The Online Library of Liberty

A project of Liberty Fund, Inc.

• Errata—vol. III.
• Defence of Usury; Showing the Impolicy of the Present Legal Restraints On the Terms of Pecuniary Bargains; In Letters to a Friend.
• Letter I.: Introduction.
• Letter II.: Reasons For Restraint—prevention of Usury.
• Letter III.: Reasons For Restraint—prevention of Prodigality.
• Letter IV.: Reasons For Restraint—protection of Indigence.
• Letter V.: Reasons For Restraint—protection of Simplicity.
• Letter VI.: Mischiefs of the Anti-usurious Laws.
• Letter VII.: Efficacy of Anti-usurious Laws.
• Letter VIII.: Virtual Usury Allowed.
• Letter IX.: Blackstone Considered.
• Letter X.: Grounds of the Prejudices Against Usury.
• Letter XI.: Compound Interest.
• Letter XII.: Maintenance and Champerty.
• Letter XIII.: To Dr. Smith, On Projects In Arts, &c.
• A Manual of Political Economy: Now First Edited From the Mss. of Jeremy Bentham.
• Chapter I.: Introduction. *
• Chapter II.: Analytical Survey of the Field of Political Economy.
• Chapter III.: Of Wealth.
• Chapter IV.: Of Population.
• Chapter V.: Of Finance.
• Chapter VI.: Operation of a Sinking Fund On the Production of Wealth.
• Chapter VII.: Noscenda.
• Observations On the Restrictive and Prohibitory Commercial System; Especially With a Reference to the Decree of the Spanish Cortes of July 1820.
• Preface.: Observations, &c.
• Section I.: Nature of the Prohibitory System.
• Section II.: Mischiefs of the Prohibitory System.
• Section III.: Causes of the Prohibitory System.
• A Plan For Saving All Trouble and Expense In the Transfer of Stock, and For Enabling the Proprietors to Receive Their Dividends Without Powers of Attorney, Or Attendance At the Bank of England, By the Conversion of Stock Into Note Annuities.
• Introduction.
• Chapter I.: Plan For the Creation, Emission, Payment, and Eventual Extension, of a Proposed New Species of Government Paper, Under the Name of Annuity Notes.
• Chapter II.: Form of an Annuity Note. (see Table II.)
• Chapter III.: Comparison of the Proposed, With the Existing Government Securities, &c.
• Chapter IV.: Grounds of Expectation, In Regard to the Proposed Measure.
• Chapter V.: Financial Advantages.
• Chapter VI.: Advantage By Addition to National Capital.
• Chapter VII.: Advantage By Addition to Commercial Security.
• Chapter VIII.: Particular Interests Concerned.
• Chapter IX.: Rise of Prices—how to Obviate.
• Chapter X.: Reduction of Interest—proposed Mode Compared With Mr. Pelham’s.
• Chapter XI.: Moral Advantages.
• Chapter XII.: Constitutional Advantages.
• Chapter XIII.: Recapitulation and Conclusion.
• Appendix A.: Government Ought to Have the Monopoly of Paper Money, As Well As of Metallic Money.
• Appendix B.: Paper Money—causes Why Not Circulated By Government Without Interest, As Well As By Individuals.
• General View of a Complete Code of Laws.
• Chapter I.: General Division.
• Chapter II.: Relations Between the Laws Concerning Offences, Rights, Obligations, and Services.
• Chapter III.: Relation Between the Penal and Civil Code.
• Chapter IV.: Of Method.
• Chapter V.: Plan of the Penal Code.
• Chapter VI.: Of the Division of Offences.
• Chapter VIII. Titles of the Penal Code.
• Chapter IX.: First General Title of the Civil Code, * of Things.
• Chapter X.: Second General Title of the Civil Code. of Places.
• Chapter XI.: Third General Title of the Civil Code. of Times.
• Chapter XII.: Fourth General Title of the Civil Code. of Services.
• Chapter XIII.: Fifth General Title of the Civil Code. of Obligations.
• Chapter XIV.: Sixth General Title of the Civil Code. of Rights.
• Chapter XV.: Seventh General Title of the Civil Code. of Collative and Ablative Events.
• Chapter XVI.: Eighth General Title of the Civil Code. of Contracts.
• Chapter XVII.: Ninth General Title of the Civil Code. of the Domestic and Civil States.
• Chapter XVIII.: Tenth General Title of the Civil Code. of Persons Capable of Acquiring and of Contracting.
• Chapter XIX.: Of the Particular Titles of the Civil Code.
• Chapter XX.: Of Elementary Political Powers.
• Chapter XXI.: Of Elementary Political Powers— Subject Continued.
• Chapter XXII.: Plan of the Political Code.
• Chapter XXIII.: Plan of the International Code.
• Chapter XXIV.: Plan of the Maritime Code.
• Chapter XXV.: Plan of the Military Code.
• Chapter XXVI.: Plan of the Ecclesiastical Code.
• Chapter XXVII.: Plan of Remuneratory Laws.
• Chapter XXVIII.: Of Political Economy.
• Chapter XXIX.: Plan of the Financial Code.
• Chapter XXX.: Plan of Procedure Code.
• Chapter XXXI.: Of the Integrality of the Code of Laws.
• Chapter XXXII.: Of Purity In the Composition of a Code of Laws.
• Chapter XXXIII.: Of the Style of the Laws.
• Chapter XXXIV.: Of the Interpretation, Conservation, and Improvement of a Code.
• Pannomial Fragments.
• Chapter I.: General Observations.
• Chapter II.: Consideranda.
• Chapter III.: Expositions.
• Chapter IV.: Axioms.
• Nomography; Or the Art of Inditing Laws: Now First Published From the Mss. of Jeremy Bentham.
• Chapter I.: The Subject Stated.
• Chapter II.: Relations.
• Chapter III.: Proper End In View.
• Chapter IV.: Imperfections Primary.
• Chapter V.: Explanations Relative to the Imperfections of the Second Order.
• Chapter VI.: Of Remedies. *
• Chapter VII.: Of Language.
• Chapter VIII.: Of the Perfections of Which the Legislative Style Is Susceptible.
• Chapter IX.: Of Forms of Enactment.
• Appendix. Logical Arrangements, Or Instruments of Invention and Discovery
• Equity Dispatch Court Proposal; Containing a Plan For the Speedy and Unexpensive Termination of the Suits Now Depending In Equity Courts. With the Form of a Petition, and Some Account of a Proposed Bill For That Purpose
• Section I.: Purpose Explained. Jeremy Bentham to the Honest and Afflicted Among Equity Suitors.
• Section II.: Equity Suitors’ Petition For Dispatch Court. to the King’s Most Excellent Majesty, —
• Section III.: Dispatch Court Bill—some Account of It.
• Section IV.: Information Requisite From Petitioning Suitors.
• Equity Dispatch Court Bill: Being a Bill For the Institution of an Experimental Judicatory Under the Name of the Court of Dispatch, For Exemplifying In Practice the Manner In Which the Proposed Summary May Be Substituted to the So Called Regular Sy
• Editor’s Note.
• Preface.
• Preamble.
• Part I.—: Judiciary.
• Section I.: Judge Located, How.
• Section II.: Remuneration.
• Section III.: Registrar, &c.
• Section IV.: Eleemosynary Advocate.
• Section V.: Judges’, &c. Deputes.
• Section VI.: Judge’s Powers—exemptions—checks.
• Section VII.: Prehensors and Messengers.
• Section VIII.: Consignees; * Or Say, In-trust-holders.
• Section IX.: Grounds of Decision For the Dispatch Court Judge.
• Section X. ‡: Suits’ Comparative Suitableness; and Order of Cognizance.
• Section XI.: Auxiliary Judges and Accountants.
• Section XII.: Sittings, Times Of.
• Part II.—: Procedure.
• Section XIII.: Definitions. *
• Section XIV.: Examination of Solicitors.
• Section XV.: Initiatory Examination of Parties, &c.
• Section XVI.: Appropriate Intercourse, Constant and Universal, Secured.
• Section XVII.: Mutual Security For Forthcomingness of Persons and Things. ‡
• Section XVIII.: Evidence-procuring Money, How Provided.
• Section XIX.: Subsequential Evidence, How Elicited.
• Section XX.: Execution, How Performed.
• Section XXI.: Equity Court Costs, How Disposed Of.
• Section XXII.: Dispatch Court Costs, How Disposed Of.
• Section XXIII.: Eventual Retrotransference of a Suit to the Equity Court.
• Section XXIV.: Expense of the Court, How Provided For.
• Supplemental Sections:—
• Section I. Or XXV.: Bankruptcy and Insolvency.
• Section II. Or XXVI.: Henceforward Dispatch Court.
• Schedules to the Bill.
• Plan of Parliamentary Reform, In the Form of a Catechism, With Reasons For Each Article: With an Introduction, Showing the Necessity of Radical, and the Inadequacy of Moderate, Reform.
• Introduction.
• Section I.: History of the Ensuing Tract—alarming State of the Country and the Constitution.
• Section II.: Most Prominent Present Grievance, Gareisoning France.
• Section III.: Causes of the Above and All Other Mischiefs:—particular Interests Monarchical and Aristocratical, Adverse to the Universal—their Ascendency.
• Section IV.: Sole Remedy In Principle—democratic Ascendency.
• Section V.: Remedy In Detail: Radical Parliamentary Reform: Elementary Arrangements In This Edition of It—their Necessity.
• Section VI.: Differences Between This and the Original Editions of Radical Reform.
• Section VII.: Virtual Universality of Suffrage Further Considered.
• Section VIII.: Virtual Universality of Suffrage—its Undangerousness.
• Section IX.: Freedom of Suffrage Further Explained—seductive Influence—its Forms, Instruments, &c.
• Section X.: Bribery and Terrorism Compared.
• Section XI.: Purchase of Seats—in What Cases Mischievous—in What Beneficial.
• Section XII.: Secresy of Suffrage—its Importance Further Developed.
• Section XIII.: Exclusion of Placemen, &c. From the Right of Voting—mischievousness and Profligacy of the Opposite Arrangement.
• Section XIV.: Universal Constancy of Attendance—its Importance.
• Section XV.: Representatives—impermanence of Their Situation—its Importance:—objections—their Groundlessness.
• Section XVI.: Moderate Reform—its Arrangements—their Inadequacy.
• Section XVII.: Trienniality Inadequate;—annuality Necessary.
• Section XVIII.: Interests Adverse to Adequate Reform—support Given By Them to Moderate, to the Exclusion of Radical: Tories—whigs—people’s Men.
• Catechism of Parliamentary Reform; Or, Outline of a Plan of Parliamentary Reform; In the Form of Question and Answer; With Reasons to Each Article.
• Section I.: Ends to Be Aimed At On the Occasion of Parliamentary Reform.
• Section II.: Means, Conducive Towards These Ends.
• Section III.: Means—their Uses, With Reference to Their Respective Ends.
• Section IV.: Means Conducive to Aptitude In Members: I. Placemen Not to Vote, Nor to Be Seated By Election.
• Section V.: Means, &c. Continued.—ii. Placemen Seated By the King, With Speech and Motion, Without Vote.
• Section VI.: Means, &c. Continued.—iii. Elections Frequent—annual.
• Section VII.: Means, &c. Continued.—iv. Speeches Authentically and Promptly Published.
• Section VIII.: Means, &c. Continued.—v. Attendance, Punctual and General, Secured.
• Section IX.: Inconveniences Incident to Elections, and Election Judicature.
• Section X.: Election Inconveniences—means For Their Removal.
• Section XI.: Collateral Advantages, Referable to the Situations of Electors, Placemen, Lords, &c.
• A Sketch of the Various Proposals For a Constitutional Reform In the Representation of the People, Introduced Into the Parliament of Great Britain, From 1770 to 1812.
• Radical Reform Bill, With Extracts From the Reasons.
• Preliminary Explanations.
• Title of the Proposed Act.
• Preamble.
• Section 1.—: Seats and Districts.
• Section 2.—: Electors, Who.
• Section 3.—: Eligible, Who.
• Section 4.—: Election Offices.
• Section 5.: Election Apparatus.
• Section 6.—: Promulgation of Recommendations In Favour of Proposed Members.
• Section 7.—: Voters’ Titles Pre-established.
• Section 8.—: Election, How.
• Section 9.: Election Districts and Polling Districts, How Marked Out.
• Section 10.—: Vote-making Habitations, How Defined.
• Section 11.—: Members’ Continuance.
• Section 12.—: Vacancies Supplied.
• Section 13.—: Security For the House Against Disturbance By Members. †
• Section 14.—: Indisposition of Speakers Obviated.
• Appendix, Including General Explanations.
• Radicalism Not Dangerous. Extracted From the Mss. of Jeremy Bentham. *
• Part I.—: Introduction.
• Section I.: Radical Reform Bill Recapitulated.
• Section II.: Persuasion of the Dangerousness of Radicalism—cause of It, and of the Vituperative Expression Given to It.
• Section III.: Terms of the Accusation,—speeches From the Throne, 16 Th July and 21 St November 1819.
• Section IV.: The Accusation In General Terms—counter-averment.
• Section V.: Plan of This Defence.
• Part II.—: Deference From the General Nature of the Case.
• Section I.: Conditions Necessary to a Man’s Embarking In Such a Design.
• Section VII.: Concurrence In Any Other Extensive Plan of Spoliation Impossible.
• Section VIII.: Concurrence of Any Constituted Authorities Impossible.
• Section IX.: Accomplishment Impossible—design Impossible.
• Section X.: The Talked-of Spunge No Proof of the Design.
• Part III.—: Defence From Experience In the Case of the United States.
• Part IV.: Defence From Particular Experience In the Case of Ireland: Years 1777 Or 1778, to 1783.
• Section I.: Analogy Between This and the Previous Case.
• Section II.: Democratic Ascendency, How Produced.
• Section III.: Fruit of Democratic Ascendency a Golden Age.
• Section IV.: Coincidence of Its Characters With Those of Radicalism.
• Section VI.: Extinction of Democratic Ascendency and Reform—restoration of Monarchico-aristocratical Ascendency, and Its Consequences.
• Conclusion.

A PLAN FOR SAVING ALL TROUBLE AND EXPENSE IN THE TRANSFER OF STOCK,

AND FOR ENABLING THE PROPRIETORS TO RECEIVE THEIR DIVIDENDS WITHOUT POWERS OF ATTORNEY, OR ATTENDANCE AT THE BANK OF ENGLAND, BY THE CONVERSION OF STOCK INTO NOTE ANNUITIES.

CIRCULATING ANNUITIES, &c.*

INTRODUCTION.

Themain principle of the proposed measure consists in the opening the market for government annuities, on terms of profit to government—viz. at a reduced rate of interest to a mass of money, which, by existing circumstances, is either excluded from the faculty of yielding interest to the owners altogether, or, in the hands of bankers or otherwise, they are obliged to accept, on inferior security, a rate of interest inferior, all things considered, to that which, with a very considerable degree of profit, might be allowed by government. The annuities, thus created, to be charged upon the existing fund; and the money thus raised to be employed, as it comes in, in the redemption of debt, and thence in exoneration of that fund. The result and benefit of the measure, taking it on the smallest scale, will, besides the above profit to government, consist in the affording to the least opulent and most numerous class of individuals (friendly societies included)—in a word, to the great bulk of the community—the means of placing out small hoards, however minute, with a degree of advantage unattainable by any other means,† and this, too, even at compound interest—a mode of accumulation which, familiar as it is in name, is not in effect capable of being realized by any other means in favour of individuals, though so happily brought to bear in favour of the public in the instance of the sinking funds;‡ —not to speak of the collateral advantage obtained, by creating on the part of the lower orders, in respect of the proposed new species of property, a fresh and more palpable interest in the support of that government, on the tranquillity of which the existence of such their property will depend.*

On the larger scale upon which it may be expected to expand itself, the measure, after accelerating the otherwise rapid ascent of government annuities to the par price,† and clearing away the 4 and 5 per cents.,‡ would afford the means of bringing the further reduction of the rate of interest on those annuities to its maximum in point of effect, rate of reduction, and rapidity, taken together;∥reduction of interest accelerating, too, in this way, redemption of principal, instead of taking place of it and retarding it, as on the plan pursued in Mr. Pelham’s days.§

Other paper currencies have been either (like the French assignats and mandats, &c.) engagements for money in unlimited quantity, and without funds for performance; or promises of minute portions of a species of property (for example lands and houses) incapable of being reduced into such portions; or, like some of the American currencies, promises of metallic money, payable at a period altogether indefinite, dating, for instance, from a fixed day posterior to the conclusion of a war.

By the proposed currency, nothing is engaged for but to pay such monies as there are already funds for paying, and at such times at which there are funds for paying them; and this in a quantity which, by the terms of the engagement, has its ne plus ultra, and can in no case add to the existing amount of the engagements it finds charged upon those funds: reimbursing immediately, and with profit, the fund on which it draws, it stands distinguished by this prominent feature, from all currencies as yet exemplified.¶

The losses, experienced or apprehended, from rash or penniless issuers of promissory notes, gave birth to the restrictions imposed on issues of sums below a certain magnitude. But this reason has no application to notes expressive of engagements, of the sort proposed, on the part of government. Issuing from such a source, the sums of the notes cannot be too minute: incapable of increasing, certain even of diminishing, the amount of the engagements they find existing, the influx of them cannot be too great. The smallness of the notes adds to the multitude of the customers; the multitude of the notes divides the mass of the engagements, and does not add to it. Confined within those bounds, the magnitude of the emission adds not only to the profit of the measure, but to the security of the fund.

A species of notes was not long ago proposed, whereby government annuities were to stand mortgaged, and yet (it was supposed) without diminution of their value:—and which were expected to pass, and be paid for as if they had engaged for the payment of so much money, though without binding any assignable individual to the payment of it. But the now proposed plan engages for no payment for which adequate funds are not already in existence; nor without imposing on a determinate individual the obligation of making the payment out of those funds; nor yet burthens those funds, without immediately disburthening them to a superior amount.

By taking from the load of government annuities which is found pressing on the market, the sale of the land tax for stock has bettered the terms of all succeeding loans. On the measure now proposed, hangs a profit the same in kind, superior in degree.*

Reducing the mass of the national debt, the operation on the land tax takes nothing from the mass of national capital;—the proposed measure adds to it. The former borrows from capital, but refunds immediately, with 10 per cent. to boot; the latter adds still more to capital, and that as speedily, without having borrowed anything.†

Every penny of the national debt redeemed, if redeemed with money not borrowed from capital, is so much added (it will be shown) to that part of the national capital which does not consist of money. The addition made by the sinking fund to the mass of national capital, is little inferior to the defalcation it makes from the mass of national debt. So many years as, by the aid of the proposed measure, may come to be struck off from the period which would otherwise have been occupied in the redemption of the debt, so many years’ interest, upon the sum equal to the greatest amount of that debt, will therefore have been added, and that at compound interest, to the amount of national capital, by the operation of the proposed measure.

A sort of discovery in political economy has been made of late (for such it seems to be,) that commercial security is not less liable to suffer by deficiency than by excess, in respect of the customary quantity of paper in circulation. Among the advantages attendant on the proposed paper, will be found that of affording a remedy, and that of the preventive kind, against the shocks which commercial security might otherwise have to sustain from such deficiency or excess.‡

Shocks of that kind are not, however, the only mischief to which the community stands exposed, not only by the abuse, but even by the use, of every species of circulating paper as yet known. Rise of prices is another mischief, less heeded, but not less real. By gold and silver money to the same amount, the same mischief would (it is true) be produced, and in the same degree; but the magnitude of the mischief is in proportion to the suddenness of the addition, not to the absolute quantum of it; and, in the shape of cash, the influx is not susceptible of any such suddenness as in the shape of paper. To be capable of opposing an effectual barrier to a torrent of this sort, will be found to be among the properties of the proposed paper. To point out measures adequate to that end, is among the tasks undertaken in the plan of the proposed measure.∥

The extent of the proposed emission being given, neither the efficiency nor the utility of the measure will be found open to dispute: the only room for uncertainty regards the extent. As to that point, cases are collected, presumptions offered: but nothing short of experience can determine.

CHAPTER I.

PLAN FOR THE CREATION, EMISSION, PAYMENT, AND EVENTUAL EXTENSION, OF A PROPOSED NEW SPECIES OF GOVERNMENT PAPER, UNDER THE NAME OF ANNUITY NOTES.

§ 1.

Creation, Emission, and Payment.

Art. 1. That there be issued from his Majesty’s exchequer, in whatever quantity[1.] it shall be applied for by purchasers, on the conditions hereinafter mentioned, through the medium of such local or sub-offices as are hereinafter mentioned, and the interest or dividends paid in such manner as is also hereinafter mentioned, a competent number of transferable promissory notes, to be termed annuity notes; importing, each of them, the grant of a perpetual redeemable annuity, payable to the purchaser or other holder of the note, in consideration of the principal sum, on the repayment of which such annuity is made redeemable, and which accordingly constitutes the denominative value or principal of such note; such interest to be paid half-yearly,[2.] immediately after the expiration of each half-year.

TABLE I.

TABLE OF A PROPOSED ANNUITY-NOTE CURRENCY;

Exhibiting divers particulars relative to a proposed series of Notes, carrying the same rate of Interest, and having for their values sums rising one above another in a series of terms, 19 in number with 2 for their common measure; of which magnitudes more or fewer may be employed as may be found convenient. Also another corresponding series of principal sums, which (they being raised in their amounts, while the corresponding amounts of interest continue unchanged) give an inferior or reduced rate of Interest, with reference to the series first mentioned. The sums proposed are in columns V. VI. VII. VIII. IX. X. XIII.;—those used for illustration, in columns I. II. III. IV. XI. and XII.

Art. 2. That the interest be in such sums as to be capable of being computed daily, as in the case of exchequer bills. That the daily interest allowed upon the standard note (so termed with reference to any smaller or larger notes that may come eventually to be added to the circulation upon the same principle) be a farthing;[3] —and that the principal or denominative value of such standard note be £12 : 16s; and that the interest, in order to afford a profit to government, be inferior to the current rate borne by government annuities at the opening of the issue, say £3 per cent. nearly[4] —a small sum being added to the principal sum, corresponding precisely to that rate, for the sake of making the sums the more even, especially at the bottom of the scale.[5]

Art. 3. That each note contain, on the face or back of it, a table, whereby the value of it, as increased by daily interest, may be seen for every day in the year, by inspection, without calculation; also a table, whereby in case of forbearance[6] to receive the interest, the value of a note of that magnitude, as increased by daily interest, added to yearly interest so forborne to be received, may be seen, for any number of years, by a single addition; together with an indication, by means of which it may be seen (also by simple inspection) for what number of years, if any, the interest on the particular note in question continues unreceived.

Art. 4. That the interest on each note, whenever issued, commence on the first day of each year of our Lord; and that, on notes issued on the several days after such first day, the interest to the day of issue be added to the purchase money.[7]

Art. 5. That no such annuities be ever issued at a less price,[8] (i. e. so as to bear a greater rate of interest) than the first issue, and accordingly, that as often as any money comes to be raised at a higher rate of interest by perpetual annuities, it shall be by the creation of stock annuities, &c. as at present; and that a clause to this effect be a fundamental article in the contract made with the purchasers on the part of government, and be inserted accordingly in the tenor of the note.

Art. 6. That, at that price, the issue be kept open, so long as any of the redeemable stock annuities existing at the commencement of the issue, continue unredeemed, and no longer; and that this be another such fundamental article. (See Art. 20.)

Art. 7. That no such note annuity be paid off till the whole mass of stock annuities existing at the commencement of the issue, or created subsequently, shall have been paid off,[9] and that this be another such article.

Art. 8. That for every £3 a-year annuity thus created, an equal portion of stock annuities be forthwith bought in and extinguished within a time to be limited; and that this be another such article.

Art. 9. That the profit resulting from the difference between the price at which each such annuity shall have been sold, and the price at which an equal mass of annuity shall have been bought in, be carried to the sinking fund, subject to such other dispositions, if any, as from time to time may be thought fit to be made by parliament with respect to a predetermined portion or portions of it.

Art. 10. That, at the outset, no other note be issued than the standard note (£12 : 16s.) with the half, or with the half and quarter of it.

Art. 11. That, by degrees, the series of notes be extended downwards, each successive note being the half of the one immediately preceding it (with or without the omission of any term or terms in such descending series) until it has descended to the lowest piece of silver coin in common currency, viz. a sixpence; and that it be then considered whether to give it a further extension downwards, viz. to the level of the copper coinage.[10]

Art. 12. That the notes having for their respective values, sums not exceeding the largest silver coin in use (viz. 5s.) be distinguished by the appellation of silver notes, all above being for the same purpose termed gold notes; and that to facilitate the discrimination, a corresponding peculiarity of colour be given to the gold notes.

Art. 13. That, moreover, as convenience may suggest, the series be extended to a correspondent length, or otherwise upwards;[11] in which case the series will, if complete, consist of nine terms below the standard note, and as many above it—total, nineteen; having two for their common difference: values as by the annexed table.

Art. 14. That when the credit of this paper has been established, or even from the first, notes already taken out by individuals be received (as bank-notes are at present) at the several government offices[12] in the country as well as in the town, and re-issued from thence in the way of circulation, as they would be between individual and individual, charged with the intervening interest, to as many as may think proper to receive them at that value.

Art. 15. That the offices from whence the proposed paper is issued to the purchasers, be, in the first instance, the several local post-offices[13] in town and country, with the eventual addition of any of the other local government offices (such as the stamp and excise offices,) or in case of need, other offices to be established for the purpose, in such situations and numbers as may be found necessary.

Art. 16. That to save trouble in the issue of the smaller notes, especially the silver notes, government reserves to itself the power of fixing the least quantity[14] of annuity-note money, which an individual shall be allowed to take out at once; as also to prescribe the composition of that quantity, taking care to leave to the customer the choice of the composition, as far as it may be a matter of indifference to government.

Art. 17. That powers be given to the king in council, or to the treasury, from time to time to declare, whether any and what fee, not exceeding a certain amount, shall be paid by the purchaser, on the emission of each note or parcel of notes constitutive of such or such a sum; as also on the exchange of an old note for a fresh note, at the instance of the holder—regard being had in both cases to the magnitude of the sum constituting the value of the note or mass of notes; as also to call in at any time any such note or notes, so it be without expense to the holder, for the purpose of their being examined or exchanged; and, by suspension of interest, or other penalties, to enforce obedience to such calls; as also to declare whether any and what fee shall be paid by the holder on the receipt of the interest due on each note or parcel of notes.[15]

Art. 18. That periodical accounts be published of the progress of the issue,[16] as regularly, and circulated as extensively, as the prices of stocks are at present, under heads expressive of the day, the place, the number of notes of each magnitude, and the total amount issued on each day at each place; together with the increase or decrease of the amount, as compared with former periods; and any such other particulars as may be of use.

§ 2.

Eventual Extension.

Art. 19. That if, by this and other means, three per cent. stock annuities should ever have risen to par, the produce of the issue of note annuities be thereupon applied to the paying off, instead of buying in stock annuities; and so toties quoties, buying in whenever they are under par, paying off whenever they are at or above par.

