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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

chapter ii

Mr. Bosanquet’s alleged Facts, drawn from the History of the State of Exchange, considered.

section i

Exchange with Hamburg.

The first position controverted is, “That the variations of the exchange with foreign countries can never, for any length of time, exceed the expense of transmitting and insuring the precious metals from one country to the other.”1

Can this be called a theoretical opinion, now brought forward for the first time? Has it not been sanctioned by the writings of Hume and Smith? and has it not been undisputed even by practical men?

Mr. , in his evidence before the Bullion Committee, observes, “that the extent to which the exchange can fall is the charge of transporting Bullion, together with an adequate profit to the risk the transporting such specie is liable to.”2

Mr. A. Goldsmid “never recollected the exchange to have differed more from par than 5 per cent. before the suspension of cash payments.”3

Mr. Grefulhe stated, “that since he had been in business he recollected no period prior to the suspension of the cash payments by the Bank, when the exchange was considerably below par.”4

The same opinions were given by many practical men before the Lords Committee in 1797.

But in opposition to all these opinions, Mr. Bosanquet has facts which he boldly thinks will prove the unsoundness of the doctrine. “In the years 1764 to 1768,” he observes, “prior to the recoinage, when the imperfect state of the coins occasioned gold to be 2 to 3 per cent. above the mint price, the exchange with Paris was 8 to 9 per cent. against London,—at the same time the exchange with Hamburgh was, during the whole period, 2 to 6 per cent. in favour of London; here appears, then, a profit of 12 to 14 per cent. for the expense, in time of peace, of paying the debt to Paris with gold from Hamburgh, which must have exceeded the fact by at least 8 or 10 per cent.; and it is worthy of remark, that the average exchange with Hamburgh, for the years 1766 and 1767, of 5 per cent. in favour of London, added to the1 2 per cent. the price of gold above the mint price constituted a premium of 7 per cent. on the importation of gold into England, or, deducting 1½ per cent. for expenses in time of peace, a net profit of 5 per cent, yet the exchange was not rectified thereby. Again, in 1775, 6, and 7, after the recoinage, we find the exchange on Paris 5, 6, 7, and 8 per cent. against London in time of peace, when half the amount would have conveyed gold to Paris, and one- fourth have paid the debts of Paris at Amsterdam.

“In the years 1781, 2, and 3, being years of war, the exchange was constantly from 7 to 9 per cent. in favour of Paris; and, during this period, gold was the common circulation of this country; and the Bank was compelled to provide it for the public at the mint price. It has been already shewn how little effect the precious metals produced towards equalising the exchange with Hamburgh during the years 1797 and 1798; and another instance may be adduced in the years 1804 and 1805, when the Paris exchange varied from 7 to 9 per cent. in favour of London.

“In every case here cited, the fluctuations of the exchanges greatly exceeded the expense of conveying gold from one country to the other, and to a much greater degree in most of them than in the present instance; the circumstances of the times were, it will readily be admitted, more favourable to intercourse on those occasions than they now are, and the state of metallic circulation afforded facilities not now experienced here. Yet, under all these advantages, the principle assumed by the Committee was not operative, and cannot therefore be admitted as a solid foundation for the superstructure of excess and depreciation attempted to be raised upon it.”1

If the facts had been as here stated by Mr. Bosanquet, I should have found it difficult to reconcile them with my theory. That theory takes for granted, that whenever enormous profits can be made in any particular trade, a sufficient number of capitalists will be induced to engage in it, who will, by their competition, reduce the profits to the general rate of mercantile gains. It assumes that in the trade of exchange does this principle more especially operate; it not being confined to English merchants alone; but being perfectly understood, and profitably followed, by the exchange and bullion merchants of Holland, France, and Hamburgh; and competition in this trade being well known to be carried to its greatest height. Does Mr. Bosanquet suppose that a theory which rests on so firm a basis of experience as this can be shaken by one or two solitary facts not perfectly known to us? Even should no explanation of them be attempted, they might safely be left to produce their natural effects on the public mind.

But before the reasoning of the Committee can be proved defective by Mr. Bosanquet’s facts, we must examine the source from whence those supposed facts are derived.

Mr. Bosanquet tells us that1 “there is annexed to Mr. Mushet’s pamphlet a table, shewing, 1st, the rate of exchange with Hamburgh and Paris for 50 years past, and how much it has been, in each instance, above or below par.

2d, “The price of gold in London, and a comparison of this price with the English standard or mint price.

3d, “The amount of Bank notes in circulation, and the rate of their assumed depreciation, by a comparison with the price of gold.”2

Now the accuracy of these tables must be admitted or proved before the conclusions, which result from the inspection of them, can command assent;—but so far from this being the case, their accuracy is disowned by Mr. Mushet himself, who, in the second edition of his pamphlet, acknowledged the false principle upon which his first tables were calculated, and has given us a new and amended set.

