- 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.
- 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
[ON SIR JOHN SINCLAIR’S ‘OBSERVATIONS’] BULLION REPORT
To theEditor of the Morning Chronicle.
I have read with attention the observations of Sir John Sinclair on the Report of the Bullion Committee, and am surprised that his ingenuity could not furnish him with any arguments against their conclusions, but such as have been again and again refuted.
It is not possible in the limits, to which, notwithstanding your indulgence, I must be confined, to point out all the false principles and uncandid statements with which the observations abound; neither would it be necessary, as the Bullion Report, though attacked, is itself an able, a satisfactory, and a conclusive answer.
Sir John takes much pains to inform us, that the increase of our commerce and of our public revenue require an additional amount of circulating medium. Who has denied it?— Did he suppose that the Bullion Committee would refuse its assent to this principle? But might they not have successfully contended, that if no increase of Bank Notes beyond such necessity had taken place, no depreciation could have occurred? That it is the excess above this amount, only, whilst the Bank possesses the confidence of the public, which causes depreciation.
Before 1797, when the Bank paid in specie, increased commerce, and increased taxation might have required, precisely as they do now, an addition to the circulating medium, which the Bank might have supplied with their notes without causing any depreciation in their value as compared with gold; but if they had refused or neglected to do so, the increased demand for money would have raised the foreign exchange above par, and the mint price of gold above the market price; or in more popular language, the market price of gold would have fallen below the mint price, and would have so continued till the Bullion Merchants had availed themselves of the advantage attending the importation of gold at the favourable exchange, and the subsequent coining of it into money, and thereby supplied the demand for currency. The exchange would then have been at or about par, and the market and mint prices of gold at the usual level. The paper given in to the Committee by Mr. Pearse, and on which Sir John rests his assertion, that it is proved [“]as a matter of fact, that there is no connection whatever between the amount of paper currency issued by the Bank of England, and the rate of exchange[”] , appears to confirm this reasoning. This paper attempted to prove, that “from January 1803, to the end of the year 1807, a period of not less than about four years, the amount of Bank Notes fluctuated from 16½ to 18 millions, and the exchange on Hamburgh varied from 32.10 to 35.6, becoming more favourable as the amount of Bank Notes increased.”
To which I answer, that no such additions could have been made in those years to the circulating medium, without lowering the foreign exchanges, and raising the price of Gold Bullion, if our increased commerce, and increased taxation, had not rendered an addition to the circulating medium necessary.
That this country has since 1797 greatly increased in wealth and prosperity, is not denied; but it cannot be justly estimated by a comparison of the nominal amount of our exports and imports, at that period and at this, because they are now estimated in a depreciated circulating medium. If the currency were now doubled, the nominal value of the exports and imports would double also, but some more solid proof would be required of the country having increased its wealth in the same proportion.
The difference of the rate of interest at which the loans have been raised, is an argument of much more weight.
Sir John informs us, on the authority of the Bullion Committee, that the exchange was greatly unfavourable to this country during the reign of King William, and that in consequence guineas were then as high as thirty shillings each. Here his information ends, but it would have been candid if he had added from the same authority, that at that period the silver coin (which was then the standard measure of value) was greatly debased, and Bank Notes were in excess. “At length,” says the Report, “the true remedies were resorted to: first by a new coinage of silver, which restored that part of the currency to its standard value, though the scarcity of money, occasioned by calling in the old coin, brought the Bank into streights, and even for a time affected its credit; secondly, by taking out of the circulation the excess of Bank notes.”
Sir John dwells with much complacency, in his own opinion, that coin or bullion ought to be considered merely as merchandize, being sanctioned by the authority of many respectable witnesses examined before the Committee. I cannot find this principle questioned in the Report, though when Sir John informs us, that under the influence of respect for the Report of the Committee, he provided himself with some gold on his journey from Edinburgh to London, but found that the depreciated currency was equally useful with the coin, he seems to have forgotten its value as merchandize, as in that state it would certainly have procured him a few additional luxuries on his journey.