Art. 20. That inasmuch as the paying off stock annuities, the greatest part thereof carrying three per cent., will lead to a rapid and almost simultaneous conversion[17] of the whole amount thereof into note annuities, bearing nearly the same rate of interest;—and inasmuch as, upon the redemption of the last parcel of redeemable stock annuities, the emission of note annuities at this rate of interest must (according to article 6) immediately cease;—and inasmuch as the mass of government annuities will in the meantime have already been much reduced, and by the continued operation of the continually increasing powers of the existing sinking funds, the scarcity will be growing greater and greater every day (notwithstanding that, being continually exposed to be paid off at par, they will be incapable of bearing any considerable premium) the offices be opened thereupon for the emission of a second issue, at a reduced rate of interest, say £2 : 7 : 5—i. e. 2⅜ per cent. nearly—(viz. by raising the price of the standard note from £12 : 16s. to £16;)—the produce of such second issue to be applied to the paying off the notes of the first issue, and the second issue to close as soon as the redemption of the notes of the first issue shall have been completed.

Art. 21. That the amount of all interest saved, as well by the redemption of stock annuities redeemed by the produce of the existing or other future funds (and, therefore, without the preparatory emission of a mass of annuity-note paper to the corresponding value) as by the progress made in the reduction of the rate of interest in the way just mentioned (viz. by the preparatory emission of a mass of annuity-note paper, at a lower rate of interest, followed by the redemption of a correspondent mass of stock annuities, or note annuities, at the higher rate,) be carried (immediately) to the sinking funds—on the principle of the provision made, in the like behalf, in and by the existing act (viz. the New Sinking Fund Act, 32 Geo. III. c. 32, § 2.)

Art. 22. That, immediately upon the redemption of the last parcel of note annuities of the first issue, the offices he again opened for the emission of a third issue at the next lowest rate of interest suitable to the nature of note annuities on which interest is computed daily, say £1 : 9 : 6—i. e. 1½ per cent. nearly[18] ;—viz. by raising the price of the standard note from £16 to £25 : 4s.;—the produce of such third issue to be appropriated to the redemption of the note annuities of the second issue as above: with like provision as above in favour of the sinking funds: and so toties quoties, in so far as any such farther reduction may be deemed eligible.

Art. 23. That inasmuch as, so long as any portion of the redeemable annuities remain unextinguished, there may remain two parcels of annuity-note paper, bearing two different rates of interest—the higher closed, the other open—provision be made, that in case of the creation of any portion of capital in stock annuities, at any time thereafter, by reason of money borrowed for the support of a war or otherwise, powers be given for extending the issue of note annuities to the extent of the capital so created, and at the rate of interest the then last or open issue of note annuities shall receive.

CHAPTER II.

FORM OF AN ANNUITY NOTE.

(See Table II.)

CHAPTER III.

COMPARISON OF THE PROPOSED, WITH THE EXISTING GOVERNMENT SECURITIES, &C.

§ 1.

Features possessed in common with other securities.

1. Rate of interest low, inferior to that afforded by money laid out in the purchase of stock annuities. Exemplified in the notes of country bankers.

TABLE II.

FORM OF A PROPOSED ANNUITY NOTE,[1] ON THE SEVERAL PLANS OF HALF-YEARLY AND YEARLY INTEREST.

BACK OF THE NOTE ON THE YEARLY PLAN.

By Statute NA Geo. III. c. NA, counterfeiting the Portrait of any Public Officer on an Annuity Note is Forgery. The having in one’s possession, without special licence, any Drawing or Plate, &c. designed to represent such Head, is presumptive evidence of such Forgery: Punishment Death.^[23] Like provision in respect of the counterfeiting this type.[24]

PORTRAIT from an engraving on wood: THE AUDITOR OF THE EXCHEQUER, WITH THE EPIGRAPH.[22]

I.

Daily Interest, or Augmentation Table:^[25]

Showing the Value of this Note for every Day in the Year, as the same is increased by the addition of daily Interest. No Interest for the last day of any Year:^[26] Nor for the 29th of February in a Leap Year:^[27] Nor for the day on which the Note is passed.[28]

II.

Underneath is the Register of Yearly Payments of Interest:[29]

In which are set down the several Years of our Lord (if any) for which Interest upon this Note has been paid by the Government:—

If upon the face of the above Register, the Interest on this Note, for any number of Years, appears to remain unpaid, to find the total value of it, add to its value for the Day, according to the above Table, the amount of the Interest for the aforesaid number of unpaid years, according to the following

III.

Yearly Interest, or Augmentation Table.^[30]

FACE OF THE NOTE, NEARLY THE SAME ON BOTH PLANS.

This Note, price and value Twelve pounds sixteen shillings, besides interest, entitles the Bearer[3] to a Farthing per day, from the first of January last for ever, out of the Consolidated Fund; but subject to redemption, on payment of the above sum, with interest.

The above interest is paid half-yearly;[4] and the interest of each half-year may be received any time not earlier than[5] [NA] days after the last day of such half year, through the medium of any Local Annuity-Note Office^[6] in town or country; previous application having been made at the same office not less than[7] [NA] days, nor more than[8] [NA] days before such last day, and such conditions being observed as may be seen at every such office.

The Fee to be paid at the office on the purchase of this Note, is [NA],[9] and no more; on exchanging the same for a fresh Note, [NA].[10]

Issued at the General Annuity-Note Office in St. Margaret’s Street, Westminster, this __________ day of __________ 18 by order of me _______________ Auditor^[11] of his Majesty’s Exchequer; and by^[12] the hands of me _______________ Issuing Clerk.^[13]

PORTRAIT from an engraving on wood: THE KING CROWNED, WITH AN EPIGRAPH ON THE SCEPTRE, “FOR SECURITY AGAINST FORGERY.”[14]

N^o __________

Issued at my Local Annuity-Note Office in _______________ this __________ day of _______________ One thousand eight hundred and __________ by me _________________________ Office-Keeper,^[18]

By Statute NA Geo. III. c. NA the faith of Parliament is pledged, that no Annuity Note, conveying a perpetual redeemable Annuity payable to Bearer, shall ever be issued at such price as to give a higher rate of interest than is given by this Note;^[19] and that no such Annuity Note shall ever be paid off without the consent of the holder, while any redeemable Stock Annuities continue unredeemed.

For security, in cases of Trust, Conveyance by Post, &c., the Head-piece of this Note may be separated from the body^[20] by cutting it across through the waved line. An account of the uses and purposes of such division^[21] may be seen at the said several offices.

By Statute NA Geo. III. c. NAcounterfeiting, &c., the Portrait of any Public Officer on an Annuity Note is Forgery; the having in one’s possession, without special licence, any drawing or plate, &c. designed to represent such head, is presumptive evidence of such Forgery, — punishment Death.^[23] Like provision in respect of the counterfeiting this Type.[24]

BACK OF THE NOTE, ON THE HALF-YEARLY PLAN.

I.

Daily Interest, or Augmentation Table:^[25]

Showing the Value of this Note for every Day in the Year, as the same is increased by the addition of Daily Interest.

No Interest for the last Day of any Year:^[26] nor for the 29th of February in a Leap Year:^[27] nor for the Day on which the Note is passed.[28]

II.

Register of Half-Yearly Payments of Interest:[29]

In which are set down the several Years and Half-Years of our Lord (if any) for which Interest upon this Note has been paid by Government.

N.B.—The Figures 1 and 2 distinguish the First and Second Half-Years of each year.

III.

If, upon the face of the above Register, the Interest on this Note, for any number of Half-years, appears to remain unpaid, to find the total value of it, add to its value for the Day, according to the above Table, the amount of the Interest for the aforesaid number of unpaid Half-years, according to the following

2. Perpetuity, of the mass of interest granted, subject to redemption.—Taken from stock annuities;—agrees with Irish debentures and India bonds;—differs from Exchequer bills.

3. The principal not demandable.—Taken from stock annuities;—agrees with Irish debentures and India bonds: also with navy, victualling, transport bills, and ordnance debentures;—differs from bank, bankers, and private notes and bills.

4. Interest without special fund, over and above the general consolidated fund.—Taken from Exchequer bills;—differs from the former practice in the creation of stock annuities;—agrees with all the other above-mentioned government engagements.

5. The quantity issued, incapable of exceeding the quantity demanded at the original price.—Agrees with bank paper, and in practice with bankers’ paper;—differs from stock annuities, Irish debentures, exchequer bills, and navy, &c. bills.

6. The evidence of the engagement consigned to a portable instrument instead of a fixed book.—Taken from exchequer bills;—differs from stock annuities;—agrees with Irish debentures, and the now disused navy, victualling, transport, and ordnance bills or debentures:—also with India bonds, bank notes, bankers’ promissory notes, and private promissory notes, and bills of exchange.

7. The paper, by its size, shape, texture, and thinness, particularly fitted for circulation.—Taken from bank paper;—agrees more or less with bankers’ paper, and with the French assignats—differs from all the other above-mentioned engagements, except from some late issues of exchequer bills, in respect of size.

8. Application of the profit of the measure towards the reduction of the national debt.—Taken from the sale of the land tax—i. e. the exchange of so many portions of the annual produce of that tax for portions of stock annuities;—differs from all the other engagements above mentioned.

§ 2.

Features altogether new.

9. Secure provision for the instant extinction of the debt created by it.

10. The amount of it incapable of exceeding the amount of the existing debt.

11. Funds, no other than those already provided for the existing debt; but the security better, in respect of the appropriation of the profit to the exoneration of the fund, by the continual redemption of a greater mass of the debt than the mass continually created.

12. Interest receivable, with scarcely any trouble or expense, wherever letters are receivable.

13. The note or instrument serving as security for the interest, purchasable of government with scarcely any trouble or expense wherever letters are receivable.

14. Ditto, receivable in the course of circulation, and with the interest, without any trouble or expense. N.B. Exchequer bills, India bonds, &c., are not obtainable in the course of circulation, without the expense of brokerage; to which is added, out of London, the expense of postage, and the expense of professional, or obligation of gratuitous agency.

15. Quantity obtainable, adapted to every purse, from the largest to the smallest.—Bankers’ notes, limited as they are, on the side of diminution by law, and in point of variety of magnitude by the narrowness of the market, &c., in the instance of each banking-house, share this advantage in an imperfect and inadequate degree.

16. Facility afforded for ascertaining by inspection, without calculation, the amount of interest due, &c.

17. Securities against forgery.—See Ch. II. Table II. Form of a note. [Notes 14, 22, and 24.]

18. Facility thence afforded for ascertaining the value in respect of genuineness—an advantage it has over gold and silver coin, and which is shared with it in but an imperfect degree by bank and bankers’ papers, &c., for want of the securities against forgery.

19. Means afforded of making compound interest, without hazard, trouble, or expense. Shared in an imperfect degree (being attended with hazard, trouble, and expense) by stock annuities—completely impracticable by any other means.

20. Security against depreciation.—The price can never rise, because any quantity may be had at the original price, so long as any portion of stock annuities remains unredeemed. In the ordinary state of things, no man need take an inferior price in the way of circulation, when men are giving the full price for it in the way of issue. As to the probability of any state of things so extraordinary as to produce a discount, see Ch. IV. Grounds, &c. Bank and bankers’ paper are incapable of rise; but, in several instances, the one has experienced a partial, and the other a total loss of value.*

CHAPTER IV.

GROUNDS OF EXPECTATION, IN REGARD TO THE PROPOSED MEASURE.

What is expected of the proposed currency is:—

That it will be taken out in the way of issue, and pass in the way of circulation, at 3 per cent. nearly (the rate of interest put upon it,) notwithstanding the higher interest yielded by stock annuities, Irish debentures, exchequer bills, and India bonds, is proved by the example of bankers’ paper, the interest on which runs from 2 to a nominal 3 per cent.; but really not so much, by reason of divers conditions, which reduce the value of it; besides that, in these instances, the engagement is not perpetual, nor the security so good.

That the interest due will be allowed for in circulation, is put out of doubt by the usage in the course of exchequer bills, navy bills, and India bonds; though none of these papers are provided with the tables, which do away the trouble of computation altogether, however small the sum, and however short the time.

The following may serve as a view of the masses of money (cash or bank paper,) capable of being employed in the purchase of this paper, whether in the way of issue, or in the course of the circulation—the time when the paper is capable of being taken in hand, being the time when the several masses of money respectively come in hand; and the time for parting with the paper, being the time when the money must or would have been parted with.

I. Monies capable of being employed in the purchase of the proposed paper, for the purpose of perpetual or permanent income, without any view to circulation; and that would thereby afford to the note-holder, so long as the paper were kept in hand, a mass of perpetual annuities on a small scale.

1. Money actually kept up in the form of a petty hoard, or hoard upon a small scale, with or without accumulation, to serve as a fund for demands, more or less remote and certain, but determinate; such as marriage, apprenticing out, or portioning children—provision for widowhood or superannuation—purchase of articles of stock in agriculture or manufactures, building, or furniture of such a price as to require a persevering course of frugality to raise the amount.

2. Money, the amount of which would be kept up in the shape of the proposed interest-bearing paper, if the proposed encouragement were to be held out.

3. Money actually kept in reserve for contingent and indeterminate expenses.

4. Money that would be kept in reserve for such purposes.*

II. Monies that could not, or would not, have been employed in the purchase of the proposed paper, but with a view to circulation; the amount being destined to be otherwise employed or spent within a smaller or larger compass of time, in masses or in driblets, as the money (cash or bank paper) would have been employed or expended.

5. Money coming in the shape of fixed income, i. e. to an amount certain, and destined for current expenditure.

6. Money coming in the shape of casual income, i. e. to an amount uncertain, and whether in driblets or large masses, and destined (as above) for current expenditure.

7. Money received in the shape of income in trust on private account: ex. gr. by land stewards, army and navy agents, guardians, receivers of the estates of corporations, of estates thrown into Chancery, &c. See Ch. XI.

8. Money received in trust on public account, in its passage to or from the exchequer: ex. gr. by collectors and receivers of the land tax, customs, excise, stamps, assessed taxes, boards and individuals receiving impress money for various services. See Ch. V.

9. Money already in capital sums (whether received on the score of debt, or by sale of lands, houses, government annuities, shares in a joint stock company, succession, testament, or gradual accumulation) under engagement to be laid out, on a day certain or uncertain, in a mode of permanent investment: ex. gr. purchase of land, houses, or government annuities; shares in a joint-stock company, loan on mortgage or bond, stocking of a farm, or establishment of a manufactory.

10. Money already in capital sums not under engagement, but waiting for opportunities of being laid out, as above.

11. Money already in capital sums, not under engagement, but waiting for opportunities of temporary employment—such as loan by discount of bills, purchases in the above ways on speculation, purchases in the way of trade, &c.

12. Money, as yet in small sums (whether saved from fixed or casual income,) kept in hand for accumulation.

13. Money received in the shape of capital, in trust on private account: ex. gr. by assignees of bankrupts and insolvents, prize agents, executors, and administrators, turning effects into money, &c.

14. Money destined for the discharge of debts, and kept in hand while accumulating into the sum due, or waiting for the time when due, or for their being demanded.*

The ground of the expectation thus entertained on behalf of the proposed currency, will appear the stronger, the more closely the advantages conferred by the possession of it are compared with the advantages afforded by the several other sorts of securities, or modes of placing out money, considered as coming in competition with it;—viz. stock annuities, exchequer bills, and the market constituted by the demands of individual borrowers, country banking-houses included, as well as those afforded by cash itself, and by Bank of England notes.

I. Compared with the market afforded by stock annuities, we shall find it possessed of the following advantages:—

I. In regard to purchase—

1. No trouble or expense on the score of journeys to London, or attendance there; 2. No expense on the score of agency, 3. Brokerage, 4. Stamp duties, 5. Fees for powers of attorney, or, 6. Postage; 7. No danger of loss by buying to a disadvantage.

II. During custody—

1. Interest daily—not so much as a day’s interest need ever be lost; 2. Interest receivable without trouble; 3. Compound interest capable of being made with certainty and facility; 4. Settlements of money in trust may be made by this means, without trouble or expense.

III. In regard to transfer—

1. No expense or trouble on the score of journeys or attendances; 2. No expense on the score of agency, 3. Brokerage, 4. Stamp duties, 5. Fees for powers of attorney, or, 6. Postage; 7. No danger of loss by selling to a disadvantage; 8. The capitals of the mass of notes, employable in the shape of circulating capital, in whatever portions may from time to time be requisite—just like so much cash—without trouble or expense.†

II. To money circumstanced as in the case last supposed—viz. to be laid out either in small parcels or parcels of any magnitude for a short time—the purchase of exchequer bills is in some measure free from the objections to which the purchase of stock annuities is exposed, but it is open to others:—

1. The period for which they are issued is limited in general to a time of war; besides which, their existence is at all times precarious.

2. The quantity of them is continually liable to increase, as well as the time of payment to retardation, and thence their marketable value to depreciation to an unknown amount.

3. Exchequer bills are never issued for sums less than £100; by which circumstance every mass of money less than that considerable amount is excluded from this branch of the market.

III. Circumstances of comparative disadvantage attending the private market may be reckoned as follows, viz.—

1. Trouble and expense and loss of time attending the inquiry necessary in many cases to the meeting with a fit opportunity of placing out money at interest.—N.B. In the case of the proposed market, this circumstance of disadvantage is altogether wanting.

2. Want of coincidence between the quantum of the sum wanted to be borrowed and that of the sum ready to be lent.—Wanting altogether.

3. Want of coincidence between the time for which money is wanted to be borrowed, and the time for which it can conveniently be lent.—Wanting altogether.

4. Difficulty of obtaining sufficient assurance respecting the competency of the security in its several points of view.—Wanting altogether.

5. Trouble, expense, loss of time and interest, attendant on the adjustment of the pecuniary part of the security.—Wanting altogether.

6. Trouble, sometimes expense, loss of time and interest, attendant on the process of demanding and obtaining payment of the interest alone, or of principle and interest together, as the case may be.—Trouble and loss of time—reduced to next to nothing: Expense and loss of interest.—Wanting altogether.

7. Danger of loss, and particular incidental inconvenience, by unexpected delay in regard to payment—wanting altogether.

8. Danger and fear of the necessity of litigation.—Wanting altogether.

9. Unwillingness to deal with a stranger, in consideration of the uncertainty respecting his trust-worthiness in respect of moral character and pecuniary sufficiency.—Wanting altogether.

10. Unwillingness to deal with the individual, if a stranger, in respect of the risk of being eventually obliged either to distress him by pressing for payment, or to submit to loss for want of such importunity in many cases. In the instance of a friend, in case of any apprehension of solvency, still more if on that of moral trustworthiness, unwillingness still greater.—Wanting altogether.

11. Unwillingness to accept of interest from a friend, especially if it be on a small sum, or for a short time.—Wanting altogether.

12. Unwillingness, through shame, to accept, and much more to demand, interest for sums and times separately trifling, how considerable soever in their collective amount.—Wanting altogether.

13. Embarrassment, disputes, and loss of time in the computation of interest on small or fractional sums, or for short and fractional periods.—Wanting altogether.

14. Danger of loss by death, marriage, or other change of condition on the part of the borrower, whereby, as far as mere personal security is concerned, a security originally sufficient may become bad or precarious.—Wanting altogether.

That it should continue to circulate without any depreciation, is not essential to the existence of a paper currency—witness the case of exchequer bills and other government paper. But though the property of circulating without depreciation may not be essential to the circulation of this annuity-note paper, it will at any rate be highly conducive to it.

Depreciation proof, it must be confessed, it cannot be, any further than the government, of whose promises it is the vehicle, is destruction proof: by any cause, therefore, that threatens immediate danger to the government—such as invasion, for example, or civil war—its value will be liable to be diminished. These cases can never be urged as an objection specially applicable to the proposed measure.

The measure would not impair, but rather add to the solvency of the government: by the profit it would afford, additional means would be afforded for the reduction of the debt of government.

To the security of government it would add by the multitude of hands it would engage by the tie of interest in the support of government. To create and maintain an interest of this sort is a most happy property common to all government securities: but all the government securities yet known in this country are confined in their circulation to the superior and least numerous classes. It is among the characteristic properties of the proposed new government security, to spread itself among the poorer and most numerous classes, and thus to engage them to give their support to government.

Against depreciation from any sudden demand for payment, the proposed paper is not only as secure as the existing government papers, but more so: those other papers engage to pay the principal and interest; the proposed paper, the interest only. In the one case, the fund drawn upon is the revenue of a single year, or some small number of years; in the other case, the fund drawn upon is the revenue of thirty-five successive years.

Setting aside the extreme cases here in question, there is but one cause of depreciation to which government paper stands exposed, and that is the forcing of the market. The proposed paper alone is not exposed to this cause of depreciation: it will be issued only in proportion to the demand, and is rendered for ever incapable of exceeding it. The produce also will be employed in strengthening the security and lightening the load of the same commodity at market.

It may, however, be urged, that though the proposed paper can never be sold under the par price, it may, in consequence of the demand for its correlative hard cash, cease to bear that price. That such would be the effect in the event of a civil war or serious invasion, will scarcely admit of doubt; and that an effect of the same nature, though to a less amount, should be liable to be produced by other causes, can hardly be regarded as improbable.

To this it may be answered—

1. That admitting (for argument’s sake) that such a result would occasionally take place to a certain degree, still this would not operate as an argument against the institution of the proposed plan, unless such a result were to appear more likely to take place, or likely to take place in a greater degree with regard to it, than with regard to any other circulating government securities.

2. That though such a state of things as the objection supposes be conceivable, yet no ground can be stated, either in point of reason or experience, for regarding it as likely ever to be realized. To whatever extent the amount of the proposed paper may have arrived at the time of the supposed extra demand for cash, it cannot have attained to it but in consequence of a proportionable preference given to it in comparison with hard cash. And the cause of that preference is a circumstance not exposed to change. It consists in this, viz. that principal with interest amounts to more than principal alone: £103 is more than £100, and the ratio is not less at one time than another.

For the purposes of expenditure within the limits of the British empire, the proposed paper could never lose its superiority; and as to so extraordinary a demand for the precious metals for exportation to foreign countries, no such case appears ever yet to have been realized;—the scarcity of bullion in 1796, in the opinion of the most competent judges, being referable not to the extent of the foreign demands, but to the constitution of the existing private paper, payable on demand; to the experienced brittleness of some of the country paper; to the occasional scantiness of the paper of the great chartered company, coupled with its preceding copiousness, and the excess of the advances made by the company to government,—causes which after all would not have been adequate to the production of the effect, had it not been for those alarms of invasion which were prevalent at the time.

3. That no such extra demand for cash, supposing it to exist, could produce any depreciation in the price of the proposed paper till after it had put an entire stop to the purchase of it in the way of issue; since the progress of the issue, being matter of universal notoriety, it could never (in virtue of Art. 18) happen, that in any one part of the country (the expense of postage being out of the question) a man should give £100 for such a quantity of this paper as might in any other part of the country be had for £99. 19s. But in the nature of things, setting aside the influence of the supposed extraordinary and temporary causes, the amount of the demand for this paper cannot but be regularly receiving a regular and very rapid increase.

4. But if, in a case thus void of probability, it were worth while to look out for a remedy, a remedy, and that of the preservative kind, might easily be provided for it: I mean that of a cash fund (not to exceed, suppose a million) formed by a reserve made of a part of the profits of the operation (as per Art. 9,) to be employed in case of need in the support of the price of the proposed paper, by either buying it in with cash, or taking it in pawn for cash, from the time that the discount upon it had risen to an amount worth regarding.

In consideration of this steadiness of price, the proposed paper would become everybody’s paper; all persons possessing any of the masses of money above enumerated—that is, all classes of the community—are likely to be included among the holders of the proposed paper, either as customers for permanent or temporary annuities upon large or small scales; and as it would possess a value in use superior to that of gold and silver, inasmuch as it would yield a profit whilst it was retained; and inasmuch as it would possess a solidity of value far exceeding the paper of any private banker, or even the paper of the bank of England—a solidity only to be destroyed by destroying the power of the government, to pay the interest promised to be paid—a solidity increasing with the amount issued—it would be secure of constant circulation from hand to hand.

Being the holder of an annuity note, there is not a person living on whom I have any right to call upon to give me value for it:—but had it not been for the advantage accruing from the holding of the note, I should not have become the holder of it: and as the advantage thus accruing to me from the holding of this note is no greater to me than it will be to thousands of other people—in a word, to every man without exception, to whom it can be in my way to offer it—in the event of his becoming the holder of it in my stead, the certainty of my obtaining value for it at any time wants nothing of being entire.

No one living is bound to give me silver for the guinea I have in my pocket; yet who is there that ever hesitated to receive a guinea, under the apprehension of not being able to get change for it? Not only the self-regarding advantage of making profit by goods sold for part of the value, engages my neighbour, the shopkeeper, to change it for me, on my laying out to the value of a few halfpence with him, but the social consideration of amity and neighbourhood is sufficient to procure for me the same accommodation at his hands, without any such personal advantage. In the case of the annuity note, the social consideration not only operates with equal force, but has the personal consideration of the advantage to be gained by the holding of the note to back and strengthen it.

The material question is,—Will it be received? This being answered, and answered satisfactorily, the other question,—Why will it be received? how comes it that it will be received?—is matter only of curiosity and speculation.

It may further be observed, that no man will ever have obtained any such note in the way of issue (I mean at the office,) who would not have preferred obtaining it in the course of circulation, and in that way would have obtained it, if he could have got it; because the trouble and expense of taking it out in the way of issue, reduced as it is to the lowest term, will always be something; and in the way of circulation he obtains it without either that trouble or expense. The necessary consequence is, that in the ordinary state of the market, there must exist at all times a disposition to receive a greater quantity of this article than is ever found in it.

The practice of taking out annuity notes can never have become general, without the practice of receiving them in the course of circulation having become universal, and the disposition so to receive them have grown into a confirmed habit—a habit as determinate as that which engages a man without reflection, without thought or deliberation, to receive bank paper, as he would gold.

The value of these notes would be depreciated or destroyed, if the taxable powers of the nation were to such a degree exhausted as not to suffice for the payment of the whole of the annuities with which it stands chargeable, and consequently not for the whole of this proposed branch of annuities. If the whole island became a province of France, or were swallowed up by the sea,—if the globe of which it forms a part were carried off by a comet, were frozen, drowned, or burnt.—But we have no need on the present occasion to take any account of any of these calamities, and that not so much on account of their improbability, for there is not one of them that can be pronounced impossible, as because, bank paper being the assumed standard of comparison, any one of them would be equally fatal to the credit of such paper.

CHAPTER V.

FINANCIAL ADVANTAGES.

The advantages of a financial kind that may be expected from the proposed measure, will require to be distinguished according to the periods or stages above marked out, in regard to the progress of it.

§ 1.

Period First,

From the opening of the first issue of annuity notes, to the arrival of the 3 per cent. stock annuities at par.

The branches of profit or advantage that may be looked for in the course, or at the conclusion of this first period, may be stated as follows:—

1. Profit on sale by the difference between the price for which a 3 per cent. annuity, as secured by an annuity note, is sold, and the price at which an annuity to the same amount, as secured by an entry in the books of the stock annuities, is bought in with cash raised by the above sale; in a word, profit by difference between the selling price of note annuities and the buying price of stock.—N.B. This branch of profit ceases altogether on the termination of Period I.*

2. Profit by interest forborne to be received on annuity notes.

3. Profit by notes in hand;—profit by interest on annuity notes received by government in the course of circulation, while kept in the hands of government.

