- 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 MR RANDLE JACKSON’S SPEECH] BULLION REPORT
To theEditor of the Morning Chronicle.
Permit me, Sir, through the medium of your Paper, to make a few remarks on the speech of Mr. Randle Jackson, delivered at the Bank Court on Thursday last, on the subject of the Report of the Bullion Committee.
I cannot help lamenting, that those who differ from the Report, should endeavour, by every means in their power, to impress on the public mind, that the question in dispute is a party question, and that in this attempt they should have received the sanction of Mr. Jackson. If ever there was a question, which, from its importance, peculiarly required to be considered on its own merits only, it is the present state of our currency, connected as it necessarily is with the best interests of the community.
When the Hon. Proprietor commenced his speech, I hoped he would have discussed it as a subject of science, admitting of clear and obvious deductions from the known principles of political conomy. I anxiously waited for his proofs of the fallacious propositions with which he stated the Report abounded—I expected that he would have grappled with some of its leading principles—have traced them to their source—detected their errors and exposed their sophistry. I expected that he would have favoured us with his own theory on the subject of money, adorned by all the graces of his eloquence, and supported by such authorities as must have commanded respect and attention. I expected, in short, to have quitted the Court enlightened and informed on a subject which possesses peculiar interest to me; but, Sir, these expectations were not to be realized; I was doomed to listen to an unmeaning attack on what was called the party spirit which dictated the Report, and to a repetition of the worst of the erroneous opinions which were delivered in evidence to the Committee, and which the Report itself has so ably confuted.
One of the first observations made by Mr. Jackson was, that the Committee had reported contrary to the evidence. He of course did not mean to charge them with any misstatement of facts, but of drawing conclusions directly contrary to the opinion given by the gentlemen whom they examined. As the evidence were not unanimous in their opinion, as the respectable authority of the late Sir F. Baring was with the Committee, they would have been equally liable to this charge on whichever side they had reported. This censure the Committee had no means of avoiding. The charge in fact means, that they erred in not agreeing with the opinions of the Bank Directors. Now, Sir, this is the feature in the Report which, I think, is its peculiar recommendation; —it has demonstratively proved that those opinions were founded on false principles, and has, I hope, for ever, rescued us from their further and fatal influence. It is to be regretted, that truth is but slow in its progress; but it will not fail ultimately to triumph. We may be deprived for a time of the beneficial efforts of the labours of the Bullion Committee, but the true principles of currency, developed in their Report, can happily never be stifled. Did Mr. Jackson mean to contend, that the Committee were not to exercise their judgment on the facts laid before them, but that they were bound to report the opinions of others? To what consequences would not such an opinion lead? Merchants may understand the details of business—they may give much useful information; but it does not therefore follow that they are qualified to give sound opinions on points of theory and science. Glass-makers and dyers are not necessarily chemists, because the principles of chemistry are intimately connected with their trades.
If it be true “that it is impossible that any greater aspersion could be thrown on the Bank, than that it was they who had increased the price of the necessaries of life,” I fear they must continue to suffer under it, notwithstanding the defence made for them by Mr. Jackson. “But what is meant,” he asks, “by an excessive issue, to which these high prices are imputed?” —Though this question has been often answered, I will again endeavour to satisfy it, and for that purpose will avail myself of the assistance of Dr. Adam Smith.
“Let us suppose,” says that writer, “that the whole circulating money of some particular country, amounted, at a particular time, to one million sterling, that sum being then sufficient for circulating the whole annual produce of their land and labour. Let us suppose too that some time thereafter different banks and bankers issued promissory notes, payable to the bearer, to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands. There would remain, therefore, in circulation eight hundred thousand pounds in gold and silver, and a million of bank notes, or eighteen hundred thousand pounds of paper and money together. But the annual produce of the land and labour of the country had before required only one million to circulate and distribute it to its proper consumers, and that annual produce cannot be immediately augmented by those operations of banking. One million will therefore be sufficient to circulate it after them. The goods to be bought and sold being precisely the same as before, the same quantity of money will be sufficient for buying and selling them. The channel of circulation, if I may be allowed such an expression, will remain precisely the same as before. One million we have supposed sufficient to fill that channel. Whatever, therefore, is poured into it beyond this sum cannot run into it, but must overflow. One million eight hundred thousand pounds are poured into it, 800,000l. therefore, must overflow that sum, being over and above what can be employed in the circulation of the country. It will, therefore, be sent abroad, in order to seek that profitable employment which it cannot find at home. But the paper cannot go abroad, because at a distance from the Banks which issue it, and from the country in which payment of it can be exacted by law, it will not be received in common payments. Gold and silver, therefore to the amount of eight hundred thousand pounds, will be sent abroad, and the channel of home circulation will remain filled with a million of paper, instead of a million of those metals which filled it before.”
So far there is no excess, but if, as is the case in this country, the Bank should be protected from paying its notes in specie, and should increase their issues to 1,200,000l, I should call the 200,000l. excessive. It could not, as formerly, over- flow and be exported, because every part of the currency consisted of paper, it must therefore either enlarge the channel of circulation, raising in the same proportion the prices of all commodities, not excepting gold and silver bullion, or it must, as is contended by the Bank Directors in their evidence before the Committee, return to them in the payment of bills discounted, as no one would consent, they say, to pay interest for 200,000l. which was superfluous and excessive. Here then the whole dispute rests, and Mr. Jackson should have exercised his talents in defence of this main prop of the Bank Directors.
