1700; we must divide the sum by 06256, and 
 the quotient will be 1,598,3001. Or, which is the same thing, 
 we must multiply it by its reciprocal 1*5983. 
 
 The annual increment of population being 0*47 per cent, 
 in every successive twenty years, it will be increased in the 
 proportion of 1*0983 to unity ; and taking the measure of 
 population in 1800 as unitj'^, that of every twentieth year in 
 the century may be obtained by divisions, or by continued 
 multiplications of unity by 0*9104, the reciprocal of 1*0983, 
 as in the second column of the second following table ; and 
 the five corresponding reciprocals, or the terms of the 
 second column of the second table, will be found by the 
 continued multiplications of unity by 1*0983, repeated four 
 times. 
 
4l6 OF PUBLIC DEBTS. [cHAP. I* 
 
 dities to vary; the burthen or charge in the 
 pound will be at all times reciprocally as those 
 prices, or directly as the value of money; in- 
 creasing with its augmentation, and decreasing 
 as it falls ; one of the principles upon which 
 Mr. Wheatlei/ proceeds: and, thirdly, if the 
 value of money and population remain fixed, 
 this burthen or charge in the pound will be as 
 the amount of the taxes, which is universally 
 admitted. 
 
 26. Hence it follows, that however, the 
 amount of the taxes, the price of commodities, 
 and the population of a state may vary, the 
 burthen of the taxes will be as their amount 
 directly and the number of the people, com- 
 pounded with the price of commodities in- 
 versely. This follows from the nature of pro- 
 portionals. 
 
 27. A numerical illustration shall now be 
 given of this rule, to determine the effect of the 
 increase of population and prices conjointly, 
 upon the burthen of the taxes. It has been 
 shown above,* that on account of the increase 
 of the number of contributors, the state could 
 collect one pound in the year 1800, with the 
 
 * See noU page 414. 
 
CHA1». I.] OP PUBLIC DEBTS. 417 
 
 «ame burthen upon them as 069561. or 12s. 
 6'd. in 1700. Moreover, on account of the 
 fall of the value of money, separately taken, 
 the burthen of the payment of 5621. at the end 
 of the century, having been no more than 
 that of 2381. at that of the preceding, by Sir 
 G. S. Evelyn's table, as giverl by Mr. W. one 
 pound v^as paid in 1800, with the same facility 
 as 0'4234l. or 8s. S^d, in 1700, and conse- 
 quently 0*62561. or 12s. 6d. in the more recent 
 period, v^^ith the same facility as 0*26491. or 5s. 
 3-|-d. in the more remote; therefore the pay- 
 ment of twenty shillings by the nation at one 
 period, was attended with no more burthen 
 than that of 5s. 3^d. at the other. Or a mil- 
 lion might have been raised upon the subject 
 in the last year of the 18th century, with as 
 little burthen as 264,9001. at the end of the 
 preceding ; and conversely, 3,774,0001. in 1800, 
 as 1,000,0001., in 17OO ; and here the fraction, 
 0-26491. is the product of 0-62561. and 0*4^2341. 
 — and 3*774l. is the reciprocal thereof: and 
 having given the amount of any paym.ent to 
 the state ill the years 170O or 1800, that of a 
 charge of equal burthen at the other may be 
 found in one of the following tables, as also 
 for all intermediate years. 
 
 s s 
 
418 OF PUBLIC DEBTS. 
 
 . Table I. 
 
 [book iir* 
 
 Sums levied in Taxes in certain Years, equal 
 in Burthen to ll. so levied in the Year 1800, 
 
 Pay. 
 
 
 Cot. 1.11. 
 
 
 
 CoI.1. 11. 
 
 
 
 
 Col. Land 
 
 
 ment ll.or 20>. 
 
 Price*. 
 
 
 
 Pi.pula. 
 
 
 
 
 Col. 2. 
 
 ■ 
 
 IbOO ilncreas- 
 
 PopuU- 
 
 i. 
 
 d. 
 
 tioti. 
 
 s. 
 
 d. 
 
 — 80 
 
 Increas. 
 
 s. d. 
 
 Year$.l ing fixed. 
 
 non. 
 
 
 
 Prices. 
 
 
 
 
 ing boh. 
 
 
 1700 
 
 
 0.4Q34 
 
 8 
 
 3^-0 6156 
 
 12 
 
 6 
 
 0-2649 
 
 5 3^ 
 
 1720 
 
 
 0-4572 
 
 9 
 
 i|o-687i;iiy 
 
 8| 
 
 ^ c 
 
 0-3142 
 
 6 3i 
 
 1 740 
 
 
 0-5106 
 
 10 
 
 2^ 0-7547 1 15 
 
 1 
 
 "il 
 
 3854 
 
 7 8^ 
 
 1760 
 
 
 0.G085 
 
 12 
 
 2 8289|16 
 
 1 
 
 o-^ 
 
 0-5044 
 
 10 I 
 
 1780 
 
 
 0.7597 
 
 15 
 
 2iO-9I0f|l8 
 
 -^- 
 
 6917 
 
 1". 10 
 
 1809 
 
 
 I -0000 
 
 20 
 
 ll-OOOO 120 
 
 
 
 
 ,1-0000 
 
 20 
 
 
 
 
 
 Ta 
 
 BLE 
 
 I!. 
 
 
 
 
 
 Sums levied in 1800, equal in Burthen of IL 
 raised in certain Years. 
 
 rty. 
 
 
 Col.l. 11. 
 
 
 Col. 1. II. 
 
 
 Coll. and 
 
 
 nient 
 
 11. or ^Os 
 
 Prices. 
 
 £ s. d. 
 
 Popula- 
 
 £ s. 6 
 
 Col. 2. 
 
 
 MiO 
 
 Increa . 
 
 PopuU- 
 
 tic. 
 
 Increas- 
 
 £ s. d. 
 
 Years. 
 
 ing hx<d. 
 
 tion. 
 
 
 Prices. 
 
 
 ing both. 
 
 
 1700 
 
 
 \3613 
 
 2 • 7 24 
 
 1-5983 
 
 1 11 14 
 
 3'7743 
 
 3 13 5. 
 3 3 7* 
 2 11 10|t 
 1 19 7f 
 
 1720 
 
 
 2 1866 
 
 2 3 8| 
 
 1-4552 
 
 1 9 1 
 
 3-1823 
 
 1740 
 
 
 1-9581 
 
 1 19 li 
 
 1-3249 
 
 I 6 5^ 
 
 2-5945 
 
 1760 
 
 
 1 -6i32 
 
 1 12 10^ 
 
 1 -2063 
 
 1 4 li 
 
 1-9823 
 
 1780 
 
 
 1-3161 
 
 I 6 3| 
 
 1-0983 
 
 1 1 lU 
 
 1-4456 
 
 1 8 10| ■< 
 
 1800 
 
 
 I '0000 
 
 1 
 
 i-oooo 
 
 1 
 
 1 -0000 
 
 I 0* 
 
 29. The fractional and money values, in the 
 first section of the first table, are the same a& 
 those, determined by Mr. Wheatley^ p. 2i7i. 
 and are a series of sums equal in burthen on 
 each individual, to the payment of twenty 
 shillings in 1800, population being- taken as 
 fixed : the fractional and money values of th& 
 j^econd section exhibit a corresponding seri^ 
 
CHAP. I.] OF PUBLIC DEBTS, 419 
 
 of the same values, prices of commodities be- 
 ing constant, and population increasing : the 
 terms of the third fractional column are the 
 products of those of the first and second in 
 the same line, followed by the money values 
 of them. The first, second, and third frac- 
 tional columns of the second table are the reci- 
 procals of those of the first respectively.* 
 
 * On the construction of the table of the successive value» 
 of money for the last century, adopted from Mr. W. here, 
 the following observations may be made. 
 
 There are two modes in^ which that value can be deter- 
 mined for any series of years : the first is, by dividing the 
 national expenditure by the number of people in eacjjyear, 
 the quotients will be a series of sums proportional to the 
 mean prices of commodities, or the reciprocals of the suc- 
 cessive values of money. One such quotient, for the year 
 1688, Mr.King exhibited ; and ifthe process whereby he de- 
 termined the expenditure be just,and it could be recovered, 
 the whole progression would be easily determined. 
 
 The second is thus : let a list of the different commodi- 
 ties ordinarily consumed by a person of the middle rank of 
 life be made out ; and the quantity of each requisite to the 
 consumption of a given number of such individuals for a 
 given time be assigned ; the aggregate price of this set of 
 commodities for any one year will be reciprocally as the 
 value of money for that year ; but all the prices would be 
 better taken from the average of a sufficient terra of years. 
 It must be noted, that different commodities have varied in 
 price with different celerities, whence the proportion of 
 
 E E 2 
 
420 OF PUBLIC DEBTS. [bOOK III, 
 
 30. The application of these tables shall 
 now be shown, to one of the numerous case& 
 determined by Mr. Wheatley from his own ta- 
 bles, retaining his numbers. He states the 
 revenue in 1800 at 30 millions ; the multiplier 
 to this, in the last section of the second table, 
 if5 unity: the revenue in 1700 he states in 
 round numbers at four millions ; the tabular 
 multiplier to which is 3*77 13, and the product 
 15,097,2001. A payment, therefore, of four mil- 
 lions, at the more remote period, was equal in bur- 
 then toK1,097,200l. at the nearer,or the burthen 
 of the state was nearly doubled : and here Mr. 
 
 each consumed must be taken into account ; the average 
 charge of maintaining one man for one year being the point 
 sought. The mean variation of price of all the enumerated 
 commodities will give a false result, resting on the tacit as- 
 sumption , that the expence incurred in the year for each i» 
 equal. ^ 
 
 The mode in which Sir G. Evelyn has proceeded to de- 
 termine the series of prices given by Mr. W. is not explain- 
 ed by him. It is supposed here to be by the valuation of 
 a set of commodities, each of the proportional quantity 
 above described. 
 
 After these two rules, resting on one common principle, 
 it is proper to note, that Dr. A. Smith has affirmed, that 
 corn is " a more accurate measure of the value of money 
 " than any other commodity or set of commodities," Book 
 L cliap. 11, 8vo. 1774, voU i, p. 293^ 
 
CHAP. I.] OF PUBLIC DEBTS. 421 
 
 W. regarding increase of prices only, and 
 omitting that of population, takes the multi- 
 plier for 1700 from the 1st column, where we 
 find 9-3613; by which, multiplying four mil- 
 lions, we have 9,446,200 (9,400,000 W.;) but 
 in the payment of each period, and particu- 
 larly the latter, there is an error in his state- 
 ment of the revenue ; and the correcter result 
 will be, that the burthen increased in the cen- 
 tury by 76'73l. per cent. Again, if a similar 
 comparison were instituted between the onus 
 of the taxes of 1700 and 1790, the latter will 
 be found to exceed the former by 15*451. per 
 cent. only. The two last results will be ex- 
 plained in a note below,* where the importance 
 
 * Mr. ^/*^rfAwr states the revenue of 1700 at 3,769,3001- 
 (p. 24) and its permanent and temporary amount jointly in 
 1«00 at 36,728,0001. (p. 25). The former is the income 
 from England alone, the latter contains that of Scotland, 
 which must be separated from it when the increase of the 
 burthen of England is enquired after. This is here taken 
 at 1,833,3301. that of 1789 having been 1,100,0001. (Sin- 
 clair, part 3, p. 351,) and must be deducted — 2dly, the 
 former income tax is also included in the total at seven mil- 
 lions. By funding the capital it wad pledged to pay, the 
 revenue was veiy soon reduced by about 4,480,0001. and it 
 is only the resting part of the charge which must enter the 
 great total ; and, 3dly, the point enquired after is, the ratio 
 ef increase ofexpence absolutely such; money raised for 
 accessary public expenditure. From this great total, there- 
 
422 OF PUBLIC DEBTS. [BOOK III. 
 
 of the subject has occasioned some further exem- 
 plifications to be given of the use of the tables. 
 
 fore, money raised for a beneficial and lucrative purchase 
 ought to be excluded ; it is a levy dissimilar in kind, and 
 cannot be mixed with the former ; the sinking fund comes 
 under this description; and its amount in 1800 is taken at 
 5,270,0001. These three articles together form a subtra- 
 hend of 11,583,3331. and the levy upon England, for ex- 
 penditure in 1800, is to be taken at 25,144,0001. Now the 
 annual charge in ISOO, equal in burthen to 3,769,0001. 
 will be equal to that sum multiplied by 3*7743, or 
 14,233,0001. ; which is to 25,144,0001. as 1001. to 176-73. 
 
 • Again, the arithmetical mean of the factors in the third 
 column of the second table,for 1800 and 1780, is 1-2228, an 
 approximation to that of 1790 ; dividing 14,233,0001. by 
 that mean, the charge in 1800, equal in burthen to the 
 whole revenue in 1700, becomes 11,634,0001. In that year 
 Mr. M' Arthur states the total revenue at 15,732,0001. ; 
 which, deducting as above, 1,100,0001. for that of Scotland, 
 and 1,200,0001. for the sinking fund, is reduced to 
 13,432,0001. ; the ratio of which to 11,634,0001. or the pro- 
 portion of the burthen of 1790 to that of 1700, is the same 
 as that of 115-451. to 1001. 
 
 . The consequences to be drawn from tables constructed 
 as above are extremely extensive ; by such means, we are 
 enabled to decide, on demonstrative grounds, the much de- 
 bated question of the sufficiency or insufficiency of the 
 civil list. Its amount having been at the demise of George 
 II. in 1700, 8(j0,0001. it was voluntarily reduced by the pre- 
 sent king on his accession, to 800,0001.; that is, it was de- 
 termined by parliament, that the services and commodities 
 
CHAP. I.] OF PUBLIC DEBTS. 493 
 
 The reviewer indeed questions the propriety 
 of Mr. Wheatley*s inference as to the injustice 
 
 then to be procured by that sum were necessary for the 
 support of the dignity of the throne, if England should not 
 become more rich and populous. In the forty years elapsed 
 to 1800, the money would have represented the services 
 and commodities here taken on that great authority, as ne- 
 cessary to the proper maintenance of that dignity, would 
 have exceeded the original sum 800,0001. in the ratio of 
 10432 to unity, or amounted to 1,314,5601. 
 
