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(C): [NOTES ON THE MINUTES OF EVIDENCE] MINUTES OF EVIDENCE - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 3 Pamphlets and Papers 1809-1811 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 3 Pamphlets and Papers 1809-1811.
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First published by Cambridge University Press in 1951. Copyright 1951, 1952, 1955, 1973 by the Royal Economic Society. This edition of The Works and Correspondence of David Ricardo is published by Liberty Fund, Inc., under license from the Royal Economic Society.
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Ricardo’s first appearance in print marked the beginning of what came to be known as the Bullion Controversy. It took the shape of an anonymous article on The Price of Gold published in the Morning Chronicle of 29 August 1809. His brother and biographer, Moses Ricardo, records how this contribution came to be published. ‘The immense transactions’, he says, ‘which he had with the Bank of England, in the course of business, tallying with the train of studies on which he was then engaged, led Mr. Ricardo to reflect upon the subject of the currency, to endeavour to account for the difference which existed between the value of the coin and the Bank notes, and to ascertain from what cause the depreciation of the latter arose. This occupied much of his attention at the time, and formed a frequent theme of conversation with those among his acquaintances who were inclined to enter upon it. He was induced to put his thoughts upon paper, without the remotest view at the time to publication. The late Mr. Perry, proprietor of the Morning Chronicle, was one of the few friends to whom Mr. Ricardo showed his manuscript. Mr. Perry urged him to allow it to be published in the Morning Chronicle; to which, not without some reluctance, Mr. Ricardo consented’.1
The publication of Ricardo’s article started an extensive correspondence in the Morning Chronicle. His own further contributions were provoked by a letter defending the Bank of England against his criticisms, which appeared on 14 September 1809 and was signed ‘A Friend to Bank Notes, but no Bank Director’, whom Ricardo ‘soon after found to be an intelligent friend of his own’,1 Hutches Trower. Ricardo’s reply to this letter appeared on 20 September over the signature ‘R.’ A second letter from ‘A Friend to Bank Notes’, although dated 23 September, was not published till 30 October; and Ricardo’s rejoinder, dated 4 November, and signed ‘R.’, did not appear until 23 November.2 This concluded their controversy in public. But once they had established each other’s identity, it seems that the two correspondents communicated their views to one another without waiting for the long delayed publication in the Morning Chronicle. Thus a private controversy arose between them concurrently with the last stage of their published letters and was carried on after their controversy in public had come to an end.
Ricardo’s answer to both of these replies of Trower was found among Trower’s papers and is printed below, pp. 36–46; the first part (pp. 36–43) deals with Trower’s reply to (a) and the second (pp. 43–6) with Trower’s reply to (b).1
Meanwhile Ricardo had decided to give further publicity to his views in the form of a pamphlet, The High Price of Bullion, a Proof of the Depreciation of Bank Notes, which was published by John Murray about a month after his last letter had appeared in the Morning Chronicle.2
The relation of the pamphlet to the Chronicle contributions has been the subject of some confusion. Ricardo himself, in his Introduction to the first three editions of the pamphlet, says that ‘he has thought proper to republish his sentiments on this question in a form more calculated to bring it to fair discussion’. McCulloch, however, who had not read any of the contributions to the Chronicle,1 is certainly misleading in his statement that ‘having subsequently collected the letters, and given them a more systematic form, Mr. Ricardo published them in a pamphlet’, as it suggests that the pamphlet was little more than a reprint of the letters.2 As Professor Hollander says,3 ‘An important consequence of McCulloch’s editorial neglect has been a general acquiescence in the view that the Chronicle letters were planned and published in serial form,4 and that the pamphlet on the “High Price of Bullion” was not merely a free version but an essential reproduction of the statements therein contained.’ A comparison of the pamphlet with the contributions to the Morning Chronicle shows that, although the main points discussed in the pamphlet had been outlined in the letters, the former is by no means a mere reprint, but was almost entirely written afresh.
Nor is there any foundation for Professor Silberling’s supposition that the High Price of Bullion was written before the contributions to the Morning Chronicle, indeed several years before.1 He rests his case mainly on the assertion that the pamphlet ‘refers to no political or economic events later than 1805’; but Ricardo’s treatment being essentially abstract, no events apart from the Bank Restriction are referred to, either before or after 1805, other than movements of prices; most of these, notably the rise in the price of gold, the fall of silver compared with gold and the depression of the exchange, refer to the year 1809. It is true that Ricardo refers only to works written before 1804, but it by no means follows that his comments on them were written at the time of their publication. It appears that in the autumn of 1809, after the publication of his original article, Ricardo read or re-read a number of writers on the subject of currency, including Locke, Sir James Steuart, Adam Smith, Lord Liverpool and Thornton, making notes which have been found among Ricardo’s papers.2 None of these writers is mentioned in Ricardo’s original article on The Price of Gold, but they are referred to both in the subsequent letters to the Chronicle (September and November 1809) and in the pamphlet. Indeed, certain controversial passages from these letters, directly replying to Trower’s arguments, are repeated verbatim in the pamphlet,3 which suggests that the latter was written some time between September and November 1809 (the Introduction is dated 1 December), during the final stage of, or immediately after, the controversy in the Chronicle.
On 1 February 1810, a month after the publication of the pamphlet, a speech by Francis Horner in the House of Commons, which led up to the appointment of the Bullion Committee, brought the Controversy to a further stage. Ricardo replied to this speech in a private letter, on 5 February,1 in which he disputed Horner’s statement that other factors besides the superabundance of the paper circulation had contributed to the high price of gold. A number of passages from this letter were embodied in the third edition, ‘With Additions’, of The High Price of Bullion, which was published early in March 1810,2 and, apart from some alterations in arrangement (see below, pp. 67,n. 1 and 74, n. 1), they constituted almost the entire changes in this edition. Further additions were made in the fourth edition, which was published a year later (see below, p. 11).
The Bullion Committee was actually appointed by the House of Commons on 19 February 1810 ‘to enquire into the Cause of the High Price of Gold Bullion’. Their report was formally laid before the House on 8 June, but it was not printed till August, and extracts appeared in all the newspapers of Monday, 13 August 1810.3
The appearance of the Bullion Report gave rise to a great output of controversial pamphlets.4 Ricardo’s contribution at this stage consisted of three letters to the Morning Chronicle in September 1810.5 The first, a review of the Report itself, appeared on 6 September.1 The second, on Sinclair’s pamphlet against the Report, on 18 September. The third, on Randle Jackson’s speech at the Bank Court of 20 September attacking the Report on behalf of the Bank, appeared on 24 September.2
Since the early summer of 1810, the question of who should review the Report in the Edinburgh Review had been under consideration. On 16 July Horner had written to Jeffrey, the editor: ‘I am just returned to town, after an absence of about ten days. The Bullion report, I am rather surprised to find, is not yet delivered from the printers; I revised the proof-sheets before I left town. I would rather do something for you myself, if you will let me know the utmost time you can allow me; rather, I mean, than trust that subject in the hands of any of your mercenary troops, one of whom was guilty of deplorable heresies in the account of a book by one Smith.3 I will do a short article for you this time, to do justice to Mr Ricardo and Mr Mushet, who called the public attention to this very important subject at the end of last year.’1
From a later letter it appears that the plan that Horner himself should write the Bullion article had been abandoned, that Ricardo had been approached and had refused2 and that Malthus had finally undertaken to do it: ‘Ricardo has taken such fright at the notion of writing in the Review, that I have not succeeded in that point; he prefers publishing in a separate pamphlet. Malthus has given me hopes that he will be able to scramble up an article this week; and I am very anxious to have the subject in his hands, and to engage him in the discussion, both because he agrees with me upon the fundamental principles of the doctrine, and because we have some differences, or rather difficulties which we try to solve differently, in some parts of the Theory. All I beg of you, though I have no right to ask any thing, is not to let Milne3 lay his hands upon us.’4
The paper which Ricardo had in preparation, and which he was unwilling to publish as a review, was no doubt his Reply to Mr. Bosanquet’s Practical Observations on the Bullion Report, which appeared as a separate pamphlet a month before the number of the Edinburgh Review containing Malthus’s Bullion article. Bosanquet’s ‘dexterous but somewhat unfair pamphlet’, as Horner described it,5 was regarded at the time as the most effective of the criticisms published on the Bullion Report. He directed his criticisms particularly against ‘Mr. Ricardo’s work, not only as having been the immediate cause of the inquiry which has since taken place, under the authority of the house of commons, but as a syllabus of the Report which has been presented by the Committee’. The Practical Observations on the Report of the Bullion Committee, by Charles Bosanquet, was published byJ. M. Richardson in the latter half of November 1810.1 A ‘Second Edition, Corrected, with a Supplement’ appeared in December of the same year,2 the Supplement being published also as a separate pamphlet. The body of Ricardo’s Reply is based on the first edition, and was sent to the press before he had seen Bosanquet’s second edition;3 his Appendix being added later to deal with Bosanquet’s Supplement.4 The Reply was being printed at the end of December 1810, as it appears from a letter of Mill,5 and it was published early in January 1811.6
Early in April7 the fourth edition of Ricardo’s High Price of Bullion was published.8 The main body of the pamphlet contained few changes, but the Introduction was omitted, and an Appendix was added containing his observations on the Edinburgh Review article, and outlining his plan for bullion payments, which he later developed in Economical and Secure Currency.9
On 8 April Horner replied: ‘Ricardo’s reply to your objections is not so well written, in point of clearness, as his usual style. I suspect that upon that dispute the truth lies between you, and that a mode of expressing and stating what takes place might be hit upon, to which you would both assent.’1
So far Ricardo and Malthus had never met, and the controversy between them had been carried on only in print. In June 1811, Malthus introduced himself to Ricardo. Malthus’s second article on Bullion, in the Edinburgh Review for August 1811, contained no criticism of Ricardo,2 and the further controversy between them was restricted to private discussions and correspondence.3
1.As I attribute the fall in the value of money during the last 40 years to the increase of the metals from which money is made, I cannot anticipate a similar fall in the next 40 years unless we should discover new and abundant mines of the precious metals.
The argument in this chapter is that an increase of paper money has the same effects in increasing prices as an increase of metallic money. This is no doubt true, but we should recollect that paper money cannot be increased without causing a depreciation of such money as compared with the precious metals. It would therefore be true that the evils of an abundance of paper money would be visible by a rise in the prices of commodities,—but a paper money which should never be of less value than the coins which it represents can never be1 in more abundance than those coins would have been if there had been no paper. The value of gold may be affected by the increase of paper but it will speedily regain its value, as the mines would cease to supply the usual quantity owing to the diminished profits. No paper circulation can therefore be permanently of less value than the coins which they truly represent.
2.Is this passage quite correct? May there not be an augmentation in the price of commodities whilst the value of money continued absolutely stationary?
