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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 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.

section i

That the Negation of the above Conclusion implies the Impossibility of melting or exporting English Coin—an Impossibility contended for by Nobody.

The next proposition of the Committee, the justness of which Mr. Bosanquet disputes, he has thus stated: “That the price of gold bullion can never exceed the Mint price, unless the currency in which it is paid is depreciated below the value of gold.” But this is not exactly the principle of the Committee. Their principle, when fairly stated, is, not that gold as a commodity may not rise above its value as coin, but that it cannot continue so, because the convertibility of coin into bullion would soon equalize their value. The words of the Committee are these; “Your Committee are of opinion that, in the sound and natural state of the British currency, the foundation of which is gold, no increased demand for gold from other parts of the world, however great, or from whatever causes arising, can have the effect of producing here, for a considerable period of time, a material rise in the market price of gold.”1 Nothing appears to me to be wanting to make this a self-evident proposition but the admission, that the law, which forbids the conversion of gold coin into gold bullion, cannot be successfully executed.

I should have expected, therefore, that any one who denied its truth would have contended that the law was fully efficient for the purposes for which it was enacted; and that he would have brought forward authorities to justify this view which he had taken of it. But authorities for such an opinion would have been difficult to have been found. From the days of Locke till the present time I have nowhere seen the fact disputed. It is by all writers indiscriminately allowed, that no penalties can prevent the coin from being melted when its value as bullion becomes superior to its value as coin.

Locke calls the law which forbids the melting and exporting coin, “a law to hedge in the cuckoo.”1 Smith observes, “that no precautions of government can prevent it.”2 On this subject too we have the authority of practical men:

The Bank Directors, in the year 1795, when the price of gold rose to 4l. 3s. or 4l. 4s. per ounce, after acquainting Mr. Pitt with that fact, observe, “our guineas being to be purchased at 3l. 17s. 10½d. per ounce, clearly demonstrates the grounds of our fears; it being only necessary to state those facts to the Chancellor of the Exchequer.”3 Now, what were those fears, but that there would be a run upon them for gold coin, for the purpose of melting it into bullion? Mr. Newland, too, when asked (by the Committee of the Lords, 1797),4 “If there were now to be a new coinage, do you think a great deal would be melted down and privately exported?” Answered, “That depends entirely upon the price of bullion.” In the same Committee Mr. Newland was also asked, “Is it more difficult to prevent false coining, or to prevent the melting down or exporting, when it is for their advantage to export it?”—Answer. “I am at a loss to guess how you can prevent either.”

These are but a few of the opinions which might be brought forward in support of the fact of the coin being melted into bullion whenever the price of bullion rises above the price of coin. I shall conclude, however, with the opinion of Mr. Bosanquet himself. Speaking of the Committee, he observes, “They say nothing about the price of bullion, which is expected, doubtless, to return when the Bank shall have sufficiently controuled the exchange; although Mr. Locke and many other writers have clearly demonstrated that the coins of any country can only be retained within it when the general balance of trade and payments is not unfavourable.”1 Now, under the circumstances supposed of a low exchange, what should take our coins from us but their superior value as bullion? Who would export coins if bullion could be bought at its Mint price? It is their superior value as bullion, therefore, that is the cause of their being melted and exported.

But the Committee have not been satisfied with simply stating a position which is almost self-evident; they have appealed to facts, and distinctly assert,2 that for a period of 24 years, since the recoinage, gold bullion in standard bars had not been at a higher price than 3l. 17s. 10½d. per ounce, with the exception of one year, beginning in May 1783 and ending in May 1784, when the price was 3l. 18s. per ounce. We are indeed informed by a letter from the Bank Directors to Mr. Pitt in October 1795, and it is on that authority reported by the Committee, that gold bullion was then as high as 4l. 3s. or 4l. 4s. per ounce; and it was stated by Mr. Newland to the Lords’ Committee in 1797, that the Bank had been frequently obliged to buy gold higher than the Mint price; and upon one occasion gave as much for a small quantity, which their agent procured in Portugal, as 4l. 8s.*

These are the only facts on which Mr. Bosanquet relies for overturning the principle in question. Prices not known to the public; not recorded in any list; given too by a corporation not remarkable for the good management of their concerns, are to be deemed the fair market price; and such exceptions as these are to overturn opinions grounded on a just theory, sanctioned by practical men, and confirmed by experience.