The following notice accompanied the second edition of Mr. Mushet’s pamphlet:3 “In the first edition of this work I stated the par of exchange with Hamburgh at 33 schillings and 8 grotes, and at that considered it as a fixed par; from the best information which I have been able to obtain upon ’Change since, 34.11¼ are considered as the par, and in the present edition I have stated it as such. I have also corrected the mistake of considering the par to be fixed; because gold being the standard of the money of England, and silver in Hamburgh, there can be no fixed par between those two countries; it will be subject to all the variations which take place in the relative value of gold and silver. For example, if 34 schillings 11 grotes and ½ of Hamburgh currency be equal in value to a pound sterling, or of a guinea, when silver is 5s. 2d. per oz., they can no longer be so when silver falls to 5s. 1d. or 5s. per oz., because a pound sterling in gold being then worth more silver, is also worth more Hamburgh currency.

“To find the real par, therefore, we must ascertain what was the relative value of gold and silver when the par was fixed at 34.11¼, and what is the relative value at the time we wish to calculate it.

“For example, if the price of standard gold was 3l. 17s. 10½d. per oz. and silver 5s. 2d. an ounce of gold would then be worth15.07 ounces of silver, being the mint proportions; 20 of our standard shillings would then contain as much pure silver as 34 schillings 11 grotes and ¼; but if the ounce of gold was 3l. 17s. 10½d., and silver 5s. (which it was on the 2d January, 1798) the ounce of gold would then be worth 15.57 ounces of silver. If 1l. sterling at par, therefore, be worth 15.07 ounces of silver, then at 15.57 it would be at 3 per cent. premium; and 3 per cent. premium on 34.11¼ is 1 schilling 1 grote and , so that the par, when gold is to silver as 15.57 to 1, will be 36 schillings 1 grote and .

“The above calculation will be more easily made by stating as follows:

As 15.07 : 34.11¼ :: 15.57 : 36.”1

As it is universally admitted, that gold is the standard measure of value in this country, and that silver performs the same office at Hamburgh, it is evident that no tables can be correct which assume a fixed invariable par. The true par must vary with every variation in the relative value of the two metals.

There are some objections, however, which I have yet to offer against the perfect accuracy of Mr. Mushet’s present tables.

In the first place, he has taken the par of silver against silver too low; he has calculated on the information which he had received, that 20 standard shillings in silver contained as much of that pure metal as thirty-four schillings and 11¼ grotes; but it appears by Dr. Kelly’s table (Bullion Rep. page 207),1 that by actual assay, as well as by computation, 20 shillings are of equal value with 35 schillings and 1 grote. This difference amounts to little more than ⅜ per cent.; and I have only noticed it because I think it highly desirable that we should be able, at all times, to ascertain the true par.

Secondly, Mr. Mushet has calculated the degree in which the exchange was above or below par by a reference to the prices which he has quoted from Lloyd’s list. Now, invariably have those prices been for bills at 2½ usances, and as the par of exchange is computed from a comparison of the actual value of the coins of the two countries, payable at the same time in both, and not in one of them at the end of 2½ months, an allowance for interest must be made for this period, which will amount to about 1 per cent.*

A deduction of 1⅜ per cent. must therefore be made from the column for the favourable exchange to England in Mr. Mushet’s tables.1

There are also, in all calculations on the true par of exchange, other sources of error, some of which will be presently noticed; so that it is not possible to ascertain with perfect accuracy, unless all those facts were before us, the actual difference which at any time existed between a remittance by bullion, and by the purchase of a bill.

To Mr. Mushet’s amended tables, thus corrected, I am willing to submit the truth of the principle now disputed. It will then appear, that at no period since 1760 has the exchange with Hamburgh been more in favour of England than 7 per cent., with one exception only; and the reader will not be surprised that there should have been such an exception, when he learns that it was in the memorable year of 1797, just after the suspension of cash payments at the Bank. At this period the currency of this country was reduced particularly low; the amount of bank notes in circulation being less than it had been for ten years preceding. That, under such circumstances, the exchange should have become favourable to England, and, consequently, that there should have been large importations of bullion, is entirely conformable with the principle of the Bullion Committee, and confirms the efficacy of the remedy which they have proposed. A great circulation of paper, and a too abundant currency, are stated by them to be the causes of the present nominally low exchange, and they confidently predict, that a reduction of its quantity will, as in the year 1797, raise the exchange, and by that means render the importation of bullion profitable. That this favourable exchange did, in the year 1797, produce an immense importation of gold can, by indirect evidence, be amply proved. The amount of foreign gold coined in his Majesty’s mint was,

But, it will be asked, how do those who contend that the exchanges of a country cannot, for any length of time, be either highly favourable, or highly unfavourable, account for the exchange with Hamburgh being permanently in favour of England for two or three years?

This was the case, Mr. Bosanquet observes,1 during the years 1797 and 1798, and he affirms that the precious metals produced little effect in equalising the exchange. It appears by Mr. Mushet’s amended tables (always corrected by the 1⅜ per cent.) that, during those years, the exchange was favourable to England, and fluctuated from 5.6 to 4.3 per cent. But the principle I understand to be this, that no country can, for any length of time, have the exchange highly favourable or highly unfavourable, because it supposes either such an increase on the one hand in her stock of money and bullion, or on the other such a diminution in that stock, as would destroy that equilibrium in the value of the currencies of countries which they naturally have a tendency to find.

