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• Prefatory Note to Volumes Iii and Iv
• Pamphlets and Papers Written For Publication 1809–1811
• Note On the Bullion Essays
• The Price of Gold Three Contributions to the Morning Chronicle1809
• The Price of Gold 1
• [first Reply to ‘a Friend to Bank-notes’] to the Editor of the Morning Chronicle.1
• [second Reply to ‘a Friend to Bank-notes’] to the Editor of the Morning Chronicle.1
• [appendix to ‘the Price of Gold’
• [a Reply By Trower]
• [a Further Reply By Ricardo]1
• The High Price of Bullion 1810– 11
• Three Letters to the Morning Chronicle On the Bullion Report 1810
• [three Letters On the Bullion Report] Report of the Bullion Committee1to Theeditor of the Morning Chronicle.
• [on Sir John Sinclair’s ‘observations’] Bullion Report1to Theeditor of the Morning Chronicle.
• [on Mr Randle Jackson’s Speech] Bullion Report1to Theeditor of the Morning Chronicle.
• Reply to Mr. Bosanquet’s ‘practical Observations On the Report of the Bullion Committee’, 1811
• Chapter I: Preliminary Observations.—mr. Bosanquet’s Objections to the Conclusions of the Bullion Committee Briefly Stated.
• Chapter II: Mr. Bosanquet’s Alleged Facts, Drawn From the History of the State of Exchange, Considered.
• Chapter III: Mr. Bosanquet’s Alleged Facts, In Supposed Refutation of the Conclusion That a Rise In the Market Price of Bullion Above the Mint Price Proves a Depreciation of the Currency, Considered.
• Chapter IV: Mr. Bosanquet’s Objections to the Statement, That the Balance of Payments Has Been In Favour of Great Britain, Examined.
• Chapter V: Mr. Bosanquet’s Argument to Prove That the Bank of England Hasnotthe Power of Forcing the Circulation of Bank Notes—considered.
• Chapter VI: Observations On the Principles of Seignorage.
• Chapter VII: Mr. Bosanquet’s Objections to the Proposition, That the Circulation of the Bank of England Regulates That of the Country Banks, Considered.
• Chapter VIII: Mr. Bosanquet’s Opinion—that Years of Scarcity and Taxes Have Been the Sole Cause of the Rise of Prices, Excessive Circulation No Cause—considered.
• Chapter IX: Mr. Bosanquet’s Opinion, That Evil Would Result From the Resumption of Cash Payments—considered.
• Appendix
• Notes On Bentham’s ‘sur Les Prix’ 1810– 1811
• Notes On the Bullion Report and Evidence 1810
• (a): [notes On the Report of the Bullion Committee]
• (b): [rough Notes On the First Part of the Minutes of Evidence]
• (c): [notes On the Minutes of Evidence] Minutes of Evidence
• Notes On Trotter’s ‘principles of Currency and Exchanges’ 1810
• Observations On Trower’s Notes On Trotter 1811
• Observations On Vansittart’s Propositions Respecting Money, Bullion and Exchanges 1811
• Appendix

[THREE LETTERS ON THE BULLION REPORT] REPORT OF THE BULLION COMMITTEE1
To theEditor of the Morning Chronicle.

Sir,

The able Report of the Bullion Committee can leave no doubt, in the minds of all unprejudiced persons, that there exists at this moment a great depreciation in the paper currency of this country; and though the Committee have treated the Bank Directors with a great degree of lenity, they justly attribute to their ignorance of the principles which should regulate them in their issues of paper, all those consequences which we at present deplore, and the remedy for which is now sought with so much anxiety. The fatal effects attending the interference of Government in commercial concerns, and which has been so frequently and so ably insisted on, are in this instance fully exemplified. Had the Bank, at the period of their difficulties in the year 1797, been suffered to have extricated themselves as well as they were able, they might possibly, under the peculiar pressure of the times, have been obliged for a short time to have ceased paying in specie, and their notes might in consequence have suffered a trifling discount; but as they could easily have convinced the public that their assets were fully equal to the discharge of all demands on them, it would in all probability have been of short duration, for who would have consented to accept much less than twenty shillings in the pound, when, by the delay of a few weeks, the Bank would have been enabled to pay him that amount. The creditors of the Bank would have seen how little foundation there was for alarm. That opulent Company would in a short time have resumed their payments in specie, and would have continued to be what Sir F. Baring in his evidence before the Committee represented them to have been for above a century previously to 1797, highly conducive to the prosperity of England.1

The law which gave the Bank the power of refusing to pay their notes in specie, has entailed upon us the evil of a depreciation in our currency of nearly 20 per cent., and has rendered it extremely difficult to restore it to the true standard by which it should be regulated—the value of the gold which is actually contained in the coin for which it is a substitute.