3.Commodities may rise from taxation tho’ they are not subject to any direct taxation themselves. If a tax were laid on bread every commodity would rise, as there is no commodity to the production of which the labour of man is not necessary.
4.A rise of prices from depreciation of money is no proof of national prosperity.
5.The evils of depreciation have been fairly described in the last paragraph, and actually consist in defrauding creditors of their just demand. Bankruptcy may be said to commence with depreciation; it may be so gradual as to prevent all convulsion,—its ultimate effects is to enrich one class of the society at the expence of another.
6.Is it not an immoral act to take advantage of a law1 the consequences of which the legislature had not in contemplation, to enrich yourself at the expense of your fellow citizens?
7.I wish the author had defined what he meant by real wealth. As I understand those words I can have no conception that a paper money can cause an increase of real wealth, whilst a metallic currency cannot.
If he applies his observation to the revenue of government only, there can be no doubt that taxes paid in a depreciated currency are of no more real value on account of the increase of their amount, whilst their standard is in the same degree depreciated.
8.The sinking fund is capital not money and therefore cannot raise prices.1
The Capital liberated by the sinking fund is not a creation of capital,—it is merely a transfer from the pockets of those who pay the necessary tax to create that fund, to the public creditor. The same effects would have followed if there had been no sinking fund, and the contributors had accumulated their portions of the tax into Capital.2 Again its numerical amount is of no consequence we must judge of its real amount3 by the quantity of industry which it can employ. The author argues as if it were a capital created.
9.The loss is here reckoned twice over.
10.What has the emigration of Capital to do with the depreciation of money. The depreciation of money neither promotes nor retards the accumulation of Capital. If Capital be transferred for advantageous employment to other countries it can arise only from its accumulation which is totally independent of the value of the circulating medium.
11.It can never be allowed that the emigration of Capital can be beneficial to a state. A loss of capital may immediately change an increasing state to a stationary or retrograde state. A nation is only advancing whilst it accumulates capital. Great Britain is far distant from the point where capital can no longer be advantageously accumulated. I do not mean to deny that individual capitalists will be benefited by emigration in many cases,—but England even if1 she received the revenues from the Capital employed in other countries would be a real sufferer.
12.I confess these opinions appear to me2 paradoxical; I will however endeavor to give to the authors views the most unprejudiced attention.
[13.I should find great difficulty to admit this proposition.]3
14.Money cannot be increased if there have not been a previous increase of the precious metals. No advantage whatever attends the increase of money,—but as it must be preceded by an augmentation of the precious metals and as those precious metals are used to gratify the desires of man, by affording him plate &ca.,—their increase is an increase of the riches and enjoyments of man.
I perceive that this is admitted in the following paragraph.
15.The national capital can never be augmented by an increase of the articles of luxury. The wages of labour are spent in the purchase of necessaries,—those necessaries must therefore be augmented before any increased industry can be called forth.
16.Altho’ it were to be allowed that the commodities circulated were 100 times, in value, the money which circulates them, it would be equally certain that their rise or fall would1 be in proportion to the increase or diminution of money; because it is the rapidity of the circulation of money which would cause any given portion to be 100 times opposed to the same description of goods. If goods of a million in value could be circulated by £10,000,—the million would not be less opposed to a million of money,—but the ten thousand pounds by the rapidity of its circulation would be 100 times in that market. This is on the supposition that such goods were only sold once but as they may be successively sold,—the £10,000 if that sum were adequate would not circulate only 100 times2 but as much oftener as sales to that amount should be effected.—
The manner in which money is depreciated by an increased quantity is very clearly described,—the public require some explanation on that subject.
We must not however forget that the precious metals are used for other purposes besides money.
17.1 Whilst Banks pay in specie there can be no additions to the circulation which can permanently lower the value of money,—because they cannot permanently lower the value of gold and silver. Those metals would not have been of greater value now if no bank had ever been heard of.
18.Articles of luxury which this author supposes to be the great object of increase cannot as I have already observed be the sources of future revenue.
19.The whole of the explanations following are very satisfactory and give a very correct idea of the real source of price.2
20.Inasmuch as it would be impossible for1 every man or a great portion to realise their pecuniary revenue Adam Smith was right. For example 10 men save out of their pecuniary revenue 1000£ each, which they lend at interest or deposit at their Bankers,—the society should therefore be richer by £10,000 money, but in all probability it is not £1000 richer in money the greatest part has realised itself in goods which are in hands of those who have borrowed the money saved. It makes no difference whether those who saved it lent it themselves or by depositing it with a banker enabled him to do it. In no case can a pecuniary revenue be realised in the form of money but by hoarding. “Si un homme parviene2 à economiser son revenue tout entier, ce qui surement n’est pas un cas tres rare, suivant Adam Smith, il n’aura point eu de revenu.” He would have a revenue but it would realise itself in the hands of him to whom he lent it in the shape of commodities. The money of the country would have been augmented in a very trifling degree,—and the remainder would be wholly commodities.
The absolute revenue is produced by the labour of one man with the Capital of another, which shall be called the unproductive?3
21.The mass of real revenue is derived from Capital and Capital is derived from the savings of the productive class, the capital must therefore once have been revenue, but the produce of that capital could never have been revenue. If from my revenue I save 100£ which next year produces me £10-the £10-is new revenue never having existed in that state before.—If this again is employed as capital it will yield a new revenue which never existed in that or any other1 shape before.
With this correction the argument founded on it appears to me perfectly correct.
22.[This remark would be just if in the real revenue the produce of the earth, of the seas, mines, and labour of man were not all included. It is taking from that real revenue to pay one sort of labour as much as another. The wages of the manufacturer as well as those of the cultivator of the earth no matter in what he is paid are derived from the same source.]2
See No. 44.3
21.4 This is rather mysterious. Does the author mean the net revenue of the5 productive classes of all sorts after paying themselves for their subsistence during the period of reproduction, or is it the gross produce. If whilst I am consuming a sack of wheat I can by my labour produce two would he call my revenue 2 sacks or one sack. If he answers one then the objection in the margin 226 is well founded because the wages of labour have been already deducted.
[23. I cannot agree with this last remark.]7
24.I like the distinction which Adam Smith makes between value in use and value in exchange.1 According to that opinion utility is not the measure2 of value.
25.Prodigality is positively injurious to a state as it diminishes the national capital and therefore its revenue and resources;3 A man who spends an ample revenue on objects of luxury is not a prodigal he does not diminish the resources of the state, but as far as he is concerned keeps them at a stationary point. The man who saves his income however ample and adds it to his capital increases the riches and resources of the country of which he is a citizen.
26.I much doubt whether this is the foundation of the value of the precious metals,—I doubt rather whether the assertion should not be somewhat qualified. If true whilst we were secure of the ability of the Bank to pay, paper money must retain its value,—but at the present moment we see the contrary to be the fact,—as with the fullest confidence in the stability of the issues of paper, that paper is at a considerable discount proceeding from excess alone.
27.This objection does not appear well founded. No sum of money carried into Switzerland would enable the possessor to drain a marsh and render it productive. The money must first be exchanged with some other country for those commodities which would increase the capital and revenue of the country. The same observation is applicable to Scotland. It was not by money, but by capital that Scotland has been improved.
28.It appears to me that the possession of new Land would add to our sum of riches without additional labour, because the same labour employed on double the quantity of equally good1 land now in cultivation in England would produce a greater return. This opinion is founded on the decreasing power of the land to produce in proportion to the labour and capital employed on it. The sentiment expressed is in the main undoubtedly true,—but I think it requires some qualification.
—I see this is admitted in the next paragraph.
29.The Bank of England is certainly not quite so secure as a bank of deposit such as at Amsterdam and Hamburgh,— but is infinitely more useful in making the whole capital of a country available. Paper in England performs the office of the precious metals,—and the precious metals are exported for those commodities which can be usefully and advantageously employed. In Holland and Hamburgh the advantages of the Banks is 1o. in the use of paper instead of metals which has been admirably described by this author, and 2dly. in having a uniform measure of value subject to no debasement or deterioration.
30.It was well observed by Mr. to the bullion Comm∼ee1 that he considered the agio on Bank money not as a premm. for Bank money because that was invariable but as the measure of the value of the current money.
The nature of Bank money on the continent does not appear to me to be well understood by the author.
36.I do not understand this passage.
37.This trade of buying gold at £3. 17. 6—and procuring it to be coined would be very unprofitable to the bank, because as they would purchase the bullion with paper they would cause an excess which would infallibly be returned to them for specie which they must provide immediately,—whereas they would not obtain the specie for their bullion sent to the mint for some weeks amounting to a loss of interest considerably more than the 4d.½ per oz.
The effects of an excessive issue of paper I have not yet seen explained by this author.
4d.½ is not 2 pc.t on £3. 17. 10½ but less than ½ pc.t
38.We are to suppose the author speaking of a paper convertible at the will of the holder. If so his system is altogether erroneous. All the banks together can by no effort keep permanently more than a given sum in circulation.
39.It has lately appeared in evidence before the bullion Committee1 that the Country Banks keep in London deposits of Exchequer bills, India Bonds &ca., for which they can speedily obtain2 Bank of England notes when necessary. It is also proved that their payments in return for the notes issued by themselves are frequently if not generally made by drafts on their London Agents. Country notes are seldom exchanged but for the purpose of obtaining London currency and this mode is convenient to both parties. To the country banker as it prevents the necessity of keeping funds to any great amount unemployed.—To the holder of the country notes as they are chiefly exchanged for the purpose of making payments in London, it saves the risk which would attend sending the Bank notes to London.
The Bank of England deposits consist of bills of exchange government securities, besides coin and bullion. Those of the country Banks of government securities, bills of exchange coin and bank of England notes.
As all the banks together whilst they are bound to pay on demand in specie can only maintain a given amount of notes in circulation prices cannot be affected by any efforts of Banks.
1.If money be depreciated, the value of an annuity payable in money must also be diminished. What other variation the author means is not clearly expressed.1
In this chapter the author does not clearly express to us what he means by money or circulating medium. Does he include checks on Bankers, Exchequer bills, India Bonds as well as Bank notes and metallic money. I consider the latter (Bank notes and metallic money) only, as circulating medium and I should think the mass of these changed hands much oftener than the author has supposed.
3.Why should the mere increase of money have any other effect than to lower its value? How would it cause any increase in the production of commodities?
4.This is true taking all commodities together,—but fashion or other causes may create an increased demand for one article and consequently the demand for some one or more of others must diminish. Will not this operate on prices?
The author evidently means all commodities together or the mass of prices.1
5.Is not this assuming that what is not spent is hoarded. The revenue is in all cases spent, but in one case the objects on which it is expended are consumed, and nothing reproduced2 in the other those objects form a new capital tending to increased production.