The assertion is true when applied to the exchanges in general of any country, but is false if the rate of her exchange with one country only be considered. It is possible that her exchange with one particular country may be permanently unfavourable, in consequence of a continued demand for bullion, but this by no means proves that her stock of coin and bullion is decreasing, unless her exchange should be also unfavourable with other countries. She may be importing from the north the bullion which she is exporting to the south —she may be collecting it from countries where it is relatively abundant, for countries where it is relatively scarce, or where, from some particular causes, it is in particular demand; but it by no means follows, as an undeniable consequence, that her own stock of money shall be reduced below its natural level. Spain, for example, who is the great importer of bullion from America, can never have an unfavourable exchange with her colonies; and as she must distribute the bullion she receives amongst the different nations of the world, she can seldom have a favourable exchange with the countries with which she trades.*

Applying then these principles to the state of our exchange with Hamburgh, in 1797 and 1798, we shall observe, that it was not in consequence of what is usually termed a balance of trade that the exchange was permanently favourable to England; it was not because Hamburgh had contracted a debt to us for the balance of commodities which she had imported, that she was necessitated to pay us in gold and silver bullion, but because she could advantageously export bullion in the same way as any other commodity, in consequence of an unusual demand for that article in England. This demand proceeded from two causes: First, from the unusually low amount of our currency; secondly, from the exportation of silver to Asia by the East India Company.

In consequence of the first of these causes, and of the immense amount of guineas which at that period had been withdrawn from circulation, for the purpose of hoarding, by timid people, we have already seen that the foreign gold coined into guineas, during those years, amounted to no less a sum than 5,200,000l. Here then was a demand for gold unprecedented in the history of the Mint, and of itself abundantly sufficient to account both for the high exchange, and the length of time which it continued. It is a practical illustration of the truth of a most satisfactory theory.

To this however must be added, the demand for silver bullion in consequence of the exportation of the East India Company. It appears, by the account delivered to the Bullion Committee, (No. 9.) that the whole amount of foreign silver coin, exported by the Company on their own account, as well as on account of private persons, amounted

From this time the exportation of silver to the East Indies was considerably reduced, and has now almost wholly ceased. Thus then it appears, that a high exchange was followed by an unusually great importation of bullion, and that when that demand ceased the exchange regained its natural level. On a further inspection of the table, it will appear, that in proportion as the amount of Bank notes increased, the exchange became depressed, and was in 1801 more than 11 per cent. against

England; and at the same time the price of gold bullion rose to 4l. 6s.—more than 10 per cent above the mint price.*

It must be confessed, that from September 1766 to September 1767, the exchange continued permanently in favour of England from 7.4 to 6.8 per cent.; and from that period to September 1768 it continued generally favourable above 3 per cent.; but what circumstances in the situation of Europe might then have made it profitable for England to become the agent in collecting bullion from Hamburgh for some other country, it is not now material to enquire. Of this I am fully assured, that, if all the circumstances were fairly before us, it might be satisfactorily explained.

But whether explained or not explained, it proves nothing in favour of Mr. Bosanquet’s theory (for theory Mr. B. has just as much as the Committee);—it only proves that the precious metals might continue to be imported from one quarter while they were exported to another; which the theory of the Committee not only allows but requires. To prove any thing in favour of Mr. B.’s theory, it must be proved that the precious metals came in permanently in greater proportion than they went out; not from one place only, but from all places taken together.

The following considerations go a certain way in accounting for the phenomena which have misled Mr. Bosanquet: the tables of Mr. Mushet are calculated on a comparison of the relative value of silver with bar gold. Now bar gold is generally 2or3s. per ounce worse in price than gold in coin; and, therefore, if the gold imported be intended for re-exportation, the true par will differ from 2 to 3 per cent, according as the calculation is made by reference to coined or to bar gold.*

When money is wanted for our own circulation I do not object to the calculation of the true par of exchange being made, on a comparison of the relative value of the silver of the foreign country with the value of standard gold bars in this; but in that case there must be added to the amount of expences attending the transportation of the silver, the interest which the purchaser of gold will lose, during the detention of the gold in the Mint whilst coining into money. The natural destination of a great part of all the bar gold is to some of the Mints of Europe, as it is in the state of coin only that gold can be made productive of interest to the owner. In comparing, therefore, the value of the currency of one country with the value of bullion in another, we must not leave out of our consideration the trifling superior value which coin bears above bullion in the importing country. Thus, if a merchant in Hamburgh were indebted 1l. sterling to a merchant in England, and should export to England as much silver as would purchase the quantity of gold contained in 1l., he would not be able to discharge his debt till the gold were manufactured into coin. In addition, then, to his other expences, the interest which he would have to pay to his creditor till the coin was returned to him would enter into his calculation at the time that he was making a comparison of the advantages which would attend either the purchase of a bill, or the remittance of bullion.

This loss of interest the Bullion Committee have estimated at one per cent.1

If these principles are correct, there must be deducted from the favourable Hamburgh exchanges of Mr. Mushet’s tables 1 per cent. more than we have already stated when the bullion is wanted for our own coin, and from 2 to 3 per cent. when it is required for re-exportation. It is also necessary to observe, that the relative value of gold to silver is constantly varying in all countries, though always tending in all to an equality of value; and that the test of our currency being depreciated is more certainly proved by the high market price of bullion than by the low exchanges.*

section ii

Exchange with Paris.

Having thus examined the objections made by Mr. Bosanquet to the conclusions of the Committee, as far as the exchanges with Hamburgh are concerned, I shall now proceed to consider the circumstances which appear to him to be at variance with the principle I am defending, in the account of the exchanges between this country and Paris.