 To return, therefore, to political arithmetic : we may like- 
 wise from the table determine, whether the grant of 
 800,0001. for the civil list, at the accession in 1760, was not 
 a profusion condemned by the laudable oeconomy of our 
 ancestors. It appears by the table, that an annual payment 
 of S-71511. (=>7743— 0592) in 1760 was no more than 
 equal in burthen to 1*98231. in 1700 ; which measures are 
 in the ratio of 1*8741 and unity respectively. In 1702, 
 700,0001. was voted to Queen Anne for the civil list : that 
 sum, therefore, was in that year the same burthen as 
 1,311,8701. in 1760, when 800,0001. was settled on the pre- 
 sent king for the same purposes. The queen, indeed, con- 
 tributed 100,0001. a year to the war ; but the sum she effec- 
 tively received, 600,0001. was equal in burthen to 
 1, 124,4601. at the accession. 
 
 In 1742, 100,0001. a year was settled by Parliament upon the 
 Prince of Wales; if that sum was properly assigned, a sum ex- 
 ceeding itinthe proportion of (2-59451.— -0-0612) 2-53331.to 
 vnity, or 253.3331. is required at this present : the allowance 
 to ambassadors follows the same rule. But the stipends of 
 all offices paid by the state, the number of persons exer- 
 
424j of public debts. [book lit, 
 
 of depreciating the'annuities of the fundholders, 
 and as far as they are merely a speculative fund, 
 we have seen little injustice occurs; but to us 
 it is obvious that as rent and interest of money 
 are designed for the support of all those who by 
 merit, industry or inheritance have acquired a 
 permanent income, the hardship upon all such 
 persons is as severe and as justly deserving of 
 remedy as the insufficiency of the royal income, 
 or salary of the crown, which can be viewed in 
 no other light than the permanent income of all 
 the subjects. We have particularly noticed this 
 point, because many are ready to acknowledge 
 the depreciation of money when the charges of 
 the state and the arrears of the civil list are in 
 question, but absolutely deny it on every other 
 occasion. 
 
 31. It should also be observed that in our 
 opinion it is not the immediate pressureof the 
 taxes which constitute the grievance,because we 
 see that they are equahzed by the depreciation 
 or debasement of money. Indeed such taxes 
 could notbe raised without continualdebasement, 
 which affords the key to all the mysteries of 
 
 €181 ng them increasing with that of thepeople,should increase 
 only as the price of commodities, and are determinable by 
 the first columns of the tables. 
 
CHAP. I.] OF PUBLIC DEBTS. 425 
 
 modern finance. But, on the contrary, it is the 
 gradual yet rapid unceasing debasement of paper 
 money, which occasions distress to all but 
 the prosperous speculator in trade, allows of 
 no refuge for exhausted industry, no tranquillity 
 for philosophic retreat, and deprives all leisure 
 and retirement of its wonted dignity. It is this 
 which leaves industry no excitement from hope, 
 while it gives to speculation all the spur of 
 want, all the goadings of dire necessity, and 
 deprives society of that class of quiet, calm^ 
 contented seceders from the bustle of active lifej 
 in whom alone reside all the learning, patri- 
 otism and philosophy, and the better part of 
 the virtues of the age ; a class without which 
 corruption and luxury must soon become unf 
 boundcjd. 
 
 32. Its effect on the labouring class, we have 
 seen, is of all things most cruel^; for it gradually 
 tends to drive them to absolute want, unless 
 they can hereafter agree to receive their wages 
 in a composition for corn as landlords will 
 speedily do with respect to vent. 
 
 35. Adam Smith has truly said " labour it 
 " the real measure of the exchangeable value 
 " of all commodities, never varying in its own 
 *' value ; it is alone the ultimate and real 
 
425 OF PUBLIC DEBTS. [bOOK III. 
 
 " standard by which the value of all commo- 
 *' dities can at all times and at all places be es- 
 *' timated and compared. It is their real price: 
 *' money is their nominal price only." (Book 
 I. Chap. V.) Hence labour should be equally 
 paid, and not deprived of its due support and 
 just reward, and being duly paid, all things 
 else in the state must be well regulated ; for 
 the labourers form the mass of the community, 
 and deserve the peculiar guardianship of the 
 profound statesman. Unless they are support- 
 ed in comfort, slavery or rebellion, want or 
 anarchy will necessarily follow, and how they 
 have suffered during the last century may be 
 seen by considering that about 1688, when 
 paper money commenced, the quartern 
 loaf was at fivepence, and the average wages 
 of husbandry labour about six shillings 
 a week ;. ( see Eden on the Poor^ ) conse- 
 quently the labourer received twenty-four 
 such loaves weekly. In 1792 the same labour 
 was nine shillings per week, the loaf seven 
 pence, and the bread price of labour fifteen 
 loaves per week ; in 1812 labour is valued in 
 money at about fifteen shillings, the quartern 
 loaf one shilling and sixpence or more, and 
 the real price of labour ten loaves a week. 
 JLandholders who have let long leases are equally 
 injured, and the stockholder, or mortgagee, 
 or curate, who with a pound sterling annuity 
 
CHAP. I.] OF PUBLIC DEBTS. ^ 42/ 
 
 in 168B could purchase eighty loaves, would 
 Teceive in 1792 only thirty-four at sevenpence 
 each, and now only thirteen at one shilling 
 and sixpence each, and in thirteen years more 
 will at the same rate of depreciation receive 
 not one loaf for his pound sterling, as it is 
 falsely called. It is therefore obvious that 
 this must be redressed, and when we argue 
 upon diminishing the pressure of public bur- 
 thens by depreciation, we only expose the means 
 by which war and taxation are supported. 
 
 34. Mr. Young estimates the fair wages of a 
 day's labour at a peck of wheat, and says that 
 in the long period which passed without com- 
 plaint previous to the price of corn rising to 
 excite clamour, the average price was 4s. per 
 bushel, and the rate of wages Is. a day: during 
 which period poor rates were low and not 
 granted to persons able to work. This propor- 
 tion was a peck of wheat a day, and if the same 
 were established at present all complaint 
 would be radically removed. The same thing 
 might be said of all other labourers ; who 
 should estimate their wages in corn and not in 
 money, but be paid in money rated by the value 
 of corn. 
 
 35, That landlords will do this cannot be 
 doubted, and then it is obvious that whatsoever 
 
428 OF PUBLIC DEBTS. [BOOK III. 
 
 maybe the money price of commodities, the 
 landholders, the traders, manufacturing work- 
 men and the labourers will see the debts 
 of the country, and the nominal wealth of 
 every individual, in money, increase, without 
 any cauge of repining. 
 
CHAF. 11.] PAYING THE DEBT, &C. 4^9 
 
 CHAP. If. 
 
 Of paying the Debt of the State : of Compound 
 Interest, and Accumulation of Money by 
 Sinking Funds, 
 
 1. When a debt exceeds the value of the 
 whole disposable property of the debtor, it can 
 only be liquidated by instalments or by a com- 
 position. Of these modes the former is the 
 anticipation of hope on contingent gains, 
 and the latter is the result of despair upon the 
 accession of future means, and the consolation 
 of saving a part from the wreck of insol* 
 vency. The debts of the state are, however, 
 contracted in war, and the intervals of peace 
 seldom afford time for their payment fairly, 
 by instalments. Accordingly we shall perceive 
 in the course of our inquiry, that they are 
 ultimately discharged by some one or other of 
 the various modes of composition, either under 
 an avowed or concealed insolvency. 
 
 2. The whole property that the state can at 
 any time command, or put to sale, cannot in 
 money produce as much as the whole amount 
 
4S0 OF PAYI^G A DEBT [eoOKIII. 
 
 of the money existing in the country ; 
 because the whole money in circulation 
 must, at any given moment^ measure the 
 value of the whole stock of vendibles brought 
 to market ; and, unless the state can at once 
 put every thing up to sale, and tempt all pos- 
 sessors of money to become buyers, to the 
 amount of the whole stock, it can only com- 
 mand a part of the circulating medium. 
 When, therefore, its debts exceed the stock of 
 the circulating medium, it is impossible to li- 
 quidate them otherwise than by instalments, 
 or immediate and positive bankruptcy. 
 
 3. In the year 1786 the debt of the state in 
 GreatBritain amounted to ^yi^^ 1 3,043L or more 
 than ten times the amount of all the money 
 then existing in the country, and it was abso- 
 lutely impossible to have paid the debt, had 
 it instantly brought to the hammer and sold 
 all the land, houses and commodities in the 
 three kingdoms ; for these could not have pro- 
 duced, for prompt payment, one tenth part of 
 the debt, and consequently the state could by 
 no possibility have paid more than two shilling* 
 in the pound. 
 
 4. By compound interest it has been said 
 by Dr. Price and others, however, that a pennj 
 
CHAP. JI.} ATCOMPQUND INTEREST, &C. 451 
 
 laid out at interest, will in IS 10 years amount 
 to as much, money as would be coined from 
 381,860,000 times the weight or magnitude of 
 the who]e terraqueous globe or the earth in 
 solidbullion, if the interest were accumulated 
 yearly; or to ], 12 1,470,000 such globes if ac- 
 cumulated half yearly, or to 1 ,905,680,000, such 
 globes if accuHiulated quarterly. But this is 
 a plain absurdity, for interest is the produce 
 of the use of money, which cannot produce^ 
 any thing except by the means of labour ; and 
 when money has measured the whole existing 
 stock of the nation, its increase can onlv di- 
 minish the value of each individual piece. 
 Wherefore, when a penny by interest has ac- 
 cumulated till the lender is intitled to the 
 whole of the current coin, he can accumulate 
 no more wealth in 'money, and cannot pur- 
 chase even one whole year's produce of Eng- 
 land with his gold. It is further palpably 
 absurd, because of the impossibility of coining 
 the whole of our globe, much more 200 millions 
 of such globes as the earth into money. W^ien 
 coined also the guineas would be mere gold 
 counters, worth no more than 20,000,000 of 
 guineas, which were once supposed to be cir- 
 culating in England, A. D. 17,74 ; unless upon 
 a supposition that they might be exchanged 
 and pass current from the planet Mercury to 
 
45i OF paVixg a debt ^book rtir 
 
 the planet Herschell^ and so 6ri through atllthe 
 Regions of the solar system. For it is demon- 
 idtl-able that ev^ry doubling of the circulating 
 riiedium is the redaction of it to on^. half of it^ 
 value, unless popuhtion and production are 
 reduced also. 
 
 6. Yet upon this basis of absurdity, has^ 
 been raised the scheme of a sinking fund to 
 pay the national debt of England, which iri 
 1811 carries an interest of 30,500,678l.0s.9d. aiirf 
 which if all were real sterling money would be 
 more than 801,386,735 guineas,or 17,808,8 l61bs. 
 tVeight of solid gold, and at 5l. per ounce, or 
 60l. per pound troy, a price which it will soon 
 reach, would be worth in notes about 
 1,072,448,8901. To comprehend the amount of 
 this debt more fully we may adopt a some- 
 what ludicrous calculation for the year 
 1810, wherein it is stated, that the national 
 debt funded and unfunded on the 5th of Ja- 
 nuary, 1810, was 811,898,0811. which are 
 equal to 773,236,257 guineas, which, at 5dwts. 
 8 grs. each guinea, weigh 6312 tons, 11 cwt. 
 S qrs. olbs. 1 oz. 6 drs. nearly, averdupoisi Now, 
 supposing a waggon and five horses 4:o extend in 
 length 20 yards, and to carry 9\ tons of these 
 guineas, the number of teams necessary to carry 
 the whole, would extend in length 28 miles 
 23 yards nearly. To count the debt in shillings, 
 
CHAP. II.] AT COMPOUND INTEREST, &C. 433 
 
 ^t the rate of 30 shillings in a minute, for ten 
 hours a day, and six days in a week, would 
 take 2469 years, 506 days, 1 7 hours, 30 minutes 
 nearly. Its height in guineas, supposing ^0 
 guineas in thickness an inch, would be 610 
 miles, 339 yards, !.) inches; and supposing each 
 guinea an inch in diameter, they would exv, 
 tend in a right line 12,203 miles, 150 yards 7 
 inches. Moreover, these guineas would 
 cover 348 acres, 2 roods, 202 yards, nearly. 
 And lastly, in shillings, each an inch in 
 diameter, they would cover 7319 acres, 1 rood, 
 349 yards ! 
 
 6. By several acts of parliament passed in 
 the years 1786, I7li2, and 1802, first an 
 annual sum of 1,000,0001. next a further sun 
 of 200,0001. and lastly a sum of one pound in 
 every hundred, upon each loan raised by parlia-, 
 ment, are directed annually to be applied in 
 the purchase of stock and annuities ; " the in- 
 " terest whereof" in the words of the acts of 
 parliament, " shall accumulate and be applied 
 '' in like manner; so as that the whole 
 ** of the several redeemable public annuities, 
 " charged upon the public funds of Great 
 " Britain, shall be paid off wnthin 45 years 
 " from the respective periods of the creation 
 " of such respective charges and public an- 
 
 F F 
 
434 PAYING A DEBT [bOOKIII^ 
 
 " nuities." And accordingly it is certain, 
 th^t, by the process described in these acts of 
 parliament, each successive charge upon the 
 public funds will be liquidated, according to 
 the strict letter of the agreement with the pub- 
 lic creditors. 
 