If this falls, and it be proved that the 200,000l. will remain in circulation, and admits of being increased to two millions, or any other amount, all the ingenious reasoning of Mr. Jackson on the hardship to which the Bank will be subjected, by a repeal of the Restriction Bill, in being obliged to purchase gold bullion, not only at the present high price, but at any advance which the avarice of the dealers in bullion will add to it, must fall with it—as it will then appear evident that the Bank have the power of raising or falling, at their pleasure, not only the prices of bullion, but of every other commodity for which their notes are exchangeable.
In defence of my opinion, that the channel of circulation admits of indefinite enlargement, I have the authority of historical facts, the discovery of the mines of America must at least have trebled the amount of money. This increased amount of circulating medium, according to Dr. Smith, could have had no effect on the rate of interest for money. In the 4th chapter of the 2d book of the Wealth of Nations, to which I, in my last letter referred, it is demonstrated that the rate of interest depends on the rate of profits, which again is totally independent of the nominal amount of the circulating medium. Admitting this fact; if profits be high, and the Bank is willing to lend at a low interest, can there be any conceivable number of Bank Notes which may not be applied for? Let us suppose that the Bank had a mine of gold on its own premises and that England were insulated from all other countries—might they not have their gold coined into guineas and discount bills with them to an indefinite amount? Where is the difference in the present case? our currency is insulated from all others, and may, by the same rule, be indefinitely increased. But the Bank never discount bills, but such as are for bona fide transactions.—Suppose A. to sell a hogshead of sugar to B. and draw a bill for its value at two months;— suppose further, that B. sells the sugar to a grocer either in London or the country, and to draw another bill at two months, are not these both bona fide transactions? And will not the Bank discount both bills? Can it be seriously contended that these are checks which will keep the currency within proper limits.
It is observed by Dr. Adam Smith, “that the whole paper money of every kind which can easily circulate in any country, never can exceed the value of the gold and silver, of which it supplies the place, or which (the commerce being supposed the same) would circulate there if there were no paper money.”
Let us try our circulation by this test. Let it be supposed possible that the Bank of England, and the Country Banks, could pay every note in circulation with specie, could the whole be kept in circulation? No; the excess would at the present exchange go abroad as bullion, and there seek a better market.
This is admitted by the Directors and their defenders. The circulation of England, therefore, according to Dr. Smith’s rule, is excessive, because it exceeds the quantity of gold and silver of which it supplies the place, and which would circulate there if there were no paper. “But the Bank has been surprisingly parsimonious in their issues,” says Mr. Jackson; “they have not, since 1797, exceeded their average issues more than 7 millions, whilst the Country Banks have increased theirs 20 millions.” So then it is allowed, that the town and country issues have been increased 27 millions; and yet we are gravely asked, what is meant by excessive issues? and it is deemed an aspersion of the character of the Bank, who have the power of regulating the amount of the country currency, because they are accused of being the cause of the high price of provisions, and of the other necessaries of life.
The Bank might make a simple experiment, by which the soundness of the principles on which the Bullion Report is founded might be fairly tried. Let them withdraw one million of notes from circulation, and if in three months no effect should thereby be produced on the price of bullion and the rates of exchange, they may then fairly exult in the justness of their views.
Mr. Jackson thinks the Directors blameless because they have to receive eighteen millions of the public, whilst the amount of their notes does not exceed twenty millions; he informs us that the Bank could raise the remaining two millions in half an hour, if it were wanted. This would be a good argument to prove the solvency of the Bank, of which no man doubts, but is of no avail against the accusation of an excessive currency. The same might be urged if 100 millions of Bank notes were in circulation and 98 had been issued in discounts. What again can the fact of the public participating in the profits of the Bank have to do with the question at issue?
Most willingly do I agree with Mr. Jackson in the just tribute which he paid to the disinterestedness and integrity of the Bank Directors; but I can go no further with him, and must deny them the character for ability and discretion, which he also bestows on them. But if men less scrupulous had been in the Direction, they might, with the power which they possessed, have alternately raised and depressed the price of Bullion, by the increase or diminution of their notes, and might either in their corporate or individual capacities have taken advantage of the successive variations.
I do not recollect that any of the Merchants in their evidence stated, as Mr. Jackson asserts, that the price of Bullion has no influence on foreign exchanges; neither was he correct in his statement, that in the year 1797, when the price of Bullion was very low, the exchange upon Hamburgh was, as now, 38 and a fraction.
This, which he considers as a strong instance against the opinion of the Committee, was unfortunately chosen, the fact being directly otherwise. The price of bullion is now high, and the exchange is proportionally low, being at31.6. and not at 38. I believe Mr. Jackson can bring no proof of a high price of bullion being unaccompanied by a low exchange—and a low price of bullion by a high exchange. But, Sir, the Report is the best antidote to these attacks—if that be but read I shall not fear the result, as it cannot fail to carry conviction to every unprejudiced mind.
I am, Sir, &c.
Reply to Mr. Bosanquet 1811 edition.