In the consideration of the par of exchange with Hamburgh, the principle on which it is calculated is easy and simple, not so that with Paris. The difficulty proceeds from this—that France as well as England has two metals, gold and silver, in circulation, both of which are legal tender in all payments.

In my former publication1 I endeavoured to explain the principles which appeared to me to fix the standard measure of value in a country where silver and gold are both in circulation, and both a legal tender.

Lord Liverpool supposed,2 that when gold became the standard measure of value in this country, it arose from some capricious preference of the people to gold; but it can, I think, be clearly proved that it was caused entirely from the circumstance of the market value of silver relatively to gold having become greater than the Mint proportions. This principle is not only most fully admitted, but also most ably illustrated by his lordship.

The Mint will coin an ounce of gold into 3l. 17s. 10½d. of gold money, and they will also coin 15.07 ounces of silver into the same amount of silver money. What is it, then, that determines the Bank or any individual to carry an ounce of gold in preference to 15.07 ounces of silver to the Mint to be coined, as they are both by law equally useful to discharge a debt to the amount of 3l. 17s. 10½ d.? No other consideration but their interest. If 15.07 ounces of silver can be purchased for less than an ounce of gold, silver will be coined; and if an ounce of gold can be procured for less than 15.07 ounces of silver, gold will be taken to the Mint for that purpose.

In the first case silver will become the measure of value, in the second, gold.

Now as the relative market value of these metals is subject to constant variation, gold or silver may alternately become the standard measure of value. Since the recoinage of silver, in the reign of King William, an ounce of1 gold has almost uniformly been of less value than 15.07 ounces of silver, and consequently gold has, since that period, been the standard of value in this country. In the year 1798 the coinage of silver was altogether prohibited by law. Whilst that law remains in force gold must necessarily be the standard measure, whatever may be the variations in the relative value of the two metals.*

Whichever metal is the standard measure of value, it will also regulate the par of exchange with foreign countries, because it will be in that metal, or in paper currency representing that metal, that bills will be paid.

In France there are also two metals in circulation, and both legal tender to any amount. The relative value of gold to silver in the coins of France, previously to the Revolution, was as 15 to 1 (Bullion Report, No. 59.), and is now 15½ to 1;—but we are informed by a letter of Mr. Grefulhe to the Bullion Committee (No. 56.), that in 1785 an alteration had been made in the number of louis which were coined from a marc of gold, that number having been increased from 30 to 32. Previously to 1785, therefore, gold must have been valued in the French Mint somewhere about 14 to 1. For the same reasons that the standard of value was subject to change from gold to silver, and from silver to gold in England, it would also be subject to do so in France. When the relative value of gold to silver was under 14 to 1, gold would have become the standard measure of value in France, and consequently the rate of exchange with England would have been estimated by a comparison of the gold coins of the two countries. When above 14 and under 15.07 to 1, gold would have been the standard in England, and silver in France, and the exchange rated accordingly. The par would then have been fixed by a comparison of the gold of England with the silver of France. And when the relative value was above 15.07 to 1, silver would have been the standard in both countries. The exchange would then have been rated in silver. But after 1785, when the Mint valuation of the metals was altered in France, and became nearly the same as that of England, the par of exchange would have been reckoned either in gold or in silver in both countries.

I have already observed1 that, to compare the amount of deviation of the exchange from par with the expences of transmitting the precious metals from one country to the other is not sufficient to prove that such trade would be profitable, we must also consider what the price of bullion is in the country to which it is transmitted, or the amount of expence which would be incurred in procuring the bullion to be coined into money. In this country no seignorage is charged. If an ounce of gold or silver is carried to the Mint, an ounce of coined money is returned. The only inconvenience therefore that an importer of bullion can experience in receiving bullion from abroad, instead of the money of England, is the delay during its detention at the Mint, and which the Bullion Committee have valued at 1 per cent.1 One per cent. appears, therefore, to be the natural value of English coin above bullion, provided the coin be not debased, and the currency be not excessive. But in France the seignorage, according to Dr. Smith, amounted to no less than 8 per cent., besides the loss of interest during its detention at the Mint. And we have his authority too, that no sensible inconvenience resulted from it* .2 An ounce of gold or silver coin was in France, therefore, of more value by 8 per cent. than an ounce of gold or silver bullion. It results from these facts that no bullion could have been imported into France, unless there was not only a profit equal to the expences attending its importation, but a further profit of 8 per cent., the par of exchange being calculated not on the value which the coin actually passed for in currency, but on its intrinsic value as bullion*

To make this appear more evident, let us suppose that the exchange with London was, as Mr. Bosanquet informs us,1 8 per cent. in favour of France, in the year 1767, and that at the same time it was 6 per cent. in favour of London with Hamburgh, and that the expences of sending gold from Hamburgh to Paris were no more than 1½ per cent. Will it not be cheaper, he asks, by 12½ per cent. to pay the debt at Paris, by sending the gold from Hamburgh† , than by remitting a bill? I answer, No; because, when the gold arrives at Paris, it must either be coined into money, or sold as bullion. If it be coined into money, 8 per cent. must be paid to the Mint; if it be sold as bullion, it will sell at 8 per cent. under the Mint price.‡ The profit then, if all the other calculations be correct, will be reduced from 12½ to 4½ per cent. But they are not correct, being subject to further deductions from the causes already stated.