We have advanced so far in this ruinous path, that we are beset with dangers on every side;—to proceed will inevitably plunge us into increasing and accumulated difficulties, from which we shall be unable hereafter to extricate ourselves; and to return, though by far the safest course, will be attended with trials which will require a great degree of ability, integrity, and firmness to surmount.

The Legislature has, by the restriction law, sanctioned for many years a most unjust interference in all contracts, benefiting one of the contracting parties at the expence of the other. No complaint has been so common as the increased prices of every commodity, but very few know, or can be made to understand, how large a portion of the inconvenience2 which they suffer, is to be ascribed, wholly, to the improper use which the Bank Directors have made of the extraordinary powers with which the Legislature has entrusted them. The evil is not less real because its source is concealed from ordinary optics.

The Bullion Committee has most ably illustrated the principles upon which a paper currency should be regulated; and I trust the day is not far distant when we shall look back with astonishment at the delusion to which we have so long been subject, in allowing a company of merchants, notoriously ignorant of the most obvious principles of political conomy, to regulate at their will, the value of the property of a great portion of the community; in a country, too, justly famed for the protection which it affords to the produce of the industry of the meanest of its inhabitants.

In treading back our steps we must necessarily again interfere, not only in contracts already made, but in those now making; this is an evil inseparable from the situation in which we are involved, it must ever attend the reformation of a debased or of a depreciated currency, and, I fear, admits of no equitable remedy.

It is by many supposed that the mode recommended by the Bullion Committee for the adoption of Parliament, namely, to oblige the Bank to pay their notes on demand in specie, at the expiration of two years, will materially lessen the amount of our exports and imports. If it is meant that the nominal amount will be less, it cannot be denied, because they will be estimated in undepreciated money, but the real amount, the number of pieces of cloth, for example, exported —or the number of hogsheads of sugar imported—they must for ever be independent of the quantity or value of the circulating medium. If a merchant has a monied capital of 1000l. with which he can purchase and export 50 pieces of cloth— and if the Bank by increasing the amount of circulating medium by advances to B. and C. so affect its value as to enable A. to purchase and export with his 1000l. only 40 pieces of cloth, they, in fact, enable B. and C. to purchase and export the remaining 10 pieces; and if they withdraw their advances to B. and C. and thereby lessen the amount of the circulating medium, the 1000l. of A. will regain its original value, and he will again become the exporter of fifty pieces of cloth.

The effect of the late great advances of the Bank has been precisely this, and is the same as if A. had contented himself with the employment of 800l. only, in the purchase and exportation of cloth, and had lent the 200l. to B. and C. and thereby enabled them to export the remaining ten pieces. There is this difference, indeed, that in the latter case A. would have received the interest on the 200l.—whereas in the former the Bank would have received it, and it would have been divided amongst the Proprietors of their Capital Stock.

If the Bank had doubled the circulation, A.’s 1000l. would have purchased only 25 pieces, but the new holders of the Bank paper, would have been enabled to purchase and export the remaining 25. As in all these cases the 50 pieces of cloth would be exported, the proposed remedy for restoring the standard currency cannot have the effect of lessening the real amount of exports.

In the same manner it might be shewn that the amount of imports will not be diminished. This principle is perhaps only strictly applicable to the regular export trade of the country, as it is founded on the supposition that the speculators, who are called into existence by the abundance of paper, will be governed by the same prudence and circumspection which had before guided the transactions of real Capitalists; but, unfortunately, this is not the case. They wish to acquire fortune by a coup-de-main, and are enabled to force exportation, unnaturally, to every part of the world; not waiting for the regular demands of trade, but forestalling it, and thereby inverting its regular course. They forcibly divert a part of the National Capital to a trade which it would not otherwise seek. The markets abroad become glutted— no returns are made, and these speculative exporters, if they are unable to renew their bills when they become due, are not only ruined themselves, but involve in their fall the whole chain with which they are connected. This I conceive to be the true history of the present failures. Exportations so injurious can well be dispensed with.

Experience has, indeed, proved, that every alteration in the regular routine of commercial concerns, is attended with some shock to general credit. If a war break out, though no loss of capital should be sustained, the employment for that part of it which is diverted from the old channels of trade, must be sought in new directions; and the consequence generally is attended with convulsions in the commercial world, in which those who are trading on borrowed capitals, and who depend on the continuance of commercial credit, cannot answer the demands suddenly made on them. As the paper system, pushed to the extravagant length which it now is, affords great facilities to this description of persons, there can be no doubt that every measure which tends to correct that system, every material reduction in the quantity of paper, will greatly embarrass and cause much distress amongst those who depend upon its continuance; and though the misfortunes of every part of the community must be deplored, it is to the pernicious system which has lately prevailed, that it will be alone to be ascribed. The remedy may be postponed, but can never be effectual without risking the safety of those individuals.