6.If any rise in the price of commodities is caused in the way here supposed it must be by diminishing the amount of commodities, which will make the money which circulates them more relatively abundant. If the commodities remained the same and their price was increased, more money would be absolutely necessary to circulate them. But if it is the mass of prices of which the author speaks, he is mistaken because what one commodity rose in price another would fall.1
7.These arguments are all founded on the supposition of the country to which they are applied being insulated from all others. If not it is evident that the rapidity of the circulation would cause an exportation of money, and would not therefore raise prices at home.
8.If by increase of capital he could increase his productions the price of them or of some other commodities2 must fall unless the money of the country has been also increased.
9.In this conclusion I perfectly agree3 if the author means the mass of prices, but a hundred articles might have risen, whilst another hundred might have fallen in consequence of increased or decreased demand, increased or decreased knowledge in the best means of producing them. Nay the mass of prices might remain the same tho’ each individual article had risen in consequence of taxation.
[9½.]4 Money cannot call forth goods,—but goods can call forth money.
The revenue of nations divided in two portions that expended on consumable commodities, and that saved for future capital a source of great error as their effects on prices the same.
10.1 Here again it is supposed that the augmentation of money precedes the augmentation of goods. I am of opinion however that it would seldom2 cause any augmentation of goods, and if it did it would be before prices had found their new level.3 It would be effected by turning a part of that fund destined for the wages of labour for a short time into capital.
11.An increased capital4 will maintain a greater amount of circulating medium without causing5 any alteration in its value. But thro’ commercial channels no money can be introduced into a country which shall affect prices, unless the mass of gold and silver have not only been increased in proportion to the increased demand, but much above it. It can be produced only by the discovery of new mines or the improvement in the mode of working the old. The question of the effect of machinery on prices is not once mentioned.
12.& 13. This calculation does not appear to me correct, if correct it is very obscure.1 If 15 pc.t be added to the amount of goods already in existence, there will be required 15 pc.t on the amount of money before employed to keep prices as heretofore2 and this is in fact what this calculation asserts, but it is necessary to the authors conclusions that we should allow that an increase of money will call forth an additional amount of commodities,—but I do not see on what principle such a consequence can be expected.
Many pages appear to me very difficult to comprehend. The author in some places speaks of money as capital calling forth the production of commodities,—and in others as purely circulating medium raising prices in proportion to its abundance.3
14.4 In as much as the million could not be imported without a corresponding exportation of commodities, the country importing money would lose in consequence of the increased fertility of the mine.—This again would be a tax to that amount on one country in favor of another. It is precisely of the same nature though as that which would attend any improvement in a manufacture of England for example which should lower its value. In consequence of such decreased value a greater quantity would be imported into other countries. If the million had been at once introduced into England for example.5
If in a foreign country new means of improving the production of commodities be discovered it will be attended with real advantage to all countries which consume that commodity.—If the article were french cambrics for example England would import the quantity of cambrics she required at a less sacrifice of the produce of her own industry:—but when gold and silver are the commodities that become cheap in consequence of improved means of working the mine or the discovery of new mines no such advantage will accrue to England because the quantity of money she requires is not a fixed quantity but depends altogether on its value.
16.Is it not to be doubted whether the augmentation of1 money in any way accelerates the prosperity of a country, for the reasons I have given I think it retards it.
17.I cannot comprehend how the increase of productions can cause commodities to rise in price, without any increase in the amount of money. War it would seem to me had rather the opposite tendency than what is here supposed, but the most correct opinion I think is that it has no effect on prices but thro’ means of taxation.2
18.What is there incompatible in a rise of prices and a diminution of wealth, if prices are regulated solely by the relative proportion of money. In a country insulated from all others such an effect would inevitably take place.
19.Is not this a very faulty opinion?
20.Not by a continuance of the same taxes but by an addition to them.
21.This does not appear clear to me. The tax for annuities is so much taken from the collective income of the nation, but it is not added to the revenue of a particular class of the same community. The capital which yielded me a revenue is annihilated by being lent to Government consequently the revenue which it produced is also lost, and tho’ I may receive from the community the same income which I before enjoyed less my share of the tax,—to the community at large there is a loss to the amount of all that I receive, with my share of the tax added to it.
The1 effects of scarcity will be to raise prices, but whilst the society does not expend more than its whole revenue it will divert a portion of money from one employment rather than another. If my revenue amounts to £1000-£800- of which I spent in my family and 200 on those raw materials which are imported from abroad it is evident that if I am constrained by scarcity to spend 200 more on consumable commodities some one else must go without those commodities. If each member of the community consumed the same as before there could be no scarcity because there would be the same consumption. I say this would be the case unless the 200 which I formerly employed on raw materials were now used in procuring from abroad an additional supply of consumable articles. The same effects would follow tho’ I spent 1200 and were to encroach on my capital.
26.Is not this principle to which I agree opposed by that which I have marked 22.1
27.This can by no means be admitted.
28.The same effects follow from a diminution in the amount of commodities as from an increase in the amount of currency so that an increase of prices is no more a proof of an increase of currency than a decrease of goods.
Ought the effects of taxation to be left out of the question?
29.If Government is indebted to the people it is so far benefited by a depreciation of money.
30.The author here asserts what I imagined he had before denied that an increase of prices may accompany increased wealth.
31.Why should we fix on a period 40 years back more than any other as the standard by which this excess is to be estimated.
Would it be desirable to have a money which was itself for ever invariable in its value?1
32.This chapter begins with what I consider a stumbling block,—I cannot agree that any addition to the money of a country produces riches, and population.
33.Do not all these points resolve themselves into the last?
35.Is it not probable that the old1 mines would have been productive of increase2 in much the same proportion as the surface of the earth? Increased price must call forth increased produce, unless the source of production is exhausted.
If so pensions, and the divd. on the national debt would not as here suppose have augmented in value.
That the increase of money is3 not been the cause of4 increased riches the author himself gives us an example in China.
36.This is no doubt a correct opinion.
37.The greatest cause is here omitted and which forms the subject in dispute at the present day, the high price of bullion and low exchanges caused by excess of paper.
38.This has not been proved, on the contrary the fact of guineas having been hoarded in 1797 is well established.
39.It is evident that these principles are very defective. Bankers cannot safely emit paper in proportion to their deposits. A banker may with a million of deposit safely issue 3 but it does not follow that with a deposit of 10 million he may safely issue 30.
40.From what has been lately written on this subject the authorâ€™s speculations in this chapter are founded in error.
41.By Negociable paper I conclude is meant bills of exchange: These may be considered as the cause of the increase of paper issues, as it is on these securities that money is generally borrowed from Banks. It may therefore be affirmed that prices are raised in consequence of the increase of these bills, because the paper money would never be called into existence if bills did not precede them. The distinction in the effects of the two sorts of paper is not apparent to me.
This chapter is altogether objectionable.
42.This chapter very defective.â€”It is clear that the circulation cannot be indefinitely augmented in proportion to the increase of depositsâ€”No notice taken of the effects of an excess of circulation in producing the export of gold.â€”The high price of bullion entirely owing to an excess of currency. â€”General bankruptcy not to be occasioned by excessive circulation whilst Banks pay in specie.
43.The utter discredit of all paper money would not be attended with the effects here asserted,â€”Commodities would no doubt fall very considerably but the fall would be temporary not permanent, provided the circulation of paper before the annihilation of credit was exchangeable for the precious metals at par.â€”We should very soon obtain such a supply of gold in exchange for commodities that prices would nearly regain their former level.
45.An augmentation of money in all cases operates to the disadvantage of some and the advantage of others,—1 it will neither accelerate nor retard the growth of real2 riches.
50.The principle of Adam Smith is mistaken; he did not say that the2 money of a country was not susceptible of increase, but that such increase depended on the diminished3 value of the precious metals. He did not deny that the discovery of the mines of America augmented the circulation of all country but expressly affirmed it. It may be doubted whether any circumstances can raise prices generally but taxation, or a diminution in the real value of the precious metals in consequence of increased abundance.—The reason why gold was exported when paper was added to the circulation was not because both the paper and the gold could not be absorbed in the general mass of circulation but because the diminished value of the currency here, whilst it retained its value abroad made it a profitable article of exportation.
This is a consequence of which the author of the manuscript does not appear to have been aware, and is of great importance in all enquiries concerning money.
The reasoning in this chapter is excellent if applied to our present circulation but not1 applied to that state of it when Adam Smith wrote. Dr. Smith was undoubtedly correct.
51.As this Chapter contains a recapitulation of the author’s opinions it may require particular attention.
1. As the whole of the revenue of a country is spent either on productive or unproductive labourers, the prices of commodities for that year is not affected by the proportion, in which revenue may be actually consumed without reproduction,—or consumed and reproduced. It is difficult to comprehend why an increase of money should produce any other effect than to raise prices; and why the author should suppose that it will be the cause of the increased2 production of commodities. Labour is paid not by money but by money’s worth therefore if prices rise it will not occasion any increased production because more money must be given to the labourer to enable him to obtain the same amount of commodities.
2. If with the produce of the labour of England we purchase a quantity of gold from any other country which we add to our circulating medium, we in such proportion diminish our real capital and therefore the source of future riches. The additional money will yield no revenue whatever, the capital with which we should have parted would.
3. Consequently an addition to the quantity of metallic1 money is not only of no advantage, but is a positive evil as it impoverishes the country which obtains it, or at least checks it in its progress towards wealth.
4. It is true that a capital employed in extending the manufacture of those commodities which may be advantageously exported is highly desireable, but an increase of2 money will not enable us to add to the annual amount of the land and3 labour of the country. The produce of4 that labour will be measured only on a different scale. It can make no difference to the real wealth of the country whether the commodities produced be exported or consumed at home. If 100 pieces of cloth be consumed at home or whether they are exported to Portugal in exchange for wine and the wine be consumed at home can make no other difference but the profit.5 —If they were exchanged for goods more durable the effects would be the same. If we imported Russias linen, and the consumers of the linen were to reproduce the value in some other commodity, it would be nearly6 the same as if the consumers of the cloth at home were to reproduce the value of the cloth. I do not mean to depreciate the advantages of foreign commerce. If not beneficial we should not engage in it,—but it is not beneficial because we do engage in it.
By carrying on manufactures on a large scale you may undoubtedly increase the real riches of a country, and the exportation of manufactured commodities will encourage their production, and augment their quantity. It will do this in a greater degree than if the commodities were destined for home consumption. This is in other words saying that we engage in foreign commerce because it is advantageous to us.
5. This foreign commerce is not profitable because we import gold in return for our commodities, but would be equally if not more so if the nations with whom such commerce was carried on had neither gold or silver to give in return for the goods which we exported.