Is there any evidence that these prices continued even for a week? If we consult the price list, we shall find, that in July of that year 1795, the price of gold is quoted 3l. 17s. 6d.; in December it is again quoted 3l. 17s. 6d., and in the intervening four months no price is marked. Does Mr. Bosanquet think it possible that such a price as 4l. 4s. for gold could have continued, whilst it was to be obtained, by melting the coin, at 3l. 17s. 10½d.? Has he so good an opinion of the self-denial and virtues of all classes of the community? If he has, why are they not now to be trusted? What is the plea urged for not paying in specie? That at the present exchange, and present price of gold, it would be advantageous to export and melt the coin, so that there would be danger that every guinea would leave the country. But when you tell us, that bullion has no connection with coin, “that there is no point of contact between English and foreign gold,”1 there can be no danger of any one’s being particularly desirous to possess coin, as, for the mere purposes of circulation, Bank notes are equally, if not more, convenient.

“If,” says Mr. Bosanquet,2 “the demand for foreign gold was at any time very great, and the melting and exportation of guineas, however abundant, by any means effectually prevented, foreign gold might rise to3 double its price in English gold, and yet the intrinsic value of guineas remain undiminished.”

I might apply to this if of Mr. Bosanquet the observation which he has made on the same word, when used by the Committee, your, if, is, a great peace-maker.4 But the above is not our case; the law cannot be effectually enforced. The remark, therefore, is of no use in the question before us.

If the law, however, could be effectually enforced, it would be attended with the most cruel injustice. Why should not the holder of an ounce of gold in coin have the same advantages from the increase in the value of his property, as the holder of an ounce of uncoined gold? From the mere circumstance of its having had a stamp put on it, is he to be made to suffer all the inconveniences from the fall in the value of his gold, in consequence of the opening of new mines, or from any other circumstances? and derive none of the benefits which may result from a rise in its value? This injustice to individuals would not be compensated by the slightest advantages to the community; as the exportation of the coin, were it freely permitted, would always cease when the value of our currency had risen to its true bullion value, and that is precisely the value at which the currencies of all countries are permanently fixed.

Such, in spite of the law, was the value of our currency till the Bank restriction bill, and for some time after. There it would inevitably fix itself again, if that most impolitic act were repealed. Increase the value of your currency to its proper level, and you are sure to retain it. No policy can be worse than forcibly detaining a million, for example, to perform those offices, to which 800,000l. are fully adequate.

section ii

Consequences which would follow on the Supposition that the Currencies of other Countries (exclusive of England) were diminished or increased one half.

Let us suppose that the circulation of all countries were carried on by the precious metals only, and that the proportion which England possessed were one million; let us further suppose, that, at once, half of the currencies of all countries, excepting that of England, were suddenly annihilated, would it be possible for England to continue to retain the million which she before possessed? Would not her currency become relatively excessive compared with that of other countries? If a quarter of wheat, for example, had been both in France and England of the same value as an ounce of coined gold, would not half an ounce now purchase it in France, whilst in England it continued of the same value as one ounce* ? Could we by any laws, under such circumstances, prevent wheat or some other commodity (for all would be equally affected) from being imported into England, and gold coin from being exported? If we could, and the exportation of bullion were free, gold might rise 100 per cent.; and for the same reason, if 35 Flemish schillings in Hamburgh had before been of equal value with a pound sterling, 17½ schillings would now attain that value. If the currency of England only had been doubled, the effects would have been precisely the same.