Keeping these principles in view, it will, I believe, appear, that the exchange with Paris was in favour of England during a great portion of the four years, from 1764 to 1768, and at all the other periods mentioned by Mr. Bosanquet.

I cannot help here observing, that it must excite astonishment, that a British merchant should seriously believe it possible, that, in time of peace, a net profit, after paying all expences, of from 10½ to 12½ per cent. should have been made by the exportation of gold from Hamburgh to Paris during four years; —a profit, which, from the quick returns, would have enabled any person engaging in such undertakings to have cleared more than 100 per cent. per ann. on the capital employed; and that too in a trade, the slightest fluctuations of which are watched by a class of men proverbial for their shrewdness, and in which competition is carried to the greatest extent. For any man to compare the account of the Hamburgh exchange, and of the Parisian, and not to see that the accounts were incorrect, that the facts could not be as so stated, is very like a man who is all for fact and nothing for theory. Such men can hardly ever sift their facts. They are credulous, and necessarily so, because they have no standard of reference. Those two sets of supposed facts, those in the Hamburgh exchange on the one hand, and those in the Parisian on the other, are absolutely inconsistent, and disprove one another. That facts such as these should be brought forward to invalidate a theory, the reasonableness of which is allowed, is a melancholy proof of the power of prejudice over very enlightened minds.

section iii

Supposed Fact of a Premium on English Currency in America—favourable Exchange with Sweden.

The next point on which I wish to make a few observations, is that first mentioned by Mr. Grefulhe,1 and now brought forward by Mr. Bosanquet. I allude to the premium which it is asserted was given in America, in hard dollars, for the depreciated currency of England. I have examined this fact with the greatest attention, and to me it appears evident; first, that the price which was called a premium of 9 per cent. given for a bill upon England was really a discount of 3¼ per cent.; and secondly, that at that price it was a cheaper remittance than if the dollars with which the bill was bought had been exported.

The par of exchange with America is reckoned in dollars; the par is called 4s. 6d. sterling for a dollar, consequently,444.4 dollars ought to contain as much pure silver as 100l. sterling. But this is not the fact. An American dollar, according to the mint regulation of America, ought to weigh 17 dwt. 8¼ grains, and is 8 dwts.2 worse than English standard silver; consequently, the value of an American dollar in our standard silver is 4s. 3¾d. According to this value, 463.7 dollars is the true par for 100l. of our English silver currency; but we are comparing the dollars of America with the pound sterling of England, which is gold, therefore, the true par for 100l. sterling at the relative value of dollars and gold in May 1809, the period alluded to, was 500 dollars. Now for a bill of 100l. on London, bought with dollars in America at the highest exchange that year, viz. 109, no more was paid than 484 dollars; it was therefore purchased at 3¼ per cent. under the real par.*

It should be recollected that the embargo laws were at that time most strictly enforced; that captains of packets were obliged, before they were permitted to proceed on their voyage, to swear that they had no specie on board; and on one occasion one of these captains was obliged to re-land the specie which he had smuggled on board his vessel. At the same time the rate of insurance was immoderately high, and a premium of 8 per cent. was paid on a few ships which broke the embargo, the underwriters being guaranteed too from the loss which would have attended their seizure by the American government. Now 8 per cent. insurance, besides commission, freight, and other expences, together with 3¼ per cent., the actual dis-count of the bill bought, would, perhaps, not be much under the discount which then existed on our paper currency; so that our depreciated paper was not bought at a premium for hard dollars, but was bought at a discount, and at its actual value.

But we are told1 the exchange with Sweden is favourable to England, and that the currency of Sweden is regulated in a manner precisely similar to ours, the Bank not issuing specie whenever the exchange becomes unfavourable. There is no doubt a perfect agreement in the two cases, and for that reason they are followed by similar effects, and the depreciation of both currencies requires the same remedy. This remedy is a diminution in the amount of the circulating medium, either by the exportation of the coins, or by a reduction of Bank paper. If the exchange with Sweden is, as stated, 24 per cent. in favour of London, it proves only that the excess of paper currency not convertible into specie is, in Sweden, proportionably greater than in England.*

section iv

A Statement, concerning the Par of Exchange, by the Bullion Committee, examined.

Having now considered every fact, or supposed fact, advanced by Mr. Bosanquet on the subject of the exchange, with a view to prove that the principle which the Committee have avowed, namely, that the variations in the exchange with foreign countries can never exceed for any length of time the expence of transporting and insuring the precious metals; having proved the conclusion to which the writer would lead us to be unsupported by his facts, of which not one is, as I think, at variance with the principle of the Committee; I must beg leave to point out an error in the report itself, an error on which Mr. Bosanquet founds his opinion, that all remedy may safely be delayed.

“Thus, then,” says Mr. Bosanquet,1 “it appears that, on a full admission of all the principles adopted by the Committee, and of their application to the present case, the foreign exchanges were at the time when the report was presented, and for three months prior thereto, about 2 per cent. below the natural limit of depression.”

“It will probably be thought that the question, as a practical question of national importance, is altogether at rest.—That there is no necessity, at least, for the adoption of hasty remedies, even though the correctness of the general reasoning of the Committee should, on full enquiry, be conceded.”