6. That therefore foreign commerce modifies the quality and increases the variety of productions which compose the mass of wealth, and only adds to the natural growth of its quantity by giving a more beneficial employment to labour;1 and that the importation of gold and silver has no tendency more than other articles to increase the real wealth of countries.
7. That because2 the increase of the precious metals contribute to add to the circulating medium, it does not therefore cause any3 augmentation to the mass of real wealth.
8. It is not obvious that the rise of prices in consequence of an increased circulating medium will check the growth of wealth because it checks4 the exportation of goods.—Such an effect is generally counteracted5 by the fall in the rate of exchange.
9. If an increase of metallic money will not increase national wealth,—why should an increase of paper money produce such effects. In what way can the increase of paper money operate on the production of commodities? Why should it increase productive labour more than an equal quantity of metallic money if obtained thro’ the same channel and with equal facility.
10. It is difficult to comprehend how paper money should increase productive labour.
11. If the effects of an increase of paper money are the same as a coercive interference of government it must be because a portion of revenue will in consequence be employed in the maintenance of productive labour which but for that interference, or such addition of paper money[,] would not be so employed. But what proofs are there that additions to the paper currency would be the cause of accumulation of capital? What should give to one class a disposition to accumulate which is not possessed by another? This must be mere speculation—it might be so, but it is equally probable that it might be otherwise.
12. The increase of paper money would operate as a tax on one part of the community in favor of the other part.
13. The disposition to consider an increase of money as an increase of riches arises out of the imperfection of language, which confounds the terms riches and money.
The Report of the Bullion Committee had been issued on 12 August 18101 in the official folio edition. Ricardo’s page- references, however, are to the octavo edition, which was published by Johnson and Ridgeway in September.2 The MS is among Ricardo’s Papers and has been published in Minor Papers on the Currency Question, 1809–1823, ed. by J. H. Hollander, Baltimore, The Johns Hopkins Press, 1932, pp. 45–59.
The reference numbers in the MS of the Notes on the Minutes of Evidence (described as (C) above) correspond to numbers written in pencil in Ricardo’s hand on his working copy of the octavo edition of the Bullion Report which is in the Library at Gatcombe.3
Although the Notes (C) begin with a comment referring top. 102 of the Minutes of Evidence, it is unlikely that any sheets containing comments on the earlier pages have been lost, since there are no numbers written on those pages in Ricardo’s working copy of the Bullion Report.1
65. If the Bank had been more liberal in their discounts at that period, they would have produced the same effect on general credit as was afterwards done by the issues of Exchr. bills. It would appear that the bank would buy the exchr. bills but would not discount the merchants bills,—or rather they would not advance money to the merchants without the guarantee of Parliament. If the bank bought the bills it was then by an increase of circulating medium that public credit was ultimately relieved.1 If the public and not the bank purchased the bills then was a portion of the circulating medium of the country which had been withdrawn from circulation again brought forth by the credit of government being pledged for the parties requiring relief.2
Aaron Asher Goldsmid.1 This gentleman’s evidence is very clear and explicit, both with regard to the price of gold, and the manner in which the bargains are executed. He stated, that, for these last 15 months, he had bought and sold more gold than on an average of years.
Does not this admission prove that it is not in consequence of our importations of corn from France that gold is greatly in demand, as if that were the case French gold coin would be particularly sought: of all gold that would be the best remittance. Yet Mr. G. believes that it is return for corn from France and Flanders that gold is2 exported:—The largest quantity sent to Holland. Does not think that the quantity of gold exported considerably exceeded, in the last twelve months, the quantity imported. Has not any idea that the increase or decrease of Bank notes has any connection with the rise or fall of the price of gold,—but acknowledges that he has paid no attention to it. If a person were at liberty to export English Gold, he certainly would get 16 pct. more than if he exported foreign gold.
Mr. Binns— 3 has frequently bought light guineas for which he has given not quite so much as 23 shillings
Mr. Merle— 1 has declined buying light guineas, as he thinks it contrary to law to give more than the coinage price for them; he has no doubt that the cause of the disappearance of guineas from circulation, [is]2 the high price of Gold Bullion and the temptation to export it on acct. of the high price. He does not think that the increase of Bank notes has had any effect on the price of gold,—but confesses that he has never made any observation on it, nor considered the subject generally. He never thought of considering what effect a large issue of Bank notes might have on the price of gold. He allowed that if there were no legal restrictions against melting guineas, he should consider paper as of less value than specie,—it would make a difference of 10/- an ounce
[NOTES ON THE MINUTES OF EVIDENCE] MINUTES OF EVIDENCE
Taken before the Select Committee appointed to enquire into the Cause of the High Price of Gold Bullion, and to take into consideration the State of the Circulating Medium, and of the Exchanges between Great Britain and Foreign Parts.
Jovis, 8° die Martii, 1810.
Mr.—, a Continental Merchant, again called in, and Examined.
[pp. 102–103.] In what way do you think the present issue of bank notes and country bankers paper would operate to reduce the rate of exchange, supposing the balance of trade to be in favour of this Country?—The greater the issue, the more the exchange would be lowered; and supposing that a scarcity of the circulating medium of this Country existed, the higher the exchange would be. Independent of this direct effect, a reduction of the circulating medium would also have that of lowering the1 prices of every article, and thus increase the facility and extent of their export.
That in consequence of an increase of bank notes in circulation, and articles of merchandize being raised in price, that the2 exports are less than they otherwise would be, and in that way the operation on the exchanges is to our disadvantage?—Yes, in as far as there is any competition in trade between this and other countries.
Admitting that by an increase or decrease of the quantity of paper in circulation the prices of merchandize are increased and decreased, and the exportation greater or less, and that the exchange is of consequence indirectly affected; will you explain more particularly the direct operation of an excess of paper currency on the exchange?—An increase of the circulating medium enables persons to make greater advances to foreigners, and more3 bills are thus brought into the foreign market; this must have the effect of lowering the exchange. Should, on the contrary, a scarcity of money exist here, it would become desirable to realize and accelerate the payment of debts due to this Country; advances now readily made to them would from necessity be curtailed, and the foreigner, who required a bill on this country, would be obliged to pay a higher price for that which was scarce than if it were abundant. The importations, from the same causes, would be curtailed; and the desire to raise money by sending a greater quantity of goods abroad, would be increased. However great the inconvenience to individuals, I conceive that a very material reduction of the circulating medium in this Country (by which I do not mean to make any distinction between coin and paper) would have the immediate effect of raising the exchange so far above par as to enable foreigners to send Bullion to this Country for the liquidation of their debt, provided this principle were carried to such an extremity.
[p. 103.] Supposing a diminution of the paper of Great Britain to take place, or an expectation of such diminution generally to prevail, would not the following effect follow; would not those English merchants who now trade on borrowed capital, and order goods from abroad on their own account, with a view to importation hither, or invite consignments from abroad by4 offering to make large advances on the credit of them, curtail their orders and limit the extent of their advances, in consequence of their anticipating increasing difficulty in providing the means of payment; would not this conduct on their part lessen the quantity of drafts drawn upon them, and thus affect the balance of payments, and would not this alteration in the balance of payments tend to improve the British exchange?—I perfectly agree in the effect of the positions placed in the foregoing question, as I tried to explain in my preceding answer.
[p. 104.] In the case supposed [the circulating medium consisting almost exclusively of paper], will not the same general advance of prices in England, which you state an augmentation of5 paper to produce, operate as a discouragement to the exportation of English articles so long as the exchange shall remain the same, which shall be assumed to be at par?—Yes, certainly; but it is an assumption which, in my opinion, could never take place in fact.
[p. 105.] Then if the exchange was affected solely by the balance, the payments of exchanges with the North of Europe at this moment ought, according to the information on which you6 have formed your judgment, to have been in favour of England? —If that were the only cause that influenced the exchange, it is my opinion, that the exchange would have been in favour of England for some time past.
[p. 106.] Do you not conceive that without a free importation1 of the coin of the country, a diminution in the amount of its currency would produce a fall in the price of all commodities, and a consequent rise of the exchange, in the same proportion as if that diminution of currency had been effected by the export of a part of our coin?—I should suppose it could only have one-half7 the effect.
[p. 107.] You have stated, that the exchange has been greatly in our favour since the restriction on the Bank, and that the balance of payments then due to England was in consequence liquidated by great importations of Bullion into this Country; you have also stated, that in your opinion, the balance of payments is now in our favour; explain to the Committee to what cause you ascribe the difference in the exchange between those two periods, in each of which you conceive the balance of payments to be in our favour?—At the period of the suspension, the situation of the trade of this Country was very favourable to it: the stock of goods on hand, and which were required by the Continent, was very great; public opinion here in favour of the measure empowering the Bank to withhold cash payments was such, that for some time no traffic at home was carried on between this paper and coin: while the balance of trade therefore continued in favour of this country, the foreigner could only liquidate his debt by sending Bullion. Had the re-exportation8 been allowed, a very small proportion of such exportation would have been sufficient to keep the exchange at near par; or even the public opinion would have fixed it at that rate, if it were ascertained that such operations could take place when required. This not being the case, and some extraordinary causes (as explained) having taken place, that depressed the exchange, and coin being withheld both from internal circulation and from its operation with foreign countries, I conceive this to be the cause of an unfavourable rate of exchange during a period of a favourable balance of trade. In fact, the foundation by which what is called a par of exchange is fixed, no longer exists as matter of fact.
1.If the reduction of the circulating medium would raise the exchange, how could it cause the exportation of commodities seeing that any advantage from the reduction in their price will be precisely counteracted by the disadvantage from the rise in the exchange.
2Is not the rise in the price of commodities, in consequence of an increase of bank notes, merely nominal to the foreigner, as whatever advance may take place in the price of goods, will, as just observed, be counteracted by the fall in the exchange, proceeding from the same cause.
3The effects here stated could only take place when the currency was undepreciated. In raising the value of a depreciated currency to par, the effects on foreign trade would be purely nominal. If the value of the currency were raised above par by further curtailments of Bank notes, the effects, as stated in the latter part of this answer would follow.
4.There would be no diminution of imports. Those trading on borrowed capitals would cease to invite consignments from abroad, but as the value of the circulating medium would be increased, those trading with their own capitals would be enabled to import an increased quantity of commodities: The increase on one hand would be precisely equal to the diminution on the other. The value of the currency would not only be raised at home, but abroad also: the improvement of the exchange would enable the same sum of english money to purchase a larger quantity of foreign commodities.
5Here the answer appears to recognize the principle which I have stated above, and is at variance with the former answer.
6.The exchange may be, and possibly is, really in our favor, though nominally against us.
7The effect of a diminution of the currency would be precisely the same as the exportation of coin to the same amount. If there be any difference it must be so small that it can scarcely be estimated. The sum exported would be divided amongst all nations and could not be permanently retained in the importing country.