4. Profit by notes lost under circumstances which either do not admit of, or do not call for compensation.

5. Profit by reduction of the rate of interest paid by government for such money as it is in the habit of borrowing by annual anticipation, by the issue of exchequer bills.

Profits peculiar to Periods II. and III.

6. Profit by saving upon the expense of management.

7. Profit by fractional interest; i. e. by the 7d. per £100, the difference between the £3 per cent. yielded by stock annuities, and the £2 : 19 : 5 yielded by £100 worth of note annuities.

8. Profit by the redemption of all stock annuities yielding more than 3 per cent., and thereupon by extinction of the masses of extra interest.

Profit peculiar to Period III.

9. Profit by reduction of the rate and quantum of interest upon the mass of the national debt.

10. Profit peculiar to a state of war; i. e. to those years in which money is to be raised by the creation of fresh masses of government annuities;—profit on loans: profit or saving by lessening the loss by those transactions, by raising the price of government annuities as compared with money, and thereby lessening the loss by the difference between money on the creation and sale of government annuities, and money paid on redemption of the same.

11. Profit by yearly interest instead of halfyearly—a profit mentioned as being obvious, and capable of being realized, but not (it is supposed) to advantage.

If to prove the proposed measure to be an advantageous one, and advantageous to a sufficient degree to give it a claim to be carried into practice, it were necessary to prove the quantum of the advantage, or even to give a calculation that had pretension to exactness, its chance for adoption would be weak indeed. Happily for the plan, no such proof can reasonably be required:—whether the profit be £10,000,000, or no more than £10,000, still, although that advantage stood alone, yet supposing it to stand clear and not to be attended with any degree of disadvantage capable of counterbalancing it, the conduct indicated would be just the same: it would be worth adopting, though the advantage were worth no more than £10,000; and it could but be adopted, though the advantage were equal to 100 millions.

Profit I. Profit by the difference between the selling price of a £3 a-year annuity note, and the buying price of a do. stock annuity.

This profit will depend upon the average price of 3 per cent. stock taken out of the market upon the buying-in plan, before the commencement of the period during which, these annuities being at or above par, the paying-off plan will have taken place of the buying-in plan, and the quantum of annuity-note paper issued, and thence the quantity of stock bought in with the produce of such annuity-note paper.

Profit II. The expectation of profit by interest forborne to be received, is grounded on the following proposition, viz.—That in general a man will not bestow either trouble or expense, much less both, how inconsiderable soever the quantity, in compassing an end which he has it in his power to compass to equal perfection without any such trouble or expense.

The trouble (not to speak of the expense) attendant on the receipt of the interest on these annuities, has been reduced to the smallest amount possible; because, the greater it is, the greater the danger lest, by the contemplation of it, individuals should at the outset be repelled from the purchase of these annuities. But be the reduction ever so great, still the remainder will be something; and this remainder, it may reasonably be expected, would, in the ordinary state of things, be sufficient to turn the scale. On the other hand, suppose the circulation of the paper to be once established, upon the terms on which government paper is in the habit of being received—(I speak of exchequer bills, navy victualling, transport and ordnance debentures, not to mention India bonds)—viz. the allowing for it, in addition to the amount of the principal, the amount of the interest that has become due upon it. A man, by simply paying away an annuity note upon that footing, will receive, from the individual who takes it of him, the amount of such interest, without the trouble of applying for it elsewhere.

The smaller the amount of interest or other money to be received, the greater the ratio which the trouble of receiving, whatever it be, will bear to it; accordingly, if there be any difference, it is in the instance of the smaller notes; and the more certainly, the smaller the note, may the dependence on this forbearance be assured.

But the disposition to forbearance will be the more steady, the more perfect and unbroken the facility of receiving the money, in the event of its being thought fit to receive it, appears to be. It is on the strength of the persuasion entertained by a man, that the amount of a banker’s note which he has taken in payment would, if demanded, be paid at any time, that his forbearance to demand it is grounded.

It is on this account, that whether or no the payment of the interest upon a fresh note be deferred till after the end of the year, or be divided into two payments, the first of them to take place at the end of the first half-year—at the end of the year it seems most advantageous, upon the whole, that the even amount of the year’s interest should be made demandable at any time.

1. In regard to the proportion of interest that would be likely to be forborne, thus much may be to be observed:—in regard to whatever portion continued to be employed as currency, the forbearance would probably be general and continual.

2. In regard to whatever part was hoarded for the purpose of furnishing compound interest, it could not take place. To obtain an interest upon a year’s interest due on any note, it would be necessary for a man to receive that interest, and with the money take out a fresh note or assemblage of notes: a second year’s interest is a year’s interest, and no more, in addition to its own amount; it does not give him the interest he might have made on the amount of the same year’s interest, by receiving it in the shape of money, and employing that money in the purchase of a fresh note carrying its interest; or (what would come to the same thing) by receiving it at once from the office, if upon his application the office were to furnish him with it in that shape.

3. In the case of a mass of annuity-note paper kept in hand for the purpose of income, but without any determinate plan of accumulation in the way of compound interest, it seems difficult to say whether receipt or forbearance would be most apt to take place. The purpose of receipt might be equally answered by forbearance; viz. by paying away at each period a mass of paper of an amount equal to what the whole mass had gained in value on the score of interest by that time. But this would require provision to be made accordingly in the composition of the sums constituted by the notes: and which of the two masses of trouble would be the greater,—that of making the provision in question, or that of receiving the interest at an office,—would depend upon circumstances.

In the meantime, this consideration operates as a reason for rendering the composition of the series of notes as favourable as possible to the purpose of affording interest in the way of simple circulation as above described, without the necessity of coming upon government for the payment of it; that is, to render the gradation of the series more regular, and the terms or degrees in it more numerous, than might otherwise be necessary or desireable. The more complete the series of notes, the greater the chance it has of meeting the demand of each individual with reference to this purpose.

As to the quantum of this branch of profit, the principal part—that which may be regarded as certain—will depend upon the quantity of the paper thus employed, and upon the time during which each parcel of that quantity remains in circulation. It will depend consequently on the duration of this first period.

Should this period prove a short one, the probable length of it (according to a supposition that will be stated a little further on) not exceeding two or three years, the branch of profit will be proportionably inconsiderable; but whenever it vanishes, it vanishes (as will be seen) only to make way for a branch of much superior importance. So long as stock annuities are to be purchased under par, none of those persons whose circumstances it suits to become customers for stock annuities, will, in respect of that portion of their money, become customers for note annuities, which will not be to be had but at par price. But no sooner are stock annuities arrived at par price, than these note annuities will be at least as well suited to the circumstances of the customers for stock annuities: and inasmuch as the mass of stock annuities will be lessened every day by the operation of the sinking fund, while the mass of note annuities cannot be increased without diminishing by at least an equal amount the mass of stock annuities, the owners of the continually increasing mass of money seeking to be employed in the purchase of government annuities, to serve as a source of permanent income, will have no other resource than to lie in wait for annuity notes as they pass from hand to hand, and so impound them and take them out of the circulation.

Profit III. The third head of advantage consists in the saving or profit that may be made to accrue on the score of interest upon annuity notes, which, after being received by government from individuals on the score of taxes or otherwise in the way of circulation, remain at the command of government till wanted to be re-issued.

This head of profit will again require to be distinguished into three branches:—

1. Profit by annuity-note paper lying in the exchequer.

2. Profit by do. lying in the hands of receivers of all classes in its way to the exchequer.

3. Do. by do. lying in the way of imprest in the several offices of expenditure, waiting till re-issued.

1. As to the first of these three branches of profit, what the probable annual amount of it may be, is completely out of the knowledge of the writer of these papers, but as completely within the knowledge of those to whom they are addressed: I mean in so far as the past is capable of serving as a guide to the future. Add together the 365 sums respectively existing in the exchequer on the 365 days of the year, and divide the sum by 365; the quotient will be the principal, the interest of which will thus in the course of the year be gained or saved to government, supposing the whole of the money to be in the shape of annuity notes. From this gross amount of principal will require to be deducted, the amount of that proportion of money which is upon an average in the shape of cash.

2. As to the second of the above three branches of profit, it will rest with government whether to take it into its own hands, or to leave it in the hands of the receiver.*

3. In regard to the last of the above three branches, little need be said. The money being already, in the shape of annuity-note paper, yielding an interest to government,—so long as it is in the hands of government, all difficulty in regard to the conversion of it into that shape is out of the question here.

Under the existing plan, much anxiety has every now and then been entertained to prevent this or that subordinate officer of expenditure from getting inordinate sums by way of imprest into his hands. Under the proposed plan, the money being in the shape of paper, that paper yielding its interest to government,—so long as it is in the hands of any office or officer keeping it on the account of government, though the quantity issued from the exchequer to this or that office, upon this or that occasion, should happen to be more than sufficient—in other words, to be excessive—it would be no matter, since not only the temptation to produce the excess, but even the mischief of the excess if produced, would, in the proposed state of things, be done away.

Profit IV. Profit by notes lost under circumstances which either do not admit of, or do not call for compensation.

As this source of profit will go on increasing as the quantity of annuity-note paper increases, and will consequently be inconsiderable in this first period, even at the close of it, in comparison with what it will be at the close of the second period, at which time the conversion of the whole mass of stock annuities into annuities secured by annuity notes will have been completed,—it is to the second period, that what there may be to say in regard to this source of profit, may with most propriety be referred.

Profit V. Profit by reduction of the rate of interest paid on other government paper.

With the fall in the rate of interest yielded by stock annuities, the fall in the rate of interest paid by government on exchequer bills will at least keep pace. As to the absolute quantum of profit on this head, that will of course depend on the amount of exchequer-bill paper issued within the time: a quantity, in regard to which, any calculations or conjectures that could be given would be of little use.

Profit VI. Profit (if taken) by difference between yearly and half-yearly interest. This branch of profit would not attain its maximum until the close of the second period; but I have already stated that my leaning is not to assume this head of profit, and for what reasons. It may, however, be observed, that it would yield a rateable profit of £225 per million, whilst the interest upon the national debt remained at three per cent.

§ 2.

Period Second,

From the arrival of stock annuities at par, to the redemption of the last portion of stock annuities; whereupon follows immediately the opening of the second issue of annuity notes at the reduced rate of 2⅜ per cent.

1. Profit (in the shape of principal-money) by sale of notes ceases; but, in the event of the creation of a fresh parcel of stock annuities, revives and continues till the redemption of such stock annuities.

2. Profit by interest undemanded will continue, and with increase. The profit above mentioned as produced by the notes in circulating hands will increase as the quantity of paper taken out with a view to circulation increases. To this will now be added the profit produced by the notes in hoarding hands; viz. the expelled stockholders who take this paper with a view to permanent income, as they held their stock. This branch may be termed the casual branch: it will arise out of such casual forbearances only as take place at present in the case of dividends on stock. The probable rate of it might be estimated from the course of the payments on this score made at present at the bank.

The quantity of government annuities, stock and note annuities taken together, will, it is true, be growing less and less every day; while the quantity of money capable of being employed in the purchase of them will be growing greater and greater: so that the scarcity will be growing at both ends. But inasmuch as the issue being open all the while, everybody will be at liberty to supply himself with whatever quantity of this paper he chooses, whether for the purpose of hoarding or with a view to circulation, the diminution will fall exclusively upon the stock annuities, the quantity in circulation will not be absorbed in any degree by the demand for the purpose of hoarding; and the only effect of the increasing scarcity, even when the issue is at the point of closing, will be to make the demand, and consequent emission, the more rapid to the last.

3. Profit by notes in hand. This inconsiderable source of profit seems likely to continue from the first period without any variation worth inquiring into. It admits of no increase from the increased amount of annuity-note paper produced by the conversion, that part only which is circulation, being capable of finding its way into government hands.

4. Profit by notes lost. During the whole of this second period, this source of profit will be on the increase; a quantity of annuity-note paper equal to the whole amount of stock annuities, being in the course of it added to the mass.

5. Profit by reduction of interest on exchequer bills. This source of profit will probably have begun to manifest itself in the course of the former period, but it is not till now that the amount could easily be submitted to calculation.* During the whole of this second period, the rate of interest will be that reduced rate towards which it will have been moving on during the first period.

This head of profit will be an enduring one. No plenitude on the part of the exchequer will warrant the disuse of exchequer bills: it would be bad economy to make and keep on foot a perpetual loan to a certain amount, in order to save occasional loans to the same amount, at the same or nearly the same rate of interest: and to keep in hand a sum in cash to the same amount, would come to the same thing. The maximum of advantage under this head is therefore what results from keeping the rate of interest on such loans from rising more than one step above the level of the rate paid on perpetual loans. Upon the adoption of the proposed measure, it would be requisite to examine whether the plan of the present exchequer bills would be the most advantageous plan for borrowing money on such temporary loans.

6. Profit by saving in the expense of management—transfer and allowance of interest, as between individual and individual, being performed without expense—and the expense attached to the issue, and to the payment of interest on government account, being defrayed in part, or in the whole by fees. See Ch. I. Plan, Art. 17. This profit, being a rateable profit on the amount of debt, will of course diminish in amount, as the amount of the debt diminishes.

7. Profit by reduction of interest from £3 to £2: 19s. This profit results from the conversion of stock annuities into note annuities at the par price of both, which will be the price throughout this second period. It amounts to exactly 1-60th part of the interest at 3 per cent. It comes in a manner without design, the difference being the unavoidable result of the defalcation of a few fractions, which it was necessary to get rid of, in order to leave even and commensurable sums.* The amount of annual profit on this score, on each million of capital in stock annuities converted—i. e. on each £30,000 of interest on the said capital—is £500.†

8. Profit by reduction of interest on stock annuities at higher rates than 3 per cent. The amount of this profit might easily be made the subject of calculation.

§ 3.

Period Third,

From the opening of the second issue at 2⅜ths nearly (viz. £2 : 7 : 5) per cent., to the redemption of the paper of that second issue;—whereupon follows immediately the opening of the third issue at £1 : 9 : 6, being a trifle less than 1½ per cent.

I. Profit by reduction from £2 : 19s. per cent. to £2 : 7 : 5 per cent.

This result constitutes the characteristic profit of this third period. The proportionable amount of it is nearly the fifth part of the interest on the mass of annuities remaining, at the commencement of this third period, viz. £5791 : 13 : 4 per annum for each million of capital of annuity notes.

II. Profit on sale, i. e. by difference between selling price of annuity-note paper, and buying price of stock annuities, remains as in Period II., extinct by the extinction of stock annuities;—subject to revival in the event of a fresh creation, as before.

III. & IV. Profits by interest undemanded, and by notes in hand, continue as in Period II. with little change.‡

V. & VI. Profits by notes lost, and by saving in respect of the expense of management, being rateable profits, their amount per million’s worth of paper continues unchanged, but their total amount diminishes of course in some degree, as the amount of annuity notes (which, from the commencement of this third period, are the only redeemable government annuities remaining) is diminished by the operation of the sinking fund.

For some time at least, the paper of this second issue carrying but £2 : 7 : 5 a-year interest, the demand for it, with a view to circulation, will be more certain than the demand for the purpose of permanent income on the footing of stock annuities: because to the former set of customers, the whole amount of interest, reduced as it is, will be as so much gain; being a profit which, but for this species of paper, they would not have made—perhaps at all—certainly not in this commodious way, and by government annuities:—whereas the reduction will sit heavy on the customers for permanent income, who, if they continue their money upon government security, must submit to see their incomes reduced to this amount, and whose capitals to a considerable amount will accordingly, for the purpose of escaping such reduction, be withdrawn from this employment, and either laid out upon other securities, or embarked along with the owners in some branch of trade.

The progress of the operation may, notwithstanding, not be diminished upon the whole; for to the amount of the demand with a view to circulation, no assignable limits can be found.

Profit VII. Profit in respect of Exchequer bills. During this third period, in compariison with the second, the rate of profit will receive an increase.

For the money wanted for occasional purposes during the second period, it will (as has been seen) have been necessary to give a rate of interest one step higher than that which, by the continual emission of annuity notes at that rate to all customers, it was in the power of everybody to make. But the first issue being now closed, it is no longer in the power of everybody or anybody to obtain government annuities at that rate; since, though paper of the first issue will still be to be had of individuals, it will not be to be had but at an advanced price. The profit by the saving of this advanced price will be sufficient to engage customers to take exchequer bills, at the par price of the closed issue, to an amount adequate to any money that can be wanted on the footing of a temporary loan.

§ 4.

Period Fourth,

From the opening of the third issue at 1½ per cent. nearly (viz. £1:9:6 per cent.,) to the redemption of the last portion of paper of that issue;—whereupon follows immediately the opening of the fourth issue at £1 : 3 : 8½ per cent., being a trifle more than 1⅙ per cent.

The annual amount of this head of profit, for this fourth period, is, for each million of capital remaining in the hands of individuals, i. e. for each £30,000 of interest at the original rate of 3 per cent., £8958 : 6 : 8;—the total amount of profit by reductions of interest up to this period inclusive, on each million of capital, £15,259.

Profits by notes lost, and by expense of management saved, will continue as before, with little change in regard to the rate, but in respect of the total amount, reduced in course as the quantity of the annuities in question is reduced.

So in regard to profit by interest undemanded, and profit by notes in hand.

Profit in respect of exchequer bills, will at this period, if not before, be so far fixed, as that the rate of interest upon these temporary loans will never be higher, but more likely lower, than that of the closed issue. For although the reduced rate of the open issue should not be accepted of by the expelled annuitants of the closed issue, nor even by any more of the customers for note paper with a view to circulation; yet, for the reasons given with reference to Period III., the premium given for the paper of the closed issue will, notwithstanding, be considerable: the more so, as the drop from the rate given by the closed issue (the second issue) to the rate given by the third issue (being the issue that remains open till the very close of this fourth period) is so great. Between the two amounts in question, a profit sufficient to draw purchasers for exchequer bills cannot but find room to place itself; and the interest on exchequer bills during this period may be expected to be considerably less than £2 : 7 : 5.

§ 5.

Concluding Period.

The precise number of reductions which the rate of interest upon this paper might be destined to experience, is what it would be too much to attempt to fix. But a picture of the last moments of the expiring debt, at whatever stage the reduction of interest may then be, may be not without its use.

It will present the profit by interest undemanded in an enlarged and interesting point of view: it will strike off in effect the last 10, or 20, or 30 millions of the debt; and strike off perhaps the value of a year or two or more from the duration of that load.

After the exoneration thus effected in the course of the fourth period by the reduction of the rate of interest to the £1 : 9 : 6 which is the rate given by the paper of the third issue,—is it or is it not likely that the reduction of interest should have descended lower before the redemption of the last portion of the principal of the debt?

The reduction of the rate of interest on the money that had been thus lent to government will stop short of this mark, or stop at it, or go beyond it, according to the influence which the rate thus allowed by government turns out to exercise over the rate of interest in general. That the influence which the government rate of interest has in its rising state maintained over the general rate of interest, has been considerable, is matter of known experience—though the operation of the restrictive laws which stop the rise at the point of five per cent. even on the slenderest security, has rendered the amount of this influence scarcely capable of being measured. The influence of the rate of interest paid on the debt cannot but increase with the magnitude of the debt, to which the magnitude of the mass of capital poured into the market (as will be seen) by the redemption of that debt, will be proportioned. The effect of 200 millions thus poured in cannot but be double (it should seem) to that of 100 millions, at least if poured in within the same compass of time.

The influence of the capital poured in by the redemption of the national debt at the time the reduction of the interest on that debt is going on, will (it is true) not depend solely on the quantum of capital thus poured in, but also on the magnitude of the growing mass of national capital into which it flows. But the general mass of national capital is also of itself in a rapid state of increase; and to such a degree on the increase, as to be of itself in a way to effect a reduction in the rate of interest in general, without any aid from this or any other factitious source. Accordingly, the factitious cause of reduction—the factitiously accumulated capital which is thus poured in by government, so far from finding any obstruction in the magnitude and vis inertiæ of the mass into which it flows, finds a powerful assistance in the operation of that mass, acting as it is already, in a direction tending to the same end.

If, then, while the two forces, the natural and the factitious, are thus acting in this direction, the influence of the factitious should be strong enough to bring the other to the same pace, things will continue on in the same state as already depicted in the account of the fourth period: paper of a closed issue, in a quantity which cannot be increased;—paper of an open issue, in a quantity which will be continually and rapidly on the increase, till, by the produce of it, the paper of the closed issue has been paid off, when a fresh issue will be opened, at a still lower rate, and the now open issue closed, and so on: always paper of two issues, at two rates of interest, till the last applied portion of redemption money comes and sweeps them both out of the market at once.

If, then, the reduction of the rate of interest go on to the last year of the debt without stopping, the state of the paper during that last year, in respect of its being divided into paper of two issues (viz. a closed issue, and an open one,) will be the same at that supposed last period of the existence of this paper, and of the redeemable part of the national debt, as is exhibited in speaking of the advantages belonging to the fourth period of its existence: the paper swept off by the last mass of redemption-money will be paper of two different issues.

On the other hand, if the emission and consequent reduction have stopped anywhere, there will, at that last stage, be but one rate of interest paid by government on the redeemable part of the debt: the annuity-note paper remaining at the time will be, all of it, of the same issue—viz. the then closed issue:—there being at that time another issue opened, but no paper of that proffered issue in existence,—nobody having purchased any at that price.

For illustration’s sake, let the last issue which meets with customers be the above-mentioned third issue,—the issue at £1 : 9 : 6, with the opening of which the fourth period commences: let thirty millions, at this time, be the amount of the whole remainder of the debt, of which let ten millions be the amount of the paper of the second issue now closed, bearing interest at £2 : 7 : 5 per cent.: and let the other twenty millions be paper of the third, or open issue, bearing interest at £1 : 9 : 6 per cent.: and let the ten millions at £2 : 7 : 5 per cent. be all of it in the hands of persons who keep it in hand as a source of permanent income; while the 20 millions at £1 : 9 : 6, is all of it in a state of circulation more or less rapid, being all of it in hands that took it out, or received it with that view.

The sinking funds, taken altogether—the sinking funds present and future—being now in a condition to pay off (suppose) ten millions in the course of a year, let such payment be made accordingly. This extinction, falling of course upon those ten millions, strikes off the whole of the hoarded paper, and leaves only that part which, being in circulation, constitutes so much of the circulating capital of the country. Upon the redemption of the last parcel of these ten millions, the opening of the fourth issue follows of course, by article 22. If any purchasers presented themselves at the rate of this fourth issue (£1 : 3 : 8½ per cent.) the reduction of the rate of interest would go on. But by the supposition, no such purchaser does present himself. The persons who had been keeping their capitals in the shape of annuity-note paper of the second issue at £2 : 7 : 5, are, by the redemption of the remaining paper of that issue, put to their option—either to cease letting their capital lie on that sort of security, or to accept of £1 : 3 : 8½ per cent. By the supposition, they all reject the paper bearing this new and lowest rate: they will not meddle with it, not even for a time, and with a view of putting it into circulation by employing it in the ways in which they determine to employ the capital thus thrown upon their hands.

When the two masses of paper that had till now been in the market, are thus reduced to one, that one will, all of it, be in the hands of noteholders who take it with a view to circulation. For, whatever rate of interest is accepted on the footing of permanent income, there will be always persons in abundance to whom it will be worth while to accept of the next lowest rate, with a view to circulation. If, by the growth of national opulence, a rate so low as £2 : 7 : 5 appears now, is raised to such a pitch of relative value as to be worth acceptance in the character of a source of permanent income, the next lowest rate, though so low as £1 : 9 : 6, will be raised along with it in the scale of importance, and will become not less worth acceptance in the character of a source of such temporary profit as could not with equal security and convenience be made by any other means. And if the £1 : 9 : 6 itself come to be thought worth acceptance in the character of a permanent provision and sole dependence, the next lowest rate, though now reduced to £1 : 3 : 8½, will no more be regarded with contempt in the character of a source of temporary profit, than the £1 : 9 : 6 was before. If, then, the demand for annuity-note paper should stop altogether at any period prior to that of the complete extinction of the debt, it is with the customers for permanent income that it will stop, and not with the customers for temporary income with a view to circulation.

Compared with cash, the interest afforded by the annuity-note paper to those who take it or keep it with a view to circulation, will, be it ever so small, be so much profit. Compared with the preceding higher rate of interest, the reduced rate afforded by the annuity-note paper will, to those who take it, and who, to the extent of their respective capitals so invested, have nothing else to depend upon for their respective incomes, present itself as a loss to the amount of the difference.

Under these circumstances (though, for illustration’s sake, the supposition has been that the fresh issue would at some period remain open without customers) it seems not very easy to abide by it. At the time the sinking fund came with its ten millions, and swept off all the paper of the second issue—all the paper that was in the hands of customers for permanent income—the demand on the part of the customers for temporary income with a view to circulation, had got no farther than the remaining 20 millions. But, under the accumulation of wealth inseparable from the state of things thus supposed, it is scarcely possible that the demand, from that class of customers, should for any length of time be altogether at a stand. If, in a twelvemonth, but a single £100 worth more than could be met with without giving such a premium as would make it dearer than the paper of the open issue, were wanted by any person for a few weeks or months, he would betake himself to the open issue.

Even in the case of the last group of now expelled note-holders, by whom this paper had been held as a source of permanent income, the supposition of their rejecting the paper of the fresh issue altogether appears scarcely tenable. They would still, to a certain degree, be customers for annuity-note paper, though with different views: before their expulsion, for the purpose of permanent income—after their expulsion, for the purpose of temporary income, till a better income or better prospects could be obtained from some other source.

True it is, that by the paper taken out of their hands they made £2 : 9 : 6 a-year; while by the paper of the fresh issue they would make not half the money—£1 : 3 : 8½. But £1 : 3 : 8½, which they might begin making from the very instant of their expulsion, would be £1 : 3 : 8½ better than nothing—which is what the interest of a considerable part of their 10 millions of capital would be reduced to, for a time more or less considerable, if it rejected this accommodation. And though no more than a single £100 of the expelled 10 millions were to betake itself to this employment, though it were but for a day, from thence would be to be dated the birth of the paper of the fourth issue.

If, however, at the period in question, there remain no paper but of one issue, it is all of it (as we have seen) in the hands of the customers for temporary income with a view to circulation, who would, generally speaking, betake themselves to the circulation for the interest of it,—upon which, the demand for interest at the office would nearly cease. But the same cessation might take place although there were to be paper of two issues—and would take place, if the paper of both issues were to be in the hands of the customers for temporary income with a view to circulation. Nor is this any more than what might well enough take place; since the paper of the closed issue would bear a premium corresponding to the superior rate of interest it afforded;* and it would be seen by government to be the case, if the interest upon the paper of the closed issue were seen to remain undemanded.

In this state of things, many millions of government paper still in circulation, and little or no interest demanded on it, there seems nothing to be gained and something to be lost by carrying the redemption any further. As to so much interest as continues to be undemanded, the debt ceases to be a burthen;—the taxes, from which the redemption money would have to come, would be a burthen; and the paper taken out of the circulation by the redemption would be so much taken from the mass of circulating capital—as much so as if gold to that amount, after having been received by government on the score of taxes, were to be thrown into the sea. A defalcation made to any such amount as the supposed 20 millions in the course of two years, might, by its suddenness, be productive of inconveniences such as it would not be easy to estimate;† —similar, in a word, to those which have been attributed to the diminution in the quantity of Bank of England paper in circulation.