 7. It is also equally certain, that by the 
 effect of credit notes not convertible into coin, 
 notes might be created nominally to represent 
 the coin contained in 300 millions of solid 
 globes of gold, each equal to the terraqueous 
 globe of the earth which we inhabit, or the 
 whole solar system. The actual worth of these 
 notes, in exchange might not, however, be one 
 thousand pounds ; and if it were possible to 
 coin the whole weight of the solar system into 
 guineas, and pay them in one day on the Royal 
 Exchange, they could scarcely value in ex- 
 change, on any true principles of the science of 
 money, one half of the real and personal pro- 
 perty ir the city of London. For it is not 
 probable that so great a portion of that pro- 
 perty could be brought to market in one day, 
 and the greater the quantity of money in circula- 
 tion, the less is the value of each individual 
 piece ; a fact which after what we have already 
 said, it is not necessary now to explain. 
 
CHAP. II.] AT COMPOUND INTEREST, &C. 435 
 
 8. It is equally certain, therefore, that to the 
 framers of this plan the science of money was 
 unknovvn,or the nature of money and circulation 
 price and value kept ^vholly out of view. They 
 attended only to the science of figures,and over- 
 looked the probable effects upon all property fe- 
 suiting from a circulation increased so enor- 
 mously, as, upon the supposition of the pay- 
 ment of the debt by such means, the circulation 
 of English currency must necessarily become. 
 
 9. If by the operation of a sinking fund 
 money 6ould be withdrawn from circulation 
 for a time, advanced at Intercast ift foreign 
 countries, and then returned in large portions, 
 for the payment of the debt, the most ruinous 
 consequences must ensue, by the certain and 
 violent depreciation of money ; and the greater 
 the resemblance of the actual operation of the 
 sinking fund to this process, the more mis- 
 chievous is its tendency. So that, if any sum 
 were so applied till the whole debt were paid 
 in one day, all monied men who should not 
 receive a due proportion of it, would be ruined. 
 
 10. Hence it will appear to every atten- 
 tive reader of this work, that, although by 
 the gradual accumulation of money at com- 
 pound interest, and laying out the annual pro- 
 
 F F 2 
 
436 PAYING A DEBT, &C. [boOK III- 
 
 ceeds in land, and the future rents also, th^ 
 private avarice of any individual might be gra- 
 tified to an extent bounded only by the limits 
 of purchase and of terrestrial acquisition ; yet 
 the accumulation of actual money, or its repre- 
 sentatives, is an unreal vision of positive delu- 
 sion and unexampled absurdity. That the state 
 might accumulate,as a private individual would 
 accumulate, is plain, but equally absurd ; be- 
 cause the gradual purchase of the land, its 
 produce, and all other commodities by 
 the state, is the purchase by all the individuals 
 cumulatively taken of all their own property,and 
 would be giving to the state nothing more than 
 it possessed previously, namely, the command 
 of all its own property and possessions. 
 
CttAI'. III.] OF THE TRUE OPERATION, &C. 437 
 
 CHAP. III. 
 Of the true Operation of a Sinking Fun(f, 
 
 1. Mqney raised by taxation is taken in 
 some instances from the surplus income of the 
 people, but,through the inequality of taxesbear- 
 ing on the necessaries of life, it is more fre- 
 quently withdrawn from the necessaries of the 
 multitude ; and, in all cases where it bears upon 
 persons of fixed income, it must necessarily 
 diminish their efficient expenditure. They have 
 naturally no money either to spare, or to lend, 
 and by the continual progress of taxation, how- 
 ever cautious in their expenditure, will ulti- 
 mately be deprived of all surplus, and must 
 sink in society. 
 
 2. Persons in trade, on the contrary, alway 
 indemnify themselves for andoftenreceiveaprofi 
 upon, taxes on consumable commodities. Thei 
 capital is however diminished. But this in a 
 state of credit, where mere credit notes supply 
 the place of money, is easily replaced by the 
 
4S8 OF THE TRUE OPERATION f BOOK III, 
 
 discounting of bills either for accommodation 
 or upon real transactions. 
 
 3. All money raised by taxation is forcibly 
 withdrawn from expenditure, and if accumula- 
 ted for any time, to be applied at interest, is 
 diverted from its ordinary channel to a new 
 one of a very different kind. And by taxation 
 for the purpose of the sinking fund, money is 
 taken from persons who have none to spare, 
 and for a time accumulated. 
 
 4. The sinking fund, being established in 
 peace, a sum of one million was annually di- 
 verted, from expenditure, and thrown into the 
 slock market, where its first operation was to 
 increase the capital of the stock jobbers, and 
 the price of stocks. By increasing the stock 
 market also it created a greater capital dis- 
 posable on loans or in speculations. The 
 interest of money accordingly fell ; country 
 banks w^ere formed, speculations in cotton and 
 other articles took place ; credit and the circu- 
 lation of bills increased, many failures ensued, 
 and canal and other speculations were set on 
 foot, although the produce at that time, A. D. 
 1794-, was not more than 15630,6151. 
 
«HAP. III.] OF A SINKING FUND. 459 
 
 d,At the commencement ofthe waragainstthe 
 French nation, or the anti-revolution war, this 
 new capital was diverted into the channel of 
 stock exchange and loan dealings,and finally dis- 
 tributed itself by means ofthe state expendi- 
 ture, throiigh the general circulation. Thus, al- 
 though thefund was continually increased, the 
 channel for its employment was increased also ; 
 and now by progressive additions and accumula- 
 tions the sinking fund produces, A. D. 181;2, 
 14,337,8341. and in 1 826,will by the calculation 
 of hord C as tier eagh amount to 27,11^,8811. 
 This calculation being made in 1806' gives no 
 allowance, however,for the increase of the fund, 
 inconsequence of additions to it by subsequent 
 loans, and in the first or second year of peace, 
 should it take place between 1812 and 1826, ^ 
 gum between 14 and 30 millions and upwards, 
 probably 20,000,0001. or 25,000,0001. will be 
 diverted from the ordinary channelsof expence 
 to new ones, and this will be repeated an- 
 nually, and will be annually increasing. 
 
 6. The ordinary expence at present, is the 
 expenditure ofthe state in war: and the new 
 application will be chiefly on loans to private 
 persons, or by novel employments of capital, 
 in trade, or in canal and dock speculation. 
 Competition will then be afforded by the raising 
 €>f new. country banks, or by the agency of 
 
440 OF THE TRUE OPERATION [bOOK III. 
 
 brokers, through whose means discounts will 
 be effected, sometimes in preference to the 
 bank of England and at lower interest. 
 
 y.The expenditure of government ceasing,and 
 capital requiring new channels for employment, 
 prices w ill then rapidlyincrease;because,in seek- 
 ing anew channel of expenditure, money must 
 always force itself by out-bidding the present 
 market price. The government expenditure 
 being withdrawn, it might be supposed that 
 the loss of so extensive a dealer in the market 
 would have a great effect in depressing the 
 value of commodities ; but as its expences 
 consist in articles used in war, and not in 
 peace, the withdrawing of such a competition 
 will most materially affect only the shipping in- 
 terest, and such articles as are used in war, 
 which are, however, somewhat numerous. It 
 will, therefore, be obvious, that notwithstand- 
 ing the reduction which may happen upon 
 some commodities ; prices in general will ne- 
 cessarily be raised in the capital, and by con- 
 sequence also must shortly afterwards rise in 
 
 the country. 
 
 8. By the operation of the sinking fund, in 
 
CHAP. III. J OF A SINKING FUND. 441 
 
 peace, a competition for discounts will be 
 instituted against the bank of England, with 
 a large increase of capital, and either the bank 
 discounts will be reduced greatly^ or those, as 
 well as private discounts, extend^^d. In the 
 former case, the profits of the company and 
 value of bank stock will be greatly reduced; 
 and in the latter, by increasing such discounts, 
 through competition, money will be greatly 
 increased, and prices raised very rapidly. Hence 
 it will appear, that the necessary effect of an 
 accumulated or sinking fund, operating in peace 
 is to depreciate money, and diminish the 
 value of all government annuities, rents, pen- 
 sions, salaries, stipends, and wages enormously. 
 Whereas the real effect of a sinking fund in 
 war appears rather to consist in the raising of 
 money involuntarily, from one part of the 
 community, to be applied in the aid of stock- 
 jobbing speculations; whereby it raises the 
 price of funded securities, 
 
 9. To endeavour to explain this so far as is 
 consistent with our limited knowledge of the 
 secrets of thestock market,we must observe that 
 the commissioners of the sinking fund lay out 
 weekly 250,0001. in the buying of stock, which 
 ijs purchased of jobbers at 2s. 6d. advance on 
 the market price per cent, and affords them a 
 
442 OF THE TRUE OPERATION [bOOK III, 
 
 profit of about 6 shillings per cent., as tbe3'' 
 always purchase of the real stockholders at 
 2s. 6d. below the market price. 
 
 10- By means of loans and omnium, 
 the instalments of which are frequently paid 
 by the bank and omnium held over, a stock 
 of the last year's loan is generally kept back ; 
 and with the money so received, and the profits 
 so made, the jobbers redeem their omnium and 
 have more new stock to sell at an advance of 
 5s. 6d. on the market price. We have not 
 been able to institute such inquiries as we 
 should deem necessary to explain thoroughly 
 the arcana of this traffic, and should wish to be 
 furnished hereafter with a knowleds^e of the 
 nature of these dealings from some practical 
 man, and particularly of the amount of 
 a day's sale, and the number of persons com- 
 monly concerned, as well in the sales of the 
 loan dealers as in the sales to the commission- 
 crs ; but it appears probable that the amount 
 of the capital employed does not by any 
 means equal the week's expenditure by the 
 commissioners of the sinking fund. 
 
 Ih The effect of a sinking fund ia war, 
 therefore, appears to be simply that of a sort of 
 forced loan to governmentj by the aid ofwhich^ 
 
CHAP. III.] OF A SINKING FUND, 443 
 
 the' debt of the state is greatly increased be- 
 yond the possibility of payment. And in 
 peace the effect of it is, in some degree, that 
 of a forced loan to cq|nmercial and agricultural 
 speculators and others. That is to say, it forces 
 money into the channel of the circulation 
 amongst bankers, brokers, and jobbers ; through 
 whose hands it must, in peace be generally dis- 
 persed. Both in peace and war, however, 
 some correctives are found to these effects, by 
 withdrawing somewhat from the n;ational fund 
 of circulation for that money which would 
 ordinarily be employed in loans to private per- 
 sons, if the taxes had not withdraw^n it from the ^ 
 hands of private individuals. But on the jvhole 
 this effect is increased, and more money divert- 
 ed to these purposes than would naturally be 
 employed. 
 
 12. The precise effects of a sinking fund of 
 S7,000,000l, and upwards, in ISi^G, annually 
 increasing cannot be ascertained by any argu- 
 ments from experience : but some approxima. 
 tion may be afforded by considering the effects 
 of 1,000,0001. in 1793, compared with the. 
 supposed value of the whole currency,and thus 
 ascertaining its proportion to currency. If, 
 therefore, the currency were at that time 27 
 
444f OF THE TRUE OPERATION [bOOK III. 
 
 millions, tho proportion of the sinking fund tottie 
 total of the currency was one-tvventy-seventh, 
 and the proportion of the sinking fund in 1826 
 to the circulating currency, should be estima- 
 ted at not less than one-twentieth, which will 
 make the whole currency in 1826 amount to 
 54-0,000,0001. increasing annually. Should it 
 only bear a proportion of one-twentieth, the 
 currency will be 270,000,0001. or it one-fifth, 
 it will be 135,000,000L 
 
 13. This view of the subject is, we believe, 
 entirely novel ; but we are afraid it is not the 
 less accurate for being hitherto undeveloped. 
 When the Earl of Lauderdale published his 
 Yiew of National Wealth, and announced to the 
 world the inconveniences that must arise 
 from throwing into circulation large masses of 
 money annually accumulated, it was answer- 
 ed by many, as it was deemed satisfactorily, 
 that his lordship had overlooked the material 
 fact that the money was already in circula- 
 tion; that it was not newly created but actually 
 existed, and thus th^e could be no inconve- 
 nience arise. 
 
 14, Now this answer appears fallacious; 
 for, owing to the circumstance of the war 
 luving commenced in the infancy of tJic^ 
 
CHAP. III.] OF A SINKING FUND* 445 
 
 operation of the sinking fund, its effects have 
 not been perceptible ; because it has not had 
 its full and fair play, the money which it 
 discharges upon the public being immediately* 
 absorbed by new loans. But, during a peace, this 
 must be felt ; and though we should admit that 
 the money must actually exist in circulation 
 before it can be applied by the commissioners 
 who manage the sinking fund, yet, if we pay 
 attention to the nature of circulation, we must 
 see that it is only a portion of the whole cir- 
 culating medium that can be so applied : and 
 that, whatever be the amount' of the annual 
 savings of the sinking fund, it can only 
 amount to a portion of the currency. Before, 
 therefore, the sinking fund can be made to 
 produce a given sum, the total currency must 
 be relatively increased* 
 
 15. It is not indeed possible, that the circu- 
 lating medium could have increased, with a 
 proportionate rapidity, while the currency con- 
 sisted of gold; but any assignable sum maybe 
 created in bank notes ; and it is probable that 
 without this aid it must have stopped 
 long ago. But if, as is almost certain, 
 the currency must increase as the sinking fund 
 increases, there recurs upon us all the disad- 
 vantage of increased but depreciated currency- 
 
446 OF THE TRU£ OPERATIOX [bOOK III* 
 
 For it is absolutely certain that if the process 
 of compound interest could by repeated accu- 
 mulations augment the currency, as it should 
 appear to do in books of arithmetic, by a series 
 of geometrical progressions, doubling every 
 fourteen years or less; then, in the same manner, 
 would the natural operation and effect of 
 money and prices reduce it in value in a sub- 
 duplicate proportion during the same period. 
 Thus at the end of a million of years, although 
 the number of pieces would be increased aJmost 
 beyond calculation, their value would be de- 
 creased in an equal ratio, and real wealth com- 
 pared with price and value remain just as at 
 the beginning. To exemplify this, by the pre- 
 sent case, supposing the currency in England 
 is 50,000, OOOl.and by the Operation of the sink- 
 ing fund it is increased to 150,000,0001., as we 
 see is more than probable in 1826, prices 
 must then have risen two-thirds, or be in the 
 proportion nearly of three to one, and the value 
 of a 31. per cent annuity will be only equal to 
 one pound in the currency of 1811. But 
 in the progress to this «tate, as at the period 
 when assignats were current in France, the 
 greatest inconveniences must be felt. 
 