8The cause here mentioned could not have produced the effect ascribed to it1 if the circulating medium were not permanently excessive. The exchange may be completely controlled by those who have now the power of issuing paper. Whilst confidence is reposed in the Bank, the restriction might continue and yet the exchange never deviate far from par.
Veneris, 9° die Martii, 1810.
John Whitmore, Esq. the Governor of the Bank of England, John Pearse, Esq. Deputy Governor of the Bank of England, called in together; and Examined.
[p. 112.] Let me suppose a case in which no demands were made upon the Bank by Government for unusual accommodations, but an unusual demand was made by merchants for increased facilities of discount; would the Bank in such a case consider itself as bound, in order to support public credit, to grant that increase of discounts, although there was a run upon it for Gold, occasioned by the high price of Bullion and the unfavourable state of the exchange?—I desire time to consider that question.
Supposing the Bank to be now paying in cash, and to experience a drain of Gold, as just mentioned; and supposing them also to afford precisely the same sum in the way of loan as before; would not a diminution of their paper take place, which would be proportionate to that diminution of their stock of guineas which the drain would occasion, inasmuch as every person coming to demand guineas would give in exchange for them an equal quantity of bank notes, which would be cancelled?—I would wish for time to consider that question.
Is there not reason to suspect that the present unfavourable state of the exchange may be in part owing to the want of that limitation of paper which used to take place before the suspension of the cash payments of the Bank, on the occasion of the exchanges becoming unfavourable?—My opinion is, I do not know whether it is that of the Bank, that the amount of our paper circulation has no reference at all to the state of the exchange.
Has that question ever been brought to a regular discussion and decision in the Court of Directors?—In the opinion of the Bank Directors, it had not sufficient bearing upon our concerns to make it more than a matter of conversation; it never was singly and separately a subject of discussion, though constantly in view with other circumstances.
Mr. Pearse.—The varying prices of the Hamburgh exchange compared with the varying amount of Bank notes at different periods, seem to prove that the amount of Bank notes in circulation has not1 had an influence on the exchange.
[p. 114.] Whether, since the suspension of the payments in cash down to the present time, there has been any material extension2 of commercial discounts?—I wish to have time to consider that question.
1.If, during the Period that the exchange has improved whilst the amount of Bank notes has increased, commerce and payments had not also increased, no such effects could have followed. An additional circulating medium, whilst it preserves the same value, will be required by an increased commerce and revenue, an augmentation of paper circulation may therefore take place at such time3 without causing either the depreciation of paper, or of the foreign exchanges. Mr. Pearse does not prove,1 even if the fact be as he stated, that the principle, “of the exchanges being affected by an excess of currency” is erroneous.
2.Is it not surprising that the Governor of the Bank should require time to consider this question,—when it is (I am credibly informed) ascertained, that the discounts have increased in no less a proportion than.2
Lunae, 12° die Martii, 1810. Abraham Goldsmid, Esq. called in, and Examined.
[p. 120.] Does not the present low rate of exchange create1 the demand and the high price of Bullion?—The present high price of Bullion is on account of the low rate of exchange.
[p. 121.] Is it your opinion that the circulating medium, as entirely confined to paper in this country, produces any effect upon foreign exchanges?—I do not profess myself competent to2 give my opinion upon that.
1.Mr. Randall Jackson said, in his speech at the Bank, that many respectable evidence had given it as their opinion to the committee that the high price of bullion had nothing to do with the fall of the exchange.3 Mr. Goldsmid whom he often mentioned with great respect, is in this answer at variance with him. Indeed I can find no such opinion given by any evidence whatever
2.Mr. Goldsmid acknowledges that he is not competent to give an opinion upon the main point in dispute. It cannot, therefore, be on his authority that either Sir J. Sinclair4 or Mr. Jackson so confidently rely, for the conclusions which they have formed “on the opinions5 of the great practical authorities,”6 examined by the committee.
Martis, 13° die Martii, 1810.
John Whitmore, Esq. the Governor, and John Pearse, Esq. the Deputy Governor of the Bank of England, called in together; and Examined.
[p. 124.] Supposing the currency of any country to consist altogether of specie, would that specie be affected in its value by its abundance or by its diminution, the same as copper, brass, cloth, or any other article of merchandize?—I have already said1 that I decline answering questions as to opinion; I am very ready to answer any questions as to matters of fact; I have not opinions formed upon the points stated in this and the preceding question sufficiently matured to offer them to the Committee.
[p. 125.] You stated in a former examination, “Supposing the excess of the market price of Gold in Bank notes above the mint price to be 5 per cent. and that in consequence a drain of guineas takes place from the Bank, and the Bank, by diminishing the amount of its outstanding demands, raises the value of its paper 5 per cent.,” in the manner described in a former answer of yours, would not the result be to bring the market and the mint price of Gold to a par, and consequently to put a stop to the demand for guineas?
Mr. Whitmore.—I believe my former answer did not go to the Bank raising the price of their notes, for in fact, if the Bank was to2 raise the value of them, and give them for discounts, estimating them at such increased value, it would incur the penalty of usury. I therefore conceive this statement to suppose a case that cannot occur.
In taking into consideration the amount of your notes out in circulation, and in limiting the extent of your discounts to merchants, do you advert to the difference, when such exists, between the market and the mint price of Gold?—We do advert to that, inasmuch as we do not discount, at any time, for those persons who we know or have good reason to suppose export the Gold.
1.After this answer can the comm̃ee be blamed for not giving implicit assent to Mr. Whitmore’s opinions? If he had answered this question, in the only way in which it could be answered, in the affirmative; he would have been obliged to admit that the issues of the Bank could be made to raise or fall the price of gold
2.He confounds price and value. How could the bank incur the penalty of usury whatever value a pound sterling might rise to. If £100—of our present currency, were so raised in value, by adding to the quantity of gold in a guinea, as to command double the quantity of commodities, which they can now purchase, and the Bank were to lend such £100—at 5 pct. how could the increased value of the notes subject them to the penalties of usury?
Mercurii, 14° die Martii, 1810. John Louis Greffulhe, Esq. was Examined.
[p. 130.] Is it not your opinion that, if no forced paper circulation existed in the Country, it would not be possible for the exchanges to fall materially below their par, or for the price of Bullion to rise materially above its standard price?—I conceive1 that that would not prevent the exchange from falling very considerably under par, if the amount of Bullion in the Country were not sufficient to pay the balances.
1.Mr. Grefulhe seems to consider it as a possible case, that the balance of payments might be so much, and so permanently against a country that if there existed in that country a metallic circulation only, she might be exhausted of all her bullion and coin. He does not reflect that the want of a circulating medium is so urgent that we should cease to import commodities, after a considerable portion of our money had left us, if it can be supposed2 foreign nations could be3 so blind to their interest as to refuse to accept any thing else in exchange for them. Those who argue thus are always obliged to suppose that the balance of payments is accidentally and uncontrollably against us; they should go a little further in their examination of cause and effect, and they would discover that a balance of payments can never be4 against any particular country, for any length of time, but from a relative excess in the currency of that country.—It buys with money because money is too abundant:— diminish the quantity and it will cease buying altogether, unless it can buy with goods.
William Cecil Chambers, Esq. called in, and Examined.
1 [pp. 136–137.] What do you say as to an excessive currency, though not forced?—I do not conceive the thing possible.
What do you mean by a forced paper currency?—A paper which I am obliged to take against my will for more than its value; it is not forced so long as people take it willingly, which they will naturally do whilst undepreciated.
1.This seems to be the source of all the errors of these practical men. A paper currency cannot be excessive, according to them, if no one is obliged to take it against his will. They must be of opinion that a given quantity of currency can be employed by a given quantity of commerce and payments, and no more,—not reflecting that by depreciating its value the same commerce will employ an additional quantity. Did not the discovery of the American mines depreciate the value of money, and has not the consequences been an increased use of it. By constantly depreciating its value there is no quantity of money which the same state of commerce may not absorb; and it is of little importance whether the state forces a paper circulation, or whether it be issued by a company only when demanded by the public, in discounting good bills, the effects of an excessive issue will be the same.—
Suppose the paper in circulation not convertible into specie to be 20 millions, and I have credit sufficient with the bank to get a bill discounted at the Bank for £1000—wishing to extend my business to that amount. Suppose too that all the other trades possess equal facilities and that by these various bills being discounted a million is added to the circulation. Now the possessors of this additional million have not borrowed it to let it remain idle but for the purpose of extending their different trades. The distiller goes to the corn market with his portion; the cotton manufacturer, the sugar baker &c. with theirs; the quantity of corn, sugar, and cotton in the country remaining precisely the same as before. Will not the effect of this additional million be to raise the prices of all commodities or 5 pct. that being the proportion in which the currency is increased. These borrowers of the Bank will succeed in their object of increasing their trade, but by rendering the 20 millions which was before in circulation less efficient there will be a corresponding loss in the trade of those who were before possessed of this sum. As no addition had been made to the quantity of the corn, the sugar or the cotton but only to the prices of those commodities there would be no increased trade but a different division of it. If another million were added to the circulation by new demands for discounts, the same effects would again follow. There can be no limits to the depreciation of money from1 such repeated additions. The observations of Mr. Harman that the Bank never discount bills but for bona fide transactions2 cannot limit the quantity,3 —the same sum of money performs successively a great number of payments,— but a bill might be given for each of these payments for bona fide transactions and if the bank discounted them all we might have four or ten times the amounts of paper that is now actually in circulation.
Mr. Chambers like those who have given their evidence before him ascribes the unfavorable exchange to the balance of payments being against us,—allows that a forced paper circulation would depress the exchange, but contends that the Bank of England cannot force a circulation; he does not conceive Gold to be a fairer standard for Bank of England notes than Indigo or broad cloth!!!
It has been contended, by some intelligent men,2 that in the year 1797 when there was a run upon the Bank for specie, —that the Directors would have upheld public credit and have put a stop to the demand for guineas by increasing their discounts, rather than by diminishing them. I am of opinion that the run upon the Bank in 1797 proceeded from political alarm, and a desire on the part of the people to hoard guineas. I was myself witness of many persons actually exchanging bank notes for guineas for such purpose,—therefore it is probable that the Bank could not have prevented the stoppage of payments to which they were obliged to have re- course. But a demand upon the bank for specie3 from fears of the solidity of its resources, or from political alarm, are very different from a demand arising from a high price of bullion and a low rate of exchange and must be differently treated. In the latter case it can proceed only from an excessive issue of paper, if the gold coin is not debased and can only be checked by calling in the excess.4 In 1797 the exchange was at 38 with Hamburgh and gold bullion at £3. 17. 6.—In 1810 the exchange is at 29 and gold bullion at £4. 13—
If the notes of the Bank of England in circulation are employed in making payments of above 1500 millions, and only a part of the Bank of England paper is available for that purpose as a great proportion is wanted for deposits by the county bankers,—does it not follow that the proportion of Bank notes to actual payments is exceedingly1 small?2 If the daily and bona fide payments exceed 5 millions,—and if we suppose what is barely possible3 such payments were made by bills of exchange payable at 60 days might not the bank contending as they do that by discounting bills given for real transactions they can never produce an4 issue of notes be called upon to discount bills in 60 days to the enormous amount of 300 millions?5
Veneris, 16° die Martii, 1810.