Sir John accuses the Committee of recommending the exportation of at least 20 millions of goods, and the importation in return of bullion, the absurdity of which, he observes, is self-evident. I have in vain looked over the Report for any foundation for this charge. Such a measure might be necessary in the contemplation of Sir John, if the Bank paid in specie, but on the principles of the Bullion Committee, that the circulation is in excess, and the excess could well be spared, there could be no necessity for any material importation of gold. Their recommendation is to lessen the amount of the circulating medium, and not to exchange one currency for another. Neither do the Committee express any expectation that the exchange will be brought to par, when the Bank is open, by the exportation of bullion, but by a reduction in the amount of the circulating medium, which will increase its value, not only at home but in its relation to the value of the currencies of other countries. The assertion, therefore, “that there is a great fallacy in the argument that opening the Bank would improve the exchange by the exportation of bullion,” will not apply to the Report.
One of the advantages attending the increase of paper circulation is, according to Sir John Sinclair, that the interest for the use of money is thereby reduced. “Let us suppose,” he says, “the total circulation of Great Britain to be 40 millions sterling in coin and in paper, bearing an interest of 5 per cent.; if it were reduced to 30 millions, bearing an interest of 6 per cent. how much would not the industry of the nation be cramped? whereas, were it raised to 50 millions, bearing an interest of 4 per cent. and the whole of it actively employed in various industrious pursuits, it cannot be doubted, that the prosperity of the country would increase with a celerity, and be carried to a height, which would not otherwise have been attainable.” If this reasoning be just, how incalculable would the prosperity of the country become, if the Bank would increase their notes to 100 millions and lend them at 3 per cent.
If Sir John will take the trouble to consult the 4th chap. 2d book, of Dr. A. Smith’s celebrated work, he will there see it undeniably demonstrated, that the rate of interest for money is totally independent of the nominal amount of the circulating medium. It is regulated solely by the competition of capital, not consisting of money. The real amount of the circulating medium, with the same amount of commerce and confidence, must always be the same; it may, indeed, be called 100 millions, or 20 millions, but the real value of the one or the other sum must be the same. He will also see in the same work, that the power of “effecting lasting improvements, such as roads, canals, bridges, harbours, mines, buildings, &c. &c.” depends upon the real wealth and capital of the country, and can neither be accelerated or retarded by the amount of the circulating medium.
“Let us suppose,” says Sir John, “that the goods annually produced in the united kingdom are worth 100 millions sterling, per annum; if the quantity were increased one-fifth, and if the price were lowered in proportion, we should not, in a pecuniary point of view, be one farthing richer; and in regard to finance, the people at large would, in fact, be less able than before to furnish supplies to the Exchequer. Those who purchased goods cheaper, and consumed them, might, to a certain extent, be benefitted, and be enabled of course to pay more to the public; but all the various classes of the community, by whose industry the goods were made and brought to market, would not be able to pay near so much as they did before, and would necessarily be impoverished.”
2. “Let us next suppose,” says Sir John, “that the quantity of goods remains the same, but that the price increases onefifth. The amount of the annual income of the nation would then rise from 100 to 120 millions in value, and there would be a much larger fund for paying the demands of the public.”
That is to say, that a country which by its industry adds one-fifth to the annual produce of her land and labour becomes less capable of contributing to the exigencies of the state.
It would, to me, appear that if the prices of commodities be increased a fifth, a greater nominal revenue might possibly be levied on the people, but as the money raised would be expended by Government in the purchase of commodities which had also increased a fifth in price, no considerable advantage would attend this ingenious experiment.
Nothing is wealth, according to these principles, but money, a doctrine which has been before maintained, but ably refuted by Dr. Adam Smith. It was reserved for this writer to contend not only that money is exclusively wealth, but paper money depreciated to any possible extent. How inexhaustible are our resources! Is it by such arguments that the reasoning of the Bullion Committee is to be overturned?
I am, Sir, &c.