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• Preface
• Studies In the Theory of International Trade
• Chapter I: English Theories of Foreign Trade, Before Adam Smith: I
• I. Introduction
• II. “ Mercantilism” and “bullionism”
• III. the Balance-of-trade Doctrine
• IV. Reasons For Wanting More Bullion
• V. Employment and the Balance of Trade
• Chapter II: English Theories of Foreign Trade, Before Adam Smith: Ii
• I. Legislative Proposals of Mercantilists
• II. the Collapse of Mercantilist Doctrine
• III. Some Modern Interpretations of English Mercantilism
• Chapter III: The Bullionist Controversies: I. The Inflation Phase
• I. the Participants In the Controversy
• II. the Factual Background
• III. Premium On Bullion As Evidence of Excess Issue: the Bullionist Position
• IV. Qualifications Conceded By the Bullionists
• V. Possible Objections to the Bullionist Position
• VI. the Anti-bullionist Position
• VII. the Balance of Payments Argument
• VIII. the Possibility of Excess Issue By Banks
• IX. Responsibility For the Excess Issue: Bank of England Vs. Country Banks
• X. Responsibility For Excess Issue: the Credit Policy of the Bank of England
• Chapter IV: The Bullionist Controversies: II. The Deflation Phase
• I. the Resumption of Cash Payments
• II. Responsibility of Resumption For the Fall In Prices
• III. the Economic Effect of Changing Price Levels
• IV. Ricardo's Position On the Gold Standard
• V. Reform Without Departure From the Metallic Standard
• VI. Paper Standard Currencies
• Chapter V: English Currency Controversies, 1825–1865
• I. Introduction
• II. the “currency School” -“banking School” Controversy
• III. the “palmer Rule ”
• IV. the Bank Act of 1844
• V. the Possibility of Overissue of Convertible Bank Notes
• VI. the Role of Deposits, Bills of Exchange, and “credit” In the Currency System
• VII. the Technique of Credit Control
• VIII. the Relation Between Bank of England Operations and Specie Movements
• IX. Currency Reform Proposals
• Chapter VI: The International Mechanism Under a Simple Specie Currency
• I. Introductory
• II. the Mechanism According to Hume
• III. an Omitted Factor? Relative Changes In Demand As an Equilibrating Force
• IV. Prices In the Mechanism: the Concept of “price Levels ”
• V. the “terms-of-trade” Concept
• VI. the Prices of “domestic” Commodities
• VII. the Mechanism of Transfer of Unilateral Payments In Some Recent Literature
• VIII. a Graphical Examination of Pigou's Analysis 1
• IX. Some Elaborations On the Basis of Pigou's Analysis
• X. an Alternative Solution
• XI. Types of Disturbance In International Equilibrium
• XII. Specie Movements and Velocity of Money
• XIII. Commodity Flows and Relative Price Levels
• XIV. Exchange Rates
• XV. A Criticism of the Purchasing-power Parity Theory 1
• Chapter VII: The International Mechanism In Relation to Modern Banking Processes
• I. Automatic Vs. Managed Currencies
• II. Primary and Secondary Expansion of Means of Payments
• III. Short-term Loans In the International Mechanism
• IV. Primary and Secondary Expansion In Canada , 1900–13
• V. the International Mechanism and Business Cycles
• Chapter VIII: Gains From Trade: the Doctrine of Comparative Costs
• I. the Nature and Origin of the Doctrine
• II. the Division of the Gain From Trade
• III. Trade In More Than Two Commodities
• IV. Trade Between More Than Two Countries
• V. Transportation Costs
• VI. Increasing and Decreasing Costs
• VII. Prices, Money Costs, and Real Costs
• VIII. Dependence of Comparative Cost Doctrine On a Real-cost Theory of Value
• IX. Differences In Wage Rates In Different Occupations
• X. Variable Proportions of the Factors and International Specialization
• XI. Variable Proportions of the Factor and Comparative Real Costs
• XII. “ Opportunity Cost” Analysis As a Substitute For Real Cost Analysis
• Chapter IX: Gains From Trade: the Maximization of Real Income
• I. “ Mass of Commodities” and “sum of Enjoyments”: Ricardo and Malthus
• II. Reciprocal Demand and the Terms of Trade
• III. Terms of Trade and the Amount of Gain From Trade
• IV. “ Net Benefit” In International Trade: Marshall
• V. Total Net Utility Derived From International Trade: Edgeworth
• VI. the Gain From Trade Measured In Money
• Appendix: a Note On the Scope and Method of the Theory of International Trade

VI. The Anti-Bullionist Position

By no means all of the anti-bullionists were willing to accept as the criterion under all circumstances of the proper amount of currency that amount which could circulate under a metallic standard, and to concede, therefore, that if it could be shown that the circulation was actually greater than could be maintained under a metallic standard the currency would thereby have been demonstrated to be in excess. But criticism of the bullionist position based on rejection of the metallic standard as the best criterion for regulation of the currency became much more widespread and important during the deflation period than it had been during the period of rising prices, and it will be convenient therefore to postpone an examination of such criticism.

The anti-bullionists often attempted to show from statistics as to Bank of England note issues either that the issues had not increased or that there was no relation in time or degree between the fluctuations in issue and the fluctuations in the premium on bullion or the exchanges. But Ricardo was able to show that even if the data were as alleged—as they often were not—they did not refute his argument. He was claiming not that the currency had been increased during the Restriction, but that it existed in an amount greater than could have been maintained at that time, other things remaining the same, if convertibility had been maintained. Whether the amount of actual issue in say 1810 was greater or less than in 1797 was beside the point if it was greater than could have been maintained under convertibility in 1810:

I do most unequivocally admit, that whilst the high price of bullion and the low exchanges continue, ... it would to me be no proof of our currency not being depreciated if there were only 5 millions of bank notes in circulation [as compared to about 10 millions in 1797 and 23 millions in 1810]. When we speak, therefore, of an excess of bank notes, we mean that portion of the amount of the issues of the Bank, which can now circulate, but could not, if the currency were of its bullion value.1

Some of the anti-bullionists contended that to prove depreciation it was necessary to prove that gold coin commanded a premium over paper, since bullion was only a commodity and its price therefore of no special significance.2 Since it was unlawful to melt or export English coin, and since persons buying such coin at a premium would come under suspicion of intent to violate the law, it is not surprising that there were no open dealings in gold coin at a premium over paper.3 What happened was that the full-weight coin quietly but rapidly passed out of circulation and was either exported on government account or went into hoards or into the melting pot for industrial use or for illegal export abroad. As Ricardo pointed out, if the law against melting and export had been repealed, gold coin and gold bullion would have commanded the same premium over paper money;4 on the other hand, if the law against melting and export could have been fully enforced, exportable bullion would have commanded the same premium over coin and paper money.5

[1]Reply to Mr. Bosanquet's observations, Works, pp. 349–50.

[2]Cf. Henry Boase, A letter ... in defence of the conduct of the directors, 1804, pp. 22–23; Substance of two speeches made by the Right Hon. N. Vansittart, 1811, p. 15; The Speech of Randle Jackson, Esq., ... respecting the report of the Bullion Committee, 1810, pp. 9 ff.

[3]Even non-exportable bullion commanded a premium over paper and there was open trade in underweight guineas, which could legally be melted down for internal use, at a premium over paper and even over full-weight guineas. See the evidence of S. T. Binns and of W. Merle, bullion merchants, before the Bullion Committee, Report, Minutes of evidence, pp. 18, 40.

[4]High price of bullion, Works, p. 280.

[5]Ibid., p. 265.