Suppose again the case reversed, and that all other currencies remained as before, while half of that of England was retrenched. If the coinage of money at the Mint was on the present footing, would not the prices of commodities be so reduced here that their cheapness would invite foreign purchasers, and would not this continue till the relative proportions in the different currencies were restored?

If such would be the effects of a diminution of money below its natural level, and that such would be the consequences the most celebrated writers on political economy are agreed, how can it be justly contended that the increase or diminution of money has nothing to do either with the foreign exchanges, or with the price of bullion?

Now a paper circulation, not convertible into specie, differs in its effects in no respect from a metallic currency, with the law against exportation strictly executed.

Supposing then the first case to occur whilst our circulation consisted wholly of paper, would not the exchanges fall, and the price of bullion rise in the manner which I have been representing; and would not our currency be depreciated, because it was no longer of the same value in the markets of the world as the bullion which it professed to represent? The fact of depreciation could not be denied, however the Bank Directors might assure the public that they never discounted but good bills for bonâ fide transactions; however they might assert that they never forced a note into circulation; that the quantity of money was no more than it had always been, and was only adequate to the wants of commerce, which had increased and not diminished* ; that the price of gold, which was here at twice its mint value, was equally high, or higher, abroad, as might be proved by sending an ounce of bullion to Hamburgh, and having the produce remitted by bill payable in London in bank-notes; and that the increase or diminution of their notes could not possibly either affect the exchange or the price of bullion. All this, except the last, might be true, and yet would any man refuse his assent to the fact of the currency being depreciated? Could the symptoms which I have been enumerating proceed from any other cause but a relative excess in our currency? Could our currency be restored to its bullion value by any other means than by a reduction in its quantity, which should raise it to the value of the currencies of other countries; or by the increase of the precious metals, which should lower the value of theirs to the level of ours?

Why will not the Bank try the experiment by a reduction in the amount of their notes of two or three millions for the short period of three months? If no effects were produced on the price of bullion and the foreign exchange, then might their friends boast that the principles of the Bullion Committee were the wild dreams of speculative theorists.

section iii

The trifling Rise in the Price of Gold on the Continent, owing solely to a Variation in the Relation of Silver to Gold.

But the price of gold, we are told,1 has risen on the continent even more than it has here, because when it was 4l. 12s. in this country, 4l. 17s. might be procured for it at Hamburgh, a difference of 5½ per cent. This is so often repeated, and is so wholly fallacious, that it may be proper to give it particular consideration.

When an ounce of gold was to be bought in this country at 3l. 17s. 10½d, and the relative value of gold was to silver as 15.07 to 1, it would have sold on the continent for nearly the same as here, or 3l. 17s. 10½ in silver coin. In Hamburgh, for example, we should have received in payment of an ounce of gold 136 Flemish schillings and 7 grotes, that quantity of silver containing an equal quantity of pure metal, as 3l. 17s. 10½d. in our standard silver coin.

Gold has since that period risen in this country 18 per cent, and is now at 4l. 12s. per ounce, and it is said that the 4l. 12s. with which it is paid for is not depreciated. Now as gold has risen 5½ more abroad than it has here, it must be there 23½ per cent higher than when it was sold for 136s. 7g., and we therefore should be led to expect that we should now obtain for it at Hamburgh 167 Flemish schillings: but what is the fact? this ounce of gold, which we are told we sell at Hamburgh for 4l. 17s., actually produces no more than 140 schillings 8 grotes, an advance only of 3 per cent.; and for this the seller is indebted to the rise in the relative value of gold to silver, which from 15.07 to 1 is now about 16 to 1. It is true, that when the ounce of gold was sold at Hamburgh at 3l. 17s. 10½d. or for its equivalent, 136 schillings 7 grotes, the currency of England was not depreciated; that sum, therefore, could only purchase a bill payable in London in Bank notes for 3l. 17s. 10½ d.; but the currency of England being now depreciated, and being estimated on the Hamburgh exchange at 28 or 29 Flemish schillings, instead of 37, the true value of a pound sterling, 140 schillings 8 grotes, or 3 per cent. more than 136s. 7g. will now purchase a bill payable in London in Bank notes for 4l. 17s.; so that gold has not risen more than 3 per cent. in Hamburgh, but the currency of England, on a comparison with the currency of Hamburgh, has fallen 23½ per cent.