Were the redemption thus to cease, it might be of use to declare, at the time that such cessation were declared, that from thenceforward, as often as a note were sent in for payment of interest, interest and principal should be paid together,* as is the practice at present in the case of exchequer bills; and at the same time to declare a respite of the redemption for a certain time.

The advantages would be—

1. The continuance of the source of profit in question (profit by interest undemanded) would be more steady and assured. For in proportion to the length of the respite declared, the paper thus respited would come to bear in circulation a premium; the amount of which premium, though limited by the rate of interest yielded by the open issue (resorted to or not resorted to) would not be prevented by it from taking place. This premium a man would lose, by sending in his paper to be paid off at par: in general, then, paper would not be sent in for that purpose, nor consequently any interest be paid by government.

2. No payment could thenceforward be made upon the proposed paper, but that a payment to a far greater amount would go in redemption of principal; whereas, without such regulation, no part of the money paid could take that profitable course.

The undemanded interest (it might be thought) might in this way come to accumulate to such a mass as might be productive of inconvenience, if by a sudden turn of affairs it were to become a matter of advantage to the whole body of annuitants to claim payment of it at once. But on a second glance, the inconvenience would be seen to vanish altogether. Supposing, as before, the amount of the paper twenty millions—rate of interest £1 : 9 : 6;—the whole amount of a year’s interest would thus be short of £300,000. Being simple interest, not compound, the whole amount of it in twenty years would be short of six millions, supposing the whole of it to remain undemanded, and the principal undiminished all that time. No issue can carry more than its own interest; because, as the open issue fills, the paper of the closed issue is paid off, interest and principal together. Respite is indeed proposed; but the term of respite need not be so long as to preclude government from providing such a course of redemption as should ward off any inconvenience that might ensue from a too sudden diminution of this part of the currency, and at the same time prevent the interest from swelling to any such amount as to become formidable. At the worst, at such a period, interest so low, money so abundant, £6,000,000 would be but a trifle to raise by an immediate and temporary loan, as now by exchequer bills.

§ 6.

War Loans.

By so many per cent. as the market price of old annuities is raised by any cause, by so many per cent. (it is well known) is the price of new annuities raised to those who give money for them to government (i. e. the terms of the loan bettered) by that same cause:—since, as between old and new the value is just the same, it would be in vain for any man, or set of men, to insist upon any considerably greater price in annuities for their money (allowance made for depreciation by increase of quantity and for dealer’s profit) than people in general are disposed to take for theirs.

Whatever takes stock out of the market, without taking out or keeping back the equivalent in money, adds in proportion to the price of stocks. The proposed measure takes stock out of the market without taking out or keeping back money: it therefore adds in proportion to the price of stocks.

True it is, that even previously to the absorption of stock annuities which it takes out of the market, it has created other annuities to a considerable part of the amount; for it is only with the money received for those new annuities, that the old are taken out. But of the money thus received for the new annuities, there is not any part that would have gone to market for old annuities; because, while stocks are under par, no money that can be employed with advantage in the purchase of stocks, can be employed otherwise than to a manifest disadvantage in the purchase of the inferior rate of interest afforded by the proposed note annuities.

Any melioration thus produced in the price of stocks, and thence in the terms of the loan for any given year, will operate (it should be remembered) not only on the loan of that year, but on all succeeding loans during the existence of the existing debt; since, whatever additions the debt may come to experience in the course of any number of succeeding years, it will always be the less by the amount of all the defalcations that have been ever made from it.†

Were it not for the operation of the sinking fund, the profit on this account would be so much clearer; but inasmuch as, to the extent of the stock purchased in the year by that fund, government loses exactly as much as it gains on the stock sold in that same year in and by the loan, the amount of the loss by the purchase will be always to be deducted from that of the profit by the sale.

To calculate the probable amount of profit on this score, for one, two, or more years, would require two sets of data;—viz. 1. Amount of the several other causes of elevation, together with those of depression, in each year;—2. The amount of annuity-note paper sold in each year. The former would scarcely yield to calculation; the latter bids defiance to it altogether.

CHAPTER VI.

ADVANTAGE BY ADDITION TO NATIONAL CAPITAL.

Among the advantages promised by the proposed measure, may be reckoned the addition it promises to make to the mass of national productive capital, and thence to the mass of national wealth; viz. by the acceleration it will give to the operation of the existing funds, in respect of the redemption of the national debt.

That an addition to the mass of national capital—an addition to the value of £100—is the result of every £100 paid in discharge of the national debt, is a proposition which, though hitherto it seems to have engaged but little if any attention, will be assented to almost as soon as mentioned. That the putting of money into men’s hands on this occasion in lieu of the income they are obliged to part with, has no tendency to increase the ratio of the amount of money expended in the way of prodigality, to that of the money expended and employed in the way of thrift, is evident enough. But if, employing the money put into his hands in lieu of a source of income of which he is deprived, a man employ it otherwise than in the view of making it productive of a mass of income to equal amount, he employs it in the way of prodigality; and if he employ it with the view of making it productive of income, it must be either by expending it himself in the production or improvement of such articles as constitute a mass of capital to the amount of such expenditure, or by lending it directly or ultimately to somebody else, by whom it will be applied to that same purpose.

If the money thus put into the hands of the expelled annuitant in lieu of his annuity were taken from the mass employed in the shape of capital, there would be neither loss nor gain by the operation, on the score of addition to the mass of national wealth.* But the money thus employed by the existing sinking fund is not taken from any such mass. It is the produce of taxes—of taxes levied on income, either directly or through the medium of expenditure, and is taken out of that fund, the whole of which (after a small deduction on account of savings) would otherwise have been expended within the year, in the way of current expenditure: that is, in the purchase partly of unproductive labour, such as that of servants, coaches, horses, players, musicians, and the like—partly in the purchase of articles consumed mostly within the year, or some other such short periods of time, without having produced any equivalent increase.

Of the money thus put in the shape of capital into the hands of the public creditors on the redemption of their respective portions of the public debt, that part which is received by British subjects, will in general be employed in adding to the mass of capital contained within the limits of the British empire: on the other hand, that part which is received by foreigners, will as naturally be employed in adding to the mass of capital contained within the dominion of the states to which they respectively belong—in adding to the quantity of foreign, not of British capital.

Deducting, then, from the whole amount of the money payable on the redemption of the redeemable, but unredeemed portion of the funded debt, that part of it which is in the hands of foreigners, the remainder will be the sum that, in the year in which the last portion of the debt comes to be redeemed, will have been added to the mass of national capital from this source, independently of any effect produced by the proposed measure.

Whatever amount of profit the proposed measure may be attended with, this profit being also applied in aid of the other sinking funds to the redemption of the debt, will act in acceleration of that effect. It will therefore, in proportion to the acceleration, be productive of a distinguishable addition to the mass of national capital in proportion to the acceleration thus produced by it. In a rough way, the amount of this addition may be stated as equal to the interest at compound interest, at the rate at which the national capital is accumulating, upon the amount of the debt redeemed for the term of years struck off by the acceleration.

From the amount of restitution* thus made to capital, in any accurate computation would come to be subtracted that proportion of the national income, which, had it not been taken by taxes, and thence in the shape of redemption money added to capital, as it were by force, would have been saved up, and, without changing hands, have gone to capital of its own accord, and from the amount of profit by acceleration of the redemption of the debt, a similar proportion of the amount of such profit.

To the account of the addition thus promised to the mass of national capital, in respect of freed capital, and such other parts of the mass as are of an intrinsically productive nature, it may naturally enough be expected that I should add the augmentation promised in the shape of circulating capital;—viz. to that branch of it which consists of money.

That in certain circumstances an augmentation of this sort would be among the natural consequences, and even, unless prevented by special care, among the necessary consequences of the measure, is a proposition, the truth of which will, I think, appear with sufficient evidence: but far from taking credit for any such result in the account of advantages, probity requires that I should give warning of it as a source of danger. To point out the means of obviating this danger, will be the business of an ensuing chapter.

CHAPTER VII.

ADVANTAGE BY ADDITION TO COMMERCIAL SECURITY.

Another advantage expected from the proposed paper, is—the addition it promises to make to commercial security—the support it holds out to commercial solvency. It presents itself, not only as being itself exempt from those shocks to which the ordinary species of paper money are essentially exposed, but as affording to the community a remedy, and that of the preventive kind, against the disorders to which it stands at present exposed by the constitutional weaknesses of those papers.

For a property thus valuable, it is indebted to two features belonging to it. One is—the making no addition by its quantity to the quantity of cash engaged for. It is by this, that it is itself preserved from that brittleness which is of the essence of those other papers. The other is—the faculty of being employed in either of two capacities at pleasure:—1. As a permanent source of income—like so much stock—so long as it is kept in the same hand; 2. As a circulating medium—a species of money, as often as it is passed on from one hand to another. It is by this latter feature that it is enabled to fill up whatever gaps may come to be made in the quantity of money in circulation, by a deficiency in the quantity of those other papers.

That in point of security, commercial wealth is liable to suffer from an excess in the comparative quantity of paper money, is a truth but too often felt, and sufficiently understood. That in point of quantity it is liable to suffer a kind of negative loss from a deficiency in the quantity of paper money, is a truth rather understood than felt, but equally out of doubt; because, inasmuch as every fresh £100 worth of paper money is so much added to the mass of circulating capital, to the amount of the value at which it passes, the national capital is of course so much the less for every accession of this kind which it might have received consistently with commercial security, and fails to receive. That by a deficiency in the quantity of paper money, commercial wealth is liable to suffer—not in point of quantity only, but even in point of security, is a sort of discovery in political economy, seemingly of very recent date.† Till the pressure upon the Bank of England in 1797, it seems to have been generally understood, that in the article of paper money, deficiency was the safe side:—but on that occasion it became apparent, that in regard to paper money of the kind in view, there is no safe side.

While there is stock to sell, and in such abundance, how (it may be asked) can commercial wealth be liable to suffer in point of security by a defalcation (which can never be a very large one) from the quantity of paper money? When by selling stock, a man who has either stock enough, or credit to borrow stock, may at any time raise as much money as he pleases: he will be a loser, it is true, by the interest of the stock sold out, from the time when sold to the time when replaced, and so far wealth suffers in point of quantity: but there ends the damage: security remains entire. Yes, doubtless;—so a man may:—but on what terms? On the terms of taking the precise amount from some one else: the deficiency is shifted only, not lessened.

Stock may be sold for money, and in that figurative sense it may be converted into money:—but in the literal sense, it cannot be converted into money: and it is in the literal sense that an article must be capable of being converted into money, to answer the purpose in question here. Stock convertible into money? Yes, in the same figurative sense in which lands and houses and goods are convertible into money—and no other. Annuity-note paper is convertible into money, paper-money, in the literal sense.

Stock is one thing—paper money (the sort at present in use) is another:—annuity-note paper, and that alone, is both in one. It has two natures, and is at all times either the one thing or the other, whichever is most wanted.*

The defalcation made from commercial security by the defalcation of a given mass of money (cash or paper, makes to this purpose no difference,) would upon examination be found greater than might have been supposed. The annual receipts of the country, on the score of income and capital taken together, may (without any error capable of affecting the argument) be stated as not much over or under three times the amount of the money of the country, cash and paper taken together.† Call, then, the quantity of Bank of England paper habitually issued and kept in circulation, £10,000,000: and of that habitual 10 millions, suppose, at a particular time, one million cancelled or kept back,—for instance, by a defalcation to that amount from the usual discounts. Here, then, is produced already, by the defalcation of this single million from the quantity of money in circulation, a defalcation to the amount of three millions from the mass of money that should have been received in the course of the year:—and this without any allowance made for the proportion of the money of both sorts (cash and paper) that will always be hoarded and kept out of the circulation in the shape of capital waiting for employment, or the cash that must always be kept up in the same way as a fund of reserve for answering the engagements contracted by that part of the currency which is in paper.

Call the amount of money kept up on both these accounts in the shape of capital, one-fourth part of the whole;—then will a defalcation, as above, from the mass of money by a defalcation to that amount from the quantity of bank paper issued and kept out, produce, instead of the above supposed defalcation of three millions, a defalcation of four millions from the mass of money receipts.

Suppose, again, that by reason of the alarm excited by this defalcation from bank paper, whatever was the cause of such defalcation, another million (cash and paper together) is hoarded up and kept out of circulation, out of the portion which otherwise would have continued in the circulation:—on this supposition, the defalcation from the mass of the year’s money receipts swells, from the four millions above spoken of, to eight millions.

But it is on the quantity of money ready to be transferred to those to whom it is due, or by whom it is otherwise expected, whether out of the portion which is kept in general circulation in small masses, and which serves as a vehicle for income, or out of the portion kept up in large masses, in the shape of capital, that the body of commercial men, in their capacity of debtors, depend for their ability to fulfil the aggregate mass of their engagements. If, then, the influx of money in the course of the year into commercial hands be thus diminished by the amount of eight millions on the score of income and capital taken together, eight millions, or some such large sum, will be the amount of engagements broken in the course of that year, by reason of the defalcation of a single million’s worth of bank paper (unless in as far as the deficiency may have been made up from other sources;)—and to this amount will the commercial wealth of the country have suffered, not only in point of quantity, but in point of security.

I speak of security, in contradistinction to quantity; i. e. to actual wealth to a liquidated amount; for if to the above liquidated loss be added the loss by failure following failure in consequence of the shock given to security, the ultimate loss may rise above the supposed eight millions, to an indefinite amount.

The want of a circulating medium as such, that deficiency, of which so much was said in 1797, may recur at any time. By the united wisdom of all parties interested, it received a cure at that time from a number of concurrent measures, all of them well adapted to the production of the effect. From true wisdom it received, for the time, a perfect cure:* but, by any other means than the sort of remedy here proposed, to prevent the evil from recurring again and again at any time, is not within the reach of the most perfect wisdom:† and prevention is still better than the most perfect cure. To be liable at any time to become the instrument of mischief, and that in either of the two opposite ways, by being in too great quantity, or in too little, is of the essence of all such promissory paper: for its not being in too small a quantity, it depends upon the wisdom and even humour of a few individuals; for its not being in too great quantity, it depends not only upon the wisdom and humour of individuals, but upon contingencies of the day, and the humours and prejudices of the uninformed and ill-informed, and hasty and impetuous multitude: upon the former, as to their not exceeding in their issues the amount warranted by the rules of prudence—upon the latter, as to their not frustrating and setting at default all the rules of prudence, by crowding in to demand for their paper without need, such a quantity of cash as is not in existence.

The sort of promise given by bank and bankers’ paper, is that sort of promise, the fulfilment of which, taken in the aggregate, is physically and constantly impossible: the promise given by the proposed annuity-note paper, is that sort of promise, the fulfilment of which, whether taken in the aggregate or in parcels, has never yet been found to fail—which possesses all the certainty that is to be found anywhere in human affairs; and which becomes less and less liable to fail, the greater the quantity of money of which it conveys the promise.

Were the proposed paper the only paper money, national wealth would not be liable to suffer either in point of quantity or in point of security—either from excess or from deficiency in the quantity of paper money in any degree; since, even without the exercise of human reason on the part of anybody (except on the part of each note-holder, in so far as his own particular interest, and that the interest of the moment, were concerned:) it would adjust itself, as it were of itself, as to what concerns the demand for circulating money, to the exact quantum of the demand: it would be stock one moment, and cash the next, whichsoever were most wanted.

In the other case, were it but one ingredient amongst others in the composition of the currency of the country, it would, as far as it went, and to the extent of the quantity kept in hand, principally with a view to income,* act as an occasional supplement to other paper money, and as a remedy of the preventive kind to whatever inconveniences might otherwise have arisen from a deficiency of that article.

Against an excess in the quantity of other paper money, its operation would not be quite so efficient or so manifest. But by presenting to every eye a species of paper money unsusceptible either of excess or depreciation, it would at once and at all times take the pretence of necessity from the rashness that might otherwise be disposed to hazard an excessive issue; and it would render the public in general the less disposed to accept, in an excessive quantity, a paper essentially hazardous, seeing that a paper essentially exempt from hazard was at their command, to any amount, at any time.

CHAPTER VIII.

PARTICULAR INTERESTS CONCERNED.

Of the four distinguishable effects looked for from the proposed measure, that which will probably be regarded as the principal, is the degree of acceleration and assurance promised by it to the redemption of the national debt. To the accomplishment of so desirable an object in a way consistent with existing engagements, no damage accruing to particular interests has ever been considered as opposing any bar that ought to be regarded as insurmountable. That a reduction, say from £4 to £3 per cent. is a tax, and that a proportional one, to the amount of 25 per cent. upon the income of a particular class of men, is a proposition too obvious to be overlooked. Yet the design of effecting a reduction of the same sort, and that to an undefined amount, is a design rooted in the mind of the legislature, evidenced by the practice of preceding parliaments,† and by the express declarations of others.‡

The nation at large, and the stockholder, are borrower and lender. When the money is to be raised, it is the lender’s harvest; and he takes advantage of the borrower and his necessities to the utmost of his power. When debt comes to be paid off, it is the debtor’s turn; and it is neither unnatural nor unjust, nor illaudable, nor ought it to be unexpected, that he, by his agents, should take the like advantage.

The stockholder of the paying-off season is not (it is true) in every instance the same individual as the stockholder of the borrowing season. He is, however, either the very same, or one who, with his eyes open, and for valuable consideration, has put himself in the other’s place:—succeeding to all his rights, it would be in vain to repine at the thoughts of having succeeded to any of his obligations. From a creditor in some cases, and on the score of humanity, mercy may, with more or less reason, be expected—but from a debtor, what mercy was ever looked for? The words merciless and debtor are words scarcely to be coupled with a grave face.

Expressions, however, and the momentary effect they may have on the imagination, are not the proper standards of right and wrong in this case any more than in any other. Human feelings, and the effect of measures upon those feelings, do constitute that standard, in so far as they can be ascertained. A stockholder is as much a member of the community—as great a part of the community—as any other man. Such as his expectations have been, such will his feelings be, when the event takes place. But what have been his expectations? It is from his situation, and that only—from the terms of the contract by which his situation in that respect is constituted—that any judgment can be formed.

Thus stands it with regard to the public creditor—the stockholder, who, on the comparative return or increase of general prosperity and opulence, has in former instances seen that part of his income reduced by one half; and who, within a period already in prospect, may be doomed, by the like cause, to a reduction to the like amount.

But in comparison with the interests of this vast branch of the community, what can be the amount of all the other particular interests put together! and in comparison with the degree of sufferance in this case, how trifling will be the degree of sufferance in any of those other cases!

The destiny of the stockholders is not hypothetical: it originates not in the proposed measure; it has been fixed and made known by the legislature, and built upon for years and years, by determinations several times repeated and brought to view, without a doubt from that or any other quarter on the head of perseverance. It is for want of means, and not of determination, that the redemption with all its consequences has not long ago been accomplished.

In comparison of such interests, whatever lighter interests may be found to stand in the way might therefore appear as scarcely worth a glance. But though all particular interests put together will not prevail for the rejection of a measure beneficial in a superior degree to the whole, yet a view of the particular ways and degrees in which they may respectively come to be affected by it, will not be without its use, were it only by way of warning of the probable sources and grounds of opposition, and of the nature of the obstacles which may be to be combated in the course of the exertions necessary to bring the measure into effect.

During Period I., while no part of the mass of government annuities is taken, but on terms on which the holder is desirous to part with it, benefit to particular interests will run along with, and probably preponderate over the damage. From the commencement of the period when the species of property in question is taken from unwilling hands, the damage, as far as particular interests are concerned, will be apt to outweigh the benefit.

The only interests that belong in strictness to the present inquiry, are those which are affected by the particular mode of operation employed by the proposed measure. The consideration of any such interests as would equally be affected, whatever other mode were employed, is foreign to the present case.

The particular interests on which it bears are of course the several interests concerned in the species of paper money already in circulation. The parties in question are, therefore—1. The Bank of England;—2. The country banking-houses; to which will be to be added (although not concerned in the emission of paper money, but on another account;)—3. The banking-houses of the metropolis.

1. If the paper of the Bank of England should be accepted by government in payment for annuity-note paper issued at the annuity-note offices, on the footing of cash, as it is at present at the other existing government offices, the circulation of bank-notes would not (it should seem) experience any diminution from the proposed measure. It might even receive assistance, since, in virtue of the same properties by which bank paper is rendered preferable to cash for all other purposes, it will be no less so for this purpose.

Should the public in general testify the expected preference for annuity-note paper as compared with cash, the Bank, by keeping that paper as the stock in reserve to answer calls for change for their own notes, might keep so much the less cash, and derive £2: 19s. interest from a portion of their stock which at present yields them none. But the profit from the present state of things is simple and certain: the result of the proposed measure, as touching its effects upon the affairs of the company, would appear wrapped in clouds. The Bank, according to their intelligent censor, Mr. Allardyce,* have not been forward to step out of the beaten track, where the step has been ever so obvious, and increased emolument ever so certain a fruit of it: the probability, therefore, seems to be, that the plan of the proposed rival paper would not be viewed from that superb edifice but with a rival’s eye.

Should damage eventually accrue to the corporation, and should the case be regarded as calling for compensation, the profit would afford an ample fund, and the situation of the party damnified is such as would render it easy to reserve compensation in a variety of shapes. But to put the public to any expense in rendering any such compensation, would be a departure from former practice. When by threats of forced redemption government has compelled the Bank to accept of a reduced rate of interest, and made a defalcation to the amount of 25 per cent. upon the greatest part of its income, compensation has neither been granted by one party, nor demanded by the other.*

To government, whose own manufactory of paper money† is of no less standing than that of the bank, it will be difficult to say why it should be forbidden to follow the example of the bank, and cut down its paper into as many smaller sizes as it found convenient. To government which for the benefit of the community at large has made no scruple of restricting the dealings of other manufacturers of paper money, it would be strange, if in the same view it were not allowable to take its own course in the manufacture of its own paper, in the management of its own affairs.

But the resource afforded by loans from the bank (it may be asked,) shall government deprive itself of such a resource? The answer is short and simple. The resource cannot be taken away by the measure, till profits have been produced to a greater amount than the fee-simple of it. Bank paper need not—would not begin to be withdrawn out of the circulation, till the paper of the country banks had been driven out of it altogether. But before this would have happened, a profit would have been made by the sale of annuity-note paper, more than equal to the usual advances made by the bank.

It is only in time of war that the resource is of any value. The quantity of money in the country will not be lessened at any rate by the proposed measure: the great and only danger is, lest it be increased too much. Upon any emergency, the same quantity of money would therefore be to be had, and always to be had only through a channel perhaps different, and at a rate of interest possibly, though not certainly, a little higher. At the worst, to set against the gain of the twenty, thirty, or forty millions, two or three times in the course of ten or twenty years, an extra expense to the amount of £50,000 or £100,000, might be incurred. Upon these occasions, a quantity of money might come to be raised upon bills in the nature of exchequer bills, under powers previously and regularly obtained from parliament, instead of being raised by treasury bills without powers from parliament.

The resource, such as it is, might or might not be reduced; but at the worst, would be but reduced. Even now, profit by paper issued is but a part of the profit of the bank.

2. As to the country bankers, the effect of the measure upon their interests appears by no means clear. On the one hand, if the quantity of cash in the country be not lessened by the proposed government paper, the demand for banker’s service in keeping that cash will not be lessened. Should the proposed government paper come to be universally received in preference to cash, the supply of cash kept by these banks for answering draughts may be made to assume that form, yielding £2 : 19s. per cent. while kept at home, while an equal amount in cash is sent abroad in the way of discount in exchange for bills. On the other hand, the money which is now attracted to a country bank by the nominal 3 per cent. or whatever interest it is that is paid for it at present will no longer find its way thither, being turned aside by the full £2 : 19s. a-year, with so many other advantages that attend the proposed paper in comparison with the paper of country bankers.

The loss, if there be any, to which this species of trader would be thus exposed, is at any rate among the slightest and least to be regretted of any to which man is exposed by the vicissitudes of trade. It is a mere cessation of gain, or rather of gain in this particular shape. A banker’s capital is all in money. It is not with a banker as with a manufacturer: no loss by removal of stock, or by forced sale in the lump, and thereby to a disadvantage, to avoid another greater loss. A banker steps into his trade without trouble, and goes out of it without loss.

In November 1792 (according to Mr. Chalmers,‡ ) the number of country banks was upwards of 400 before the month of March 1793; according to the evidence given on the 1st April 1797, to the Committee of the House of Lords,∥ they had decreased to about 280: on that same 1st of April 1797, according to the same evidence, they did not exceed 230. If, in consequence of the proposed measure, the numbers of these banks should experience a further reduction, or were to be swept away altogether, the change is of a sort that threatens not to be either preceded or followed by distress. Failure cannot be among the consequences. The banks will have had ample warning, time for getting in their debts, and contracting their issues. Of the issue of the proposed paper, the progress, from the very opening of it, will be known day by day, the whole island over, to a penny.§ Months at any rate, not to speak of years, will have intervened between the first authentic mention of the measure, and the establishment of it.

From withdrawing without failure—from withdrawing, should it take place in consequence of the advancement of the proposed annuity-note paper—little damage would ensue to the few individuals particularly concerned, and none to anybody else. From failure, as often as it happens, ruin ensues to the individuals concerned, and much mischief to the community at large. An entire substitution of the proposed government paper to the paper of country bankers, would prevent the recurrence of this mischief, and that ruin. It is no light matter—out of the four hundred and odd country banks above spoken of (according to an account taken by Mr. Chalmers,) a full fourth had failed:* of more recent failures I say nothing, having nobody to quote.

By expulsion from this branch of trade the whole body of the trade would thus be secured from failure. By the failure of a part, though it were but a tenth part, more distress would at any time be produced, reckoning that of the trade alone, than by the expulsion of the whole.

3. For the banking-houses of the metropolis, there seems less cause of apprehension than for the country banks. They have no paper for the government paper to annihilate. True it is, that on the one hand many persons who now keep their money at a banker’s, because, by keeping it themselves, they could make no interest, would not keep their annuity-note paper at the banker’s, if by keeping it there they could make no interest on it, while by keeping it at home they could make £2 : 19s. per cent. of it. But the inducement to keep money at the banker’s does not consist solely in the consideration of safe custody, but in that and other advantages put together: in the saving in point of time and trouble in regard to the counting of money, and doubts and disputes about the goodness of money offered, together with the convenience of a man’s having the account of his expenditure kept by other hands. For these remaining conveniences, some might be willing to waive their claims to the small and unusual gain of 2d. per £100 per day upon expenditure: others, though unwilling to give up the whole, may be willing to give up some part of it; and in this way a man might keep his annuity-note paper at his bankers, as he does his cash, but upon terms; and the profit by interest on the paper might thus come to be shared between the owner of the paper and the keeper of it. Capital sums, however, which now are in so many instances suffered, through indolence, and while waiting for a distant and undetermined employment, to lie dead to the owner at a banker’s, would not be quite so apt to lie there, when in the shape of annuity notes they might be productive of interest to the owner, without prejudice to such their destination, and without any increase of trouble.

Here, then, we see two new sources of profit opened by the measure to the banking-houses of the metropolis:—1. Profit by interest of annuity-note paper kept in reserve, instead of cash to answer drafts; and 2. Profit by annuity-note paper kept for customers upon terms. Suppose the quantity of cash in the metropolis to be undiminished by the measure, the amount of the above profits will even be neat. Will it remain undiminished? The affirmative seems highly probable.