When the exchange is admitted to be exceedingly depressed, we are told that to oblige the Bank to pay in specie would be attended with the most dangerous consequences; that we must wait till the exchange becomes more favourable; and when it is supposed to have risen within 2 per cent. of its natural limit, then we are again desired to pause, because it is no longer a question of national importance. By this mode of reasoning, a motive may be found for refusing ad infinitum to renew the payments of the Bank. I confidently hope that no such fallacious reasoning will be listened to; that we shall at last open our eyes to the dangers that beset us,—that we shall examine coolly and decide manfully.

The principle upon which Mr. Mushet’s amended tables are constructed has been most fully admitted, and most correctly and concisely stated in the Report (page 10).1

“If one country uses gold for its principal measure of value, and another uses silver, the par between those countries cannot be estimated for any particular period, without taking into account the relative value of gold and silver at that particular period.”

The Committee have, moreover, in their endeavours to find out the real par between this country and Hamburgh, kept this principle constantly in view, as will appear from the questions put to Mr.—, (Report, page 73).2 Mr.— also fully admitted the principle, and yet, when he was requested to “state in what manner he applied those general ideas to the statement of the par of exchange as between England and Hamburgh,” he answered, “taking gold at the coinage price of 3l. 17s. 10½d., and taking it at Hamburgh at what we call its par, which is 96 stivers banco for a ducat, and further reducing 55 ounces of standard gold as being equal to 459 ducats, it produces a par of exchange of 34s. 3½g. Flemish for a pound sterling: a ducat contains at the rate of 23½ carats fine.”

Now here is not one word said about the relative value of gold to silver in the market, and the only information which is obtained from this answer is, that 34s. 3½g. Flemish, in gold coin, is equal to a pound sterling of gold;—and this calculation agrees within ½ grote with that of Dr. Kelly (Rep. No. 59). If the purchaser of a bill in London for 34s. 3g. could obtain at Hamburgh 34s. 3g. in gold currency, that might truly be called the par, but he can only obtain 34s. 3g. in silver, which is not worth by 8 per cent. as much as 34s. 3g. in gold coin. The question proposed by the Committee was, in effect, What amount of Hamburgh currency contains the same quantity of pure silver as can be purchased by a pound sterling in gold?

At the period when the report was made, the answer would have been 37s. 3g. Flemish; 37s. 3g. therefore was then the true par of exchange. If the Committee had calculated according to this par, instead of 34s. 3g., they would not have reported that the exchange with Hamburgh was not more unfavourable to England than 9 per cent., but nearly 17 per cent.; and Mr. Bosanquet would not have had an opportunity for observing, that, admitting the reasoning of the Committee, the evil was not of sufficient magnitude to make any immediate interference necessary.

[1 ]This is quoted more accurately on p. 161 above.

[2 ]Bullion Report, ‘Minutes of Evidence’, p. 83; a loose quotation. On ‘Mr.—’ see below, p. 427 ff.

[3 ]A. Goldsmid’s actual statement is ‘I have known it differ as much as 5 per cent. either way.’ And in reply to a further question ‘I have known it 5 per cent. but very seldom, and not for a long time together.’ ib. p. 117.

[4 ]ib. p. 130.

[1 ]‘the’ is not in Bosanquet’s text.

[1 ]Practical Observations, pp. 17–19.

[1 ]By a misprint the inverted commas open at the beginning of the paragraph.

[2 ]p. 9.

[3 ]An Enquiry into the Effects Produced on the National Currency and Rates of Exchange, by the Bank Restriction Bill; Explaining the Cause of the High Price of Bullion; with Plans for Maintaining the National Coins in a State of Uniformity and perfection. The second Edition, With some Observations on Country Banks, and on Mr. Grenfell’s Examination of the Tables of Exchange annexed to the first Edition. By Robert Mushet, of His Majesty’s Mint, London, Baldwin, 1810, pp. 94–5.

[1 ]The last figure should be ‘36.1 ’, as given by Mushet.

[1 ]The reference is to the folio ed.; in the octavo ed., ‘Appendix of Accounts’, p. 73.

[* ]By Mr. evidence to the Bullion Committee (Appendix, page 74),2 it appears that the course of exchange from Hamburgh to London in ordinary times differs 1 Flemish schilling from the course of London to Hamburgh, to compensate the 2½ usances and commission allowed on bills both ways; when the difficulties of communication existed to the greatest extent the difference of exchange was full 2s. Flemish.

[1 ]Neither of these corrections was made in Mushet’s 3rd ed., 1811, although he there (p. 103) refers the reader to Ricardo’s ‘very ingenious and masterly’ Reply to Bosanquet.

[1 ]p. 18.

[* ]Mr. Huskisson has commented with great ability upon the few transactions, few comparatively, which take place in bullion, and has observed, that those transactions are principally confined to the distribution of the produces of the mines to the different countries where gold and silver are in use.1

[* ]Lord King satisfactorily accounted1 for the long duration of an exchange favourable to this country with Hamburgh, from the circumstance of the demands of the India Company for silver bullion for their settlements in the East. Mr. Blake comments in his late publication2 upon what he calls “the erroneous opinions” entertained by Lord King on this subject; and observes, “that the exportation of bullion is affected like that of any other commodity, when there is such a difference in its real prices, at any two places, as will afford a profit on its transit; an occurrence that will frequently take place with an exchange at par.” An occurrence, I should say, which can never take place, with an exchange at par. Who would send bullion from Hamburgh to London at an expence of 4 or 5 per cent, whilst the exchange was at par, when by means of a bill he could obtain the same amount of bullion in London free from all charges?