 IC. To ascertain the progress of currency. 
 
CHAP. III.] OF A SINKING FUND. 447 
 
 and the effect of taxes during its increase, it is 
 fle(;;pssary to possess several elements of calcu- 
 iation which are yet unknown ; amongst which 
 one of the most necessary is the total amount 
 of currency in each year from 1786; for which 
 we are left to conjecture, from not knowing 
 the amount of country bank notes. These 
 elements might be obtained, in future, by im- 
 posing an increased stamp duty of id. or 2d. in 
 the pound on every promissory note payable 
 on demand, and requiring them to be renewed 
 annually, w^ithout increased expence for three 
 years. The stamp office would then ascertain 
 the amount of paper currency in England ; and 
 financial operations be greatly facilitated. To 
 further this plan, a bank of deposit should be 
 opep^d as at Hamburgh, by which the amount 
 
 ot real monev would be ascertained, 
 
 « 
 
 17. By the income tax, population returns, 
 excise and customs, and reports of the bank 
 directors, and by corn returns and agricultural 
 surveys, indeed, many elements are discovered 
 for calculations in political economy, which were 
 unknown to Dr. Adam Smithy and other phi- 
 losophers of the eighteenth century. And we 
 are in this respect placed on an eminence from 
 w hich we may carry our views probably to a 
 
 jk 
 
448 OF THE TRUE OPERATION [boOK III. 
 
 greater extent, though we may want the mental 
 sagacityand natural acuteness of political vision 
 which he possessed. Thus the income tax 
 affords a true cadastre or valuation of all the 
 land in England equal to that proposed in 
 France ; but, at the same time, the value of 
 commercial property and income is by the 
 same means very imperfectly ascertained. 
 
 18. It is foreign to our immediate views to 
 enter into these investigations at present, but . 
 the opportunities which are afforded to the 
 parliament of making enquiries through the 
 tax office returns, and reports of committees 
 which might be established for the ascertain- 
 ing of financial facts, would be gratifying to an 
 inquisitive speculator, and would shortly 
 place the science of political economy on the 
 basis of absolute certainty. Private philo- 
 sophy can only meditate in this science upon 
 possibility, but public power can institute 
 experiments to develope facts and bring to 
 light invaluable truths. Every discussion of a 
 financial question in parliament is useful, not ' 
 merely for the speculations of the leading cha- 
 racters whose judgment is mainly perverted by 
 party spirit,but for the remarkable facts and last 
 ing truths, not to say damning exposures which 
 
CHAP. III.] OF A SINKING FUND, 
 
 449 
 
 it elicits and throws into strong lighj|fe Ere 
 many years have elapsed, the science of 
 political economy will in this manner be 
 perfected, and the art of government rendefed 
 manifest to all capacities. 
 
 G a 
 
^60 HESTORATION OF COIN [bOOIL III, 
 
 GHAP. m 
 
 On the Restoration of Coin, durinor the ContU 
 nuance of a large Debt and Sinking Fund. 
 
 1. We have seen already the difficulty of 
 restoring coin when once it is entirely banish- 
 ed from the circulation ; and this difficulty be- 
 comes greater by the introduction of two 
 prices, which it is almost impossible, during 
 that time, to prevent, 
 
 2. When, in fact, two prices ar6 once intro- 
 duced, the paper becomes more and more de- 
 preciated; and its value can only be support- 
 ed by diminishing its quantity, and a strict 
 attention to foreign exchanges. The intro- 
 duction of coin is, therefore, necessarily at- 
 tended with a diminution of currency, and in- 
 crease of its exchangeable value ; so that 
 annuities on government security can no 
 longer be paid in the same coin, without greatly 
 changing the pressure of the taxation. But 
 jEvery alteration in the settled mode of taxa- 
 
I 
 
 CHAP. IV.] DURING THE SINKING FUND. 4^1 
 
 tion, and its existing equipoise and relative 
 pressure, is burthensome and dangerous to the 
 state, 
 
 3. When the revenue and expenditure of 
 the state has attained a fixed point, the quan- 
 tity of currency existing is necessary to that 
 expenditure. For, as currency equals demand, 
 and state expenditure, or the levying of taxes, 
 is a principal part of the demand, it cannot 
 safely be diminished. Nor is it possible to 
 diminish a currency and introduce coin, with- 
 out diminishing state expenditure. Because, 
 state expenditure increases the demand beyond 
 that of other countries, which has expelled the 
 coin by raising foreign exchanges and home 
 prices. Until the expenditure decreases, there- 
 fore, it is impossible to restrain the outgoing 
 of coin, OF to procure its return when ex- 
 pelled. Wherefore, in order to restore coin 
 after a high state of national debt and expen- 
 diture, these must be destroyed or reduced. 
 
 4. The evil of a national debt is its ten- 
 dency to depreciate money, ^nd the impossi- 
 bility of justly satisfying the creditor of the 
 state, arising out of the continual increase of 
 money. But, if the money be reduced, and 
 
 GG 2 
 
45^ RESTORATION OF COIN [boOK III. 
 
 the demand also reduced relatively, no mate- 
 rial change is effected ; and this would happen 
 if the debt were reduced relatively to the 
 coin, currency, and taxation. But if the 
 debt were destroyed entirely without compen- 
 sation, a great injustice must be committed by 
 the state, and, where the debt is large in pro- 
 portion to the exchangeable value of land and 
 commodities, a great part of the people would 
 be absolutely ruined. 
 
 5. Now the sudden ruin of a great part of the 
 people of property, and the reducing them to 
 absolute poverty, occasions a. thorough convul- 
 sion of the state. And if this ruin extended 
 to one- fourth only of the people of property, 
 the state of society would be broken up, to 
 be reformed from its elements, the most 
 dreadful anarchy be produced, and till the 
 new settlement of property, and a fixed go- 
 vernment, civil wars the most sanguinary and 
 violent would most probably arise. 
 
 6. For all violent changes in the state or 
 the relative condition of the people are essen- 
 tially revolutions. And the change of the re- 
 lative condition of the owners of 20 millions 
 
CHAP. IV.] DURING THE SINKING FUND. 4 53 
 
 of property out of 1 10,000,0001. which is the 
 proportion of the funded annuities to the 
 whole income, on which the property tax is 
 raised, would, by reducing one-fifth of the 
 people of property to ruin, occasion in Great 
 Britain a revolution of the most horrible kind* 
 At the same time the inability of a government 
 to perform its obligations, and pay its creditors 
 brings it into contempt, and leads to revolution, 
 which sooner or later, ensues from the in- 
 creasing debility of the state. 
 
 7.The actual distribution of wealth in any state 
 is the distribution of the land in unequal shares, 
 and the unequal possession of goods and money, 
 the latter of which in part, is raised in taxes 
 and distributed by the state in payment of its 
 creditors and its servants, or the governors 
 and their agents, with the military. But it 
 has frequently occurred in ancient states, and 
 in new conquests, that a new division of pro- 
 perty is made to suit existing circumstances:^ 
 Thus among the Jews, every fiftieth year 
 during the year of jubilee, it is said, that 
 all lands which had been alienated during 
 the interval returned to their former posses- 
 sors. 
 
4i64i RESTORATION OF THE COIN [BOOK IT. 
 
 8. Now supposing that by increasing bur- 
 thens, taxfes raised for payment of a debt be- 
 carfie intolerable, and the necessity of intro- 
 ducing coin is added to the evil, and coin 
 cannot be introduced without destroying the 
 taxes raised for paynient of interest, it is 
 plain, that without a new distribution of pro- 
 perty, the state annuitants must be wholly 
 ruined, and revolutionary convulsions ensue. 
 To remedy this evil, therefore, a new division 
 of property becomes necessary : when taxes 
 being destroyed, land, commodities, and all 
 produce will become more valuable relatively. 
 
 9. B-ut the creditors of the state have a 
 claim to part of the taxes, and taxes being 
 imposed upon commodities, land and its pro- 
 duce, they have a claim to be indemnified from 
 all these, when the taxes are no longer paid. 
 And as the reduction of taxes by removing 
 the claim of the annuitants, increases the value 
 of land, its produce, and all other commodities 
 in exchange, in a given proportion, the an- 
 nuitants have an equitable and just claim to 
 be indemnified by the distribution of the land 
 and commodities, according to this exact pro- 
 portion. 
 
 - 10. The details of a new division of pro- 
 
CHAP. IV.] DURING THE SINKING FUND. 4^5 
 
 perty in any state, cannot be given in a the- 
 oretical treatise upon science; they must be 
 discovered in the existing circumstances of the 
 state) and must be regulated with great dis- 
 cretion, and above all with equity, moderation 
 and justice ; which will best be attained by 
 allowing assessments to be made, impartially 
 by juries, and by various compositions be- 
 tween parties having specific claims. 
 
 1 1. Supposing the taxable income of the peo- 
 ple, estimated in the existing currency at 
 110,000,0001. and the claim of the annuitants 
 at 20,000,0001. the claim of the annuitants is 
 as one-fifth nearly, or 20 per cent, and may be 
 so estimated in any given value, in coin of any 
 denomination. The division of one-fifth of 
 the land is then easily made, and the portion 
 required may be conveyed to the same uses 
 as the stock, either in the hands of trustees in 
 every parish, or specifically by proper assess- 
 ments by means of commissioners, as in the 
 division of common lands newly enclosed. 
 
 12. The raising of commodities, in specie, 
 might be more difficult, but great facilities are 
 afforded by the system of the excise andcuston^s. 
 Coffee, cotton, corn, coals, beer, flour,flax,hemp, 
 iron, wine, spirits, and other commodities in 
 
4^6 RESTORATION OF THE COIN [bOOK III, 
 
 the gross, would be easily distributable and 
 might be bonded in government warehouses, 
 and the real produce only applied, in discharge 
 of such claims, providing by the purchase of 
 lands for all annuities in settlement. 
 
 13. Upon a new distribution of property, as 
 settled abov^, it would be easy to call in all 
 bills or credit notes, and to make an issue of 
 a new coin, exactly adapted to the emergency ; 
 which, by a due admixture of a proportion of 
 paper might be rendered nearly equivalent to 
 the currency of other neighbouring states ; and, 
 being issued on discounts, might easily be re- 
 duced gradually, to adapt itself to the state of 
 foreign exchanges. But assessments of damage 
 on all previous special contracts would be ne- 
 cessary, and every special contract must there- 
 by be reduced to a sort of meritorious claim of 
 uncertain damage, which in our law is called 
 quantum meruit^ when the claim is for labour, 
 and quantum valebant^ when it is for goods, at 
 an uncertain price or meritorious value. The 
 difficulty of thus arranging the private debts 
 of the people is very great, but without a proper 
 arrangement the greatest injustice must ensue. 
 
 14. Sudden changes of property leading to 
 revolution, it may be said that. an Agrarian 
 
GHAP. IV.] DURING THE SINKING FUND, 457 
 
 and proprietary law is a revolution ; but, 
 though it is a change which would produce 
 revolution, in a state declining or debilitated, 
 yet when made by the authority of the state, 
 possessing its full vigour, it is plain the au- 
 thority of the state must remain in all its force ; 
 and will be increased rather than diminished. 
 For the relative state of property is by that means 
 not disturbed, but the state is relieved from a 
 cumbrous burthen.* Thus the incumbrance 
 of debt being removed,; and a real currency 
 restored without confusion, the real wealth 
 and power of the state remain unimpaired, 
 ^nd new and better modes of levying imposts 
 may be adopted. 
 
 * Figurative language being the bane of all science, it 
 may be referred to a note to illustrate these principles, by 
 observing: that a revolution is like the fall of a venerable 
 pile, by dilapidation and decay, when the whole becomes 
 a heap of ruin and confusion; but by taking down the 
 parts carefully, the building may be rectified without in- 
 jury. It is in this way that revolutions can alone be prevent- 
 ad ; they always happen of necessity, arising out of Ion*; 
 aeglect, ov unavoidable changes in the state of society. 
 
458 OF TAXES, AND OF [bOOK UK 
 
 CHAP. V. 
 
 Of the Burthen of Taxes, and of a Tax on 
 Capital. 
 
 1. Taxes are the means by which all the 
 funds for the expenditure of the state are 
 raised, and these are applied either in the or- 
 dinary support of the persons employed in its 
 service, or in some extraordinary expenditure 
 on occasions of war and otherwise. The real 
 effect of taxation is to appropriate a certain 
 portion of all the labour of the nation, which 
 alone is ultimately productive of wealth, to 
 the support of those persons who are combin- 
 ed for the purpose of the government of the 
 state. 
 
 2. Taxes ultimately resting in this appro- 
 priation of labour, can in reality bear only 
 upon the annual production and revenue of 
 the people, and cannot,~without the most de- 
 structive and unjust violations of private pro- 
 perty, be nfiade to bear on capital. We have 
 considered labour as the only source of wealth, 
 nationally considered, though an individual 
 may possess wealth invested in houses, goods, 
 
GHAP. v.] A TAX ON CAPIxAt. 459 
 
 money, or lands, which have all been ac- 
 quired by labour originally, and by lending 
 or employing these may be said to use his 
 capital advantageously for the purpose of the 
 new production of wealth. Labour and skill 
 are alone the real sources of wealth ; but it 
 has been made a question what part of the 
 national wealth ultimately bears the burthen 
 of taxation. Locke is of opinion, that all 
 taxes are paid by the land, and there is rea- 
 son to think that, in a great measure, the pro- 
 prietors of the land suffer the most by the 
 heavy burthens of taxation, because indeed 
 they are most capable of supporting the bur- 
 then. 
 