In further proof of the truth of my assertion, that it is not gold which has risen 16 or 18 per cent. in the general market of the world, but that it is the paper currency in which the price of gold is estimated in England, which alone has fallen; I will subjoin an account of the lowest prices of gold in Hamburgh, Holland, and England, in the year 1804, and the highest prices in each of those countries in the year 1810, by which we shall be enabled to ascertain the actual rise in the price of gold measured in the currencies of each. This account was furnished to the Bullion Committee by Mr. Grefulhe, and is numbered 56.

Now in Hamburgh and in Holland, where the currency is silver, gold may not rise 3 per cent. only, but 30 per cent., without its being any proof of the depreciation of the currency; it proves only an improvement in the relative value of gold to silver. But in England, where the price of gold is estimated in gold coin, or in Bank notes representing that coin, a rise of 1 per cent. cannot take place without its proving a corresponding depression* of the coin or paper. This observation is equally applicable to the fact mentioned by Mr. Bosanquet,1 and of which he himself seems aware, of gold having varied in Hamburgh no less than 8 per cent. within a period of two years.

As there is an acknowledged difference between the price of standard gold bars and the price of gold coin reduced to the English standard, arising out of the latter being a more marketable commodity on the continent† ; I cannot admit the inferences which Mr. Bosanquet draws from the comparison of Mr. Grefulhe’s paper (No. 58), with the paper No. 60, in the Report. It would be first necessary to ascertain whether the prices of gold, as quoted in these papers (and they do not quite agree), were for gold in coin, or for gold of any other description; and whether the prices of gold in this country at different periods were always for gold of the same quality.

Mr. Bosanquet observes, that “From the calculation furnished by Mr. Grefulhe to the Committee, it appears that in the spring of 1810 an ounce of gold of English standard weight was worth at Hamburgh 4l. 17s. sterling; the price being 101, and the exchange 29s. At this time the extreme price of bullion in London was 4l. 12s.—or 5½ per cent. below the price of Hamburgh.”1 The reader must recollect, that it is 4l. 17s. in Bank notes that is here meant, as I have already explained. But I cannot admit the perfect accuracy of this statement. The exporter of an ounce of gold purchased here at 4l. 12s. would at least have had to wait three months before he could have received the 4l. 17s. because after the gold is sold at Hamburgh the remittance is made by a bill at 2½2 usances; so that allowing for interest for this period he would actually have obtained a profit of 4¼ per cent. only; but as the expence of sending gold to Hamburgh is stated in evidence to be 7 per cent.,3 a bill would at this time have been a cheaper remittance by 2¾ per cent.

Now allowing that Mr. Bosanquet is perfectly accurate in his statement, that the price of gold was in this country at 4l. 12s. during the months of June, July, August, and September, 1809, as well as in the spring of 1810, and that in all these instances such price was given for gold of the same quality; his conclusion that in those months in the year 1809 a profit of 5½ per cent. could be made by the exportation of gold, over and above the expences, is not warranted by the fact. “If at 101 and 29, observes Mr. Bosanquet,1 there was a profit on the export of gold from hence to Hamburgh of 5½2 per cent.; it follows that at 104½ (the prices in Hamburgh June, July, August and September, 1809), and 28s. there was a profit of 12½ per cent.; or, deducting the expences of conveyance, that gold, if bought here at 4l. 12s. per ounce, was a cheaper remittance by 5½ per cent. than a bill at the current exchange.” As I have already shewn that when the exchange was 29, and the price of gold in Hamburgh 101, gold was a dearer remittance than by bill by 2¾ per cent.; it follows that at 28s. and 104 , it was only cheaper by 4¼ per cent.