I am happy that an opinion similar to that which I have expressed is also entertained by Mr. Bosanquet, page 12. “In the event of an unfavourable balance of payments, the depression of the exchange must necessarily attain this limit (the expences of conveying and insuring the precious metals from one country to the other) before the balance can be adjusted by the exportation of gold.”

[* ]Mr. Mushet’s calculations take for granted, that the relative value of gold and silver was the same in both countries, and that the gold and silver were of the same description, viz. in bars. But it is chiefly by the value of gold in coin that a foreigner determines whether he shall export gold to this country, or make a remittance by bill, and the price of gold in coin in England must necessarily enter into his calculation. On a reference to the Appendix of the Bullion Report, No. 6, it will appear that the transactions in gold with the continent are mostly confined to gold in coin. For 15 months, ending in March 1810, the whole amount of sales of bar gold, by private dealers, transacted through the Bullion Office at the Bank, did not exceed in value 60,867l., whilst the sales of gold in coin during the same period amounted to 683,067l.

[1 ]Report, p. 12.

[* ]I have read in a small French tract, “Sur L’Institution des Principales Banques de L’Europe,”2 that on one occasion the Bank of Hamburgh was obliged to suspend its payments in consequence of having made too great advances on gold bullion. I have in vain endeavoured to find out in what year this occurred. It is evident that a circumstance of this sort must have had some influence on the exchange,—and it is not impossible that it might have happened in the years 1766–7.3

[1 ]High Price of Bullion, above,p. 65 ff.

[2 ]Cp. above, p. 66.

[1 ]‘an ounce of’ had been omitted in the text, and was added in Errata.

[* ]The Bullion Committee,2 as well as Mr. Huskisson,3 consider gold as the standard measure of value, in consequence of the 39th of the king, which declares that silver shall not be a legal tender for sums exceeding 25l. except by weight at the rate of 5s. 2d. per ounce. But this law would not have prevented the coinage of silver when under its mint price, and, therefore, under its mint relative value to gold. In 1798, for example, when the price of silver was 5s. per ounce, and the relative market value of silver to gold as 1 to 15.57, and when therefore silver could be profitably coined, the new silver fresh from the Mint would have been a legal tender to any amount.

[1 ]Above, pp. 174–5.

[1 ]Report, p. 12.

[* ]Since writing the above I have seen an extract from a Moniteur of the year 1803,3 by which it appears that the seignorage in France was

And was fixed in 1803 at ⅓ per c. for gold, and 1½ for silver.

[ii],p.53.

[* ]It is only whilst the currency of France was kept at its proper level that the price of gold could continue 8 per cent. under the Mint price, in the same manner as the price of gold would and did continue under the Mint price of England. The currency of England was rather above its level when gold was 3l. 17s. 6d., as 4d. an ounce is not sufficient compensation for the delay of the Mint. It follows therefore that the principle here contended for can only have its full force whilst the currency is not excessive.

[1 ]p. 17.

[† ]As silver is the currency of Hamburgh, it would be silver, and not gold, which an English creditor would be entitled to send from Hamburgh to Paris.

[‡ ]“In France, a duty of 8 per cent. is deducted for the coinage, which not only defrays the expence of it, but affords a small revenue to the government. In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanship, as you pay for it, adds to the value, in the same manner as to that of wrought plate. A sum of French money, therefore, containing a certain weight of pure silver is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective Mints, a sum of English money could not well purchase a sum of French money, containing an equal number of ounces of pure silver, nor, consequently, a bill upon France for such a sum. If for such a bill no more additional money was paid than what was sufficient to compensate the expence of French coinage, the real exchange might be at par between the two countries, their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France.”—Wealth of Nations, Chap. iii. Book iv.1

[1 ]In his evidence to the Bullion Committee, ‘Minutes’, p. 71, quoted by Bosanquet, p. 20.

[2 ]Misprinted ‘8½ grains’: corrected in Errata.

[* ]The weight of the American dollar in circulation is not more, according to Mr. Williams’s evidence,2 than 17 dwt. 6 gr., which would make the true par somewhat lower than 4s. 3½d.; and, according to Ede’s book of Coins,3 the American dollar is 11 dwts.4 worse than standard, and contains no more pure silver than 4s. 2¼d. of English standard silver coin.

[1 ]Bosanquet, pp. 20–21.

[* ]Before however it can be admitted that the exchange with Sweden is 24 per cent. in favour of London, we must be informed whether both gold and silver be legal tender in Sweden, and, if so, at what relative value those metals are rated in the Swedish Mint. I suspect that a part of this favourable exchange may be accounted for by the rise in the relative value of gold to silver.

[1 ]pp. 14–15.

[1 ]Octavo ed., p. 23.

[2 ]Octavo ed., ‘Minutes of Evidence’, p. 78.