John Whitmore, Esq. the Governor, and John Pearse, Esq. the Deputy Governor of the Bank of England, called in together; and Examined.
[pp. 152–153.] Suppose a case in which no demands were made upon the Bank by Government for unusual accommodations, but an unusual demand was made by merchants for increased facilities of discount, would the Bank in such a case consider itself as bound, in order to support public credit, to grant that increase of discounts, although there was a run upon it for Gold occasioned by the high price of Bullion and the unfavourable state of the exchange?—I now consider my answer as my own opinion, not having the opportunity of consulting the Bank upon the question; in my opinion the Bank would not increase1 their discounts, nor on the other hand would it, I think, after the experience of the years 1796 and 1797, do well materially to diminish them.
Veneris, 23° die Martii, 1810.
John Whitmore, Esq. the Governor, and John Pearse, Esq. the Deputy Governor of the Bank of England, called in together; and Examined.
[p. 176.] Taking the daily average amount [of payments made by all the London bankers put together] so low as five millions, does it not follow that in the course of the year the notes of the Bank of England in circulation are employed in making payments of above 1,500,000,000 sterling, on the counters of the London bankers alone?—According to the opinion that I entertain, it will amount to that.
Taking into consideration the quantity of Bank of England paper necessary for country bankers, and the various other uses and applications for which it is demanded, does it not follow that there is only a certain limited proportion of the total amount of Bank of England paper in circulation, available for effecting the payment of this 1,500 million?—It is only part of the circulation that is available for such purpose.
Veneris, 30° die Martii, 1810.
[pp. 184–185.] Does not the unfavourable course of exchange with foreign countries tend, even under the present restriction, in some degree to render its continuance and prolongation necessary, in so far as that necessity may depend on the proportion of specie in the coffers of the Bank to the amount of its notes in circulation?
Mr. Whitmore.—In my opinion the high price of Gold bullion abroad, does make it necessary to continue the restriction; but I have already observed, that the low state of exchange has not operated before the restriction to drain us of our guineas to any1 material extent.
Mr. Pearse.—Undoubtedly it does, as far as regards the supply of the public wants with a circulating medium, as it would not be possible for the Bank to continue that supply if the Restriction Bill were removed, whilst the foreign exchanges remain so unfavourable as at present; a profit of from ten to fifteen, to twenty per-cent. upon converting Guineas into bullion, would be too great a temptation to allow any to remain in the Bank, as long as a bank note remained in circulation. The Bank would therefore inevitably be driven to the necessity of calling in its notes, or in2 other words of reducing its advances on bills, &c. which would produce that distress which the Restriction Bill was passed to prevent.
[p. 186.] Suppose the measure to be determined upon by Parliament, of the opening of the Bank at a distant period, should you think that in the event of the exchanges continuing the same or nearly the same, some restriction of the Bank issues ought to take place with a view to prepare for the opening?...
Mr. Pearse.—In the contemplation of the removal of the Restriction Bill at any definite period, it would become necessary for the Bank to regulate the amount of its issues, with a reference to the course of exchange with foreign countries; but while that 3 exchange continues unfavourable (an event as arising out of the balance of payments not within the control or influence of the Bank) I cannot see that any regulation within the means of the Bank, would in the event of an opening, effectually preclude the risk of a demand for specie being then made for the purpose of profit in exporting it to the Continent.
[pp. 187–188.] 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 exchange4 for such circulating medium?—It is a subject on which such a variety of opinions are entertained, I do not feel myself competent to give a decided answer.
In your examination of the 21st inst. you state, that an excess of country bank paper can only obtain when issued otherwise than as representing securities arising out of real transactions, and payable at fixed and not distant periods; and yet, in your examination of the 23d, you state, that this paper must always circulate at par, or it would return upon the parties that issue it; can there then be any permanent excess of country bank paper while it is so exchangeable?—In my answer of the 21st of March, I adverted to the causes which might be productive of an excess in the issues of country bank paper: in my answer of the 23d, I meant to allude to the consequences which must inevitably, in my opinion, result from the existence of such an excess. It is certainly possible, were it important in amount, that the country banks, by not regulating their issues on the principle of the Bank of England, might send forth a superabundance of their notes; but this excess, in my opinion, would no sooner exist in any material degree, than it would be corrected by its own operation, for the holders of such paper would immediately return it to the issuers, when they found that in consequence of the over issue its value was reduced or likely to be reduced below par: thus,5 though the balance might be slightly and transiently disturbed, no considerable or permanent over issue could possibly take place, as from the nature of things the amount of Bank notes in circulation must always find its level in the public wants.
[pp. 188–189.] If, however, he [the foreigner] receives £.100 in Bank notes, and is under the necessity of going to market for Bullion, will he the foreigner not rate his goods twenty per cent. higher, the difference in the price between them; and will he not invoice his goods twenty per cent. higher to his correspondent6 accordingly? [Mr. Whitmore]—I cannot contemplate a trade where the invoices are made out with reference to the price of Bullion.
If this were the case, what prospect should we have of a rise in the price of the exchange?—Never having weighed the subject7 with any reference to the price of Bullion, I am not prepared with an opinion how a merchant would act in such a case.
1Before the restriction the exchange was never for any considerable time against this country. If such a state of the exchange had permanently existed,7 whilst the Bank paid in specie, the Bank might have been drained of every guinea.—
2Mr. Pearse is no doubt correct in his answer as far as regards the necessity which the Bank would be under of reducing its advances on bills &ca, but he is wrong in supposing that any distress similar to that in 1797 would ensue from the repeal of the restriction bill.
3The limitation of the Bank issues would certainly raise1 the foreign exchange
4.Is not the affirmative to this question self evident?
5.Mr. Pearse must give up his accusation against the country banks of causing an excess of circulation, as he here admits that it is an evil which would correct itself.
6.Is it not self evident that the value of the money for which the foreigner must sell his goods in this country must enter into his calculation?
7.Is not this a confession that he has not considered a most important question in political economy particularly necessary to be well understood by a Bank director.
Lunae, 2° die Aprilis, 1810. William Coningham, Esq. called in and Examined.
[p. 190.] It appears from your evidence before the Irish Exchange Committee in the year 1804, that you were of opinion that the paper currency of Ireland was then depreciated, and that this depreciation was the cause of the unfavourable state of the exchange between England and Ireland; are you of opinion that that paper is still depreciated, and if so, to what circumstance do you8 ascribe the improvement in the exchange between the two Countries?—I think it is still depreciated, but in a very inconsiderable degree compared with what it was in the year 1804: and I am inclined to think, that the cause of the depreciation being so much less now than it was at the period alluded to is, that there is greater confidence in the paper than there was at that time; and therefore the people take it with more freedom, and of course consider it of more value.
8He does not consider it so much depreciated as formerly because on a comparison with Bank of England paper it is now nearly at par. which it was not then. To me it is evident that the value of Bank of Ireland paper has not been raised to the value which Bank of England paper then bore, but that the value of Bank of England paper has been sunk to that of Bank of Ireland paper, and that therefore they are now both depreciated.
Mercurii, 4° die Aprilis, 1810. Sir Francis Baring, Bart. called in, and Examined.
[p. 195.] Would not the removal of the restrictions upon1 trade diminish the price of bullion?—The removal of the restrictions upon trade would produce an exportation of merchandize, and facilitate the means of importing bullion.
[p. 196.] Are you not aware that the issuing of notes under five pounds has increased materially the whole amount of notes issued; and do you not believe that the amount of small notes should be left out of the account in comparing the present amount of notes in circulation with that existing at the period you have alluded to [previous to 1797]?—The small notes are equally paper, and they add to the mass of Bank notes before in circulation; they issue in the same manner in exchange for public or2 private securities: Instead of being left out in a comparative view, I fear they rather tend to increase the difficulty more than their due proportion, because they cannot be withdrawn without an issue of specie to an equal amount, and therefore stand in the front of the battle.
[pp. 198–199.] Do you conceive that the Bank of England will effectually guard against the possibility of any excess in the circulation of the country (as well their own as the paper of country banks) if they regulate their issues by the demand for discounts of good bills founded on real mercantile transactions, as the occasions of the Public may appear to require?—It has been ascertained by long experience, that wherever paper has circulated under the power and influence of Government on the Continent, it has failed. The paper of the Bank of England has stood firm for above a century, and flourishes at this moment with unabated confidence. The power reposed in the Bank is great; their paper is the basis on which the best interests of the Country rest; it is the seed which serves to produce the whole of its commerce, finance, agricultural improvements, &c. &c. Such a power may remain with safety, so long as the Bank is liable to discharge their notes in specie, because that circumstance constitutes a complete counteraction to any disposition (if it should be entertained) to increase the circulation beyond a reasonable and safe limit, and, under that circumstance, things (foreign exchanges,3 &c.) will find their proper level.... I consider the opinionentertained by some persons, that the Bank ought to regulate their issues by the public demand, as dangerous in the extreme, because I know by experience, that the demand for speculation can only be limited by a want of means; and I think the Bank would not be disposed to extend their issues beyond three-fourth parts of its present amount, if the restriction was removed....
1.The removal of the restrictions on trade might undoubtedly facilitate the means of importing bullion, if circumstances were favorable to such an operation; but the exportation or importation of bullion must be regulated by the relative value of bullion in the two countries, or which is the same by the rate of the real exchange between two countries.
2.This question is not fairly answered. It is certain that the small notes cannot be withdrawn without an issue of specie to an equal amount, as they are wanted for small payments and are therefore indispensible; but the question is whether in judging of an excessive issue by a comparison of the present amount of notes, and the amount in 1797, the amount of small notes should be taken into consideration.1 If the small notes substituted have not exceeded the amount of guineas withdrawn, it is clear they should not be taken into the account.
3.Sir F. Baring is decidedly opposed to the opinion entertained by the Bank Directors, that they cannot produce an excess of circulation whilst they discount bills for real bona fide transactions.
Mr. Tritton’s evidence generally is very cautious,—he appears not to have paid much attention to the subject of currency, and the effects produced on it by London and country Banks.
Page 218, 219
Mr. Harman1 thinks that the diminution of the paper of the Bank, would, neither immediately or remotely, tend to an improvement of the exchange.