These facts prove that in June, July, August, and September, 1809, whilst the exchange was at Hamburgh 28s. and gold 104½, the real exchange was in favour of Hamburgh; whilst in the spring of 1810 it was so much less favourable, that it would not cover the expences attending the importation of gold.

As for the rise of gold in Hamburgh with an invariable exchange, it is what would have been naturally expected if there had been a corresponding rise in the price of gold here. In proportion as the English currency becomes depreciated, as compared with gold, will it become worth fewer of the schillings of Hamburgh, unless a rise in the value of gold at Hamburgh should counteract the depreciation, by making a gold pound sterling more valuable.

The exchanges again would partake in all the variations in the value of a depreciated pound sterling, whilst the price of gold continued invariable at Hamburgh.

“It appears,” says Mr. Bosanquet,3 “by the return from the Bullion-office at the Bank, Nos. 7 and 8 in the Appendix to the Report, that the total amount of gold bullion imported and deposited in the Bullion-office in 1809 amounted in value to

of which only 592l. was not exportable.

“The amount of the importation is therefore such as, when compared with the amount of exports and imports, and that of the circulating medium, to justify the assumption of comparative scarcity; and the excess of delivery beyond the importation is sufficient evidence of unusual demand.”

The fact itself here insisted on would be of little importance in the question which we are now discussing; but it appears to me that Mr. Bosanquet is not warranted in his conclusions by the statements in the accounts to which he refers.

The excess of delivery beyond the importation is not any evidence of unusual demand, as it is accounted for by the following note to No. 7, from which the larger sum is extracted.

“Note.—The above is the amount of gold which has passed the Bullion-office in the time above named, as sales and purchases by private dealers, but which may have passed more than once1 the Bullion-office, having no information generally from whence the seller procures his gold.”

The importations stated in No. 8 are actually deposited by importers from abroad, and can only be received once. Besides this objection, these accounts were not fair subjects of comparison, No. 7 being made up to the 18th April, 1810; No. 8 to 30th March, 1810.

“The point of view in which these facts are important,” continues Mr. Bosanquet, “is that which places the amount of gold imported or delivered in line of comparison with the amount of paper currency supposed to be depreciated on the evidence of the increased price of bullion. The advance of 12s. per oz. on the total quantity of gold delivered in one year, about 200,000 ounces, amounts to 120 or 130,000l.; and this is assumed as an unequivocal symptom of a depreciation of 12 or 13 per cent. on 30 or 40 millions of paper, the probable amount of our paper currency.” “We may soon expect to be told that the value of Bank notes has increased, because the paper on which they are made is somewhat dearer than heretofore.”1

The value of a Bank note is ascertained, not by the number of transactions which may take place in the purchase or sale of gold, but by the actual comparative value of the note with the value of the coin for which it professes to be a substitute.

As it is allowed2 that a Government Bank might force a circulation of paper, although our Bank cannot, how would Mr. Bosanquet calculate the depreciation of such forced notes, but by a comparison of their value with the value of bullion? Would he think it necessary to enquire whether 100 ounces only had been the amount transacted in the year, or whether it had been a million? If gold be not a test by which to estimate depreciation, what is? Whilst it is a criminal offence to buy guineas at a premium, it does not seem probable that we can possess the only test which would satisfy these gentlemen, namely, two prices for commodities, a price in guineas, and another in Bank notes. They might, even in that case, contend, that it was the scarcity of gold abroad which had raised the value of the guinea.

section iv

Failure ascribed to Mr. Locke’s Theory relative to the Recoinage in 1696.