Among the effects of the measure is one, that to a certain degree cannot fail to increase that quantity. The cash which now remains, and would otherwise have remained in the hands of the frugal poor—in unproductive hands, being now poured into the hands of the commissioners for the redemption of the national debt in return for annuity-note paper, will be restored to the circulation, and add to the quantity put into the hands of bankers.

CHAPTER IX.

RISE OF PRICES—HOW TO OBVIATE.

I have already stated an extra rise of prices as among the conceivable results of the proposed measure. Taken by itself, it is evidently an undesirable result: it is a tax on income to the amount—a tax which comes out of everybody’s pocket, and goes into nobody’s. Being, with reference to the proposed measure, an unfavourable result, I may be believed with the less difficulty when stating it as a probable one.

Supposing the influx of the proposed paper not to be followed, or rather kept pace with, by an efflux of other money to an equal amount; and supposing it too sudden to be productive of an influx of vendible commodities, to an amount worth regarding in this view, within the assumed space of time; the result presents itself as a demonstrable one. For the price of the whole mass of vendible articles taken together, sold within the year, is, in other words, the same thing as the quantity of money given or undertaken for in exchange for them within that time; so that the quantity of those articles remaining the same, the greater the quantity of the money is that has been given for them, the higher has been the price.

It has already been observed, that it seems impossible to say with any precision to how small or how great a length the emission of the proposed paper may eventually be found to extend previously to the arrival of stock 3 per cents. at par: That, at some part or other of that interval, a small quantity at least can, however, scarcely fail to find acceptance; and that a small quantity, a very few millions for example, issued previously to the conclusion of it, would be sufficient to operate the conversion indicated, and thereby give the form of the proposed paper to the whole of the remaining mass of annuities composing the national debt: That, although the quantity of that species of property will be continually and rapidly on the decrease, while the demand for it will be as continually and rapidly on the increase, it will nevertheless be difficult, if not impossible, to prescribe any determinate limit to that portion of it which in this way may come to have introduced itself into the circulation, on the footing of current money; for the open issue will remain equally open to the customers for temporary income (who, when they have kept it as long as they can afford, will throw it into the circulation) as to the customers for permanent income; and it seems impossible to say in what proportions, at any given time, the quantity of annuity-note paper remaining at that time, will find itself distributed between the two classes.

On these considerations, it will be matter of prudence to be prepared for the several possible cases and degrees in which it may happen to constitute a clear addition to the mass of money in circulation, to any such amount as to be in a sensible degree productive of the apprehended inconvenience.

Of such preparation, the practical result will be, to take such measures as shall be effectual for the prevention—not of the rise of prices, which is impossible—but of any addition to that degree of rise, or rate of increase, which would have taken place in the natural course of things, independently of the proposed measure.

If after having expelled of itself the whole amount of paper money of other sorts, it were to keep on increasing without expelling metallic money to an amount equal to its own, it would thence forward, if not restrained, make a proportionable addition to the quantity of money of all sorts in circulation, and thence to the prices of vendible commodities. In this case, it would be necessary to apply the check to the proposed paper itself, by limiting the quantity that should be suffered to enter into the composition of the mass of money in circulation: for example, by stopping the issue of all annuity notes below a certain magnitude; say, for instance, the £102 : 8s. notes. By an expedient thus simple (the requisite powers being given to the executive government ab initio) the end might be accomplished, in the possible event supposed, without any fresh interference on the part of the legislature. That the means thus proposed would be adequate to the end, will appear clear enough (it is supposed) from what has been said on this subject in a former Chapter.*

That in proportion as the proposed paper advanced in circulation, country bankers’ paper and Bank of England paper would quietly withdraw themselves, is a result that appears more probable than the contrary, according to what has already been observed.†

Should it fail of taking place in the requisite degree of itself, it would require to be produced by means directed expressly to that end.

The first of the two species of paper attacked, would naturally be the paper of the country banks. Collectively modern, individually changeable, they have no such claims on government as those which plead in favour of the great incorporated bank.* Express prohibition would not be necessary: by taxation the same effect precisely might be produced—by a simple extension of a tax already imposed for other purposes. By this means, if necessary, about half the utmost possible amount of the supposed redundant mass of paper would be chased away.†

Secondly, and lastly, would come the paper of the Bank of England. In this case, as in the other, the same means would be sufficient to the same end. Perhaps, however, in this case, they would not be necessary. A simple refusal on the part of government, to receive at its own offices any other than its own paper, might be adequate to the effect.‡

It may be asked—to what end throw the whole burthen of the measure upon the two particular classes in question, instead of letting it spread over the community at large in the shape of a rise of prices?

My answer is—to reduce the amount and pressure of it to its minimum. At an estimate greater than any possible one, the former loss would not be to the latter in so high a proportion as that of interest to principal. To the banking class, it is not clear (as hath already been shown) that the loss would in fact amount to anything. But put an extreme case, and take it, in the instance of each individual, at the utmost possible amount it could rise to in the instance of any one. Call the total amount of bank and bankers’ paper 25 millions,∥ and upon the whole of this paper suppose a real profit of 5 per cent. annually made. Upon a supposition in a variety of points thus excessive, the total loss is but £1,250,000 a-year. Call, on the other hand, the total quantity of money of all kinds taken together 75 millions;§ —and suppose (according to the position brought to view at the commencement of this chapter) that the addition made to the prices of vendible commodities, taken together, is in the exact proportion of the supposed sudden addition to the mass of money; viz. as 25 to 75—as 1 to 3. On this supposition, the rise of prices being supposed equable, and therefore universal, every income which did not receive a rateable increase from the supposed sudden influx of 25 millions, would in effect be diminished by a fourth—the whole income of a man so circumstanced producing him no more than three-fourths of the quantity of vendible commodities it produced to him before. Call, with Dr. Becke, the annual income of the country (including income from day labour without stock) £217,000,000—or for round numbers £210,000,000; then will the annual burthen on the country, by rise of prices on the nonexpulsion of the paper money in question, be £70,000,000.*Per contra, the utmost possible annual loss to the bankers and bank proprietors by the expulsion, not so much as £1,250,000; the probable loss, scarcely so much as the odd £250,000.

The amount of the loss would, it is true, be made good in money, in a certain degree, to every person whose circumstances enabled him to make in money an addition to his income equal to the degradation thus sustained by it;—for although the real value of the total mass of money—its value in respect of the quantity of vendible commodities it purchases and conveys—is not greater after the supposed addition to the mass of money, yet on the other hand, neither is it less. The misfortune is, that although the pressure from the defalcation would be felt in all its force—and felt by all parties, indemnified as well as unindemnified—the indemnity would in comparison be scarcely perceived. The loss by the rise of prices would be felt as so much loss:—the gain by the share in that extra influx of money by which the loss had been produced—this gain not being coupled and set down per contra in the mind of the party, and confronted with the loss, would present itself in the shape of an independent gain, unconnected with any such effect:—and by an indisputable law of the sensible faculties of man, sums and circumstances equal, the enjoyment produced by gain is never equal to the suffering produced by loss: if it were, the main reason for affording protection to property would cease.

That an increase in the quantity of real wealth, i. e. of vendible commodities, has been produced by an increase in the quantity of nominal wealth—viz. current money, cash and paper together—seems by no means clear of doubt. But what seems not exposed to doubt is, that the quantum of such addition, if real, accruing in the compass of a year, cannot amount to more than the produce of the fresh quantity of unemployed capacity for labour brought into employment by the application of a proportionable quantity of the supposed fresh influx of money over and above that which would have been brought into employment:—so that if at the commencement of the year all hands capable of employment were full of employment, and so would have continued during the whole course of it, no addition could in the course of that time be made to the quantity of real wealth or vendible commodities by the influx of the money in question, howsoever copious. But whatever quantity of money being introduced into the circulation has not the effect of producing a correspondent quantity of vendible commodities, cannot but have the effect of producing a correspondent degradation in the value of the existing mass of money into which it flows, thereby producing, what is in truth no more than the same effect expressed in other words, a correspondent rise of prices.†

CHAPTER X.

REDUCTION OF INTEREST—PROPOSED MODE COMPARED WITH MR. PELHAM’S.

Reduction of Interest is a declared object with Parliament:—the only question is as to the mode.

To exhibit the comparative eligibility as between the two plans—(the one here proposed for the future, and the one pursued in time past by Mr. Pelham)—I shall consider them together under the several heads of expense—celerity of operation—previous assurance of success—and gentleness of operation:—not forgetting, with respect to Mr. Pelham’s, the possibility of applying it at the present time to the immensely increased mass of debt.

I. As to Expense—viz. as compared with profit.—In Mr. Pelham’s time, the profit consisted in reducing to 3 per cents. the whole amount of the then existing quantity of 4 per cents.; that is, reducing the quantum of interest paid on the nominal capital of £57,703,475, from about £2,308,136 to about £1,731,102.

When the operation was first mentioned by him in parliament, it was a sign that then at least the state of the money market was ripe for it; otherwise he could not have obtained the requisite assurance of the money for paying off in case of refractoriness:—how much longer it might have already been ripe, it would be in vain to attempt to calculate. This being assumed, whatever respite he allowed—whether as to the whole or as to a part of the interest proposed to be struck off—is to be considered as a price, or bonus, which under the plan proposed it was looked upon as advisable in point of prudence to allow to the stockholders, in order to purchase their acquiescence, and insure the plan against the hazard of failure. I say, to prudence; for as to sympathy for the sufferings of the individuals damnified, the professedly vindictive measures pursued afterwards against the repugnants are a sufficient proof that no such motive was consulted in the arrangements of the terms.

1. A year’s interest was allowed in the first plan without reduction:—i. e. the amount of the one per cent. that was to be afterwards struck off by the reduction, £577,034, was allowed for the first year.*

2. Half of the one per cent. ultimately struck off was allowed for seven years more. This for one year was £288,517;—for the seven years £2,019,619. Adding the one per cent. for the first year, makes the total price paid for consent, £2,596,653;—deducting £426,980 discount for the several years to come, leaves the amount of the money paid for the £577,034 a-year thus saved, £2,169,673.

This £2,169,673 (thus paid for consent to the reduction) amounts to a little more than 1-27th of the amount of the capital of £57,703,475, upon which the reduction of the 4 per cent. to 3 per cent. was thus effected: a little less than £2,308,136, which would be the exact amount of four year’s purchase of the perpetual annuity thus struck off. Such, then, was the price that on Mr. Pelham’s plan was given for a consent, which upon the proposed plan would be obtained gratis.

On the proposed plan, the quantum of interest that would be struck off by the first reduction (meaning the reduction effected in the course of the two first periods, by conversion of 4 and 5 and 3 per cents. into capitals bearing £2 : 19s. per cent.) by means of the paper of the first issue, would be £1,212,608.

That, upon any proposed reduction to be effected at this time of day, the same terms precisely should be offered as were offered at that time of day, would, under the vast difference of circumstances, be a supposition altogether untenable; but as it would be a fruitless attempt to determine what would be the terms now offered, the only terms on which any argument can be grounded are the above.†

On that supposition, the price to be paid for a consent to the striking off a mass of permanent annuities to the above amount of £1,212,608 a-year, would be a little less than four times that sum: it would be £4,559,458: exactly four times would be £4,850,432.‡

3. A sacrifice which may be added to the expense attending the reduction of interest, as above, is—that of going on with the redemption of the principal of the debt. By Mr. Pelham’s plan, this latter mode of liberation was given up: even in point of right, for eight years—and in intention, perhaps for ever. Since the establishment of the existing sinking funds, it could not now be given up upon any terms; and supposing it possible, and deemed eligible, to adopt the principle of Mr. Pelham’s reduction plan to a certain extent, it could not be adopted without such modifications as would be necessary to render it compatible with the institution of those redemption funds.

On the proposed plan, reduction of interest and redemption of principal afford assistance to each other: reduction to redemption, by the supplies it pours into the fund;—redemption to reduction, by the sums which, by expelling them out of the old annuities, it drives into the new.

4. Another sacrifice that would be to be made upon Mr. Pelham’s plan was—of the eventual advantage of ulterior reductions:—the very right given up for eight years as before—and for any subsequent period, no foundation laid, nor prospect opened, for anything that appears.

On the proposed plan, issue follows issue—reduction, reduction—as wave follows wave,—execution treading without respite upon the heels of possibility. What space of time each reduction would occupy, is scarcely open to conjecture:—thus much is certain, that there is not a moment’s interval between the completion of one reduction and the commencement of the next.

II. Celerity of Operation constitutes a head of comparison different in name, but in effect carried to account already, under the head of Expense. A given sum is worth the less, as the time for receiving it is more distant. Acceleration is profit—retardation, loss.

III. Previous Assurance of Success.

That Mr. Pelham’s plan was practicable, was proved by the event. But for a long time it was likely to have failed: and had it failed, it would have failed in toto; since, if the reduction had not been submitted to in respect of nearly the whole mass, it could not have taken place as to any part. Had not the quantity of uninscribed stock (about 3¼ millions) been small enough to admit of its being paid off, the submission, testified in respect of the subscribed stock, could hardly have been accepted: nor could the plan have taken place in any degree, without a joint and simultaneous operation on the part of one or other of two numerous sets of parties—viz. the stock holders, who were called upon to submit to the reduction—or the monied men, from whom, as far as the expected submission failed of taking place, the money was to come for paying off the repugnants.

But though practicable then, in respect of the 57 or 58 millions in question then, it does not follow that it would be practicable now, in regard to the amount of debt now in question, not even although stocks should arrive at par.

In regard to reduction on the proposed plan, success is, as we have seen, independent of contingencies. In each year—month—day, the process will go on to the utmost extent consistent with the state of the money market at that time. By the proposed subscription plan—by the consequent competition for respite from further deductions—the first reduction might be rendered in a manner instantaneous; and a very short space of time would be sufficient for the accomplishment of it, even without any such aid. The 5 or 6 millions (which would by that time be the amount of a year’s produce of the sinking fund,) call it 5 millions—this vibrating without ceasing between the stock market and the annuity-note market, would be sufficient to dispatch the reduction, and with prodigious rapidity, although the subscription plan were untried, or tried without effect. In the machinery thus put in motion, no part is liable to stop of itself for want of the assistance of any other—and as it is at the beginning, so is it at the end.

During the first issue, every note then issued pays off by the money it produces, and thus, converts into note annuities, a corresponding portion of stock annuities. During the second issue, every note then issued converts in the same way, into paper bearing the reduced rate of interest of that second issue, a correspondent portion of the paper of the first issue:—and a single note thus taken out in the way of issue, would bring about the reduction upon that portion of capital, and in a determinable time even upon the whole capital, although not another note were ever to be issued on the same terms.

Once put in motion, the machine keeps going of itself, without any fresh winding up, so long as there remains a particle of the debt for it to act upon and cut down:—nothing is left to depend on circumstances of the moment—nothing on the humours of individuals;—no interval between reduction and reduction—no pausing, deliberating, negotiating, debating, fumbling:—nor yet is the process exposed to the charge of precipitation or excess,—government having it in its power to stop or retard the operation at any time, by stopping or retarding the influx of the primum mobile from the sinking fund.*

IV. Lastly, as to Gentleness of Operation. Of Mr. Pelham’s plan, it is upon record that it experienced much opposition, and created much dissatisfaction. It was in the nature of it so to do. It brought forward the minister in an obnoxious attitude, calling upon men to submit to a loss to the amount of a perpetual tax of 25 per cent. upon income, subject only to an abatement to the amount of about four years’ purchase, on the condition of their lending their hands to a sacrifice of which they were the sole victims.

Accordingly, though on the ground of justice nothing could be more unimpeachable, ill-humour on one side appears to have begot ill-humour on the other—on the part of the authors of the suffering, as well as on the part of the sufferers themselves. On those who stood out at first, harder terms were afterwards imposed; and, to judge from the debates, the professed motive was not merely economy but vengeance.*

By the proposed plan, no such invidious task is put into the hands of any one. Before anything of hardship shows itself (at least to the great class of individuals here in question—the stockholders,) the measure will have been known—known for years as a measure of universal accommodation. Every man’s money will have been breeding money in his pocket—every man who has sold out, will have sold to an advantage. When hardship comes at last, it will be at the end of a long chain of causes and effects, the first link of which has been removed by time, almost out of the reach of observation. The immediate cause, being everybody’s act, is nobody’s. No new act—none at least that carries anything of compulsion on the face of it, is required at this (or indeed at any time) on the part of government.

On Mr. Pelham’s plan, everything turning upon subscription, a man knew not but that he was subscribing to his own loss. On the proposed plan, the loss takes place at any rate, and the effect of a subscription is all gain to him. The quantity of this gain depends upon his own exertions; and the bustle of competition serves to call off his mind from the suffering which is to come.

CHAPTER XI.

MORAL ADVANTAGES.

To the head of moral advantages may be referred two very distinct results:—prevention of improbity, and promotion of frugality: prevention of improbity, by furnishing (as we shall see) a new means or instrument of prevention; promotion of frugality, by the offer of a new species of property, which, by annexing an unprecedented remuneration to the exercise of that virtue, operates at once as an incentive and as a means.

I. As to prevention of improbity. The class of persons in whose instance it may operate to this effect, consists of trustees of every description, to whom it belongs to receive money on account of their principals—executors and administrators, guardians, stewards and receivers, assignees of bankrupts, prize-agents, factors, and the like.

To cause trust-monies, as often as a suitable case presents itself, to be laid out in the purchase of government annuities for the benefit of the principals, is, in the court of Chancery, matter of long-established practice—a practice which, by an act of very recent date, has received express support from parliament. The credit of the proposed new government annuities having been previously established by sufficient experience, let a similar investment of all trust-monies, as they come in, be rendered a matter of general obligation by an act of the legislature. A trust-receipt book to be kept with a trust-till. In the book, an entry to be made of each sum received, with the day on which it was received; the statement of the day to be indispensable. The money, if not received in the shape of annuity notes, to be sent to the office on that day or the next, to be changed into annuity notes; the notes received to be entered by their numbers; if the day be not entered, the first day of the year to be presumed, for the purpose of charging the trustee with the interest. The trust-paper, as received, to be deposited in the trust-till, to save it from being confounded with money of his own. This not to prevent the disposal of the amount to superior advantage (i. e. at a higher rate of interest than what is afforded by annuity notes) in as far as the nature of the trust admits of it.†

What is thus proposed to be rendered obligatory for the benefit of the principal, is no more than what a careful trustee would do spontaneously, either for the benefit of the principal or for his own, according to the texture of his conscience. Should a precaution thus simple and unexceptionable be neglected, the institution of annuity notes will be but too apt to operate as a premium for vice as well as virtue—a premium for improbity in the one situation, as well as for frugality in the other.

II. Lastly, as to promotion of frugality. We have seen the peculiar advantages which the proposed new species of property holds out to the acquirer. Within a trifling and unavoidable fraction, 2d. a-day: £3 for every £100 by the year—not for risk of lending, but for mere self-denial in not spending. Income, receivable without expense, and without stirring from his home. No attendance, no agency fees, no brokerage fees, no stamp-duty, either on purchase or on sale. No loss, on either occasion, by fluctuation of price. Not a day without its profit—profit by keeping, for the minutest as well as for the largest portions of time: conveyance obtainable for it by the post in the minutest portions as well as to the most distant parts of the island. Security afforded by division against misadventures of all sorts—against accidents and against crimes—in the house or on the road—by fire, water, or forgetfulness—from theft, robbery, burglary, or breach of trust. Compound interest brought within the reach of individuals for the first time.

In proportion to the degree in which it presents these several accommodations, in that same proportion does it act as an incentive to frugality:—in all classes in a certain degree, and in as far as current expenditure is concerned; but in a more especial degree, in those humble, and at the same time most numerous walks of life, in which it is of most importance to prudence, probity, and happiness.*

In the existing state of the money-market, the hoards of the opulent are prolific and accumulating: the hoards of the poor alone are dead and unproductive. By the proposed measure, the condition of the poor in this respect would be raised to a level—in the first instance not much below, and in process of time (as the price of stock annuities rose, and the rate of interest obtainable by the purchase of them diminished) altogether upon a par with, the condition of the rich.

A result not to be viewed without regret is, that in every period after the second, and in proportion as the rate of interest afforded by government annuities comes to be reduced, the encouragement thus given to frugality will thus be reduced likewise: for though, after the reduction, the remainder will be gain, as compared with the present period, yet the difference will be loss, in comparison of the period then last in experience. But in the meantime, the condition of the poor in this respect will, at any rate, have been raised to a level with that of the rich, and will so continue. The habit of frugality will have taken root, and having so done, may derive strength, rather than weakness, from the increased exertions it will be called upon to make.

CHAPTER XII.

CONSTITUTIONAL ADVANTAGES.

Among the effects resulting from the national debt in the early stages of its existence, was the security it afforded to the old established constitution, by engaging the purses and affections of the monied interest in the service and support of the new-established government. That was the great-monied interest. In other points of view, the institution of that debt has found many disapprovers: in this it has found none—among those, at least, by whom the existing constitution is regarded as fit to be preserved. The advantage resulting from the transmutation of that debt into the proposed form would be—the security to the constitution and government now grown into one, arising from its engaging the support of what may be called the little-monied interest by the same powerful tie.

The body politic, not less than the body natural, is subject to its constitutional diseases. Tyranny was the grand disease in prospect then: anarchy now. The danger then was, from a single person in respect of the sentiments of submission pointed to that person, and carried to excess: the danger now is from the great multitude—in respect of the disposition to unruliness which has been, and continues to be propagated with but too much success among the lower orders—among those (let it never be out of mind) of whom is composed the vast majority of the people.

If the name of great-monied interest, employed above for distinction’s sake, be well applied, it is with reference to money, and by reason of the greatness of the shares, but with reference to men, meaning multitude of men—and even with reference to money, if the magnitude of the total be the object of consideration—it is the little-monied interest that should be termed great.

As the disease changes its form, so should the remedy. Stock, in its large doses, served for the disorder of that time: paper, in its small doses, is the specific for the present.*

Admirable are the remedies that have already been applied: admirable, not more for their efficiency than for their gentleness. There remains this one—and perhaps another that might be named—remedies, not less efficient, and still more gentle.

Turning to Ireland, the demand for the remedy will be found the same in kind, but much more urgent in degree: the proportion of petty to great money-holders much greater: the bias to turbulence and anarchy (not to speak of idleness and drunkenness) beyond comparison more prone.†

Turn, lastly, to British India:—What a sheet-anchor to British dominion—to the mildest, the most upright, the steadiest of all governments—if by insensible and voluntary steps the population of that remote, most expanded, and most expansive branch of the British empire, should be led to repose the bulk of their fortunes and their hopes on a paper bearing the image and superscription of a British governor! What a reduction in the rate of interest paid there by government!—what a remedy to the risks and embarrassments attendant on the interchange of so many debaseable and incommensurable modifications of metallic currency!—what an augmentation to the general mass of currency, capital, and wealth!

But all these are trifles in comparison with the additional pledge of popular attachment, and the increased assurance of internal peace. From the Zemindar to the Ryot, every Hindoo, every Mussulman, who possessed this money—every individual, in a word, who possessed money—might thus, by his own money, and to a great part of the amount of his own money—might thus, and without impeachment of probity—be converted into a pensioner of the British government.‡ For a premium equal to the interest the paper yields, he would be underwriting—perpetually underwriting his allegiance to the amount of the principal.

CHAPTER XIII.

RECAPITULATION AND CONCLUSION.

Upon the whole, the proposed measure, it is believed, will be found to promise, with some degree of assurance, the following connected, but perfectly distinct advantages:—

1. Advantage of financial profit, by contributing in so many various, and to such considerable amounts, to the redemption of the principal of the national debt, as well as to the reduction of the rate of interest—and by affording an instrument more advantageous than any other for the application to that end of such means as are or may be provided from other sources.

2. Moral advantages, by the encouragement of frugality, and thence of temperance, among the inferior and most numerous ranks of the community.

3. Constitutional advantages, by constituting an additional bond of connexion with the government, and thence affording an additional safeguard to internal tranquillity.

4. Politico-economical advantage, by addition made to the mass of national productive capital, and thence to the mass of growing wealth.

Each of the above four masses of advantage appears sufficient to warrant an experiment, even should it be attended with some risk. Shall they not all of them together be deemed sufficient to give birth to an experiment altogether free from risk?

Few measures have ever been brought to view pregnant with such high advantages—none in which, in case of success, the degree of success has been beforehand so precisely ascertainable—none in which the deviation from the path of safety, as marked out by experience, is so slight and imperceptible.

Were the proposal expressed in these words—“Make your exchequer bills for small sums,”* —this, though not completely nor correctly expressive of the measure, would express all the innovation of it.

The only feature in the proposed plan, which, separately taken, can be called new, is, the bringing into the market portions of government currency less than heretofore—portions less than have been issued by government in this country, but not less than than what have been issued by governments in other countries, and in this country by individuals.

The other leading features are collected altogether from established institutions. The annuity engaged for is perpetual, but redeemable—the paper containing the evidence of its sale by government, light and transferable—the produce of the sale appropriated to the extinction of the national debt.

If the experiment be tried, the earlier the success the greater;—but sooner or later, and to a certain extent, success is infallible, and even failure would be unattended with loss.

APPENDIX A.

Government ought to have theMonopolyofPaper Money,as well as ofMetallic Money.

Bank Notes, though bearing no interest, circulate at par. Even private notes—the notes of country bankers, do the same:—Government paper not without interest, and even when carrying interest, not at a corresponding premium.

To what causes are we to attribute a contrast thus striking, and so much to the disadvantage of government? Is the disadvantage remediable, or irremediable? If remediable, are there any efficient reasons against employing a remedy? If a remedy can be found, is it not an event to be wished for upon the whole? Instead of bearing a share comparatively so minute as that which government bears in the business of issuing paper currency, and that upon terms comparatively so disadvantageous, ought it not rather to possess the whole?—is it not to be wished that it did possess the whole? How stand these questions with reference to general constitutional principles?—how stand they upon the footing of particular expediency—of expediency with reference to the circumstances of the particular case in question, independently of the general expediency of adhering to constitutional principles? If obtainable and desirable, by what means can such an extension of the government currency be attempted with the greatest prospect of advantage and success? Of what nature are the advantages to be derived from it, and to what length are they capable of being carried?

The advantage is the first object in the order of importance. Whatever may be the present amount of paper circulating without interest,—upon the supposition that government possessed the monopoly of the issue of such paper, the saving of the interest upon such amount, whatever be the current rate of interest, would be the advantage accruing from such monopoly.

If, then, the whole of this advantage, or any part of it, could be gained, would there be any harm in gaining it? Let us open, in the first place, the great book of the constitution. To be the same in principle at all times, constitutional laws must vary as the times, and adapt themselves to the times.

Among the most unquestioned, innocent, and unobjectionable prerogatives of the crown, acting in this as in all other instances under the controul of parliament, is the monopoly of the coinage.* When there was no currency but metal, the crown had the sole issuing of that currency. To metal currency is now added paper currency: the crown, therefore, to preserve the prerogative in statu quo, ought to have the sole issuing of that currency; at any rate, unless the extension of the monopoly to this modern branch be attended with greater inconveniences than what accompany its application to the old one.