In his answer to a subsequent question he allows that an augmentation of the quantity of Bank of England notes tends to raise the prices of commodities.
It therefore follows that a diminution of the quantity of Bank notes would lower the prices of commodities;—but if prices were considerably lowered and the exchange were not affected, this real fall in their price would not fail to en- courage foreign purchasers. But such purchases2 according to the principles of those who are for ascribing every effect on the exchange to the balance of trade, would speedily turn the balance in our favor or at least render the present balance less unfavorable and would therefore indirectly raise the exchange. It is to be regretted that the Committee did not press Mr. Harman for some explanation of these opinions which might have been proved so inconsistent.3
Lunae, 9° die Aprilis, 1810.
[pp. 213–18.] John Henton Tritton, Esq. a Partner in the Banking-House of Barclay & Co., called in, and Examined.
[p. 218.] Jeremiah Harman, Esq. Director of the Bank of England and General Merchant, called in, and Examined.
[p. 219.] Do you conceive that the diminution of the paper of the Bank would, either immediately or remotely, tend to an2 improvement of the exchange?—None whatever.
Was it not the practice of the Bank, antecedently to the restriction of the cash payments, to lessen in some degree the amount of its issues, when a material demand for guineas was made upon3 it?—It has been occasionally, and at one period in particular, according to my view of the subject, it accelerated very much the mischief which ensued.
[pp. 219–220.] Supposing the Parliament to enact that the Bank of England should again pay in Gold at a distant period, say one, two or three years, would it be your opinion that the Bank ought to resort to the measure of restraining its issues, as a means of preparing itself to meet that event, supposing the exchanges and the price of Bullion to continue as they now are?—I conceive4 that they must necessarily, if the exchanges were to continue as they now are, which, however, I deem barely within possibility.
[p. 220.] Do you not apprehend that there is a disposition in persons keeping accounts at the Bank, to apply for a larger extent of discount than it is on the whole expedient for the Bank to grant?—Very many do, and we treat them accordingly.
Do you not think that the sum total applied for, even though the accommodation afforded should be on the security of good bills to safe persons, might be such as to produce some excess in the quantity of the Bank issues if fully complied with?—I think if we discount only for solid persons, and such paper as is for real bonâ fide transactions, we cannot materially err.
Supposing you were to afford your accommodation at four per cent. instead of five per cent. interest, the current interest being five per cent., would there not be danger of excess?— Perhaps so.5
Does it not then follow, that, provided money is now worth something more than five per cent., and being in general difficult to be procured at that rate, you may fall into some excess by granting it at five per cent. on the principle which you have stated?—I think not, because we should discover the superabundance6 very soon.
What should you consider the test of that superabundance?— Money being more plentiful in the market.7
[p. 221.] Supposing the exchange to continue long and greatly unfavourable, should you not be disposed to refer this circumstance in some measure to an excess of paper currency, or should you assume that the balance of trade had continued during8 that long period unfavourable?—I must very materially alter my opinions, before I can suppose that the exchanges will be influenced by any modifications of our paper currency.
Have you ever known the exchange to fall to twelve or fifteen per cent. in any part of Europe, in which it was computed in coin9 containing a fixed quantity of gold or silver, or in paper or bank money exchanged at a fixed agio, either for such gold or silver coin, or for gold or silver bullion of a definite amount?—I really cannot from recollection answer that question.
2.This question is not fairly answered. It is certain that the small notes cannot be withdrawn without an issue of specie to an equal amount, as they are wanted for small payments and are therefore indispensible; but the question is whether in judging of an excessive issue by a comparison of the present amount of notes, and the amount in 1797, the amount of small notes should be taken into consideration.1 If the small notes substituted have not exceeded the amount of guineas withdrawn, it is clear they should not be taken into the account.
3.But at the period here alluded to the exchange was considerably in our favor and therefore the present case and that case are totally dissimilar
4.That the exchanges should remain as they now are Mr. Harman thinks barely within possibility. Any material improvement of the exchange with the present amount of paper money I deem barely within possibility. Nothing can improve the exchange but some alteration in the relative state of the currency of this and the currencies of other countries
5 and 6.Are not the answers to 5 and 6 contradictory?
7.This opinion is built upon the idea that the interest of money rises or falls according to the abundance of money.— If the Bank Directors could be convinced that this is an erroneous principle we might expect to see them adopt a very different system. The interest which a man agrees to pay for the use of a sum of money is in reality a portion of the profits which he expects to derive from the employment of a capital which that sum of money will enable him to obtain. In the interest which he is willing to pay he is guided solely by the probable1 extent of those profits. His profits are necessarily totally independent of the abundance or scarcity of the money which circulates commodities2 in the country. If America had had no mines3 but we had obtained by the discovery of that large portion of the world the same commerce which we now enjoy, the value of gold and silver would not have been depreciated, and no country would have had more than a third of the money which they now possess4 , but its greater value would have made it equally effectual for the commerce and payments of each. Profits would have been precisely the same as they now are though they would be expressed by a different amount of Pounds sterling. A man possessed of £500 year would then have been as rich as one possessed now of £1500. And a monied man with £5000—lent at 5 pct. would1 have had as abundant an income, as one under the present circumstances with £15000 lent at the same rate of interest. If gold were to become as abundant as lead it would make no permanent alteration in the rate of interest for money; the depreciation which money experiences renders the same nominal sum less effective in the precise degree of its depreciation. If then an abundance of paper circulation as allowed by Mr. Harman raises the prices of commodities or in other words depreciates the value of money, will not that circumstance alone be a cause for an increased demand for it? Will not the supply again depreciate it and the demand increase? And may not this continue ad infinitum. And as the larger quantity of depreciated money will be no more effective than the smaller quantity of undepreciated money was before who will be conscious of an excess?—who will find that the particular sum which he possesses is superfluous and endeavour to return it to the Bank in payment of a discounted bill. The bank during the suspension of Cash payments, with its present excessive issues produces the same effect as the discovery of a new mine of gold which should materially depreciate the value of money. In the case of the mine, as the currency of all countries would be equally depreciated its effects would be visible only in the rise of prices of all commodities for which money is exchanged, and the exchange which2 expresses the relative value of the currencies of different countries would continue at par;—but in the case of the augmentation of Bank notes not convertible into specie at the will of the holder, the rise of the prices of commodities is confined to the country where the notes are issued and consequently the depreciation of money is local and not general; and is made evident by the effect produced on the exchange with foreign countries, which deviates from par nearly in the same proportion as the money is depreciated.
8How unfit for a Bank Director, whilst the restriction bill is in force, is that man who without qualification declares “that he must very materially alter his opinions, before he can suppose that the exchanges will be influenced by any modifications of our paper currency.[”]
9.This is the true test by which to try the soundness of their principle. I defy them to answer it in the affirmative.
Mr. Richardson’s evidence is full of information with respect to the details of money transactions in London as well as in the country. He proves most satisfactorily that there have been of late years great improvements in the way of economising the use of Bank notes which renders the same amount of notes effective for an enlarged commerce: He was asked whether he thought that ten millions of Bank notes would keep afloat the same quantity of business as fifteen millions would have done ten years ago. His answer was, “Not quite so much perhaps ten years ago”. It must however be admitted that a considerable saving in the use of notes has been effected.1
Martis, 22° die Maji, 1810.
[pp. 228–31.]Thomas Richardson, Esq. again called in, and Examined.
NOTES ON TROTTER’S ‘PRINCIPLES OF CURRENCY AND EXCHANGES’
|Edition 4 1811||McCulloch’s edition||Gonner’s edition||Present edition|
|Edition 4 1811||McCulloch’s edition||Gonner’s edition||Present edition|
[1 ]Annual Biography and Obituary for the Year 1824, pp. 371–2. The passage continues: ‘and it was inserted in the shape of letters under the signature ofR., the first of which appeared on the 6th day of September, 1810.’ This is quite incorrect, for in fact it was inserted in the shape of an article, unsigned, which appeared on 29 August 1809: the two other contributions to the Chronicle of 1809 were evoked by criticisms of the article after publication and could not have formed part of the original MS shown to Perry. The biographer is confusing the three contributions of 1809 with the three letters to the Chronicle of 1810.
[1 ]Annual Biography and Obituary for 1824, p. 372.
[2 ]The authorship was acknowledged in a leading article of the Morning Chronicle of 27 August 1810, after the publication of the Bullion Report: ‘The letters of our invaluable correspondent Mr Ricardo, contributed most essentially to open the eyes of the public to the true cause of the depreciation of paper.’ Ricardo’s article and his two letters to the Morning Chronicle of 1809 were reprinted under the title Three Letters on the Price of Gold, by David Ricardo, ed. by J. H. Hollander, Baltimore, Johns Hopkins Press,1903.
[1 ]The first part of Ricardo’s answer was first published by Dr Bonar under the title ‘Ricardo on Currency’ in Economic Journal, March 1896, pp. 64–9. The two extant papers of this private controversy between Trower and Ricardo were published in their entirety as Appendix A (1) and (2) to Letters of David Ricardo to Hutches Trower and Others 1811–1823, ed. byJ. Bonar and J. H. Hollander, Oxford, 1899. Trower’s paper is here printed from the MS now in the possession of Dr Bonar. Ricardo’s paper is reprinted from Letters to Trower; the MS is now in the possession of Professor Hollander (see The Economic Library of J. H. Hollander, Ph.D., privately printed, Baltimore, 1937, p.314).
[2 ]There is some doubt as to the exact date of publication. Murray’s advertisement in the Morning Chronicle of Tuesday, 26 Dec. 1809, announced ‘On Thursday next will be published, The High Price of Bullion...’, and Bosanquet (Practical Observations, p. 2) refers to it as ‘published late in 1809’. However, the first advertisement under the usual heading ‘This day is published’ occurred in The Times of Saturday, 30 December; even this may have been premature, as it gave no price, whereas the practice was to do so on actual publication. The earliest advertisement stating the price (2s.) which has been found is that published in The Times of 3 Jan. 1810. Thus, publication may have been delayed a few days into the new year, which would agree with the date 1810 on the title-page of the pamphlet.
[1 ]As is shown by the fact that in his Life and Writings of Mr. Ricardo (1824 and later editions), he gives the date of the first contribution to the Chronicle as ‘6 September 1809’, which is an attempt to reconcile the date given in the Annual Obituary (see above, p. 3, n. 1) with the year given in Ricardo’s Introduction.
[c]Culloch in the successive editions of his Life and Writings of Mr. Ricardo.
[3 ]Introduction to Ricardo’s Three Letters on the Price of Gold, p. 4.
[c]Culloch was following the Annual Obituary; see above, p. 3, n. 1.