It is correctly stated by Mr. Bosanquet1 that Mr. Locke’s theory was similar to that now held. He did most certainly maintain that an ounce of silver in coin could not be less valuable than an ounce of silver bullion of the same standard. And the Committee now maintain2 that in the sound state of the British currency an ounce of gold bullion cannot, for any length of time, be of more value than 3l. 17s. 10½ d., or an ounce of gold coin: but neither of these opinions have been yet found incorrect. The effects expected from the recoinage in King William’s reign failed of being realised, not because Mr. Locke’s theory was followed, but because it was not followed. It did not fail, because he could not be convinced that “the value of silver bullion was become greater than the standard or mint price” (that being impossible if estimated in silver coin), but because his suggestions were not adopted.

It was proposed by Mr. Locke that silver coin should be the only fixed legal standard of currency, and that guineas should pass current in all payments at their bullion value. Under such a system, a guinea would have partaken of all the variations in the relative value of gold and silver; it might at one time have been worth 20 shillings, and at another 25; but contrary to Mr. Locke’s principle, the value of the guinea was first fixed at 22 shillings, and afterwards at 21 shillings and sixpence, whilst its value as bullion was considerably below it.* At the same time the silver coin, for the very reason that gold was rated too high, passed in currency at a value less than its bullion value. It was to be expected, therefore, that the gold coin would be retained, and that the silver coin would disappear from circulation. If the value of the guinea in currency had been lowered to its true market value in silver, the exportation of the silver coin would immediately have ceased, and, in fact, this was the remedy which was at last adopted. The matter being referred to Sir I. Newton in 1717, then master of the Mint, he reported “the principal cause of the exportation of the silver coin was, that a guinea, which then passed for 21s. 6d., was generally worth no more than 20s. 8d., according to the relative value of gold to silver at the market, though its value occasionally varied.” “He then suggested, that 6d. should be taken off from the value of the guinea, in order to diminish the temptation to export and melt down the silver coin, acknowledging, however, that 10d. or 12d. ought to be taken from the guinea, in order that gold might bear the same proportion with silver money in England, which it ought to do by the course of trade and exchange in Europe* .” The same effects would have followed without the intervention of Government, if the relative value of gold and silver in the market had so varied as to have made them agree with the Mint proportions.

Lord Liverpool, in speaking of the recoinage in 1696, is of a very different opinion from Mr. Bosanquet;—so far from considering that measure as having “subjected the nation to disappointment and inconvenience, under which we still labour, and to an unprofitable expence of nearly three millions sterling,”1 he observes, “that great as this charge was, the losses which the Government as well as the people of this kingdom continued daily to suffer till the recoinage was completed, justified almost any expence which might be incurred for their relief.”1

Mr. Bosanquet is not quite correct in saying, page 34, that the price of silver has never been under the Mint price since the recoinage in the reign of King William. On a reference to Mr. Mushet’s tables, it appears that it was as low as 5s. 1d. in 1793 and 1794, and in 1798 it fell to 5s., which was the occasion of the law for prohibiting the coinage of silver which I have already noticed2* .

[1 ]Report, pp. 4–5; Ricardo’s italics.

[1 ]Some Considerations on the Consequences of the Lowering of Interest and Raising the Value of Money, 2nd ed., London, 1696, p. 24.

[ii], p. 52.

[3 ]‘Report of the Lords’ Committee of Secrecy relating to the Bank’, 1797 (reprint 1810), p. 84.

[4 ]ib. p. 40.

[1 ]pp. 104–5. The words following ‘although’ are quoted by Bosanquet from Lord Liverpool’s Treatise on the Coins of the Realm, p. 109.

[2 ]Bullion Report, pp. 7–8.