 3. The taxing of land raises the price of all 
 its productions, as the taxing of commodities 
 raises their price. * Hence every man's in- 
 come in money remaining the same, every tax 
 must diminish the general consumption of the 
 article taxed, and reduce the effective wealth 
 of each individual. But by the increase of 
 currency and prices, and the improvements of 
 skill in the productive effect of labour, this is 
 in a great measure counteracted, and while 
 the taxes are moderate a general equalization 
 of the burthen is produced, and the people 
 suffer little by taxes ; except indeed the 
 
4^0 OF TAXKS, AND OF [bOOK III. 
 
 poorest individuals whose present income is 
 barely sufficient for support of life, and who 
 by the smallest deprivations must be driven 
 from existence. 
 
 4. By taxing the annual rent of land, the 
 produce of land is increased in price annuall}^, 
 and the burthen distributed equally, not 
 amongst the land owners merely, but amongst 
 all the consumers of the produce of land. And 
 by taxing commodities generally, the burthen 
 is also distributed amongst the consumers of 
 those commodities; so that in the ordinary 
 process of taxation it bears entirely upon the 
 annual production and consumption of com- 
 modities. Taxes are therefore ordinarily Con- 
 sidered as raised upon the revenue or yearjy 
 income of the people. 
 
 5. In some particular emergencies, when the 
 amount of the taxes upon revenue are deemed 
 insufficient for the support of the state, it has 
 been proposed to augment them by a tax on 
 capital. This, wherever it occurs, is the 
 wildest vision of political ignorance that 
 despotism and folly can invent ; and we shall 
 shortly demonstrate that it means nothing 
 more than to raise the amount of the taxes 
 beyond the endurance of a patient and degraded 
 
CHAP. V.J A TAX ON CAPITAL. 461 
 
 people, and that when it is attempted to be 
 carried into effect by a tax levied in money, 
 it ends only in the ruin of all landed proprietors, 
 and the disappointment of the financial vision- 
 ary by w^hom it is attempted. 
 
 6. When a tax is laid upon any commodity, 
 it bears upon the whole existing stock ; and is , 
 paid amongst the consumers, whatever be the 
 monied amount of the tax : and as commodities 
 which are consumable are never existing in the , 
 country beyond the natural consumption of the 
 year, that is, beyond the quantity which will 
 be sold to consumers within the year ; a tax on 
 commodities is necessarily a tax on the mere 
 reVenue of consumers ; and can never be made 
 
 a tax on capital. 
 
 7. Such a tax can only be levied by raisi/ig 
 an assessment upon the supposed money (Capital 
 of the people, and the landed proprietors. Now 
 when this comes to be paid, if all persons were 
 obliged to pay one-tenth of their capital in 
 land, or mone}^ or in land estimated in money,, 
 the most mischievous and ruinous effects must 
 ensue; for the whole stock of money in circu- 
 lation is just as much as is necessary to carry, 
 into effect the sales of the ordinary saleable 
 stock of lands and commodities in the usual 
 
462 OF TAXES, AND OF [BOOK III. 
 
 transactions of one or two pf the days in which 
 the sales are the most frequent. Any increase 
 of these sales must render a greater stock of 
 money requisite, or must reduce the prices. 
 In the one case the effective quality of the 
 money is not increased ; in the other the owner 
 of the commodity is greatly injured in the re- 
 duction of its price. 
 
 S. Now the capital of every individual in a 
 nation is vested in a small stock of cash, but 
 principally in machineryj commodities, lands, 
 v;and houses, or debts; amongst which may be 
 ^umbered the national debt in particular. To 
 pay a tax upon capital, therefore, as no one 
 would have enough in ready money, a corre- 
 sponding quantity of the actual capital must be 
 brought to market throughout the nation, and 
 as this would create an extraordinary demand 
 for money, the existing currency would not be 
 enabled to meet it, so as to keep the stock at 
 the ordinary prices. The price of every thing 
 must fall, qr currency be increased in- 
 stantly. Either, therefore, the people must sell 
 a much greater portion of their renl capital, to 
 raise the assessment on their estimated money 
 capital, or the nation must abate of its demand, 
 md the tax become unproductive* 
 
CHAP, v.] A TAX ON CAPITAL. 463 
 
 9. Suppose, for instance, the capital of the 
 nation be estimated at 20 years' v^^lue of the 
 income on which a tax is now paid, and which 
 is probably not one half of the income of the 
 whole population ; it will then amount to 
 2,200,000,0001. : a tax of lOl. per cent, on this 
 will be 220,000,0001. which if raised and paid 
 by a quarterly assessment, would require a sum 
 of 50,000,0001. to be paid into the exchequer 
 quarterly,* This would exhaust all the cur- 
 
 * It is not, however, necessary, upon every increase of taxes 
 or expenditure, that an equal addition should be made to 
 the currency, to support it. In general a small sum will 
 suffice, by the contrivances of circulation, to liquidate a very 
 large one. But in whatever respect by increase of taxes or 
 prices, the demand for money is increased, there must be 
 An inV!rease of the currency ; which, however small it may 
 be in fact, has an equal effect upon the demand or scarcity 
 of money, as if the currency were actually increased, by the 
 whole amount of the tax, or augment of prices. In like 
 manner the addition of one million to the stock of currency 
 would operate very sensibly in increasin;^ the effect of the 
 ^irculation.For supposing the [ revious currency to be 50 mll- 
 iions,it would allow all prices to be augmented by one- fiftieth 
 pffrt, or hiore ; that is, it would raise all commodities 21. per 
 <:ent. in nominal value. Whatever be the amount of the 
 payments in the year throughout the nation, the currency 
 multiplied by the circulation must equal it : and thus the 
 great effect of a small augment or decrease of currency must 
 be readily perceptible. Hence the effect of an increase of 
 fint or two millions annually ir^ the amount of bank notes, 
 
46i OF TAXES, AND OP [BOOK IIT. 
 
 rency existing in the nation, and either that cur- 
 rency must be rapidly increased and depre- 
 ciated, or the tax could not be raised. It is 
 easy to be perceived that such a tax would not 
 be paid. The land owner would sell every 
 tenth acre at a very low price in money, and 
 tender the amount in payment of the tax ; or 
 suffer it to be seized by the collectors. The 
 government would be disappointed, but the 
 money brokers, bankers, and jobbers, would 
 amass wealth rapidly, as in the French revolu- 
 tion, 
 
 10. Such are the limits which nature affixes to 
 the rapacity of state theorists, and such is the 
 ignorance of those who, regardless of the effect 
 of currency and circulation, must ever remain 
 unacquainted with the true science of money 
 and finance. 
 
 1 1 . Atax on capital, raised in money upon any 
 
 which produce a large increase of country notes^ and greatly 
 augments the currency, must hare a veiy considerable and 
 very sensible effect upon the prices of all necessaries. The 
 present low price of many commodities, is owing to the failure 
 of foreign trade, and the ruined state of manufactures, which 
 compel every one to sell his commodities even at a loss. 
 A few years will prove the injuries of our commerce, by the 
 war>to the most careless and igaorant of our statesmen. 
 
CHAP, v.] A TAX ON CAPITAlf. 4SS 
 
 given assessment, it is certain, would produce 
 nothing but ruin to the state, and destruction 
 to its proposer. Such ignorance and such 
 folly produced most of the miseries of the 
 French revolution, when loans were raised 
 -upon the estimated value of the national 
 domains, which were brought hastily to mar- 
 ket, and either fell rapidly in price, or were 
 paid, for in depreciated paper. 
 
 12. In any other country where a revolution i& 
 not already commenced, let but a tax on capital 
 to be paid in money bo enforced, and the hour 
 of revolution or of ruin is fixed. If a tax on 
 capital Can be raised, it must be levied in com- 
 modities and land, to be transferred to the state 
 creditors, in some manner similar to that men- 
 tioned in the last chapter. 
 
 H H 
 
466 OP RAISING THE SUPPLIES []boOK 5IU 
 
 CHAP. VI. 
 
 Of raising the Supplies of the State within the 
 Year, — Conclusion. 
 
 1. Whatever be the means of raising the 
 supply, as it is called, the actual burthen of 
 the state is provided annually. 
 
 2. For, the waste and consumption of war 
 And other expenditure are the true supply af- 
 forded to the state. The taxes raised and 
 debt created are merely indirect modes of dis- 
 tributing the burthen; which may be sup- 
 plied by better and more equitable modes of 
 original taxation. 
 
 3. All the intricacies in which our previous 
 inquiry has been involved to detect the ope- 
 ration of paper money, debt and permanent 
 taxation, arise out of the successful endeavours 
 which the active and commercial inhabitants 
 make to transfer the burthen upon others less 
 active. And the real capacity of the state to incur 
 new burthens, is only derived from the general 
 
CjKAP. VI.] OP THE STATE. 46? 
 
 equipoise of the taxes produced by time and 
 the different exchanges of property. 
 
 4. Hence, by a due distribution of the 
 means and power of the state, its natural 
 energy might be kept in constant and equal 
 exertion, either for necessary defence or sue* 
 cessful aggression. Instead of which war is 
 now a state of violent exertion, succeeded by 
 the repose of peace, which is seldom per- 
 mitted to endure long enough to restore the 
 exhaustion of war. 
 
 '5'. How practical the raising of supplies 
 sinnually is, in reality, may be proved by the 
 usage of ancient states; and, by the facility 
 with which large burthens are iiow actually 
 levied, wbich, were it not for the incumbrance 
 of a national debt would supply the annual 
 expenditure. 
 
 6. For this purpose it seems necessary to 
 adopt only an equaL land* and house tax, a 
 
 * A landtta: is easily assessed by ^^ytbin^'or antraal irm- 
 position.The most equitable house tax would be imposed,not 
 by the absurd estimate of the light and air adimitted ; but by 
 a valuation derived from the actual rent,and tlie number and 
 cubic contents of the rooms compounded together. For a 
 H H 9 
 
468 OF RAISING THE SUPPLIES,&C.[boOK III. 
 
 property tax, and a proportional duty or ton- 
 nage on the conveyance of all commodities by 
 land and water, by the mile inland, with al- 
 lowance of certain drawbacks on exportation. 
 Importation of the produce of land should in 
 that case be prohibited except at a duty of one- 
 fifth or one-tenth of the value; by which 
 aieans agriculture would be sufficiently pro- 
 tected and encouraged. But these considera- 
 tions would lead to inquiries w^hich would ex- 
 tend our work almost without limit. 
 
 7. Notwithstanding, therefore, that the 
 subject would properly conduct us to many in- 
 quiries into the natural and appropriate limit* 
 of state expenditure, in which it would be ne- 
 cessary to consider the character of hostile 
 operations and warlike combinations, as far a» 
 Ihey are affected by pecuniary circumstances ; 
 yet we must here conclude, contenting our- 
 selves with draw ing the inference which must 
 wow be obvious, that states can never incur 
 debts without affecting v^ry considerably the 
 money system of the country. Let us add, 
 that wfcen they pay their creditors according 
 
 perfect view of all the objecfts of taxation, sec the useful and 
 laborious work of Sir J". Sinclair on Revenue. 
 
CHAP. VI,] CONCLUSION, 469 
 
 to any of the processes hitherto adopted, whe- 
 ther by alterations in the coin or by paper money 
 and accumulated sinking funds, they, in fact, 
 practice a delusion, and commit a cruel injus- 
 tice towards a great part of the community. 
 Whereas, if they regard the land and property 
 of the state as their own, which it really must 
 be, and make a fair division, there is always an 
 adequate fund to discharge any debt, however 
 nominally large, without injury to any indivi- 
 dual, and without producing comparatively the 
 smallest disorder. 
 
 8. In this view, it would be easy to shew, 
 that all the financial operations of the French 
 previous to and during the revolution, from 
 which most of its calamities were derived, as 
 well as the sinking fund of Great Britain^ were 
 the result of radical error, and a complete ig- 
 norance of the science of money; and that with 
 a true knowledge of it there is no diflSculty of 
 financial embarrassment, which a wise and 
 bold minister should encounter with dismay, 
 which a strong and prudent government cannot 
 survive, and from which a virtuous natioiu will 
 not rise with augmented energy and increasing 
 glory. 
 
APPENDIX. 
 
 ART. I. 
 
 Estimate of the effective Debasement of Mouei/ in tht 
 Eighteenth Century, 
 
 Sir Geo, SkuMurgh Evelyn has calculated the 
 tlepreciation of mon^y from the mean result of the 
 prices of several of the most necessary commodities ; 
 and accordingly it appears that in the year 1700, the 
 value of one pound might be expressed by an as- 
 sumed number -238 ; that is to say, 238 pounds 
 would then purcliase a given quantity of such com- 
 modities ; but in ten years after, 247 pounds were re- 
 quired to purchase the same commoditiefi. 
 
 Therefore, one pound at each of these times, was 
 in the proportion of 238 to 247 inversely ; or as 247 
 is to 238, so is one pound, in 1700, to a fourth propor- 
 tional; which will be a fraction of the pound in 
 1700, and equal in the power of purchasing commo- 
 <lities, in that year, to the pound or money unit of 
 1710. By this means we shall find, taking the 
 value of a pound in 1700 for the standard, what was 
 the comparative value of a pound in any subsequent 
 year, according to the proportions in Sir George 
 Shuckhurgh Evelyn s table. This may conveniently 
 be stated in the following form, placing the value of 
 
472 EFFECTIVE DEBASEMENT OF MONEY [aPP. 
 
 1700 as the numerator, and the depreciating number 
 in each successive ten years, as the denominator of a 
 fraction, which will give the value of a pound for 
 each of these years, in the actual pound of 1700. 
 In other words it will express what we have called 
 the successive debasements of the money unit in 
 England. Then by dividing these fractions and re- 
 ducing them to decimals, we have the value in deci- 
 mals of a pound sterling, for each year, as follows : 
 
 A.D. 
 1700 
 
 IfJ 
 
 — - 
 
 1.0000 
 
 -- 
 
 £. s. 
 1 
 
 d. 
 