Nor let it be thought that the expediency of this extension rests upon the mere general ground of adherence to established principles, sanctioned by general acquiescence—upon the propriety of keeping matters in respect of government as they are—in a word, of keeping up the vis inertue of government. If the prerogative had utility for its support in its original shape, it is recommended by equal utility in the proposed supplemental one. The use of the prerogative in respect of metal money, was to guard the people against loss by the suppression of counterfeits: in the instance of paper currency, the use and reed of it are the same.

The loss to which the subject was exposes by metal money coined by individuals, was that of the difference between genuine metal and of full weight, and the coin of light weight and base alloy, which it might be apprehended would be issued by individuals. The loss to which the subject is exposed from bad paper currency is of the same kind, but much heavier in degree. Loss by bad metal currency distributes itself in small parcels, and by the minuteness of the portions to which it adheres, falls with a gentle and almost imperceptible stroke. Loss by bad paper falls in much larger masses. Loss by bad copper is as nothing—loss by bad silver is no great matter—even loss by bad gold is light, in comparison of the average rate of loss upon bad bills.

The justification of the monopoly in the new case is stronger than in the old one, in every point of view. By the monopoly of the metal coinage, the government succeeds but very imperfectly in saving the subject from loss. Coiners were punished as traitors; and yet the country swarmed with coiners. A few years ago, and the copper was three-fourths bad:—the pretended silver, a great deal of it base, and scarcely a piece of genuine silver that was not either counterfeit or light. By the monopoly of the paper currency, government might most perfectly protect the subject from bad paper. Let it but supply the market with its own paper, and a simple prohibition will keep all other paper out of the market most effectually. Against the fabrication of bad coin, capital punishment has been expended in vain: against the fabrication of paper, which under the danger of its turning out so much worse than bad coin, it seems expedient to prohibit, a pecuniary penalty would be perfectly sufficient.

If, then, in the whole scheme of government, there be an instance in which it is expedient to bring back institutions to the standard of first principles, the present will, I believe, be found among the number. Compare the advantage resulting to the community from the monopoly in the respective instances of the two species of currencies, we shall find it in every point of view greatly superior in the instance of the paper currency of fictitious value, to what it is in the instance of the currency of natural value, the metallic currency. Will the prerogative be abused? No more when extended to paper, than it is now that it confines itself to coin. Good faith as towards subjects is a jewel so deeply set in the British crown, that it can as little be expected to shake in any one part, as to drop out altogether.

APPENDIX B.

Paper Money—Causes why not circulated by Government without interest, as well as by Individuals.

The contrast between the terms on which bank paper is received, and those on which government paper is received, has been already brought to view. The inferiority of the latter cannot, however, be owing to any inferiority in point of credit. The credit of the Bank of England can never be greater than that of the government of Great Britain;* yet a man who would trust government with his whole fortune, to the amount of hundreds of thousands of pounds, will not give a premium of more than a few shillings per £100 for an exchequer bill bearing interest, though he will give £100 for a bank note to that amount, for which he will receive no interest. The same man, too, will not only take a promissory note from the great company, of whose opulence the opinion is so universal and so high, for its nominal value, but perhaps even the note of some country banker, of whom, except from such his note, he has no knowledge. The cause of this inferiority can never, therefore, consist in any inferiority in point of credit. It must be looked for, therefore, in some other circumstance.

There are several circumstances which cooperate towards giving to the bank paper the aptitude it possesses with respect to circulation. The want of any of these properties, or the possession of it in an inferior degree, will account pro tanto for the inferiority of the terms upon which the government paper obtains the degree of circulation it has obtained.

These properties are—1. The being payable to the bearer on demand; 2. The being transferable, like coin, from hand to hand, without indorsement or any other formality; 3. The being issued for such small sums as £20, £10, and £5; 4. The being impressed on paper which, in point of size, is neither so large as to take up much room, nor so small as to be liable by its minuteness to escape observation, and be lost; and in point of texture is thin enough to bear folding without cracking, and yet not so thin but that it will bear to be written upon, by which means any proprietor may put his mark upon it, to enable him to vindicate his right to it in case of loss; 5. The having been so long in possession of the national confidence, and that to such a degree as to be the only paper which individuals all over the kingdom are universally in the habit of accepting upon the same terms as the current coin.*

An exchequer bill bears a daily interest, and is made payable to bearer. Upon hearing this, one should suppose that it should bear a premium to the amount of the interest;—since a bank note for that sum, payable to bearer and carrying no interest, bears no discount, but is received at par. An exchequer bill does indeed bear a premium, but that premium is very far short of being equal to the interest.

The difference, we have seen, does not arise from difference in point of security and credit, but may perhaps be traced to the combined influence of several causes; viz.—1. The want of bills for small sums of a size adapted to the general run of the demand; 2. The not being made payable to the bearer at any time, but only after the interval of about half a year after its issue; 3. The want of that simplicity, in respect of the terms and mode of payment, which is observable in the paper of the Bank of England;—to which may perhaps be added, something (of which presently) in the sensible properties of the instrument itself by which the engagement is conveyed.

That the want of sufficient division has a very considerable share in the production of the effect, can scarcely be a matter of doubt. Exchequer bills are not for a less amount than £100; they are never issued for a less sum. Bank notes are for various amounts less than £100, viz. £50, £40, £30, £20, £15, £10, and £5. In the instance of exchequer bills, the magnitude of the sum is itself sufficient to render this species of paper unfit for the ordinary course of circulation—it is of itself sufficient to throw it out of the ordinary current of private dealings. It is a commodity for which comparatively so few are qualified to bid, that those few cannot but enjoy considerable advantage in their biddings. It is the money of so few men, that that circumstance is of itself sufficient to prevent it from being generally known. Accordingly, the circulation of exchequer bills is confined in great measure, for aught I know, to the metropolis:—it is confined to the neighbourhood of the Alley—to bankers, stock-brokers, and the other classes of money dealers. A man may have enjoyed a large income—a man may have had very extensive dealings in the way of trade, and yet go out of the world without having ever set eyes on an exchequer bill.

The bank, it may be said, issues notes for sums as large as £100—indeed, for sums to a prodigious degree larger; and yet there is no more discount upon these large notes or the bank, than upon the very smallest ones. True: but then, along with these larger notes, the bank issues, and that in great plenty, the smaller notes above mentioned—and that in such plenty, as to be in readiness for change of the larger notes, wherever and by whomsoever such change is wanted: nor are such larger notes ever issued to any one who chooses rather to have the smaller notes.

The small notes of the bank, it may be observed in reply, afford no facility to the circulation of the large notes of the same company, that the exchequer bills of government do not equally possess: for, admitting that the value of an exchequer bill of £100 would not be quite so great, setting aside the article of interest, as that of a bank note to the same nominal amount, still the exchequer bill has a known value in the market, as experience shows, not much less than that of the bank note. It ought, therefore, to be as easy, were this all, to find change for a £100 exchequer bill in bank notes, as for a £100 bank note.

To this it may be rejoined, that the facility in the two cases is not in truth alike. Everybody being equally acquainted with bank notes, anybody who has £100 to keep for a little while before he will have to change it, will as readily take it in a single bank note for £100, as in ten notes for £10; for though he may never have seen such a thing as a bank note for £100 before in his life, yet the perfect resemblance it bears in every respect but the quantity of paper, engraving, and writing, to the ten £10 notes, makes it, so long as he does not want to change it, exactly the same thing to him:—the security is the same,—the conditions and time of payment are the same,—and what is no small matter, the appearance of the instrument is exactly the same, the variation in respect of the sum excepted—a sort of variation which he is already accustomed to by the smaller notes. A man who has a £100 bank note, need not fear, therefore, the getting smaller bank notes to the same amount from any one who has them, and is in no immediate want of such lesser notes in the way of change:—whereas a man who has only a £100 exchequer bill, may see good grounds for doubting whether he shall be able with equal facility to get such change for such exchequer bill; since, among twenty people to whom he may offer it, every one may perhaps be altogether unacquainted with it, and if not absolutely decided in regarding it as a species of paper of less value, may still be unwilling to give himself the trouble of satisfying himself whether it be of equal value or not.

The want of efficient assurance of putting off this species of paper with as much facility as a bank note to the same amount, gives this species of paper a disadvantage, or at least it may be reckoned among the causes which contribute to give this paper a disadvantage in point of prompt circulation, in comparison with bank notes. But since, accordingly, the exchequer bill is not, like the bank note, everybody’s money, the consequence is, that in order to find out a person whose money it is, it must be sent to the great market for money in different shapes,—the Alley: it must go into the hands of a broker; and the expense, but much more the time (for the expense is but per cent.) places it thus on a ground of considerable disadvantage in comparison with a bank note.

So far as this disadvantage goes, instead of operating as current cash, it has the effect only of so much capital in the funds, operating in the shape of principal money, as carrying interest, and serving as a source of income. In this quality, the price it bears will approach to that of stock—to that of a government annuity given in exchange for so much money rather than to the price of so much money receivable at any time. It will, however, have the advantage, in point of price, of such an annuity, and that on several accounts: it is transferable with so much less trouble and expense—the value of it rises by keeping, according to a visible and certain law, in a visible and certain proportion, day by day;—whereas the price of so much stock, though it may rise in much the same degree upon the whole as the period of payment approaches, yet as it can rise by no interval less than ⅛ per cent., amounting in three per cents. to 1/24 [Editor:?] of the whole, it can rise by no shorter steps than one step of at least fifteen days; and even then, the rise is so liable to be disturbed by fluctuations, as to be, in the character of a rise proportioned to lapse of time and the consequent accrual of interest, in a manner imperceptible.

It might be thought, that though the £100 exchequer bill is, for the reasons above pointed out, not everybody’s money—not the money of so many people as the £100 bank note, still it might be worth so many people’s money, as to bear the same price, or nearly the same price. It would, for example, be the money of bankers and money-dealers in general. It certainly is the money of bankers to a degree: yet still not in the same degree as the bank note. It is their money upon a footing more nearly approaching to that in which so much stock is their money, than that in which the bank note is their money. A banker may lay out his money in this way for the purpose of making it produce an interest; and thence he may lay out in this way such part of his receipts as be allows himself to lay out for his own benefit: but he cannot lay out in this way, as he may in bank notes, any part, or at least any considerable part, of the money which he deems it necessary to keep by him in readiness to answer drafts; because, as has already been observed, he cannot be equally sure of the exchequer notes being accepted of by a person who comes with a draft, as he can of the bank notes being so accepted of. He can keep it, therefore, upon no other footing than that of an evidence of his being entitled to a principal sum bearing interest,—in a word, as a source of interest. But in the capacity of a source of interest, it must bear the interest it purports to give, or at least a very considerable part of it: if it did not, it would not answer the purpose; it therefore cannot bear, in this quality, a premium eating out that interest, or any considerable part of it. It may indeed be worth his while to take somewhat less interest upon such a security than he could make of the same money in the funds; because it will cost him rather less time, and at at any rate less money, to convert it into cash at any time, than to convert into cash so much stock. And this accordingly is the case:—a man makes almost one per cent. less in this way than by buying into the funds.

As to the circumstance of the exchequer bill not being payable on demand, till half a year after the time of its being issued, this circumstance is not sufficient of itself to account for the depreciation. Taken by itself, it seems in fact to have but little or no influence. If this were the sole cause of depreciation, this cause being removed, the effect would cease: before the time when principal and interest became payable, or at least at the time of issuing, an exchequer bill would indeed bear no premium; but no sooner were that period arrived, than it would bear a premium, and that equal to the interest. This, however, is so far from being true, that, as far as I can learn, the arrival of this period makes in this respect no perceptible change. At the time of issuing, the exchequer bill bears a small premium, thereby reducing the rate of interest that can be made of it; at the arrival of the time of payment, it continues to bear that premium, but does not bear any more. The truth is, that the inconvenience of its not being payable for half a year is foreseen, and so far as it is reckoned for anything, allowed for from the first; and the exchequer bill takes its station among the commodities of the Alley, as a paper better adapted for a source of income than for general circulation; and this station the change in its nature, operated by the arrival of the time for payment, is not able to raise it from.

The comparative want of simplicity in respect of the terms and mode of payment, in comparison with a bank note, cannot but have some share in the comparative depreciation of an exchequer bill. To be adapted to general circulation, an engagement of this sort, as to the contents of it, ought to be so simple, that, if possible, everybody of a condition high enough to have property to such an amount pass through his hands, may be able without effort to apprehend them. The engagement taken by the bank—a promise on the part of an individual to pay the sum in question on demand, and that to the bearer by whom the instrument of engagement shall be produced—possesses this property in the highest degree of perfection that can be conceived. In the instance of the exchequer bill, several circumstances concur in keeping down the terms of the engagement considerably below this point of perfection. It is to be paid indeed to the bearer—that is, if it be paid at all. But will it be paid at all? This appears to depend upon a variety of contingencies;—viz. l. If aids happen to be granted for the service of the next year, then out of the first of such aids. But will any such aids be granted? This is expressly stated to be a matter of uncertainty:—it is stated, that perhaps no such aids may be granted before a certain date in the next year,—and provision is made accordingly for that contingency, that if no such aids be granted, that the money is to be paid out of the consolidated fund. But if paid out of this consolidated fund, when is it to be paid?—and by whom? These are questions it leaves in utter darkness. Is it, too, in other respects, a good bill? Grounds of suspicion, and those of the strongest kind, present themselves upon the face of it. A period is expressed, during which it will not be accepted of as such by the very government that issues it. It is not to be current, or pass in any of the public revenues, aids, taxes, or supplies whatsoever, or at the receipt of the exchequer, before a certain day in the next year,—that is, for half a year and upwards. Before that period, then, it will not be treated as a good bill;—this it expressly says. Will it afterwards? and when? Of this nothing is said; it is left entirely to conjecture.

Nor is this all:—another ground of uncertainty and suspicion. It does not state how soon it is to be paid; but it does state that it is not to be paid till another sum, amounting perhaps to several millions, has been paid. “Registered and payable after 1,754,400,” says a bill, No. 17545, I have before me. When is it, then, that this £1,754,400 will be paid? This again is all in darkness.

To a person acquainted with the mechanism of government, all these points are in a state of perfect clearness: he knows, that with all these apparent difficulties and uncertainties, the bill that presents them is at least as good as a bank note. But among persons who are not unaccustomed to the simple language of a bank note, not one out of a hundred, or perhaps a thousand, has any such acquaintance with the mechanism of government.

Even the introductory words, inserted with the view of indicating the authority on which the bill is issued, are of a nature more likely to excite doubt and difficulty in an unlearned mind, that is, in the mind of the bulk of readers, than to command confidence. “By an act of Parliament, Tricesimo quarto Geo. III. Regis. For raising a certain sum of money by loans or Exchequer Bills for the service of the year 1794.” In this formidable mixture of English and Latin, interlarded with terms of art and the language of finance, a man is sent to an act of parliament, to know whether the bill will be paid or no, and if paid, when and how and by whom—the rather as in the bill itself no answer to any of these questions is to be found:—and upon his putting a right construction upon a revenue act of parliament—he who perhaps never read an act of parliament in his life, and almost certainly (if not a lawyer) is not in the habit of trusting himself to find out the sense of an act of parliament—depends his knowing whether the bill will or will not be paid, and so forth. It is a case for him to consult his lawyer upon, as he would think it necessary to do upon other acts of parliament, where property to much less amount than £100 (the amount of an exchequer bill) was at stake. But the occasion does not allow time for consulting a lawyer;—and if it did, the expense of consulting him would eat a good way into the profit to be made by the interest of which the bill holds out the prospect, in addition to the principal that would be promised by a bank note to the same amount.

The fourth and last of the causes that have been mentioned as appearing to concur in the production of the depreciation in question, is the character of the instrument in respect of its sensible qualities—the size and texture of the paper. A bank note is perhaps, in respect of these properties, as convenient for circulation as can be imagined. In point of size and thickness neither so large as to take up an inconvenient quantity of room in the pocket or pocket-book, not even when a considerable number are taken together;—nor yet, on the other hand, so small as to be liable to escape notice and be lost: while, by reason of its extraordinary thinness (besides being so much the better guarded against fraudulent alteration, which is the principal object,) it is better adapted to bear folding to reduce it to a size fit for the pocket and pocket-book, without cracking at the edges, and so coming to pieces.

In these particulars, the difference between the bank note and the exchequer bill is not great—though, as far as it goes, it is rather to the disadvantage of the exchequer bill. In point of size, the exchequer bill is much upon a par with the bank-note—not quite so long—a little broader: these differences are not at all material. But the paper is a great deal thicker—rather of a thick and brittle sort than otherwise—so much so as to be in appearance more exposed to crack than any of the papers commonly used as writing papers.

In the bank note, too, there is something in the meatness of the engraving, and the conspicuous and emphatic display of the sum, that cannot but be particularly attractive and fascinating to an ordinary eye. In the exchequer bill, there is no such display of the sum; and the style of the impression of the long-winded explanation of the conditions of payment has nothing particular to recommend it.

Upon these combined causes, then, it appears most probable that the depreciation of government paper depends; and not till they are removed, can it be expected that this comparative depreciation will disappear.

[* ]When the pen was first set to work upon these pages, there was generally understood to be a deficiency of paper money. At present, there is at least no such deficiency:—a superabundance seems much more probable. At the time of the want, the proposed paper presented itself as a remedy against the want: now, at the time of the superabundance, it presents itself as a safeguard against the sort of mischief—past, present, and impending—which may be traced to the superabundance.

[† ]See Chap. XI.

[‡ ]On the first institution of the sinking fund, either designedly or undesignedly, the facts seem to have been forgotten, that all the accumulations at compound interest would arise from taxes; as also that to borrow with one hand, and at the same time to redeem with the other, must be attended with loss. The loss occasioned by this latter practice has been ably exhibited in Dr. Hamilton’s Work on the national debt.—Ed.

[* ]See Chap. XII.

[† ]See Chap. V. § 1.

[‡ ]See Chap. V. § 2.

[∥ ]See Chap. V. §§ 3, 4, & 5.

[§ ]See Chap. X.

[¶ ]See Chaps. I. III. & IV.

[* ]See Chap. V. § 6.

[† ]See Chap. VI.

[‡ ]See Chap. VII.

[∥ ]See Chapters VIII. & IX.

[[1.] ]Art. 1. (In whatever quantity.) The money thus raised being appropriated to the redemption of stock annuities, when that redemption is completed, the emission will cease, by articles 6 and 20; and, subject to that limitation, the more copious the emission, the more profitable the measure.

As to the mode of limiting, in cases of necessity, the portion producing the effect of money in the circulation, see note to Art. 16, and Ch. IX. Rise of Prices.

[[2.] ]Art. 1. (Half-yearly.) Yearly would be more simple (as may be seen in the form exhibited for that purpose in Table II.) as well as more profitable to government; but being unconformable to the established usage, it would be apt to strike the customer as a great drawback from the value, stand in the way of the profit expected as under mentioned, by forbearance on the part of note-holders to receive the interest (see Ch. V.) and would be in a manner destructive of the advantage obtainable in the way of compound interest by persons keeping the paper in hand, as stock is kept in hand, for that purpose.

[[3] ]Art. 2. (A farthing.) By taking, for the standard note, a principal sum, having for the amount of its daily interest, at the proposed rate of interest, an even sum (i. e. a sum having an existing piece of coined money or number of pieces of coined money, corresponding to it,) the multiples of this standard note will in like manner have even sums for the respective amounts of their daily interest, and their aliquot parts will have for their amounts of interest, sums capable, when put together, of being made up into even sums.

Here, as in Exchequer bills, the interest is computed daily, that each note may receive from each day a determinate addition to its value, and may pass accordingly in circulation.

The smallest of all notes possessing this property is taken for the standard note, because the smaller a note, the greater the number of persons that are capable of becoming customers for it.a

The standard note being scarcely small enough in this view, it were better, perhaps, that not only the half, but the quarter of it should be issued at the same time.

The larger notes will serve to protect the smaller ones from the contempt which might otherwise attach upon them, by reason of the smallness of the daily, and even weekly, amount of interest.

[[4] ]Art. 2. (3 per cent.) For the reason why no higher rate of interest could be allowed with profit on a series of notes carrying daily interest, nor any lower above 2⅜ per cent., which in the first instance might be too low, see Currency Table, note m.

[[5] ]Art. 2. (Bottom of the scale.) See Currency Table.

[[6] ]Art. 2. (Forbearance.) See Currency Table. On a note which passes on from hand to hand, any number of years may elapse before the interest on it is received from government; since the interest may be received by each holder with less trouble from the individual to whom he passes it. Hence one source of the profit to government (see Chap. V.) It is only where a man keeps a note in his hands as a source of income, that the interest of it will be applied for at the offices. In fact, it is only in the case where a man means to hoard up at compound interest, that it will be necessary for him to receive the interest upon his paper from government; inasmuch as, without trenching upon the principal, he may spend the income from his notes, by passing off a proportion to that amount, keeping in hand the rest.

[[7] ]Art. 4. (Interest added.) Upon all notes of the same denomination, interest must commence upon the same day (say the first day of the half year,) otherwise 365 notes of the same denomination might be of so many different values: and if interest is to commence on that day, a purchaser in the way of issue must pay for the note accordingly; otherwise customers would be apt to delay taking out their notes till the last moment; keeping their money in their pockets, or employing it in other ways in the meantime; and then they would pour in, all at once, in crowds too great to be served.

[[8] ]Art. 5. (At a less price.) Want of security against depreciation has hitherto been the bane of government currencies, and is among the reasons why banker’s paper, yielding a low interest, is taken, notwithstanding the existence of a government currency (exchequer bills) yielding a higher interest. Government must, it is true, have the money it wants upon any terms; but so long as it reserves to itself the faculty of selling any one species of annuities (ex. gr. the existing stock annuities) in a quantity commensurate to the amount of the money it wants, at the times price, it may refuse to sell any other (such as the proposed note annuities) under a fixed price. As anybody may have as much of these annuities as he will at par, nobody will ever give more; and as no more can ever be sold than is applied for, and the demand for these annuities will increase as the mass of existing stock annuities comes to be redeemed, by the money raised by the sale of these note annuities, backed by the money from so many other funds, no man need ever part with them at a less price; since, by taking an annuity note in the way of circulation, a man will save the trouble of going to the office for it, and taking it out in the way of issue, not to speak of the small fee which it may be necessary to require. (See Art 17, and Chap. IV.)

[[9] ]Art. 7. (Paid off.) By an assurance to this effect, nothing can ever be lost to government; because, so far from profit, while an annuity to the amount of £3 a-year can be paid off by £100, an annuity to no more than £2 : 19s, a-year can never be paid off but to a loss: and it will be no small recommendation, especially when, by the operation (as will be seen) of this measure, the complete redemption of the existing mass of annuities has been brought to view. (See Chap. V. § 2.)

[[10] ]Art. 11. This, if not stopped by the expense (which increases with the number and not with the value of the notes,) would be attended with several advantages.

1. The copper notes, the receiving of interest upon them being attended with a degree of trouble, in proportion to the number requisite to produce a principal yielding a mass of interest worth regarding, would stay in the circulation, and by lessening pro tanto the amount of the supply capable of meeting the demands of those who want their paper to hoard for the purpose of income, it would increase the scarcity of the paper of the first issue, and render customers the more willing to accept a second issue at a reduced rate of interest.

2. The profit by forbearance to receive the interest (see Chap. V.) would take place upon the whole of this branch of the currency.

3. The proposed paper, being so effectually guarded (as will be seen) against forgery (see Explanations to the Form of an Annuity Note,) and the copper coinage so much exposed to that crime, notwithstanding all the exertions that have been made to rescue it, the saving to the public, especially to the inferior and more numerous classes, on this score, would be a matter of considerable and almost universal accommodation;—and,

4. The saving to government, by the diminution of the expense of renewing the copper and other coinage, would be proportionably considerable.

How far the expense would be capable of being paid for by the profit, would be learned by experience from the silver notes.

The minuteness of the small notes would be protected from contempt by their relation to the large ones; and to go in change for one another, they must, all of them (even copper not excepted,) bear an interest, and the same rate of interest.

A reason for making the extension gradual, may be to avoid perplexing the public mind with a multiplicity of notes of different values, before it has been familiarized with any of them. But, at the worst, the magnitudes would be little, if anything, more numerous than in the case of bank-notes.

[[11] ]Art. 13. (Upwards.) The time for issuing large notes, i. e. notes of the magnitude of the smallest exchequer bills and upwards (in a word, all annuity notes above the £50 : 8s. notes,) will not arrive till after stock 3 per cents. are at par; for, till then, exchequer bills, yielding more interest, will draw off from the proposed annuity notes all customers whose quantum of money capable of being kept in hand extends to such a purchase; unless possibly in the remote parts of the country, where exchequer bills are unknown, or not in use.

[[12] ]Art. 14. (Received at government offices.) Were this to be done from the first, a great lift would certainly be given to the proposed currency at once: the only objection seems to be, the possibility lest, in case of any sudden turn taken against it by the public mind, the exchequer should for a time be overloaded with it, i. e. labour under a deficit of cash (the only money that nobody can refuse) to the amount of it. But in Chapter IV. the improbability of such an event, and at the same time an effectual remedy, is pointed out.

Supposing bank-notes to be driven out of the circulation,a the same sort of necessity, or supposed necessity, which gives employment to bank paper in the transactions of governmentb and in other transactions upon a large scale, in preference to cash, to save counting, examining, and luggage, would create an equal demand for the annuity note paper on that score.

[[13] ]Art. 15. (Post-offices.) Dispatch, punctuality, cheapness in the transaction of the business, sufficiency of number, and equality of distribution in regard to the stations, forming the characteristics of the post-office establishment, as compared with all other provincially-diffused official establishments. These form the properest stations for the transaction of the business, as well as the properest, or rather only proper, standard for the mode of conducting it. In the London penny post-offices, deliveries of letters six in a day; therefore once every day cannot be too often for deliveries of packets of annuity notes. Six times a-day go letters, some of them with money in them; therefore once in a day cannot be too often for money to go without the letters.

The oftener the receiver’s hands are emptied of the principal money, the less the degree of pecuniary responsibility that need be required of him: few of the existing post-offices, town or country, that may not be trusted with a day’s stock (say £200 or £300) at a time (more in some places, according to the opulence and populousness of the spot;) many whom it would not be prudent to trust with a month’s stock, say thirty times that amount.

This public money being required to be kept unmixed with any other monies, and in a government package, and the officer declared to be a “servant” of government,—in respect of its deficiency, otherwise than from accident, he might be treated on the footing of embezzlement;—capital felony in case of absconding; single otherwise.

In the penny post-office, one-tenth of a penny is the pay in respect of each letter, for marking each with two stamps; besides the trouble of examining and receiving the money, and occasionally of giving change, in the case of those letters with which money is paid.

The proper quantum of pay is in all cases the least that will be accepted by a person competent to the business; such cases only excepted in which, from the nature of the service, the value of it is capable of being raised to an indefinitely increasing pitch of excellence by extraordinary exertions.

With this exception, quantity of trouble, not value of the subject-matter, any otherwise than with a view to pecuniary responsibility, is the proper standard and efficient cause of demand for pay. Poundage, considered as a mode of remuneration, is therefore very apt to be disproportionate and excessive.