[* ]It appears that it was in 1795, and most probably in October, that the Bank gave 4l. 8s. for gold, as stated by Mr. Newland. On being asked concerning the time by the Lords’ Committee, he answered, “I believe it was about two years since the Bank gave about 4l. 8s. per ounce for gold; it was but a small quantity, it was soon stopt on account of its price. The Bank at that time thought it expedient to obtain gold from Portugal, which their agent could not do at a less price than 4l. 8s.”1

Mr. Newland was speaking on the 28th March, 1797.

It is a case by no means improbable that the Bank may frequently have bought foreign gold above the Mint price, at the same time that they could have obtained gold in bars, not exportable, at a comparatively cheaper price. They might flatter themselves that, by not purchasing English gold, they would lessen the temptation to melt the guineas: at the same time their diminished stock required them to replenish their coffers. This opinion is very much confirmed by an examination of the account in the Appendix of the Bullion Report, No. 19, where it appears, that from 1797 to 1810 the amount in value of gold coined at his Majesty’s Mint was 8,960,113,11l., of which only 2,296,056 was coined from English gold, the remainder, 7,044,282 was coined from foreign gold.2 It appears too that since 1804, 1,402,542l. has been coined from foreign gold, and not one guinea from British gold. During the whole of this period the price of foreign gold in the market exceeded the price of English gold. Is it not probable, therefore, that the Bank, who are the only importers of gold into the Mint, have been guided by some such policy as I have supposed?

[1 ]In substance, Bosanquet, p. 31.

[2 ]pp. 31–2. Ricardo’s italics.

[3 ]‘rise to’ is not in Bosanquet.

[4 ]Bosanquet, p. 99.

[* ]That commodities would rise or fall in price, in proportion to the increase or diminution of money, I assume as a fact which is incontrovertible.—Mr. Bosanquet in his admission1 of the effects on prices from the discovery of a mine shews, that he has no such doubts on this subject as the governor of the Bank, who, when asked by the Committee, “Do you conceive that a very considerable reduction of the amount of the circulating medium would not tend in any degree to increase its relative value compared with commodities, and that a considerable increase of it would have no tendency whatever to augment the price of commodities in exchange for such circulating medium?”—Answered, “It is a subject on which such a variety of opinions are entertained, I do not feel myself competent to give a decided answer.”2

[* ]The Bank could not on their own principles then urge that most erroneous opinion, that the rate of interest would be affected in the money market if their issues were excessive, and would therefore cause their notes to return to them, because in the case here supposed the actual amount of the money of the world being greatly diminished, they must contend that the rate of interest would generally rise, and they might therefore increase their issues. If after the able exposition of Dr. Smith1 any further argument were necessary to prove that the rate of interest is governed wholly by the relation of the amount of capital with the means of employing it, and is entirely independent of the abundance or scarcity of the circulating medium, this illustration would, I think, afford it.

[1 ]Bosanquet, p. 24.

[* ]This expression has been noticed by Mr. Bosanquet2 as extremely theoretical, but I consider it so exceedingly correct that I have taken the liberty of using it after the Committee.

[1 ]p. 26.

[† ]See note to page [174].

[1 ]pp. 23–4. The last sentence of the quotation, which had been omitted, was inserted in Errata.

[2 ]Misprinted ‘2¼ ’, corrected in Errata.

[3 ]‘From 4 to 7 per cent. for all charges covering the risk, as well as the cost of transportation’, according to Abraham Goldsmid, ‘Minutes’, p. 115; ‘from 1½ to 2 per cent.’, plus ‘about 4 per cent.’ for the premium of insurance, according to ‘Mr.—’, ib. p. 84.

[1 ]p. 24.

[2 ]Misprinted ‘5¼ ’, corrected in Errata.

[3 ]pp. 32–3.

[1 ]Ricardo’s italics.

[1 ]Bosanquet omits this sentence in his 2nd ed.

[2 ]See quotation below, pp. 215–16.

[1 ]pp. 35–7.

[2 ]Report, pp. 4–5.