 
 1710 
 
 Hf 
 
 = 
 
 0.9635 
 
 = 
 
 19 
 
 3| 
 
 1720 
 
 H'r 
 
 = 
 
 0.9260 
 
 =: 
 
 18 
 
 6| 
 
 1730 
 1740 
 
 141 
 
 = 
 
 0.8913 
 0.8750 
 
 
 
 17 
 17 
 
 9i 
 6 
 
 1740 
 
 m 
 
 = 
 
 0.8311 
 
 = 
 
 16 
 
 7| 
 
 1750 
 
 in 
 
 zr: 
 
 0.7579 
 
 = 
 
 15 
 
 11 
 
 1760 
 
 HI 
 
 = 
 
 0.6800 
 
 = 
 
 13 
 
 7 
 
 1770 
 
 938 
 ITT 
 
 = 
 
 0.6197 
 
 zzi: 
 
 12 
 
 H 
 
 1775 
 
 m 
 
 rr: 
 
 0.5748 
 
 = 
 
 11 
 
 H 
 
 1780 
 
 Wr 
 
 =: 
 
 0.5574 
 
 = 
 
 11 
 
 n 
 
 1790 
 
 m 
 
 = 
 
 0.4798 
 
 == 
 
 9 
 
 7 
 
 1800 
 
 VA 
 
 = 
 
 0.4234 
 
 = 
 
 8 
 
 5i 
 
 1806 
 
 VA 
 
 = 
 
 0.3777 
 
 = 
 
 7 
 
 61 
 
 In like inanner Mr. Arthur Young, in his Enquiry 
 into, the Progressive Value of Money in England, as 
 marked by the price of agricultural products; gives 
 twenty-one different items, by which he also estimates 
 the value of money in separate proportions of one in 
 twenty, making corn the principal. 
 
 In order to obtain an average from the whole of 
 
ART. I.] IN THE EIGHTEENTH CENTURY. 473 
 
 these articles we have added each line together, and 
 multiplied it by four, to clear it from the fractions 
 or quarters ; which gives the several proportions of 
 the depreciation of money as under, and shews how 
 many pounds at one given time are necessary to 
 purchase a like quantity of these commodities. By 
 a similar proportion as before, we have endeavoured 
 to give the real value of a pound at any specified 
 time during the ISth century, making the value of 
 a pound in the year 1700, the unit or standard, and 
 considering the successive depreciations as equivalent 
 to debasements. The result is as follows : 
 
 Table of the debasements of a pound in the course 
 of the eighteenth century, as derived from the table 
 of proportions in twenty by Mr. Arthur Young. 
 
 A.D. 
 
 
 
 
 
 £. s. 
 
 d. 
 
 1700 
 
 Ui 
 
 = 
 
 
 = 
 
 I 
 
 
 
 17G6 
 
 in 
 
 = 
 
 0.8858 
 
 = 
 
 17 
 
 81 
 
 1789 
 
 HI 
 
 = 
 
 0.4646 
 
 = 
 
 9 
 
 3! 
 
 1800 
 
 ni 
 
 = 
 
 0.4597 
 
 := 
 
 9 
 
 2| 
 
 1803 
 
 tV^ 
 
 = 
 
 0.03382 
 
 = 
 
 
 
 8 
 
 1810 
 
 t¥A 
 
 •-~ 
 
 0.02309 
 
 = 
 
 
 
 5i 
 
 This, as it affords a result in the depreciation since 
 ISOO much greater than Sir Geo, Shuckburgh Evelyn s 
 table, is certainly very opposite to the purpose for 
 which it was designed ; but as it corresponds so 
 nearly in the depreciation for 1800, it afibrds a strong 
 confirmation of the accuracy of the former table. 
 
 Mr* Arthur Young's tables give iii addition the 
 
474 EFTECriVE DEBASEMENT OF MONEY [aPP. 
 
 depreciation as derived from his statement of the 
 prices of grain calculated in proportions of one in 
 twenty ; which also form a part of the last table. 
 These proportions being likewise multiplied by four, 
 to clear them of fractions or quarters give the pro- 
 portions corresponding to those in the last table as 
 follows: 
 
 A.D. 
 
 
 
 
 
 £. s. d. 
 
 1700 
 
 i; 
 
 = 
 
 
 = 
 
 10 
 
 1766 
 
 ¥t 
 
 = 
 
 nearly 
 
 = 
 
 14 
 
 1789 
 
 a 
 
 zzz 
 
 0.8409 
 
 ;::: 
 
 16 9: 
 
 1800 
 
 u 
 
 = 
 
 0.7708 
 
 = 
 
 15 5 
 
 1803 
 
 u 
 
 sr: 
 
 0.7483 
 
 z^z- 
 
 14 lOi 
 
 1810 
 
 1^ 
 
 — 
 
 0.4625 
 
 ^— 
 
 9 3 
 
 But it should be observed, that in taking 37 for the 
 proportion of the year 1800, we are somewhat misled ; 
 for the 91, or 37, which is given as the proportion, is 
 in fact the average price of 100 years, from 1()01 to 
 1700, and by no means affords a just view of the 
 price at the year 1700. It would be much better to 
 take as the standard the average price from 1701 to 
 1766,which is 31. As also it will be seen that the whole 
 of this line of proportions is very barren in confirma- 
 tion of the value in the prices of wheat, and as Mr. 
 j4. Young must have been well acquainted with the 
 prices of wheat, it is to be wished that he had given 
 the value of money in these prices, for the last cen- 
 tury chiefly. We shall, therefore, assume the second 
 figure in the table, which is the average from the 
 year 1701 to 1766, as the true standard, although we 
 regret that Mr. J. Young has not afforded the means 
 
A^T. I.] IN THE EIGHTEENTH CENTURY, 47S 
 
 jof a clear comparison by giving the average of ten 
 ye.ars instead of sixty-six years. On this ground the 
 depreciation will be as follows ; 
 
 A.D. 
 
 1700 
 
 i^ 
 
 
 
 1.0000 
 
 -_ 
 
 £. s. d. 
 10 
 
 1766 
 
 U 
 
 =r 
 
 0.7045 
 
 = 
 
 14 1 
 
 1789 
 
 u 
 
 rrs 
 
 0.6451 
 
 r=r 
 
 12 10? 
 
 1800 
 
 i^ 
 
 = 
 
 0.5961 
 
 = 
 
 11 11 
 
 1803 
 
 u 
 
 = 
 
 0„3875 
 
 = 
 
 7 9 
 
 Sir Geo. S.Evtlyris table gives the actual proportion 
 of the value of money, at stated times, by the actual 
 price of corn ; but Mr. A. Young denies the ac- 
 curacy of his prices. He states the proportion in 
 1675 as 246, and for that of 1740 as 197, and for 1760 
 as 203, and for 1795 as 426. Making, therefore, 197 
 the standard from the year 1700 tol740,we shall in like 
 xnanner as before, have the following debasements, 
 4riz. 
 
 A.D. 
 
 
 £. s. 
 
 d. 
 
 1700 
 
 
 = r = 1 
 
 
 
 1740 
 
 t q 7 
 
 TT7 
 
 = =10 
 
 
 
 17iiO 
 
 r^i 
 
 = 0.9704 = 19 
 
 4i 
 
 1795 
 
 m 
 
 = 0,4624 =:l 9 
 
 n 
 
^5 EFFECTUAL DEPRECIATION OF MONEY [aPF. 
 
 To compare these results it will be necessary to 
 throw them together in a table, which gives the com- 
 parative value of a pound note, as follows : 
 
 
 
 
 Mr. A. 
 
 
 
 
 Sir Geo. S. 
 
 Young from 
 
 
 Sir Geo. S. from general 
 
 from the 
 
 the aggre- 
 
 Ditto from the price of 
 
 results. 
 
 
 price of 
 
 gate priceof 
 
 corn. 
 
 
 
 corn. 
 
 21 articles. 
 
 No. 1. No. 2. 
 
 Epochs. £. s. 
 
 d. 
 
 
 
 
 1700 ..10 
 
 
 
 1 
 
 10 
 
 10 
 
 10 . . 19 
 
 31 
 
 
 
 
 20 , . 18 
 
 6i 
 
 
 
 
 30 . . 17 
 
 9k 
 
 
 
 
 35 . . 17 
 
 6 
 
 
 
 
 40 . . 16 
 
 7k 
 
 1 
 
 
 
 50 . . 15 
 
 n 
 
 
 
 
 60 . . 13 
 
 7 
 
 19 4 
 
 17 81 
 
 14 1 
 
 70 . . 12 
 
 4i 
 
 
 
 
 75 . . 11 
 
 5i 
 
 
 
 
 80 , . 11 
 
 1^ 
 
 
 
 
 1800 ..0 8 
 
 7 
 
 9 2i 
 
 9 3^ 
 
 16 9 12 10 
 
 5| 
 
 
 21 
 
 15 5 11 Hi 
 
 1803 . . 
 
 
 
 
 14 10| 9 3 
 
 1806 ..07 
 
 6i 
 
 
 8 
 
 
 1810 . . 
 
 
 
 51 
 
 9 3i 
 
 In this table it is very remarkable that the values 
 of money deduced from Sir Geo, Shuckburgh's propor- 
 tions, as given by the price of wheat, correspond very 
 nearly with those afforded by Mr. J, Young, from the 
 average of twenty-one articles. And on the whole 
 it appears that Sir G. Shuckburgh^s table from gene- 
 ral results, is so far confirmed that it may be relied 
 on with much more safety than either of the others; 
 while the disagreement of all the tables would induce 
 one generally to rely upon the value of wheat and 
 of land, as the best criterion of the comparative value 
 
ART. I.T IN THE EIGHTEENTH CENTURY. 477 
 
 of money, and the effect of any given income, accord- 
 ing to the opinion both of Fuffendorff and Adam 
 Smithy whose united authority must deserve the 
 greatest confidence. 
 
 Taking, however. Sir Geo. ShuckburgJis table for 
 the basis of our calculation, it will be easy to com- 
 pare the advantage which might have been made by 
 purchasing a farm of lOOl. a year in 1700, and selling 
 it in ISOG ; instead of laying out the same sum on 
 mortgage and recalling it in the same year. For this 
 purpose we may suppose the farm not to have been 
 improved in value by superior cultivation, but to 
 have produced nearly the same quantity of corn, 
 allowing only for such an improvement as would 
 counterbalance the increase of taxes and poor's rates, 
 which we may suppose the landlord would endeavour 
 to lay upon the tenant at every increase of rent. Then, 
 if the landlord granted new leases every ten years, ad- 
 vancing the rent as the value of money fell, he would 
 every year receive as much money as would be equi- 
 valent to his original rent of lOOL and in order to 
 make the com{>arison, we may take his receipts as 
 always equivalent to lOOl. a year, in the currency of 
 1700; while that of the mortgagee will be onlya* 
 the depreciated values of the money unit at the same 
 successive periods. The result would be the same 
 if we compared a pension, a salary, or a curacy of 
 1001. a year with the purchase and sale of land. 
 
 The farm would in 1700 have cost 20001. ai twen- 
 ty years purchase, would have produced 10,0001. in 
 rent, equal to the money of 1700, and would have 
 
47B EFtECTIVE DEBASEMlSNT O]^ MOl^Elf I^AP^y 
 
 sold for thirty years purchase on the actual rent, 
 which would have borne a proportion inversely to the 
 1001. of original rent, as 0.4234 or Ss. 5|d. would have 
 borne to 20s. : that is, the rent Would at the resale 
 have been 236.8, and the price of it at twenty-eight 
 years purchase would have amounted to 06191. 4s. 
 or thereabouts. 
 
 The value of the annuity will require a nicer cal- 
 culation, which will be most easily performed by the 
 decimal values given in the former table. Thus, to 
 ascertain the amount of the receipts, we must multi- 
 ply the value of one pound by one hundred foV every 
 year, and that by ten for each ten years, or to save 
 trouble by 1000, and adding the results we shall have 
 the total receipts in pounds and decimal fractions as 
 follows : 
 
 <£ s. d. 
 
 From 1700 to 1710 1000 
 
 1710 to 1720 0.9635 963 10 O 
 
 1720 to 1730 0.9260 926 6 
 
 1730 to 1740 0.S913 891 6 
 
 1740 to 1750 0.8311 831 2 
 
 1750 to 1760 0.7579 757 18 
 
 1760 to 1770 0.6SG0 680 
 
 1770 to 1780 0.6197 619 14 O 
 
 1780 to 1790 0.5574 657 8 
 
 1790 io 1800 0.4798 479 16 O 
 
 Price 20001. received in debased l o£ 7606 
 money of ISOOjValued at 4234. > 847 12 0' 
 
 w 8s. 6|d. in the pound, j — 
 
 ^8453 12 Of- 
 
ART. I.] IK THE EIGHTEENTH CENTURY. 479^ 
 
 Supposing therefore, the land not to be improved 
 in produce, but the present rent in depreciated or 
 debased currency to be equal to lOOl. in the year 
 1700, and the selling price to be at thirty years pur- 
 chase, the landed proprietor would have received in 
 the mean time 13,0001. in the currency of 1700; and 
 the difference between the two would have been 
 45401. Ss. But it is probable that the estate would 
 have been greatly improved, and the gain of the 
 proprietor amounted to considerably more than 
 this estimate. This sum of 45461. however, being the 
 money of 1700, will bear to the money of 18dO the 
 proportion of 1 to 0.4234, the reiprocal of which is 
 0.23645, and the value of ll. in 1700 is equal to 
 2.3646 in 1800 ; therefore, the real profit in money 
 of 1800 will be 10,7491. 8s. 
 