But whatever may be lost in consequence of the difficulties to which the persons of whom we have been speaking may be exposed, cannot be regarded as a national loss, as the capital which they could command by the credit which the abundance of circulating medium afforded them will revert to those hands which have been heretofore dispossessed of it, and where it will at least be as profitably employed as in those where this ruinous system has placed it.

A merchant trading with a monied capital has been injured by the depreciation of money, as his capital has not been equal to the same extent of business as before the depreciation; but there are few merchants in this situation:—their capitals, as well as that of tradesmen, are invested in goods, ships, &c. they are rather debtors than creditors to the rest of the community. A varying circulating medium, though injurious to every class of the community, is least so to mercantile men; as the prices of their commodities will undergo the same variations as the prices of all others, their comparative value will, under all circumstances, be the same, and their nominal, not their real value, will be affected.

The depreciation of the circulating medium has been most injurious to monied men.—By monied men I mean, that class whose property consists wholly of money, the amounts of which must, in this country, far exceed the total amount of the circulating medium.

It may be laid down as a principle of universal application, that every man is injured or benefited by the variation of the value of the circulating medium in proportion as his property consists of money, or as the fixed demands on him in money exceed those fixed demands which he may have on others. Thus the farmer is injured by any increase in the value of money, from whatever cause it may arise, whilst he has a fixed money rent, and fixed money taxes to pay. His produce will in consequence of the increased value of money sell for less, whilst his taxes and his rent continue the same. He must sell a greater number of quarters of corn, or whatever may be the produce of his land, to pay the same rent and the same taxes. He, more than any other class of the community, is benefited by the depreciation of money, and injured by the increase of its value. He has contracted to pay certain fixed sums,—the merchant and tradesman have done the same, but they have perhaps equal demands on others. The farmer trusts wholly to the sale of his produce; whatever, therefore, lowers the price of produce is injurious to him, without any corresponding benefit. The landlord will gain a great part of what the farmer loses, he will receive a greater real rent than he contracted for.

The landholder will be no loser, as the price of his produce will conform itself to the price of other commodities. Inasmuch as his taxes will be really increased in the same proportion as those of the farmer he will be a sufferer. But he cannot complain of injury—because, if the Bank had continued since 1797, to pay in specie as it had done before, he would not only now have to pay this amount of taxes but would have been obliged to do so for some years past. He has had an exemption which it would be unjust to continue to him.

Applying the principle which I have already noticed to the monied man, he must of course be greatly benefited by the restoration of the currency, as he stands in relation of creditor to all those with whom he has dealings. The rate of interest, it is true, is not affected by the increased value of the circulating medium, but the value of that interest is. He may receive in both cases 500l. for the use of 10,000l. but he will be sensible of the real increase of his revenue, by the fall in the prices of all the commodities which he consumes. He will, as well as the landholder and farmer, have increased taxes to pay, though the same nominal amount, but he will be amply compensated by the real increase of his income. He will re- gain by the restoration of the currency to its original standard, that portion of his revenue of which he has long been unjustly deprived, and which has been enjoyed by the issuers of paper money. The stock-holder and annuitant will, for the same reasons and in the same degree, be benefited.

The revenue will no doubt suffer some diminution, as an increase of 20 per cent. on all the existing taxes, can scarcely be paid without a considerable defalcation; in addition to which we must calculate on a deficiency in those taxes which are levied on the value of goods, such as many of the export and import duties,—the duty on houses by the rent,—the Income tax, and several others. It is certain that there will be a great deficiency in the amount of those taxes. But those who should, on account of these difficulties, contend for a continuance of the present system, should consider that a much less annual amount of loan and war taxes would be adequate to carry on the present expensive contest than what is now necessary. The loans and taxes being paid in a depreciated medium, and prices being affected in exact proportion to the depreciation, larger loans and larger taxes are requisite than what there would be, if the circulating medium were restored to its standard value. This is capable of an easy illustration. They should also consider that the longer the remedy is delayed, the more will the nation have ultimately to pay for it. We shall have to pay on every loan which may be raised, and on which the dividend shall hereafter be paid in standard currency, not only the interest really contracted for, but also the difference between the value of the dividends estimated in the present depreciated medium and their future value to which it is intended that they shall attain. This is a consideration of no trifling importance. Will it be contended that it would be wise and prudent to render the present system permanent?—Should such a plan be adopted, it is easy to foresee that we shall fare the fate of all those countries who have run the same ruinous course before us. It is impossible that a paper-money issuable by Government, or by a char- tered company, at pleasure, and which is not exchangeable for specie, at the will of the holder, can retain a permanent value. Its value must be constantly vacillating, and it is not difficult to foretell what the consequences must be of uncontrouled power remaining in the hands of the issuers of paper, whilst their interest and that of the public must necessarily be at variance.

R.

[1]Morning Chronicle, 6 Sept. 1810.

[1 ]Bullion Report, ‘Minutes of Evidence’, 8vo edition, p. 198.

[2 ]Misprinted ‘convenience’ in the Morning Chronicle.