On a letter, for which no more than a penny is received—out of which penny the expense of conveyance must be defrayed, as well as a portion of the expense of general superintendence, and a profit made—10 per cent. for the trouble of receiving it, is at the same time almost as little as can be given, and yet (though in this case no more than the tenth part of a penny) as much as requires to be given. For receiving the price of a set of stamps, some of them as high as several pounds a-piece, the same poundage would be acknowledged to be excessive.

If the trouble attending the issuing of an annuity note (the filling up the blanks, and examining and taking care of the purchase money) were no greater than that of receiving a penny-post LETTER (allowance made for the proportion on which money is received, and the requisite extra trouble taken,) experience shows that the tenth part of a penny would be a sufficient recompense: but the trouble would be in a considerable degree greater—perhaps three, four, or five times as great:—therefore so, it would be necessary, should the pay. A halfpenny might in this way be necessary, and at the same time sufficient, in the case of the standard note of £12 : 16s.; and upon a note of this magnitude, not only a halfpenny, but several pence, might perhaps (as will be seen in Art. 17,) without much inconvenience be thus imposed; and thus, as far as notes of that magnitude were concerned, the expense of management at the local offices might be thrown upon the individuals—the purchasers. But though a purchaser might not grudge a few pence for the profit to be made in the way of interest upon a £12 : 16s. note, he certainly would not give so much as a halfpenny for the profit to be made upon a sixpenny note, as it would be three or four years before the interest would have reimbursed the fee thus advanced. In notes that were to a certain degree below the standard note (say in the £3 : 4s. or £1 : 12s. notes,) it would be necessary that the fee upon each, though not remitted altogether, should be reduced below the amount of the lowest coin,—a farthing; which would be the case, if notes under the £3 : 4s. note, for instance, were not to be taken out but in parcels, and a halfpenny or a farthing were the fee upon each parcel; in which case it would be necessary that government should make up the difference. This it would be well worth its while to do, even upon the copper notes; since, in Yorkshire, according to Adam Smith, before the restriction on small notes, sixpenny notes were issued by individuals in abundance.

As to the general annuity note office,—having no intercourse with individual customers, nor with the local office-keepers but by letter, the nature of the business admits of its being conducted with perfect regularity, and upon a plan extremely simple. (See Chap. V. § 2, Profit in respect of management.)

[[14] ]Art. 16. (Least quantity.a ) A note under this amount would consequently not be capable of being taken out singly, but only as one in a parcel, with other notes of the same or different magnitudes. So also, perhaps, in regard to the carrying in notes to the local office to be sent up to the general office, to be returned from thence with the interest; as likewise in regard to the changing large for small notes, or vice versá, or injured notes for fresh ones. But instead of a prohibition, as above, the same end might be answered, perhaps more advantageously, in some, at least, of the above instances, by a small fee, acting as a penalty to the amount of it, as by the next article.

By this means, the offices would be kept clear of the most troublesome, as well as numerous, class of customers. Silver notes, for example, would in that case be taken out, not singly by journeymen manufacturers, but in parcels by masters, by whom at pay-day they would be distributed among their journeymen.

Interest would by this means be capable of being received at the offices upon the smallest notes (which, as above, is necessary to their passing in change for large ones;) though what is probable is, that on the small it will scarcely ever be demanded. (See on this head, Chap. V. Profit by interest undemanded.)

What is the least note that can be issued with profit, will be determined by the quantity of time occupied in the operations necessary to the issue of it. Possibly on this account, in the silver, or at least in the copper notes (if any,) the actual signature of the local office-keeper might be dispensed with, and a stamp of some kind (affixed at the time of issue at his office, or previously at the general office) be employed in its stead.

In this power is included that of suspending the issue of notes of any particular magnitude or magnitudes; by which means, in case of an inordinate demand for the proposed paper (viz. such an one as shall threaten to swell to a pernicious magnitude the quantity of it producing the effect of money in the circulation,) a stop may be put at any time to the inconvenience. (See Ch. IX. Rise of Prices.)

[[15] ]Art. 17. (Emission, exchange, or payment of interest.) Imposing, after the opening of the office, the minutest fee on any of these occasions, would be a breach of engagement, and moreover, if otherwise than by authority of parliament, an invasion of parliamentary rights.

In regard to the fixation of the amount, no harm could result from allowing to the executive government a moderate latitude; such as from a farthing to sixpence on the standard note of £12 : 16s.; and room would thus be allowed for following the dictates of convenience, as indicated by experience. Without being so great as to check the issue, the fee might perhaps be made to favour the circulation. In the circulation it might produce a premium, the maximum of which would be the amount of the fee.

The progress of the issue being known everywhere, it is scarcely possible that, in one and the same place, this paper should be meeting with customers in the way of issue, and at the same time meet with refusals in the way of circulation; the trouble of taking out, however small, being, with or without the expense of the proposed fee, so much saved by taking the note in the course of circulation. Not even as between different places does it seem very likely that any such contrariety should take place; but were the inconvenience to happen, the proposed fee, if made a little larger than would otherwise be necessary, might afford something of a remedy. Suppose the fee on the £12 : 16s. to be 4d., and the circulation dull at York, while the issue was brisk at Bristol: a York banker, taking them at par at York, might, by sending them to a correspondent at Bristol, sell the notes there at 2d. or 3d. premium, especially if a correspondence of that sort were favoured in regard to postage. So long as this lasted, the issue at York would be stopped; instead of getting them at the government office, the customer would get them at the bankers, whereby he would save 1d. or 2d., besides a part of the trouble; and the load upon the market at York would be taken off. An agio to an unlimited amount would indeed be destructive of one of the characteristic advantages of the measure; but an agio to an amount thus strictly limited, would scarcely (it is supposed) be felt as a disadvantage. Were the note kept in hand, though it were but for a few days, the interest on it for that small space of time would afford complete reimbursement of the greatest possible amount of loss.

If, in regard to the quantum of the fee, the principle were, that it should amount to just so much as would be sufficient for the remuneration of the local distributor,—this, again, would be a reason for making it variable within certain bounds; for, under any given plan for conducting the business, it would be matter of experiment what is the lowest fee that would be sufficient; and by such improvements on the plan, as reflection fed by experience might indicate, the time and trouble, and thence the quantum of remuneration necessary, might from time to time come to be reduced.

[[16] ]Art. 18. (Accounts published.) The uses of such publication are as follows:—

1. That, from seeing this paper taken out in the way of issue, people may be the more ready to take it in the way of circulation.

2. That in case of its proving to be in any degree an impediment to the circulation of bank and country banker’s paper, the parties concerned may, by observing how the paper spreads, have timely warning to withdraw or keep out of the market any superfluity in their own paper.

3. That in case of any local difficulty as to the circulation of the paper in one part of the country (for instance, by reason of any sudden and extraordinary demand for cash) the load of the paper in the market may be lightened, by sending it to another part of the country, where the issue is observed to be going on briskly.

4. That from the amount of the issue in the course of each given period, indications may be deduced of the degree in which any temporary cause of depreciation must have operated, before it can have the effect, not only of stopping the issue, but subjecting to a discount the quantity already in circulation.

5. That data may be afforded, from which the several classes of persons interested may be able to foresee the approach of the several results or effects in which they are interested; such as the rise of stock 3 per cents. to par—the growing scarcity of government annuities—the reduction of the rate of interest paid by government in respect of them—the increase in the mass of national capital, by the paying off the annuitants—the reduction of the rate of interest in general, &c.

[[17.] ]Art. 20. (Conversion.) Conversion is a word used for shortness, to indicate the result of two operations:—on the part of government, the redemption of such or such a mass of stock annuities; and on the part of the stockholders so expelled, a purchase made of the fresh mass of note annuities to equal amount—a result which, in the case where a man does not choose to part with the mass of annuity he receives from government, is a necessary consequence.

That the disposition to accede to such conversion should be nearly universal, seems altogether probable. The loss of interest is but a sixtieth; and, in all other points, the change will be greatly to a man’s advantage. In a very short period it cannot fail of taking place. When stocks (three per cents.) are no higher than par, the £2 : 19s. note annuities are (it is true) worth, as far as interest only is concerned, no more than £98 : 6 : 8;—but no sooner are three per cents. up at 102, than the £2 : 19s. per cent. are worth upwards of £100¼.

Among any such group of annuitants thus forcibly expelled, there will always be a certain proportion (it is true,) who at the time of the expulsion were desirous of disposing of their annuities, and would have done so, had the matter been left to their choice. But, by the supposition, there will be at the same time another group desirous of purchasing a mass of annuities, equal at the least to that which is thus wished to be disposed of; otherwise the price of the article would not be at par, which it is supposed to be;—therefore, setting the one demand against the other, the whole amount of the mass of annuities paid off at or above par, may be set down as so much taken from a set of proprietors, who will not part with such their property, but will accept of it in the proposed new shape.

Proposed mode of effecting the conversion.—Adjoining to the room where a man signs in the stock-book a recognition of the redemption of his mass of stock annuities, are two other rooms—a money-room (as at present the dividend-warrant room) and an annuity-note room. Question by the clerk: “Is it money you want? yonder is the room for receiving money, and here is the warrant for it. Do you keep your annuities? yonder is the annuity-note room, and here is your warrant for the amount in annuity-notes.”

On this occasion, two provisions, customarily inserted in the acts, will require observance;—1. That notice (a year in some instances,a half-a-year in others)b be given of the intention to pay off; and that the masses paid off at once be not less than of a certain magnitude—£1,000,000 in some cases, £500,000 in others. Of the former the object was, as it should seem, that a man may have time to form his plans in regard to the employment of his money; of the other, to obviate the suspicion of personal preferences, which, if the masses were small and undetermined, might be manifested in favour of individuals; viz. by paying a man off, or respiting him, whichever were most advantageous at the time.

To comply with these conditions, as far as appears either practicable, or material, or consistent with the practice and intention of the legislature:—suppose the course taken, in regard to the redemption of the stock annuities, with a view to their proposed conversion into note annuities, to be as follows, viz.—

1. Notice to be given, in the usual form, on the day immediately preceding the next day for a half-yearly payment, or on any earlier day subsequent to the then last day of half-yearly payment;—such notice to be expressive of a general intention on the part of parliament, from and after the day mentioned in such notice, to pay off the then remaining mass of stock annuities, in masses or lots of not less than the above stipulated magnitude of £500,000, as fast as the sums of money for the making of such payments shall respectively be completed;—the order in which the masses shall be paid off, to be determined by a lottery, unless changed in the way next mentioned.

By the publication of the progress of the issue in the newspapers, it will be known all over the kingdom, day by day, what sum is in hand applicable to this purpose. The masses being marked in numerical order for this purpose, each stockholder will see, day by day, whether the mass his portion of stock belongs to is ripe for payment, or if not, how soon it is likely to become so.

That a general notice of the intention, in contradistinction to a particular notice for the very day, was all that was meant by the legislature, may be inferred with some degree of assurance from the practice in Mr. Pelham’s case. Fifty-seven millions worth, and upwards, was the mass of capital in relation to which notice was given on that occasion—that, in the event mentioned, it should, on a particular day mentioned, be paid off: so that, if the invitation given had remained altogether without compliance (an event which for some time was highly probable,c ) the whole would on that one day have been to be paid off, and the money put into the hands of as many as on that one day might happen to apply for it. But, that such payment could have taken place, either in respect of the whole of the mass, or so much as the greater part of it, and that, either on the day fixed, or on any assignable subsequent day, within a week’s or a month’s or even a quarter’s distance of it, is a result that does not present itself as probable.

To borrow nearly fifty-eight millions in the lump, and at that early period too—or even nine and twenty millions, and that payable all in one day—presents itself as an affair of no small difficulty, even on the ordinary footing of mutual obligation as between the two contracting parties. How much greater the difficulty, if (as by the supposition contended against) one party (composed of the eventual lenders) was to be bound, while government, the eventual borrower, was to remain loose!

It seems, therefore, that (according to the interpretation put in that instance by parliament) by a notice that the capital of government annuities will, to such amount, be paid off on such a day, nothing more is to be understood than that (as here proposed) a part will be paid off on that day to such as apply for it, and the remainder at some subsequent day or days, according as the money for paying off shall happen to come to hand.

If not—and if it were regarded as an article not to be dispensed with, that no one parcel of the consolidated 3 per cents. should be paid off but on one of the half-yearly days in use for the payment of the dividends on those annuities, and that day posterior, by one day at least above a twelvemonth, to the first day on which the notice to that effect shall have been made public—the consequence will be, that upon the first parcel so paid off, the loss of time and interest will amount to a full twelvemonth; but that upon all subsequent parcels, the loss of time will be such as cannot amount to less than a year and a quarter upon the whole. For paying off the first parcel—say on the 25th of December 1804—the latest day on which notice can be made public, will be the 24th of December 1803. For paying off the second parcel, the earliest day that can be appointed will be the 24th of June 1805. Should a parcel of the magnitude required by the act (£500,000) have come in or been made sure by the 25th of December 1803, notice may be given on the next day, appointing, as the day of payment in respect of that second sum, the 24th of June 1805. But on this second transaction, 1¼ year, all but a day, would be lost. If, again, by the 23d of June 1804, a third sum happened to have been collected or made sure, and notice given accordingly for the 24th of June 1805, as before—then upon that sum no more than a year and a day would be lost, as above mentioned; and upon the whole, supposing the intermediate days—of collection perfected, and notice given accordingly—to run in a regular series between such earliest day and such latest day, it would, by the nature of an arithmetical series come to the same thing as if the quantity of time thus lost amounted to 1¼ year in each instance.

[[18] ]Art. 22. (1½ per cent. nearly.) See Table I. Note m. From 3 to 1½ is no greater reduction than from 6 to 3;—being that which, in the course of 33 years, viz. between 1717 and 1750, took place in regard to divers parcels of stock, though the reduction of the great mass from 4 to 3 per cent. was not completed till 1757. (See Sinclair on the Revenue, II. 112.)

When Adam Smith wrote, the rate of interest in the Dutch funds was already as low as 2 per cent. [B. I. ch. ix.]

[[1] ]The figures of reference refer to explanatory matter, the greater part of which has been thought not worth inserting in this compressed view.

[[24] ]The type (say) as tall again as the tallest ever employed, the dimensions to be fixed, and types more than half as tall again prohibited.

The great quantity of letter-press places the information where it is most useful; and, together with the variety of type employed, renders the task of the forger so much the heavier.

For trust purposes (such as settlements, &c.,) where the magnitude of the sum renders it worth while, the form of the Note might be varied, so as to be divisible into three, four, or more parts. The expense of the plates might be defrayed by a small extra fee on each Note. An Exchequer Bill, though for £1000, affords no such security. A Bank Note, whether for £1 or £1000, is divisible into two parts; but, yielding no interest, is not the subject of a settlement. Settlements of stock require sometimes journeys, always expensive formalities.

[[28] ]Insert here, or on the paper mentioned in Note [21,] “To make up the value of the Note for any odd day (i. e. any day which is not in the Table,) add a farthing for every day between such odd day, and the day next before it in the Table.”

[[29] ]Insert here, or in the paper mentioned in Note [21,] “When the blanks in this Register are all filled up, this Note, if not paid off, will be exchanged for a fresh one gratis.”

The obliteration of the Register of the payments made, is the only profitable fraud of which these entries are susceptible; and that might easily be rendered impracticable. The number of years here inserted, is that, at the end of which the value of the Note will have doubled itself, at simple interest.

Another mode of indication might be furnished by the principle of the French Coupons. An edging composed of compartments similar to those exhibited in the Table. In the interior column, the compartments filled with the figures expressive of the several half-years; in the exterior, the compartments left blank; and, on making the payment in respect of each half-year, one to be stamped off a few words being inserted, as in the Table, for the purpose of explaining the import of the defalcation.

[[3] ]The wording of the engagement is grounded on that of an Exchequer Bill. The size may be exactly that of a Bank Note.

[[4] ]The yearly form, having been the first framed, is here inserted, to show its comparative simplicity; but (for the reasons mentioned in the Observations on the Plan) it is not proposed to be employed. Placed as it is, it saves the two other compartments from being covered by the leaves of the book.

[[5, 7, 8, 9, 10] ]These blanks cannot be filled up till the last hand is put to the official arrangement of the business. The filling up will depend on the number of Notes issued, the number of hands employed in the General Office, the number of office hours for each hand, and on the mechanism employed for giving dispatch to the operations.

[[14, 22] ]The object most difficult of imitation, to an ordinary artist, is a portrait engraven by a first rate hand. Imitation being a capital offence, the form must be such as no artist could possibly adopt, but with criminal views. The Epigraph should be so placed as that, in case of imitation, the intention shall betray itself at the earliest stage possible. A single plate, if multiplied according to the method invented by Professor Wilson of Glasgow, as described in his paper reprinted in Nicholson’s Philosophical Journal for May 1798, will serve for any number of impressions.

[* ]A government engagement couldnot, like this, have been rendered depreciation proof, but for the pre-existence of stock annuities, and its connexion with them as above. The exigencies of government not being susceptible of limitation, no species of engagement could be offered, of which the price should be fixed, and the quantity limited to what could be disposed of at that price, but for the co-existence of some other species of engagement unlimited in respect of the quantity offered at market, and thence exposed to an unlimited diminution of price.

[* ]This (should it ever come into existence) will be the only species of property known, which not only pays for keeping, but pays without either risk or trouble. To the aged and parsimonious, it will be a new discovered treasure. Timidity and indolence are the natural accompaniments of that disposition to parsimony which is so natural an accompaniment of old age. To place money out at interest in any other way, is a work not only of exertion but of hazard: in this way, a man escapes from both.

To hoard money—to keep in hand any quantity that might be placed out at interest—is to suffer a continually increasing loss. Yet the habit of sustaining this loss is found a concomitant—and that not an unfrequent one—of the habit of parsimony.

At the hour of death, ready money, in large masses, has been found in the hands of the parsimonious of all ranks, from the beggar to the prince. But what prince, or what beggar, is there, who will hoard metallic money, when, by simply forbearing to part with this new species of paper money, he may, every day of his life, be not only preserving his property, but adding to it?

[* ]Of the annual amount of money received in the shape of income, and capable of being employed in the purchase of the proposed paper, a conception may be formed from the supposed amounts of the several component branches of the national income, as exhibited in the income table framed for the purpose of the income tax, and printed in Mr. Secretary Rose’s Finance Pamphlet of 1799; to which are subjoined the amounts of the same articles, according to the estimate of Dr. Beeke.a

Observations.—The more regular the receipt, and the larger the masses received, are, in proportion to the total income of the year, the better adapted are they to the purpose of the proposed temporary employment. Stock dividends occupy the highest point of the scale—professional profits, where accumulation is out of the case, the lowest. The weekly pay of a labourer would afford him no inducement to take out annuity-note paper in the way of issue, unless in case of boarding; but in the way of circulation, it would at least be upon a footing with cash.

[† ]The following bill of costs, exhibiting the charges attendant on dealings in stock, though it were for the minutest portion, in cases where, by distance of residence and want of connexions in the metropolis, the party is obliged to have recourse, in the regular way of business, to professional assistance, may serve to show how ill adapted government annuities are, upon their present footing of stock annuities, to enable a man to employ inthat way to advantage, either a small sum for any length of time, or even a considerable sum for a short time; and this, even independently of those contingencies which in the latter case have so frequently the effect of converting expected profit into positive loss. The charges are such as I have reason to look upon as rather under than overrated. By doing certain parts of the business himself, or getting them done gratis by a friend, a man may save so much of the expense;—as his wife might save the expense of a mantua-maker, by making her own gown: but a contingency of this sort does not prevent the professional charge from being, in a general point of view, the proper standard of expense.

If the party die before the stock is resold, the whole of the above expense of £2 : 5 : 8 will be to be repeated; and to it there will be to be added the expenses attendant upon proving the will, or taking out letters of administration to the deceased.

[* ]This branch of profit will have for its accompaniment, and that, as we have seen already, an inseparable one, the effect, and that an advantageous one, of taking out of the market a mass of stock equal to the mass of annuity paper issued, although the burthen on government, in respect of the mass of annuity to be paid, remain the same. But though the effect be produced immediately and at all events, the profit resulting from it depends upon two other circumstances;—viz. the having money to raise for the creation of government annuities, and the arrival of the period which will put into the hands of government the power of bringing its annuitants to consent to a reduction in the amount of their several annuities. These constitute two perfectly distinguishable branches of profit, which will be considered in their respective places.

[* ]The interest upon exchequer bills ceases when they are paid into the hands of the receivers of taxes.

[* ]These papers appear to have been written in August 1800. At that time Mr. Bentham calculated the annual saving upon £6,500,000 of exchequer bills at £126,234 per annum.

[* ]Table showing the principal sums of the several notes entering into the composition of £100 worth of annuity-note paper, with their respective amounts of interest, taken from Table of Annuity, Note Currency.

[† ]A portion of profit under this head would arise in Period I. It will, however, reach its maximum at the end of Period II., thenceforward its amount will decrease as the amount of the debt diminishes.

[‡ ]Profit by interest undemanded ceases, it is to be remembered, at every reduction, in proportion as the conversion from the paper bearing the higher rate, into paper bearing the lower rate goes on:—because, whenever a note is paid off, the whole amount of interest remaining due upon that note must be discharged as well as the principal. It follows that, in regard to the paper of such issue, the time of forbearance cannot date from any earlier period than the opening of that issue.

[* ]The premium is a necessary condition of the co-existence of two papers of the same denominative value, bearing different masses of interest: a man would never give £100, or the value, for a mass of paper called £100, and yielding £1 : 3 : 8½ a-year interest, if for the same price he could get a mass of paper which, though called but £100, yielded £1 : 9 : 6 a-year interest.

[† ]See further, Chapter VI. Advantage by addition to National Capital.

[* ]By this restriction, the amount of the premium might perhaps be made less than it would have been otherwise;—but this would comparatively be of little moment.

[† ]This, though so evidently true as to appear little better than nugatory, will be apt enough to be overlooked, or even appear disputable: for such will naturally enough be the case, if, after rising the first year of the application of the given cause of elevation, stocks should, in consequence of fresh causes of depression, experience a fall the next, or any other succeeding year.

[* ]This supposition is actually realized in the case of money employed in the redemption or purchase of portions of the land-tax, and laid out in the purchase of masses of stock annuities on government account, to be added to the sinking fund. The money for a purchase of that sort cannot be supposed (unless here and there by accident) to be saved out of the income of the year, and defalcated from what would otherwise have been the unproductive expenditure of the year, unless in the case where, without any such call, a sum to the same amount would have been saved, and employed or lent out in the shape of capital. It is therefore so much taken from the mass of national capital:—on the other hand, when handed on to the stockholders of whom the stock is bought, and in payment for their stock, it is then so much added to the mass of national capital; being so much which would not have taken that course, had it not been for the measure. It therefore leaves the amount of national capital where it found it.

[* ]I say restitution; for as the amount is added to productive capital upon the redemption of the debt, so was it taken from productive capital on the creation of the debt. The case might be supposed, in which this restitution should be complete, and even more than complete. It must, however, still be remembered, that the parties into whose hands this new wealth is poured, are not the parties from whose hands the wealth expended in war was originally drawn;—that money given to A is no compensation for loss of money, of life, or of limbs to B;—that if the acquisition be made, it is made by no other means than that of the most cruel pinching;—and that if the money wrung from pleasurable expenditure had been added, the whole of it, in the first instance, to productive capital, instead of being consumed in misery-making expenditure, the addition to productive capital and wealth would have been so much the more abundant. It may be further observed, that from the influx, or rather reflux of capital upon the redemption of the debt, suffering and loss must inevitably ensue to those whose incomes are reduced by the fall in the rate of interest of money. But this consideration may serve to reconcile the public in general, and the parties affected by it, that such would have been their suffering, and still greater, had there been neither borrowing nor redeeming, but had the country been reposing all the while in a state of uninterrupted peace.

[† ]The source to which I am indebted for it, is the evidence of Mr. Henry Thornton, as printed in the several unpublished Reports of the Committees of Lords and Commons on the affairs of the Bank in March and April 1797, and reprinted in Mr. Allardyce’s published Address to the Bank proprietors in the same year. In the form of a note, the substance of that evidence would form a valuable addition to the future editions of Adam Smith’s Wealth of Nations.

[* ]It is a fact no less curious than true, that by a mere collateral circumstance, such as the mode of transfer appointed, and the nature of the evidence required in proof of title, the nature of a species of property, in itself the same in both cases, should undergo so material a change. Without a degree of expense, destructive of a part, or the whole, or even more than the whole of the value, stock, as we have seen, cannot be broken down into masses corresponding to those small and diversified portions into which money is and must be divided:—nor can it at any expense be either bought or sold on any occasion without loss of time, and the obligation of personal attendance at one certain place, the same for the whole island, wheresoever the residence of the parties may happen to be in each instance. It cannot be carried by a man in his pocket, and so like so much cash distributed among any number of hands, at the very instant the occasion for each disbursement arises. Annuity-note paper, like cash and Bank of England paper, but still more divisible, is already broken down into a multitude of portions still more various, and commensurate to all purposes—and, like cash, is to be had at all times and in all places.

I have a weekly bill of £1 : 12s. to pay to my baker. The £1 of it which should have come to me in bank paper, has, in consequence of the million of supposed deficiency of that paper, failed me. Can I say to him, “Come to the bank, and I will transfer to you £1 : 12s. worth of stock?” His answer would be—“True, £1 : 12s. is the worth of the stock you will give me to-day, but what will it be to-morrow; I have my batch of bread to mind, my journeymen to overlook, my customers to wait upon; I can find no time to go with you to the bank to-day to receive stock, another day to receive the interest, and another day to sell the stock: and if I were to receive it, what would the principal amount to when the brokerage is paid out of it? No: it would be cheaper to me to give up the debt, than to obtain payment for it on such terms.”

How different would be the case, if, instead of stock, I had my £1 : 12s. worth of government annuities in the shape of an annuity note! “Here (I should say) is your money—£1 : 12s. is what I have just been giving for it: pass it to-day—everybody will give you the same sum for it:—keep it till to-morrow sevennight—anybody will allow you an additional farthing for it, and so on a farthing for every eight days, for as many times eight days as you may think fit to keep it.”

[† ]

[* ]1. On the part of the bank, the extension given to the quantity of their paper—not in notes of the then usual magnitude, but in notes of the reduced magnitudes—the £1 and £2 notes;—whereby the market was enlarged to such an extent as, if given to it at an earlier period, would, it seems probable, have prevented the exigency.

2. On the part of government, the suspending to a certain degree the action of the restrictive laws, by which individuals had been prevented from issuing notes below a certain magnitude.

3. On the part of the commercial body, by their agreement to accept of Bank of England paper, without demanding cash for it.

4. To the force of these factitious remedies was added that of the natural remedy, the return of the hoarded money of both kinds into the circulation upon the cessation of the alarm.

As no man can keep any unnecessary quantity of money by him for any length of time but to a loss, would not this natural remedy, together with the preceding one, have been sufficient?

That the exigency of the case would have admitted of the waiting for the operation of these two last-mentioned remedies, is more than I will undertake to say. But that if it would, the application of the two first might have been omitted with great advantage on another score, is an opinion that will, I imagine, be acceded to by whoever recognizes the mischief pointed out as flowing from every addition to the quantity of money, metallic or paper, in Chap. IX. On the Rise of Prices.