 If, on the other hand, we calculate the annuity to 
 be paid^ during the whole century from 1700 to 1800, 
 in the nominal currency of the successive years, then 
 we shall have for the total receipts of the annuity 
 10,0001. in nominal currency, and the value of it at 
 twenty years purchase will be 20001. making a total 
 of 12,0001. But, as the rent of the farm would have 
 risen as the value of money decreased, the successive 
 ^mounts of the annual rents may be estimated accu* 
 rately enough for the present purpose, by calculat- 
 ing the debasement of money according to the fore- 
 going decimals, and the increase of rent by the re- 
 ciprocals of the three first figures thereof. The account 
 will then stand as follows : 
 
480 ErrECTiVE debasement of money [app. 
 
 Years. Money wn its. Reciprocals. Amount of rent. 
 
 From 1700 to 1710 1.0000 0.00000 1000 
 
 1710 to 1720 0.9G35 0.10384 1038 8 
 
 1720 to 1730 0.9260 0.10799 1079 18 
 
 1730 to 1740 0.8913 0.11223 1122 6 
 
 1740 to 1750 0.8311 0.12034 1203 8 
 
 1750 to 1760 0.7579 0.13210 1321 
 
 1760 to 1770 0.6800 0.14706 1470 12 
 
 1770 to 1780 0.6197 0.16155 1515 10 
 
 1780 to 1790 0.5574 0.17953 1795 6 
 
 1790 to 1800 0.4798 0.20877 2087 14 
 
 1800 0.4234 0.23646 
 
 ^13,634 2 
 
 To this add the vake at thirty years purchase on 
 the rent in 1800, which estimated by the above reci- 
 procal 0.23646, will give the value of one pound 
 3^646, which gives 7093.80 or 70931, 16s. making a 
 total of 20,7271. 18s. From this sum we may sub- 
 tract the total receipts and talue of the annuity, 
 being 12,0001. and we shall have a profit in favour of 
 the purchase of land of S7271. 18s. more than the 
 profit gained by the laying out of the money in the 
 purchase of an annuity, or on mortgage, secured on 
 land, at an interest of 51. per cent. These calculations, 
 however, are given rather to elucidate a principle or 
 exliibit a theory than to form a perfect and pre- 
 cise estimate* It would have been easy to have done 
 tbi^ by a reference to some actual cases of the rise of 
 rents ; but upon consideration it was deemed prefer- 
 able to gave a theoretical vieW of what should be the 
 natural increase of rents, during the century, by the 
 depreciation of money, and to leave the reader to 
 
ART. I.] IN THE EIGHTEENTH CENTURY. 481 
 
 make a trial within his own experieijce of the ac- 
 tual rise in the value of land, in confirmation of the 
 theory. 
 
 The value of the royal stipend has been given by 
 Mr. JVheat/e^ during the whole of the above period, 
 as follows ; 
 
 " In the spring of lS04,Sir Geo.Shiu:kLurgk favoured 
 ine(Mr.W.)with theresultof his calculations on the de- 
 preciation of naoney from 1800 to 1803.The depression 
 had advanced in the latter year, according to the 
 proportions which he formed, to* 595. From 1803 
 
 ■ f ' - ' ■ '■ 
 
 * As Sir George Shuckburgk died in the summer of 1804, 
 b^ore he had completed an essay, which he was writing, on 
 the subj ect of the depression of money, it is impossible for me, 
 says Mr. W. to refer to a printed document in testimony of 
 this assertiou. It may be said too that the mere assumption 
 of the same depi^ssion from 1803 to 1806, as from 1800 to 
 1803, is too loose for practical application. 1 certainly 
 should not have made any attempt to give the depression 
 to 1806, had not an addition of 60,0001. a year been made 
 to the civil list in 1804; and as it might have been con- 
 ceived that this augmentation would bring the revenue to 
 a correspondence with the charges, I thought it right to 
 explain its effect. But the following calculation, which 
 carries the revenue and the depreciation of money no lower 
 than 1800, may perhaps be more satisfactory, 
 
 A.D; £. £. 
 
 1710 — ^47 — 5G2 --. 700,000 -- 1,592,000 
 
482 EFFECTIVE DEBASEMENT OP MONEY [aPF. 
 
 to 1806, 1 will assume that the same depression oc- 
 curred as from 1800 to 1803, which will nearly bring 
 the value of our present money to 630. But the 
 value of money in 1700 was 238, and the revenue of 
 King William 700,0001. a year. The same propor- 
 tion, therefore, which 238 bears to 630, 700,0001. will 
 bear to 1 ,852,0001., and upon this principle the table 
 is constructed.** 
 
 A.D. 
 
 
 
 
 
 
 £, 
 
 
 £. 
 
 1700 
 
 — 
 
 238 
 
 — 
 
 562 
 
 — 
 
 700,000 
 
 — 
 
 1,652,000 
 
 1720 
 
 — 
 
 257 
 
 — 
 
 562 
 
 — 
 
 700,000 
 
 — 
 
 1,530,000 
 
 1727 
 
 — 
 
 267 
 
 — 
 
 562 
 
 — 
 
 800,000 
 
 — 
 
 1,683,000 
 
 1730 
 
 — 
 
 272 
 
 — 
 
 562 
 
 — 
 
 800,000 
 
 — 
 
 1,652,000 
 
 1740 
 
 — 
 
 287 
 
 — 
 
 562 
 
 — 
 
 800,000 
 
 — 
 
 1,560,000 
 
 1750 
 
 — 
 
 314 
 
 — 
 
 562 
 
 — 
 
 800,000 
 
 — 
 
 1,463,000 
 
 1760 
 
 — 
 
 342 
 
 — 
 
 562 
 
 — 
 
 800,000 
 
 — 
 
 1,314,000 
 
 1770 
 
 — 
 
 384 
 
 — 
 
 562 
 
 — 
 
 800,009 
 
 — 
 
 1,170,000 
 
 1777 
 
 — 
 
 414 
 
 — 
 
 562 
 
 — 
 
 900,000 
 
 — 
 
 1,221,000 
 
 1780 
 
 — 
 
 427 
 
 — 
 
 562 
 
 — 
 
 900,000 
 
 — 
 
 1,184,000 
 
 1790 
 
 — 
 
 496 
 
 — 
 
 562 
 
 — 
 
 900,000 
 
 — 
 
 1,019,000 
 
 1800 
 
 — 
 
 562 
 
 — . 
 
 562 
 
 — 
 
 900,000 
 
 — 
 
 900,000 
 
 The first column of the table gives the value of money at 
 the stated periods. 
 
 The second, the value of money in 1800. 
 
 The third, the actual amount of the revenue at the stated 
 periods. 
 
 The fourth, the vmlue of that revenue in the money of 
 1800. 
 
Art. I 
 
 .] 
 
 IN 
 
 tHE EiaiitEENTH CJENTtJRTi 483 
 
 A.D. 
 
 
 * 
 
 
 t 
 
 
 i£. 
 
 
 %£. 
 
 1700 
 
 • 
 
 238 
 
 » 
 
 630 
 
 - 
 
 700,000 
 
 - 
 
 1,852,000 
 
 1710 
 
 . 
 
 U7 
 
 - 
 
 630 
 
 - 
 
 700,000 
 
 - 
 
 1,785,000 
 
 1720 
 
 - 
 
 257 
 
 - 
 
 630 
 
 - 
 
 700,000 
 
 - 
 
 1,715,000 
 
 1727 
 
 • 
 
 267 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 1,887,000 
 
 17^0 
 
 - 
 
 272 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 1,8*2,000 
 
 1740 
 
 . 
 
 287 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 . ,756,000 
 
 1750 
 
 - 
 
 314 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 1,605,000 
 
 1760 
 
 - 
 
 342 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 1,473,000 
 
 1770 
 
 - 
 
 384 
 
 - 
 
 630 
 
 - 
 
 800,000 
 
 - 
 
 1,312,000 
 
 1777 
 
 - 
 
 414 
 
 - 
 
 630 
 
 - 
 
 900,000 
 
 - 
 
 1,369,000 
 
 1780 
 
 - 
 
 427 
 
 - 
 
 630 
 
 - 
 
 900,000 
 
 - 
 
 1,327,006 
 
 1790 
 
 - 
 
 496 
 
 - 
 
 630 
 
 - 
 
 900,000 
 
 w 
 
 1,143,006 
 
 1800 
 
 -. 
 
 562 
 
 - 
 
 630 
 
 . 
 
 900,000 
 
 - 
 
 1,008,006 
 
 1806 " 630 - 630 ^ 960,000 ^ 060,000 
 
 **The subsequent statement will shew the extent to 
 which the revenue should have been raised at the 
 period to which each calculation refers, in order to 
 have been maintained upon an equality with tha 
 700,0001. a year in 1700." 
 
 * This column shews the value of money at the »tate4 
 pitriods. 
 
 t The value of money in the year 1806. 
 
 J The actual amount of the revenue at the stated periods, 
 
 ^ The VJdue of that revenue in the money of 1S0C» 
 
 f i2 
 
484 EFFECTIVE DEBASEMENT OF MONEY [aPP^ 
 
 A.D. 
 
 *■ 
 
 t<£. 
 
 + 
 
 
 § £. 
 
 1700 - 
 
 • 238 
 
 - 700,000 - . 
 
 238 
 
 <■ 
 
 700,000 
 
 1710 - 
 
 . 23S 
 
 - 700,000 - 
 
 247 
 
 - 
 
 726,000 
 
 1720 - 
 
 . 23S 
 
 - 700,000 - 
 
 257 
 
 - 
 
 755,000 
 
 1727 - 
 
 . 238 
 
 - 700,000 - 
 
 267 
 
 <m 
 
 784,000 
 
 1730 - 
 
 . 238 
 
 - 700,000 . 
 
 272 
 
 
 800,000 
 
 1740 . 
 
 . 238 
 
 - 700,000 - 
 
 287 
 
 - 
 
 843,000 
 
 1750 - 
 
 ■ 238 
 
 - 700,000 - 
 
 314 
 
 - 
 
 923,000 
 
 1760 . 
 
 - 238 
 
 - 700,000 - 
 
 342 
 
 - 
 
 1,005,000 
 
 1770 . 
 
 - 238 
 
 - 700,000 - 
 
 384 
 
 • 
 
 1,128,000 
 
 1777 ■ 
 
 - 238 
 
 - 700,000 - 
 
 414 
 
 - 
 
 1,217,000 
 
 1780 . 
 
 - 238 
 
 - 700,000 - 
 
 427 
 
 •■ 
 
 1,255,000 
 
 1700 . 
 
 - 238 
 
 - 700,000 - 
 
 496 
 
 - 
 
 1,458,000 
 
 1800 . 
 
 - 23S 
 
 - 700,000 - 
 
 562 
 
 - 
 
 1,652,000 
 
 1806 . 
 
 - 238 
 
 - 700,000 - 
 
 630 
 
 - 
 
 1,852,000 
 
 " By these calculations, therefore, it is obvious, that 
 the present revenue of 960,0001. a year, though no- 
 minally superior, is in reality only one half of the 
 value of the 700,0001. which KingWilliam possessed.'* 
 
 The debased value of lOOl. in a curacy, rent or 
 
 ♦ The first column of the table gives the value of money 
 in the year 1700. 
 
 + The second, the amount of the revenue in the year 
 1700. 
 
 J The third, the value of money at the periods to which 
 each calculation refers. 
 
 § The fourth, the extent to which the revenue should have 
 been augmented at the different periods, to have been equal 
 the 700,0001. a year in 1700. 
 
ART. I.] IN THE EiaHTEENTH CENTURY. 485 
 
 annuity, may be taken frono the foregoing calculations 
 nearly as follows : 
 
 £. s. c£. s. 
 
 Debased value 1700 100 Necessary increase 100 
 
 10 m 12 103 16 
 
 20 92 Q 107 18 
 
 30 89 2 112 4 
 
 40 83 2 120 6 
 
 60 75 14 132 2 
 
 60 m 147 12 
 
 70 61 18 161 10 
 
 • 80 55 14 179 10 
 
 90 47 18 208 14 
 
 1800 42 6 236 4 
 
 The first column of this table shews the real value 
 estimated in the currency of the year 1700, which the 
 stockholder, annuitant, mortgagee, pensioner, or 
 curate has received; and the second, the amount in 
 nominal value, which he ought to have received to 
 have kept bis income at the same real and effective value. 
 
 The daily pay of the officers of the army was fixed in 
 the reign of William the Hid. and continued the same 
 during the last century. The yearly pay of acaptain 
 at9s.5d. a day, is 1711. 17s. Id. ; but for easier caU 
 culation it may be estimated at 1721. 
 
 We have taken this as an easy, and a fair average; 
 but the nominal pay fixed by act of parliament, in the 
 reign of king William, was 10s. Of this the officer 
 received regularly, 7s. 6d. a day, or 1361. 17s. 6d. a 
 year for subsistence. The remaining 2s. 6d. a day 
 "which would have amounted to 451. 12s. 6d, a year, 
 was called his arrears, and should have been paid at 
 the end of the year j but this wa^ »ot regularly done. 
 
485 EFFECTIVE DEBASEMENT OF MONEY [afp* 
 
 and it was always subject to certain deductions which 
 reduced it to 341. 9s. 7d. and made the total pay 
 1711»7s. 6d. In 1797 the two sums weie combined, 
 and the pay fixed at 9s. 5d. a day, amounting as above 
 to 1711. 17s. 6d. In 1806, a further sum of Is. Id, 
 was added to the pay, which m^de it lOs. 6d. a day, 
 or 1961. 12s. 6d. a year. 
 
 A. D. 
 
 1700 
 
 Debased value of Pay. 
 