[* ]It may be said, that although guineas were by law prohibited from passing at more than 21s. 6d., they were not declared a legal tender till 1717; and, therefore, that no creditor was obliged to accept of them in discharge of a debt at that rate. But if Government received them in the payment of taxes at such value, the effects would be nearly the same as if they had by act of Parliament been made a legal tender.

[* ]Lord Liverpool’s letter to the King.2

[1 ]Bosanquet, p. 36.

[1 ]Lord Liverpool, p. 76.

[2 ]Above, p. 177.

[* ]Since this was sent to the press I have seen the second edition of Mr. Bosanquet’s work, in which this inaccuracy is corrected.

[* ]It appears that it was in 1795, and most probably in October, that the Bank gave 4l. 8s. for gold, as stated by Mr. Newland. On being asked concerning the time by the Lords’ Committee, he answered, “I believe it was about two years since the Bank gave about 4l. 8s. per ounce for gold; it was but a small quantity, it was soon stopt on account of its price. The Bank at that time thought it expedient to obtain gold from Portugal, which their agent could not do at a less price than 4l. 8s.”1

Mr. Newland was speaking on the 28th March, 1797.

It is a case by no means improbable that the Bank may frequently have bought foreign gold above the Mint price, at the same time that they could have obtained gold in bars, not exportable, at a comparatively cheaper price. They might flatter themselves that, by not purchasing English gold, they would lessen the temptation to melt the guineas: at the same time their diminished stock required them to replenish their coffers. This opinion is very much confirmed by an examination of the account in the Appendix of the Bullion Report, No. 19, where it appears, that from 1797 to 1810 the amount in value of gold coined at his Majesty’s Mint was 8,960,113,11l., of which only 2,296,056 was coined from English gold, the remainder, 7,044,282 was coined from foreign gold.2 It appears too that since 1804, 1,402,542l. has been coined from foreign gold, and not one guinea from British gold. During the whole of this period the price of foreign gold in the market exceeded the price of English gold. Is it not probable, therefore, that the Bank, who are the only importers of gold into the Mint, have been guided by some such policy as I have supposed?

[* ]That commodities would rise or fall in price, in proportion to the increase or diminution of money, I assume as a fact which is incontrovertible.—Mr. Bosanquet in his admission1 of the effects on prices from the discovery of a mine shews, that he has no such doubts on this subject as the governor of the Bank, who, when asked by the Committee, “Do you conceive that a very considerable reduction of the amount of the circulating medium would not tend in any degree to increase its relative value compared with commodities, and that a considerable increase of it would have no tendency whatever to augment the price of commodities in exchange for such circulating medium?”—Answered, “It is a subject on which such a variety of opinions are entertained, I do not feel myself competent to give a decided answer.”2

[* ]The Bank could not on their own principles then urge that most erroneous opinion, that the rate of interest would be affected in the money market if their issues were excessive, and would therefore cause their notes to return to them, because in the case here supposed the actual amount of the money of the world being greatly diminished, they must contend that the rate of interest would generally rise, and they might therefore increase their issues. If after the able exposition of Dr. Smith1 any further argument were necessary to prove that the rate of interest is governed wholly by the relation of the amount of capital with the means of employing it, and is entirely independent of the abundance or scarcity of the circulating medium, this illustration would, I think, afford it.

[* ]This expression has been noticed by Mr. Bosanquet2 as extremely theoretical, but I consider it so exceedingly correct that I have taken the liberty of using it after the Committee.

[* ]Lord Liverpool’s letter to the King.2

[1]‘Report of the Lords’ Committee’, 1797 (reprint 1810), p. 40.

[2]According to the Appendix referred to, the two latter figures represent not the amounts of gold coined but the amounts received by the Mint, which accounts for the discrepancy in the sum.

[1]See quotation below, pp. 215–16.

[2]Bullion Report, ‘Minutes of Evidence’, p. 187.

[1]Bk. ii, ch. iv; vol. i, p. 335.

[2]p. 31, n.

[2]p. 82.