[† ]To a theoretical glance it might be apt to appear that the lesser quantity of money might serve to convey the same quantity of annual receipts as the greater, if in proportion to the deficiency in the quantity of matter, the velocity of the circulation were to be increased. But upon examination, I do not imagine it would be found by what means the velocity would be capable of receiving any adequate increase. The natural effect of those pressures, to which such increased velocity would be a relief, is—not to accelerate the circulation, but to relaod [Editor:?] it.

[* ]It therefore would not begin to act in this capacity till after Period I.; but from thenceforward the quantity would be more than adequate to the purpose here in question in a prodigious degree.

[† ]In the compass of thirty-three years, viz. from 1717 to 1750, interest on divers parcels of the national debt was reduced from £6 to £3 per cent.—(Sinclair, II. p. 214.)

[‡ ]One instance, 32 Geo. III. c. 55.

[* ]Address to the Proprietors of the Bank, 1798.

[* ]By the reduction of interest on government annuities from 4 to 3 per cent. in Mr. Pelham’s time, 1749 to 1750; 23 Geo. II. ch. 1 & 22.

[† ]Exchequer bills.

[‡ ]Estimate, &c. edition 1794. Dedication, p. lii.

[∥ ]By Mr. Ellison, agent to the Association of Country Banks.—Lords’ Report, p. 87.

[§ ]By Article 18, Chap. I.

[* ]Estimate, &c. ib. 62.

[* ]Chapter IV. Grounds, &c.

[† ]Chapter VIII. Particular Interests, &c.

[* ]The case of the incorporated banks of Scotland does not appear to differ materially in this respect from that of the incorporated and unincorporated country banks of England.

[† ]By the tax upon country bankers, government has already taken to itself a share in the profit on that paper. In so far as country bankers’ paper came to be extruded by the proposed government paper, the profit by this tax would fall of course to be deducted from the sum total of profits promised by the proposed measure.

[‡ ]In this case, nothing would be receivable at the annuity-note offices but cash.

[∥ ]The estimated amount of bank and country bankers’ paper in 1800.

[§ ]The estimated amount of money of all kinds in 1800, nearly.

[* ]Upon the whole, then, the result is, that by every £100 worth of paper issued by a banker, he imposes a tax upon the community, and that to an amount prodigiously greater than that of his own profit.

[† ]For example, let £6,000,000 be the quantity of extra influx money introduced into the circulation in the course of the year;—let the quantity of extra labour produced by this extra influx be equal to full employment for 100,000 fresh hands: the allowance would be perhaps sufficient as applied to the whole amount of fresh labour produced within the year by all causes, the existing quantity of money, and the supposed extra quantity taken together:—applied, therefore, to the latter alone, it will be excessive. It is not a matter of necessity that any addition at all to the mass of vendible commodities shall have been produced by the extra influx of money, since a particular application of the existing quantity of money in the country, without any accession to it whatsoever, is altogether adequate to the producing the utmost possible degree of accumulation. (But for illustration’s sake, the supposed state of things may serve as well as if it were more correct.) Call the average value of the produce of the labour of these 100,000 fresh hands 12s. a-week for each: this in round numbers will be £3,000,000 a-year. £3,000,000, then, is the quantity of extra influx money remaining, the efficiency of which is spent altogether in degrading the value of the mass into which it flows, and producing the correspondent rise in the price of vendible commodities.

[* ]This, it may be thought, should not be considered as constituting part of the bonus, inasmuch as in some of the acts, and probably in all the acts prior to that date, it will be found that a year’s notice previous to redemption was among the stipulated terms. On the other hand, if instead of waiting for meditations and negotiations, and observations to be taken of the times, a plan had been adopted in the first instance, such as (like the proposed plan) would have given the public the benefit of the reduction from the instant that the rise in the rate of interest in general, and of money in the funds in particular, had rendered the commencement of it practicable, the probability seems to be, that the extra interest, not only of the year in question, but of one or more preceding years, might have been saved.

[† ]Written 1800.

[‡ ]As £577,034 is to £2,169,673, so is £1,212,608 to £4,559,458.

[* ]This being so perfectly opposition-proof, is a feature by which the proposed mode of reduction stands distinguished in a very striking point of view from every other. Though this consequence of the proposed conversion were ever so clearly foreseen, by those who, either from factious motives, or on the honest ground of personal motives, were disposed to thwart it, though it were even expressly announced by government (as indeed virtually it could not but be,) it would not be in the power even of conspiracy so much as to impede it. By refusing the paper, each conspirator would make a complete and certain sacrifice of his own personal advantage, without the smallest chance of affording any sensible help to the common object of the conspiracy. Limitation only, not prevention—limitation to a degree altogether without effect—would be the utmost possible result of the most unanimous and most persevering opposition on this ground.

[* ]In the case of the second set of subscribers, two years were struck off from the half per cent. for seven years that had been allowed to the first set. First act, 23 Geo. II. c. 1. Second act, 23 Geo. II. c. 22.

[† ]Since the above was written, a passage has been discovered in Pinto, whereby it appears that at the date of his book (1771) a law to this effect existed in Holland, in respect of the interest-bearing paper of that country, termed obligations. [De la Circulation, et du Crédit, p. 81.] There is a great deal of good and a great deal of evil (he says) in the effects of this law: but the good appears to consist in the mode of employing the money as above—the evil, in the hands in which the management is reposed, or in some other such collateral circumstance as the forced sale of property, in whatever other shape it may be in, besides money, for the purpose of converting it into this.

[* ]Frugality, itself a virtue, is an auxiliary to all the other virtues: to none more than to generosity, to which, by the unthinking, it is so apt to be regarded as an adversary. The sacrifice of the present to the future, is the common basis of all the virtues: frugality is among the most difficult and persevering exemplifications of that sacrifice. Important in all classes, it is more particularly so in those which abound in uncultivated minds. In these, to promote frugality is to promote sobriety: to curb that raging vice which in peaceful times outstrips all other moral causes of unhappiness put together. In the prospects opened by frugality, the wife and children have a principal share: they derive nothing but vexation and distress from the money spent at the gin-shop or the ale-house. Compared with the prodigal, the hardest of misers is a man of virtue.

In the “Outline of a plan of provision for the poor,” as printed in Young’s Annals of Agriculture,a among the collateral uses there mentioned as derivable from the system of industry-houses there proposed, is that of their affording, each of them to its neighbourhood, a bank, for the reception and improvement of the produce of frugality on a small scale, under the name of a frugality bank. In the plan that was handed about of the then proposed Globe Insurance Company, since established by act of Parliament, among the uses mentioned as proposed to be made of the stock of such company, is that of carrying on the business of such a frugality bank, with a reference to the suggestions given in the above papers.

Were the proposed annuity-note paper to be emitted, “Every poor man might be his own banker:” every poor man might, by throwing his little hoards into this shape, make banker’s profit of his own money. Every country cottage—every little town tenement—might, with this degree of profit, and with a degree of security till now unknown, be a frugality bank.

[* ]To judge of the steadiment which an engine of this nature is capable of applying to established order, turn to France and see the support it lends to subversion: the affections of the people ebbing fast into the old channel; but the revolution in property operating as a barrier against the return of ancient monarchy, and as a sheet-anchor to the name of a commonwealth.

[† ]Irish debentures—price and value not less than £100—paper or parchment instruments as much out of the reach of the body of the people as exchequer bills—have to this purpose as little application as so much stock.

[‡ ]Though the debt is in loose paper, it is in large paper, and in that respect on a footing with stock. There seems therefore no bar to the introduction of the proposed plan, unless it be from local circumstances, such as without particular investigation and opportunities it lies not in a man’s way to be informed of.

Who can say but that the circulation of this paper might come to extend itself even beyond the sphere of British dominion?—the value of this paper in exchange having been once established and certified by experience.

“Narrainee is a base silver coin struck in Cooch Bahar, of the value of about tenpence, or one-third of a sicca rupee. The commodiousness of this small piece, the profits the people of Bootan derive from their commerce with Cooch Bahar, and some local prejudices against the establishment of a mint, have given the narrainee in these regions, as well as in those where it is struck, a common currency, though both countries are perfectly independent of each other, and totally different in their language and manner.”—Turner’s Thibet, 1800, 4to, p. 143.

The seal or other mark of the East-India Company on their packages (I remember hearing once from authority that appeared unquestionable) is received in China at vast distances from the factories, as satisfactory evidence of the quantities and qualities of the contents, to the value perhaps of some hundreds of pounds. Is it a supposition altogether chimerical, that a similar confidence might be brought in process of time to extend itself to the exchangeable value of a piece of paper, value a few pounds or a few shillings? In Africa, in more places than one, Park (as he tells us) made a paper money out of the Lord’s Prayer. Might not commercial experience give at length a value which was thus given by mere superstition without experience?

[* ]Supposing the general plan of the proposed annuity-note currency to be discarded, an advantage upon a smaller scale might still be derivable from it, by applying some of the features of it to the improvement of the existing species of government currency called an exchequer bill, in such manner as to cause it to be accepted of at a lower rate of interest than it would otherwise be.

1. It might be made out for much smaller sums, say £10 or £5; that is to say, a part of the whole mass might be broken down with a view to general circulation—a competent portion being reserved in the present large sums for operations on a large scale.

2. It might be furnished with the proposed aids to computation, by proper tables printed on the front or back of it.

3. It might be made to receive those facilities for general circulation, which depend upon the physical qualities of the paper—viz. upon the size, form, texture, and thinness, &c., which are possessed by the notes which compose the currency of the Bank of England.

4. It might be invested with all the new securities against forgery which are here proposed.

5. Markets for the purchase of it might be opened all over the country, by the simple expedient of remitting it, in such quantities and proportions as should be deemed advisable, to the several local offices already in the pay of government:—for example, post-offices—stamp-offices—excise-offices—custom-house offices.

This suggestion is made solely for the purpose of illustration. Compared with the proposed general plan, the sacrifice made by thus confining the application of it, would be a sacrifice without an object. Limited as it is in respect of its total amount—limited as it is in respect of the duration of the annuity conveyed by it, the exchequer-bill currency is radically incapable of meeting the demand of the two classes of petty hoarders; and thus a proportionable part of the accommodation afforded to individuals would be lost. The utmost it could do, would be the going a small part of the way towards meeting the demand for temporary interest on the part of the other great class—possessors of temporary sums—customers for flying annuities:—and even to this portion of the demand, it would become less and less suitable, as the time when the annuity would cease, and the trouble of carrying in the bill for payment, and receiving the redemption money for it, approached.

The supposed modification and improvement of the exchequer-bill currency would be productive of but a part, and that a very small part, of the advantages held out by the institution of the proposed annuity-note currency. But by the institution of the proposed annuity-note currency, the advantages thus derivable from the supposed improvement of the exchequer-bill currency would be obtained in their full extent—obtained in the way of collateral result, and without any distinct measures directed to that end.

At an early period of the exchequer currency, bills were issued for sums as low as £10, or even £5. How it should have happened that the practice of issuing such small notes should have ceased, and the minimum note be raised to and invariably fixed at its present pitch of £100, is not difficult to conceive. The form of the security would naturally be adapted to the convenience of the lenders, more especially as the lenders were individuals acting on their own account, and the borrowers statesmen acting without any personal interest for the public at large. The lenders on this security have been, on the one part, and that the principal part, the immensely opulent company the Bank of England;—on the other part, the small but prodigiously opulent circle of monied men, known to each other, and meeting one another continually at or in the neighbourhood of the Exchange. £100 was a magnitude quite small enough for persons of this class. The faculty of employing in the same way a smaller sum, suppose £50, would have been of no use to them;—even £100 is not so much as they would each be under the necessity of keeping by them, or at their bankers, for the purpose of current expenses, and payments on a small scale. Bills of less magnitude would thus be attended with no advantage, and they would be attended with the disadvantage of making a proportionable addition to the trouble of computation. Another relative disadvantage, and a much more considerable one, is, that the effect of small bills—£10 and £5 bills for example—would be to open the market to a greater number of customers; thence to increase the competition for the article, and to raise the price;—in other words, to lower the rate of interest upon this paper, and thence diminish the profit to be made by purchasing it.

Whether government were aware of this at the time, is a point which at this time of day it might perhaps be difficult to ascertain. They might see it, but not be able to profit by it. If in times such as those of King William and Queen Anne, the connected circle of London monied men concurred in insisting upon large sums in preference to small sums, it would have been difficult for the government to resist:—pressed by the exigencies of the moment, it might have been hazardous, and perhaps impracticable, to wait for the success of an experiment upon the more extended scale. As to the monied men, some would be aware of this, others not:—witness the Bank, who, guided (it should seem) rather by habit than reflection, forbore for such a length of time to give that extension to the circle of customers for their paper, which, when given at last, relieved them from their embarrassments, and seems to have proved that the scarcity which had produced their embarrassments might as properly be called a scarcity of small notes, as a scarcity of cash.

[* ]This branch of the prerogative, like most others, had its origin in force, with little or no regard to public utility: the king took it, not from any view of the general advantage the nation would reap from his taking it, but because he found his private advantage in taking it. But the utility of the institution is not the less real;—the advantage is not less really among its effects, though it were not the final cause of the institution. It has at times in this country, and regularly in several other countries, produced a profit to government; but its constant object has been the guarding individuals against loss by fraud from the substitution of coin of inferior value to that indicated by the exterior appearance of the pieces.

The monopoly of the metal coinage, it is to be observed, is confined to the fabrication of such coin as shall be legal tender; i. e. as a creditor shall be obliged to receive in satisfaction of his debt:—for as to the fabrication of medals of the same intrinsic value, or purporting to be of the same intrinsic value, there is nothing against it in law, so long as the impression upon them is not an imitation of the medals made on government account. The monopoly consists in the taking the coin fabricated on the king’s account for the sole subject of that part of the law of contracts which prescribes what acts shall amount to the payment of a debt.

[* ]The greatest part of the capital of the Bank of England has been laid out in the purchase of government annuities; the directors of the bank therefore can never distribute these annuities in the shape of dividends amongst its stockholders, unless they receive them from government.

[* ]A bank-note has other properties calculated to guard it against forgery;—but these do not belong to the present matter.

[[3] ]Art. 2. (A farthing.) By taking, for the standard note, a principal sum, having for the amount of its daily interest, at the proposed rate of interest, an even sum (i. e. a sum having an existing piece of coined money or number of pieces of coined money, corresponding to it,) the multiples of this standard note will in like manner have even sums for the respective amounts of their daily interest, and their aliquot parts will have for their amounts of interest, sums capable, when put together, of being made up into even sums.

Here, as in Exchequer bills, the interest is computed daily, that each note may receive from each day a determinate addition to its value, and may pass accordingly in circulation.

The smallest of all notes possessing this property is taken for the standard note, because the smaller a note, the greater the number of persons that are capable of becoming customers for it.a

The standard note being scarcely small enough in this view, it were better, perhaps, that not only the half, but the quarter of it should be issued at the same time.

The larger notes will serve to protect the smaller ones from the contempt which might otherwise attach upon them, by reason of the smallness of the daily, and even weekly, amount of interest.

[[12] ]Art. 14. (Received at government offices.) Were this to be done from the first, a great lift would certainly be given to the proposed currency at once: the only objection seems to be, the possibility lest, in case of any sudden turn taken against it by the public mind, the exchequer should for a time be overloaded with it, i. e. labour under a deficit of cash (the only money that nobody can refuse) to the amount of it. But in Chapter IV. the improbability of such an event, and at the same time an effectual remedy, is pointed out.

Supposing bank-notes to be driven out of the circulation,a the same sort of necessity, or supposed necessity, which gives employment to bank paper in the transactions of governmentb and in other transactions upon a large scale, in preference to cash, to save counting, examining, and luggage, would create an equal demand for the annuity note paper on that score.

[[14] ]Art. 16. (Least quantity.a ) A note under this amount would consequently not be capable of being taken out singly, but only as one in a parcel, with other notes of the same or different magnitudes. So also, perhaps, in regard to the carrying in notes to the local office to be sent up to the general office, to be returned from thence with the interest; as likewise in regard to the changing large for small notes, or vice versá, or injured notes for fresh ones. But instead of a prohibition, as above, the same end might be answered, perhaps more advantageously, in some, at least, of the above instances, by a small fee, acting as a penalty to the amount of it, as by the next article.

By this means, the offices would be kept clear of the most troublesome, as well as numerous, class of customers. Silver notes, for example, would in that case be taken out, not singly by journeymen manufacturers, but in parcels by masters, by whom at pay-day they would be distributed among their journeymen.

Interest would by this means be capable of being received at the offices upon the smallest notes (which, as above, is necessary to their passing in change for large ones;) though what is probable is, that on the small it will scarcely ever be demanded. (See on this head, Chap. V. Profit by interest undemanded.)

What is the least note that can be issued with profit, will be determined by the quantity of time occupied in the operations necessary to the issue of it. Possibly on this account, in the silver, or at least in the copper notes (if any,) the actual signature of the local office-keeper might be dispensed with, and a stamp of some kind (affixed at the time of issue at his office, or previously at the general office) be employed in its stead.

In this power is included that of suspending the issue of notes of any particular magnitude or magnitudes; by which means, in case of an inordinate demand for the proposed paper (viz. such an one as shall threaten to swell to a pernicious magnitude the quantity of it producing the effect of money in the circulation,) a stop may be put at any time to the inconvenience. (See Ch. IX. Rise of Prices.)

[[17.] ]Art. 20. (Conversion.) Conversion is a word used for shortness, to indicate the result of two operations:—on the part of government, the redemption of such or such a mass of stock annuities; and on the part of the stockholders so expelled, a purchase made of the fresh mass of note annuities to equal amount—a result which, in the case where a man does not choose to part with the mass of annuity he receives from government, is a necessary consequence.

That the disposition to accede to such conversion should be nearly universal, seems altogether probable. The loss of interest is but a sixtieth; and, in all other points, the change will be greatly to a man’s advantage. In a very short period it cannot fail of taking place. When stocks (three per cents.) are no higher than par, the £2 : 19s. note annuities are (it is true) worth, as far as interest only is concerned, no more than £98 : 6 : 8;—but no sooner are three per cents. up at 102, than the £2 : 19s. per cent. are worth upwards of £100¼.

Among any such group of annuitants thus forcibly expelled, there will always be a certain proportion (it is true,) who at the time of the expulsion were desirous of disposing of their annuities, and would have done so, had the matter been left to their choice. But, by the supposition, there will be at the same time another group desirous of purchasing a mass of annuities, equal at the least to that which is thus wished to be disposed of; otherwise the price of the article would not be at par, which it is supposed to be;—therefore, setting the one demand against the other, the whole amount of the mass of annuities paid off at or above par, may be set down as so much taken from a set of proprietors, who will not part with such their property, but will accept of it in the proposed new shape.

Proposed mode of effecting the conversion.—Adjoining to the room where a man signs in the stock-book a recognition of the redemption of his mass of stock annuities, are two other rooms—a money-room (as at present the dividend-warrant room) and an annuity-note room. Question by the clerk: “Is it money you want? yonder is the room for receiving money, and here is the warrant for it. Do you keep your annuities? yonder is the annuity-note room, and here is your warrant for the amount in annuity-notes.”

On this occasion, two provisions, customarily inserted in the acts, will require observance;—1. That notice (a year in some instances,a half-a-year in others)b be given of the intention to pay off; and that the masses paid off at once be not less than of a certain magnitude—£1,000,000 in some cases, £500,000 in others. Of the former the object was, as it should seem, that a man may have time to form his plans in regard to the employment of his money; of the other, to obviate the suspicion of personal preferences, which, if the masses were small and undetermined, might be manifested in favour of individuals; viz. by paying a man off, or respiting him, whichever were most advantageous at the time.

To comply with these conditions, as far as appears either practicable, or material, or consistent with the practice and intention of the legislature:—suppose the course taken, in regard to the redemption of the stock annuities, with a view to their proposed conversion into note annuities, to be as follows, viz.—

1. Notice to be given, in the usual form, on the day immediately preceding the next day for a half-yearly payment, or on any earlier day subsequent to the then last day of half-yearly payment;—such notice to be expressive of a general intention on the part of parliament, from and after the day mentioned in such notice, to pay off the then remaining mass of stock annuities, in masses or lots of not less than the above stipulated magnitude of £500,000, as fast as the sums of money for the making of such payments shall respectively be completed;—the order in which the masses shall be paid off, to be determined by a lottery, unless changed in the way next mentioned.

By the publication of the progress of the issue in the newspapers, it will be known all over the kingdom, day by day, what sum is in hand applicable to this purpose. The masses being marked in numerical order for this purpose, each stockholder will see, day by day, whether the mass his portion of stock belongs to is ripe for payment, or if not, how soon it is likely to become so.

That a general notice of the intention, in contradistinction to a particular notice for the very day, was all that was meant by the legislature, may be inferred with some degree of assurance from the practice in Mr. Pelham’s case. Fifty-seven millions worth, and upwards, was the mass of capital in relation to which notice was given on that occasion—that, in the event mentioned, it should, on a particular day mentioned, be paid off: so that, if the invitation given had remained altogether without compliance (an event which for some time was highly probable,c ) the whole would on that one day have been to be paid off, and the money put into the hands of as many as on that one day might happen to apply for it. But, that such payment could have taken place, either in respect of the whole of the mass, or so much as the greater part of it, and that, either on the day fixed, or on any assignable subsequent day, within a week’s or a month’s or even a quarter’s distance of it, is a result that does not present itself as probable.

To borrow nearly fifty-eight millions in the lump, and at that early period too—or even nine and twenty millions, and that payable all in one day—presents itself as an affair of no small difficulty, even on the ordinary footing of mutual obligation as between the two contracting parties. How much greater the difficulty, if (as by the supposition contended against) one party (composed of the eventual lenders) was to be bound, while government, the eventual borrower, was to remain loose!

It seems, therefore, that (according to the interpretation put in that instance by parliament) by a notice that the capital of government annuities will, to such amount, be paid off on such a day, nothing more is to be understood than that (as here proposed) a part will be paid off on that day to such as apply for it, and the remainder at some subsequent day or days, according as the money for paying off shall happen to come to hand.

If not—and if it were regarded as an article not to be dispensed with, that no one parcel of the consolidated 3 per cents. should be paid off but on one of the half-yearly days in use for the payment of the dividends on those annuities, and that day posterior, by one day at least above a twelvemonth, to the first day on which the notice to that effect shall have been made public—the consequence will be, that upon the first parcel so paid off, the loss of time and interest will amount to a full twelvemonth; but that upon all subsequent parcels, the loss of time will be such as cannot amount to less than a year and a quarter upon the whole. For paying off the first parcel—say on the 25th of December 1804—the latest day on which notice can be made public, will be the 24th of December 1803. For paying off the second parcel, the earliest day that can be appointed will be the 24th of June 1805. Should a parcel of the magnitude required by the act (£500,000) have come in or been made sure by the 25th of December 1803, notice may be given on the next day, appointing, as the day of payment in respect of that second sum, the 24th of June 1805. But on this second transaction, 1¼ year, all but a day, would be lost. If, again, by the 23d of June 1804, a third sum happened to have been collected or made sure, and notice given accordingly for the 24th of June 1805, as before—then upon that sum no more than a year and a day would be lost, as above mentioned; and upon the whole, supposing the intermediate days—of collection perfected, and notice given accordingly—to run in a regular series between such earliest day and such latest day, it would, by the nature of an arithmetical series come to the same thing as if the quantity of time thus lost amounted to 1¼ year in each instance.

[* ]Of the annual amount of money received in the shape of income, and capable of being employed in the purchase of the proposed paper, a conception may be formed from the supposed amounts of the several component branches of the national income, as exhibited in the income table framed for the purpose of the income tax, and printed in Mr. Secretary Rose’s Finance Pamphlet of 1799; to which are subjoined the amounts of the same articles, according to the estimate of Dr. Beeke.a

Observations.—The more regular the receipt, and the larger the masses received, are, in proportion to the total income of the year, the better adapted are they to the purpose of the proposed temporary employment. Stock dividends occupy the highest point of the scale—professional profits, where accumulation is out of the case, the lowest. The weekly pay of a labourer would afford him no inducement to take out annuity-note paper in the way of issue, unless in case of boarding; but in the way of circulation, it would at least be upon a footing with cash.

[* ]Frugality, itself a virtue, is an auxiliary to all the other virtues: to none more than to generosity, to which, by the unthinking, it is so apt to be regarded as an adversary. The sacrifice of the present to the future, is the common basis of all the virtues: frugality is among the most difficult and persevering exemplifications of that sacrifice. Important in all classes, it is more particularly so in those which abound in uncultivated minds. In these, to promote frugality is to promote sobriety: to curb that raging vice which in peaceful times outstrips all other moral causes of unhappiness put together. In the prospects opened by frugality, the wife and children have a principal share: they derive nothing but vexation and distress from the money spent at the gin-shop or the ale-house. Compared with the prodigal, the hardest of misers is a man of virtue.

In the “Outline of a plan of provision for the poor,” as printed in Young’s Annals of Agriculture,a among the collateral uses there mentioned as derivable from the system of industry-houses there proposed, is that of their affording, each of them to its neighbourhood, a bank, for the reception and improvement of the produce of frugality on a small scale, under the name of a frugality bank. In the plan that was handed about of the then proposed Globe Insurance Company, since established by act of Parliament, among the uses mentioned as proposed to be made of the stock of such company, is that of carrying on the business of such a frugality bank, with a reference to the suggestions given in the above papers.

Were the proposed annuity-note paper to be emitted, “Every poor man might be his own banker:” every poor man might, by throwing his little hoards into this shape, make banker’s profit of his own money. Every country cottage—every little town tenement—might, with this degree of profit, and with a degree of security till now unknown, be a frugality bank.

[a]Had the bank been sufficiently aware of this, would they have waited, till compelled by necessity, before they issued their £2 and £1 notes?

[a]This (it should seem) would depend upon government; since if government, in the issues of annuity notes, refused to take bank notes in payment for them, the unwillingness to take barren paper, when interest bearing paper was to be had, would soon become general, if not universal. As to the propriety of this, or any further measures in the same view, see Chapters VIII. and IX.

[b]“Guineas cannot be used in any considerable dealings,” says Mr. H. Thornton, in his evidence before the Committee of the House of Lords on the stoppage of the bank. (Report, p. 72; reprinted in Mr. Allardyce’s Address on the Affairs of the Bank, Appendix, p. 54.) By Mr. Abraham Newland’s evidence, in the above Report (p. 62,) it appears that the payments of cash into and from the exchequer, are small in comparison with the payments in bank notes; not above £50,000 or £60,000 a-day, upon an average, remaining in the exchequer in the shape of cash; forming a daily total of money (cash and paper together) averaging about £151,095 (see Chap. V.) And out of £20,000,000 paid on the score of dividends at the bank, not above £1,300,000 or £1,400,000 is paid otherwise than in bank-notes.

[a]Not less, for instance, than the amount of the quarter note (the £3 : 4s. note) or the half quarter (the £1 : 12s. note.)

[a]25 Geo. II. c. 27 (the first consolidated act;) 39 & 40 Geo. III. c. 32.

[b]3 Geo. III. c. 10.

[c]Sinclair, ii. 112.

[a]Observations on the Income Tax, second edition, 1800.The amount of the sums which, having been received in the shape of capital, are susceptible of the proposed temporary employment, is altogether unsusceptible of calculation. In the course of the year, it is greater or less than that of the sums received and kept for the purpose of expenditure.

[a]See that work as reprinted in the present collection.