 172 
 
 Value of the 
 money unit. 
 ^ 1. 0000 
 
 10 
 
 163 12 
 
 0.9635 
 
 SO 
 
 159 4 
 
 9260 
 
 30 
 
 153 4 
 
 0.8913 
 
 40 
 
 140 18 
 
 0-8311 
 
 50 
 
 130 4 
 
 0.757P 
 
 60 
 
 118 18 
 
 0.6800 
 
 70 
 
 106 10 
 
 0.6197 
 
 80 
 
 95 16 
 
 0.5574 
 
 90 
 
 82 10 
 
 0,4798 
 
 ISOO 
 
 72 16 
 
 0.4234 
 
 Pursuing the same mode of calculation as before, 
 it will appear, that to raise the captains in the army 
 to the same rank in respect of income, which they 
 would have held, had not the valuo of money fallen, 
 their annual pay should be very considerably en- 
 creased. For the value of a pound in 1700 is equal 
 to 2.364 in the money of ISOO. 
 
 In the third book Chap. I. of the preceding work, 
 an intention was expressed of giving a like table of 
 the pay of a captain in the navy, and of a common 
 soldier ; but it appears now unnecessary. The elements 
 pf the calculation are here fully supplied, and i^ 
 
JkRT. I.] IN THE EIGHTEENTH CENTURY* 487 
 
 may be easily made. The pay of a common soldier 
 is also by no means an estimate of his real source 
 of subsistence, which is, in a great measure, derived 
 from the publicans on whom he is generally quar« 
 tered. But, unless the whole of the present 
 theory of money is erroneous, and unless provisions 
 cease to rise as they have done for the last twenty 
 years, it is obvious that the claims of the army and 
 navy to an increase of pay will speedily become at 
 loud as they \a\\ be just^necessaryi and irresistible. 
 
4SJ iEATHEK MONEY IK THE EAST. [APPy 
 
 ART. II. 
 
 Lccilher or Paper Money in the East, 
 
 '^ FcfFFENDORF in liis Law of Nature aiul Nations^ 
 Book V. Gi^ap. I. § xiv. gives a remarkable instance 
 of the odium in which leather or UHveal moiiey i^heldi 
 in the east. 
 
 ** The great Cham at Cambalu put his royal stamp 
 upon a vast sum of money made of the bark of mul- 
 berry-trees, which no man, in his dominions, upo4i 
 pain of death dared to refuse, or to coin and use 
 other. The foreigners too, who traded into those 
 parts for the gold, silver and jewels which they im- 
 ported, 'were forced to take that money which they 
 converted into the commodities of the country, and 
 so exported again. By which means that prince 
 heaped up a prodigious quantity of gold and silver,'* 
 
 " The Persians call the leather money, which an un- 
 just king had imposed upon them, Schehreva (i. e.) 
 money imposed on the s.ubject at the pleasure of 
 the prince. The memory of which has made such 
 an impression upon them, that when they would de- 
 note the injustice of any king, they express it by 
 saying. He imposes leathef money upon his people*** 
 
ART. III.] THE author's SUGGEST IO>^Sy &C. 43^ 
 
 ART. III. 
 
 The Authors Suggestions cojicerning the Present Crisis, 
 inl8l2. 
 
 It may naturally be asked whether any results 
 practically useful can be drawn from the facts and 
 theories contained in the foregoing treatise; and the 
 author feels it necessary to state some which are ap- 
 plicable to the present crisis, for various reasons : 
 first, that he may not be deemed deficient of sensibi- 
 lity to the welfare of his country; and secondly, that 
 he may neither be taken for a gloomy misanthrope nor 
 an enthusiastic speculator. All that he can ofter is 
 calm opinion, founded upon the foregoing exami- 
 nation, to restrain eager rashness and check headlong 
 folly. 
 
 The advantages and disadvantages of a paper sys- 
 tem have been fully examined and clearly illustrated. 
 In as far as it has enabled commercial men to- borrovsr 
 a capital of all the nst of the community, it has ex- 
 tended commerce, and, while it depreciated money 
 rather slowly, it improved manufactures, provided 
 employment for the poor, and rendered cheap many 
 useful and necessary commodities- This was its 
 principal operation from the peace of 1783 to the 
 year 1797 ; but, since that time, it has chiefly as- 
 sisted in the support of w^ar and the increase of 
 
490 THE author's suggestions [Apy* 
 
 taxes ; and now that the commerce of Europe and 
 ot America is excluded from the British isles, manu- 
 lactures are }-apidly falling into decay and merchants 
 jinking into bankruptcy- 
 
 Tl>i» must continue, till the state of trade and ma- 
 nufactures is reduced to the level of domestic con- 
 sumption, and the labourers who are without work 
 and without food, have found either new means of 
 subsistence, employment intl>e armies, or rest in their 
 graves; unless peace shall speedily open new outlets of 
 comn^rce, and revive, ere they sink for ever, those 
 manufactures which were so lately the pride of Britain 
 and the envy of the world. 
 
 In the years 1797 and 1798 the bank of England 
 repeatedly otFered to recommence its payments ; but 
 the great financier of that day, a man who, since his 
 death, has received the apotheosis of immortality, th€ 
 late celebrated Mr. Pilt, forbade them; and many 
 are those amongst his admirers who now regret tha 
 his voice was obeyed, since the measure of justice 
 which was then deemed easy is now considered al- 
 most impossible. 
 
 The difficulties of restoring coin have been fully 
 examined in this work, and they are so far insufi- 
 mountable, that probably few who read it will expect 
 its speedy accomplishment. But the power which 
 laid its seals upon the coffers of the b^nk, will, in 
 due time, be compelled of necessity to remove them ; 
 
ART. III.] CONCERNING THE PRESENT CRISIS. 491 
 
 for those who direct the councils, who collect the re-^ 
 venue, and who wield the sword of the state, will dis^ 
 cover, in the end, that, by excluding coin from circu- 
 lation, they wage a destructive war against them- 
 selves. 
 
 It ia then that the laboured investigation of the 
 present work will be found useful, in pointing out 
 all the difficulties and many of the distresses which 
 jnust ensue from the restoration of coin, an event that 
 cannot take place without a sudden and universal 
 change of value in all articles bought and sold for 
 money : attended with the utmost confusion in the 
 liquidation of all debts and credits, and in the pa}^- 
 inent of all taxes, customs, duties, rents and annuities- 
 
 In the mean time, all that sobriety and prudence 
 can advise, is to direct the attention of the legisla^ 
 tureand its committees, as well as of all commercial 
 men, and all proprietors of land as well as public 
 stock, to prepare themselves for encountering the 
 evil which they cannot prevent, and to provide such 
 regulations for the emergency as may give to equity 
 and justice some controul in the midst of confusion, 
 and prevent the entire usurpation of wild unbounded 
 anarchy. 
 
 Till this preparation is made, the bank restriction 
 ought not to be removed, either in peace or war. 
 When it is made, the restriction may be removed at 
 any time. In the interval let the bank manage ita 
 
4P5 THE AUTHOR^S SUGG?ESTIONS [a^J, 
 
 own concerns AT ithout the interference of the state, 
 except so far as may be necessary to ascertain the 
 quantity of bullion in its possession, the circulation of 
 its notes, and the necessary particulars relative to 
 the public funds and the sinking fund ; but all re- 
 straints upon its issues must, of necessity, be futile ot 
 mischievoiis. 
 
 The solvency of the bank is unquestionable, and 
 results from the nature of its constitution ; but the 
 power of converting all its paper into gold is, from 
 the same cause, at all times chimerical : for it ha* 
 teen seen, that its debts may be liquidated entirely 
 Kvithout money, by simply retiring its bills, though 
 its stock of bullion remain untouched in its coffers. 
 This is a sacred deposit which should on no account 
 be violated. It constitutes at present the real wealth 
 of the bank proprietors, and will ii) the end be found 
 the sheet anchor of the national currency. It will 
 enable the state to distribute a portion of coin uni- 
 versally and equably through the country, upon the 
 first abandonment of the paper system. How to dis- 
 pose of this fund most usefully, without violating thi> 
 property of the holders of bank stock, is amongst the 
 most necessary objects of national attention. How 
 to liquidate the debts and credits of individuals just- 
 ly, and without uuiversal insolvency; how to rescue 
 tenants, and the grantors of annuities from inevitable 
 ruin and confusion ; how to "regulate taxes, funds, 
 customs and pensions, with equity upon the sudden 
 
ART, III,] CONCERNING THE PRESENT CRISIS, 493 
 
 change of currency; how to maintain some equality^ 
 of proportion between the prices of corn and graia 
 compared with manufactures, during the influx of 
 gold from the continent, are all questions which wili 
 demand the utmost skill,prudence and foresight in the 
 minister, whose arduous duty it shall be to preside 
 over the councils of the state, in the great re'volutioa 
 of pro{)erty, which must follow immediately upoa 
 the opening of the payments at the bank. 
 
 To decree this opening, it has been seen, is simpl/ 
 to withdraw for a time, the paper currency of the 
 bank of England, and by that means to close the shops 
 of all the ^even hundred provincial bankers, whose 
 minor streams are fed from the great metropolitaa 
 spring of paper currency. 
 
 Its first consequence will be to deprive the people 
 of all circulating medium, and the merchants, manu- 
 facturers, and great agriculturists of the principal 
 part of their capital. Those who have witnessed the 
 temporary embarrassments of a provincial town, upoa 
 the failure of a country bank in its vicinity, and the 
 want of silver at a country market during the autuma 
 of 1811, may forma faint picture of the national eon- 
 fusion which this first consequence must immediately 
 produce. 
 
 Yet this decree is already pronounced by the legisla- 
 ture, and the era of peace IS to be the harbinger of ail 
 
4^4. THE author's SUGGESTIONS [AI^P'I 
 
 the confusion which must inevitably ensue within si^d" 
 months after a definitive treaty, by the present provi*^ 
 sions of the bank restriction act. 
 
 To introduce a new currency^ is a subject of entirel)^ 
 dillerent and subsequent provision. New paper will 
 not pass, at least in the beginning; for what paper cart 
 be devised upon a better principle than that which isJ 
 now current, and what promises of payment in coin 
 can be relied on with certainty, when no one can esti- 
 mate the proportionate influx of bullion, and the pro- 
 gressive change in the money value of all vendibles ? 
 The author has formed some schemes for the facilitat- 
 ing of that ancient barter which is the foundation of all 
 exchange ; and which,in the natural gtate,preceded the 
 introduction of money : but, though this seems the 
 true course of exchange, upon the sudden relinquish- 
 ment of the advantages of a money circulation ; yiet all 
 &uch schemes are complex, difficult, and of uncertain 
 efficacy* 
 
 In this difficultyj great as it is, the stock of bullion 
 in the coffers' of the bank, whatsoever its amount, will 
 be found, as before stated, the sacred fund of national 
 salvation. In the administering of this fund, this 
 miraculous remnant of the food which is to appease 
 the craving necessity of millions, the wisdom, the pru- 
 dence, the fortitude of the government, and the 
 good disposition of an industrious people, will be put 
 to a severe trial; and the author is somewhat sanguine 
 
ART.IEI.J fcOXCERNtNG THE PSE^ENt CftlSJS. 4^3 
 
 in his hopes, tUat, in that eventful period, t!ie Riiers 
 aad the people will derive much assistance from tk^ 
 plain principles and undoubted truths contained iit thk 
 volume: in which he has endeavoured to analyse witk 
 scrupidous fidelity ail the principles, and detect ail 
 the mysteries of every various medium of circ4jiuti<>n, 
 bitherto used auiougSit civilized nations. 
 
 It is with thi« hope, that he cx>mmits it to the work!* 
 
 confident of his own honest intentions, presuming 
 only upon the utility of patient labour and i«i. 
 dustrious sincerity, little anxious whether he i» 
 deemed the advocate for paper or for gold; bat 
 desifxjus that, if he shall be esteemed the prophet 
 of evil rather than of good, he shall be allow-ed 
 to have stated adverse prognostics only to render the 
 patient subniissive to the cui-ative process of i[\e state 
 physician ; that, if he has probed tlie deepundsinuou* 
 wounds of the state with severity, he has touched to 
 the quick, only to guide the master surgeon the mor^ 
 safely in the painful operations of his skilL 
 
 >^ 
 He has kept nature and her law in view through all 
 liis labours, and he has endeavoured to pronounce hef 
 decrees as the true guide and principle for the rulers 
 of all states- If reason and nature have really dictated 
 his opinions, he has confidence in the wisdom of par- 
 liament, and the justice of the nation to believe that 
 his humble voice will not want attention. If he is in 
 error, the test of experience will soon detect his falja- 
 
496 *rHE AUT|J[0R*S SUGGESTIONS, &C. [aPP, 
 
 cies; for his principles, unlilce those of many others, 
 are definite, tangible, experimental, and demonstrative. 
 At all events, he has performed a duty, which long 
 reflection had induced him to consider as imperative. 
 He has given the warning to his countrymen : the 
 yesult is beyond the reach of his philosophy, and for 
 the evfent he can only wait with patience and resigna- 
 tion. He commits himself, under providence, to the 
 stream of time, and the hope of futurity ; deprecating 
 the centre of enmity, and the outcry of prejudice, 
 with an humble prayer, that if he shall have spoken, 
 according to his intentions, the voice of truth, and the 
 dictates of sound policy, he may not be numbered 
 amongst those who have prophesied in vain, and that 
 it may not be recorded hereafter in the history of his 
 countrymen, as in that of Troy, 
 
 IfUNC ETIAM FATIS APERIT CASSANDRA FUTURIS 
 ORA DEI jySSU, NON U^QUAM CREjOITA TBUCIUS, 
 
 ^^^ OF THE ^^ 
 
 UNiVERSiTY 
 FINIS, 
 
 W. Plint, Printer, Old Bailey, Loadoa, 
 
UNIVERSITY OF CALIFORNIA LIBRARY 
 BERKELEY 
 
 Return to desk from which borrowed. 
 This book is DUE on the last date stamped below. 
 
 O0cl'5Si' f 
 0CT7 1953 Llll 
 
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