[* ]By Mr. evidence to the Bullion Committee (Appendix, page 74),2 it appears that the course of exchange from Hamburgh to London in ordinary times differs 1 Flemish schilling from the course of London to Hamburgh, to compensate the 2½ usances and commission allowed on bills both ways; when the difficulties of communication existed to the greatest extent the difference of exchange was full 2s. Flemish.

[* ]Mr. Huskisson has commented with great ability upon the few transactions, few comparatively, which take place in bullion, and has observed, that those transactions are principally confined to the distribution of the produces of the mines to the different countries where gold and silver are in use.1

[* ]Lord King satisfactorily accounted1 for the long duration of an exchange favourable to this country with Hamburgh, from the circumstance of the demands of the India Company for silver bullion for their settlements in the East. Mr. Blake comments in his late publication2 upon what he calls “the erroneous opinions” entertained by Lord King on this subject; and observes, “that the exportation of bullion is affected like that of any other commodity, when there is such a difference in its real prices, at any two places, as will afford a profit on its transit; an occurrence that will frequently take place with an exchange at par.” An occurrence, I should say, which can never take place, with an exchange at par. Who would send bullion from Hamburgh to London at an expence of 4 or 5 per cent, whilst the exchange was at par, when by means of a bill he could obtain the same amount of bullion in London free from all charges?

I am happy that an opinion similar to that which I have expressed is also entertained by Mr. Bosanquet, page 12. “In the event of an unfavourable balance of payments, the depression of the exchange must necessarily attain this limit (the expences of conveying and insuring the precious metals from one country to the other) before the balance can be adjusted by the exportation of gold.”

[* ]I have read in a small French tract, “Sur L’Institution des Principales Banques de L’Europe,”2 that on one occasion the Bank of Hamburgh was obliged to suspend its payments in consequence of having made too great advances on gold bullion. I have in vain endeavoured to find out in what year this occurred. It is evident that a circumstance of this sort must have had some influence on the exchange,—and it is not impossible that it might have happened in the years 1766–7.3

[* ]The Bullion Committee,2 as well as Mr. Huskisson,3 consider gold as the standard measure of value, in consequence of the 39th of the king, which declares that silver shall not be a legal tender for sums exceeding 25l. except by weight at the rate of 5s. 2d. per ounce. But this law would not have prevented the coinage of silver when under its mint price, and, therefore, under its mint relative value to gold. In 1798, for example, when the price of silver was 5s. per ounce, and the relative market value of silver to gold as 1 to 15.57, and when therefore silver could be profitably coined, the new silver fresh from the Mint would have been a legal tender to any amount.

[* ]Since writing the above I have seen an extract from a Moniteur of the year 1803,3 by which it appears that the seignorage in France was

And was fixed in 1803 at ⅓ per c. for gold, and 1½ for silver.

[‡ ]“In France, a duty of 8 per cent. is deducted for the coinage, which not only defrays the expence of it, but affords a small revenue to the government. In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanship, as you pay for it, adds to the value, in the same manner as to that of wrought plate. A sum of French money, therefore, containing a certain weight of pure silver is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective Mints, a sum of English money could not well purchase a sum of French money, containing an equal number of ounces of pure silver, nor, consequently, a bill upon France for such a sum. If for such a bill no more additional money was paid than what was sufficient to compensate the expence of French coinage, the real exchange might be at par between the two countries, their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France.”—Wealth of Nations, Chap. iii. Book iv.1

[* ]The weight of the American dollar in circulation is not more, according to Mr. Williams’s evidence,2 than 17 dwt. 6 gr., which would make the true par somewhat lower than 4s. 3½d.; and, according to Ede’s book of Coins,3 the American dollar is 11 dwts.4 worse than standard, and contains no more pure silver than 4s. 2¼d. of English standard silver coin.

[2]Octavo ed., pp. 79–80.

[1]The Question concerning the Depreciation of our Currency Stated and Examined, London, Murray, 1810, pp. 49–50.

[1]Thoughts on the Effects of the Bank Restrictions, 2nd ed., 1804, pp. 55–9 and 153–62.

[2]Observations on the Principles which Regulate the Course of Exchange; and on the Present Depreciated State of the Currency, London, Lloyd, 1810, pp. 35–6.

[2]Conside´rations sur l’institution des principales banques de l’Europe, particulièrement sur celle de France; ses statuts, son administration, sa solidite´ et son cre´dit, par M. Monbrion, Paris, an xiv, 1805, p. 23.

[3]The Bank of Hamburg did in fact suspend specie payments in 1766 and resumed them by a decision of the Hamburg Senate of 9 December1767. See A. Soetbeer, ‘Die Hamburger Bank’, in Vierteljahrsschrift fu¨r Volkswirthschaft, 1866, vol. iii, pp. 42–3.

[2]Report, p. 10.

[3]The Question, etc., p. 6.

[3]Gazette Nationale ou le Moniteur Universel, 8 Germinal, An XI (29 March 1803), vol. 28, pp. 842–4, reports a speech by Darn in the Tribunat which contains the table reproduced here. There is among Ricardo’s papers a summary of this speech in Ricardo’s handwriting.

[1]Cannan’s ed., vol. i, p. 442.

[2]‘Minutes of Evidence’, p. 141.

[3]A View of the Gold and Silver Coins of all Nations..., by Js. Ede, London, J. M. Richardson, n.d.[1808], p. 8.

[4]Misprinted ‘11 grains’: corrected in Errata.