[1 ]‘The tract was probably first thrown together several years before as essentially a criticism (through the eyes of Horner and Lord King) of Thornton’s hesitant conclusions: it contains some evidence of Wheatley’s influence, and, like Wheatley’s Essay, refers to no political or economic events later than1805. The main body of the tract was, in all probability, prepared prior to the articles in the Chronicle newspaper.’ (‘Financial and Monetary Policy of Great Britain during the Napoleonic Wars, II, Ricardo and the Bullion Report’, in Quarterly Journal of Economics, May 1924, p. 423, n.) Professor Silberling’s strange theory that the publication of the Bullion pamphlet was part of a bear manoeuvre on the Stock Exchange will be discussed in connection with Ricardo’s business activities.
[2 ]These notes contain conclusive evidence (in the form of dated postmarks) of having been written in 1809, and some of them after the middle of October 1809.
[3 ]See below, pp. 24 and 82, and pp. 27 and 87–8.
[1 ]Below, VI, 1.
[2 ]Advertised in Monthly Literary Advertiser of 10 March 1810. The second edition, ‘Corrected’, which is a reprint of the first with merely verbal alterations, was first advertised in The Times of 28 February, but is likely to have been prepared for publication before Ricardo wrote his letter to Horner of 5 February.
[iv], p. 98), is also disproved by the letter of Horner quoted below, p. 9.
[4 ]Ricardo annotated, more or less extensively, several of these pamphlets. His Notes on Trotter’s Principles of Currency and Exchanges are printed below, p. 379 ff.; the remainder are merely marginal jottings, mostly illegible.
[5 ]Although the date of the first of these letters had been given in the Memoir of Ricardo in the Annual Biography and Obituary for 1824, (see above, p. 3, n. 1), that reference has been regarded as merely a misprint for the date of the original article of 1809, and consequently the existence of the 1810 group of letters was generally overlooked until the discovery of their cuttings among Ricardo’s Papers, when they were reprinted in Ricardo’s Minor Papers on the Currency Question, Baltimore, 1932.
[1 ]This letter was reprinted, without acknowledgement to the Morning Chronicle, in The Tradesman; or Commercial Magazine for 1 Oct. 1810, pp. 344–50, under the title ‘Observations on the Report of the Bullion Committee’ and over the signature ‘R.’ What purported to be a sequel to it was inserted, unsigned, under the same title in the number for 1 Nov. 1810 of The Tradesman; this, however, was not by Ricardo, and had appeared as an anonymous letter in the Morning Chronicle of 8 Sept.1810.
[2 ]A few days later, on 1 October, Whishaw wrote to Horner from London: ‘Your Bullion Report is, I think, very successful. It is much talked of and has made a greater impression than I expected; of which R. Jackson’s speech (for which he has received or is to receive an handsome present from the Bank) and the various publications which have appeared, are the most decisive proofs. The discussion has been tolerably well kept up in the Morning Chronicle, to which Ricardo has contributed many very good observations.’ (Unpublished MS in the possession of Lady Langman.)
[3 ]The author of the review of Thomas Smith’s Essay on the Theory of Money and the Exchange, in the Edinburgh Review for October 1808, was James Mill (see Bain, James Mill,p. 91).
[ii], p. 24.
[2 ]The Notes on the Bullion Report (below, p. 347 ff.) written by Ricardo about this time may have been in connection with this proposal.
[3 ]Mill, whose family name was sometimes spelt Milne (Bain, op. cit. p. 3); cp. above, p. 9, n. 3.
[4 ]Horner to Jeffrey, 3 Dec. 1810. Unpublished MS in the possession of Lady Langman.
[1 ]The postscript to the 1st ed. is dated 14 Nov. 1810.
[2 ]The preface to the 2nd ed. is dated 3 Dec. 1810.
[3 ]See below, pp. 204 and 247.
[4 ]In the Library at Gatcombe there are Ricardo’s copies of the 1st ed. of Practical Observations and of the separate Supplement. The former contains many comments in Ricardo’s handwriting, but they are almost entirely illegible.
[5 ]25 Dec. 1810, below, VI, 14. This letter accompanied the first part of the MS of Dumont’s translation of Bentham’s work on prices which Ricardo proceeded to read and criticise; see below, p. 259 ff.
[6 ]Advertised in Monthly Literary Advertiser, 10 Jan. 1811. The Reply did not go to a second edition. A slip of errata containing five entries was printed and is found in some copies. The corrections are noticed in footnotes below.
[7 ]Shortly before, on 21 March 1811, Ricardo took part in a General Court of the Bank of England at which the subject of the Bullion Report was raised, and spoke briefly on the price of gold; see below, V, 461–2.
[8 ]Advertised in Monthly Literary Advertiser for 10 April; the earliest advertisement in the Morning Chronicle did not appear till 27 April.
[9 ]The Appendix was also published as a separate pamphlet, see below, p. 99,n. 1.
[1 ]Both MSS, unpublished, are in the possession of Lady Langman.
[2 ]Cp. below, VI, 47–8.
[3 ]The Bullion Controversy entered upon its final stage in April and May 1811, with the debates in the House of Commons on the Resolutions of Horner and the counter-Resolutions of Vansittart. Ricardo’s Notes on the latter (printed below, p. 411 ff.) are all that he seems to have written on the subject at this stage.
[1 ]See above, p. 8, n. 3.
[2 ]Advt. in The Times, 23 Sept. 1810; and a new ed., ib. 13 Dec. 1810 [nos. 2 and 4 in F.W. Fetter’s ‘Editions of the Bullion Report’, Economica, 1955,p. 153–4]. Ricardo’s two copies are of the former edition. For dating the Notes see also the reference to Randle Jackson’s speech of 20 Sept. 1810, below, p. 358, and the allusion to the table of discounts, which was first published in the Morning Chronicle of the 15 Oct., below, p. 358.
[3 ]There is another copy of the same edition of the Bullion Report that belonged to Ricardo in the Goldsmiths’ Library of the University of London, but it bears no reference numbers.
[1 ]On the other hand, some later sheets of the MS may have been lost, since there are a few numbers written on pages after p. 102 which have no corresponding comment; see below, p. 360, n. 1 and p. 372, n. 1.
[1 ]This sentence is ins.
[2 ]Replaces ‘for the suspected parties.’
[1 ]The passages referred to are in Bullion Report, ‘Minutes of Evidence’, 8vo ed., pp. 4–18.
[2 ]‘chiefly’ is del. here.
[3 ]Bullion Report, ‘Minutes of Evidence’, p. 23.
[1 ]ib. pp. 26 and 37–8.
[2 ]Omitted in MS.
[1 ]Corrected by Ricardo on his copy ‘[expo]rtation’.
[2 ]The exclamation marks on the margins of this page are Ricardo’s.
[1 ]In Ricardo’s copy of the Bullion Report, the figures 2, 3 and 4 are written against other questions to Greffulhe (the first, fourth and fifth following the one reprinted above), but there are no corresponding notes in the MS. They may have been written on a sheet now lost.
[1 ]This note, which is a general comment on Chambers’ evidence, pp. 135–7, follows in the MS the note to p. 136.
[iii]. Cp. Bullion Report, 8vo ed., p. 65.
[3 ]Replaces ‘But a run upon the bank’.
[4 ]Replaces ‘checked by a diminution [replacing ‘limitation’] of the amount of notes.’
[1 ]Written above ‘very’, which however is not del.
[t]. was made by a bill of exchange’ is del. here.
[3 ]Last six words are ins.
[4 ]‘excessive’ has probably been omitted here by an oversight.
[5 ]An earlier version does not contain the two lines, from ‘contending’ to ‘issue of notes’, but it has in addition at the end of the paragraph: ‘if they were to consider as they profess to do that they can never err in discounting bills for bona fide transactions’.
[6 ]MS, by a mistake, has ‘181’.
[1 ]This note refers to the answer marked ‘2’ in Ricardo’s copy of the Bullion Report. Although the figure ‘1’ is written against the first answer in Harman’s evidence (‘though the state of the exchanges is constantly watched, the amount of our discounts is not regulated with any reference to that circumstance’), there is no corresponding comment in Ricardo’s MS.
[2 ]The last two lines beginning ‘this real fall’ replace ‘foreigners would be induced to purchase more of our commodities,—this’ which however is not del.
[3 ]Replaces ‘of these discordant opinions’.
[1 ]On the last sheet of the MS (B) there is written by Ricardo the following paragraph which appears to refer to Account No. XIX of the Appendix to the Bullion Report: ‘What is the reason that gold monies in the years 1805, 6, 7, 8, 9 and 1810 should be coined at the mint from foreign gold, when by the evidence of the dealers in bullion English gold as it is called can be purchased cheaper?’
[1 ]A ‘Second Edition’ of 80 pp. was published under the author’s name and ‘sold by Cadell and Davies, andW. Winchester and Son’; it is odd that it bears the same date, ‘Dec. 1, 1810’. From the page references in Ricardo’s Notes it is clear that he was using the first edition.
[2 ]The Notes have been published in Minor Papers on the Currency Question, ed. by J. H. Hollander, Baltimore, The Johns Hopkins Press, 1932, pp. 91–99.
[3 ]There is a copy of the first edition of Trotter’s pamphlet which belonged to Ricardo in the Goldsmiths’ Library of the University of London, but it bears no such numbers; ‘by Coutts Trotter’ is inscribed in Ricardo’s hand on the title-page.
[1 ]Omitted in MS.
[1 ]Ricardo refers to this passage in his comments on Trotter’s pp. 19, 57, 59 and 71.
[1 ]Bullion Report, ‘Minutes of Evidence’, 8vo ed., pp. 210–13.
[1 ]This comment must refer to the first part of the quotation, although Ricardo appears to have overlooked the peculiar sense which Trotter attaches to ‘convertibility’. Trotter says in effect: Had paper retained its value in terms of commodities in proportion to its gold cover only, it must have fallen in terms of commodities (as well as of gold). Ricardo’s interpretation seems to be: Had paper retained its value in terms of gold by retaining its convertibility, it must have fallen in terms of commodities.
[1 ]A slip, for ‘why should he not gain from a rise in the value’.
[1 ]It is there prefixed to another paper, written by Ricardo in 1809, which in the present edition is printed above,p. 36 ff.; cp. p. 5.
[1 ]See Principles of Currency and Exchanges, 1810, pp. 44–7.
[1 ]This passage is quoted from Trower’s Notes on Trotter. As a result of Ricardo’s criticism Trower crossed it out in his MS and replaced it with a new version.
[1 ]Both sets of Resolutions are in Parliamentary Papers, 1810–11, vol. x.
[2 ]The Resolutions, like the Report, were drawn up by Horner, Huskisson and Thornton: ‘I understand that the first ten or twelve were by Mr. Huskisson, and those which follow by Mr. Horner, except the resolution stating that “it is the duty of the Bank”, et cetera, which is by Mr. Thornton.’ (Letter of Lord Auckland to Lord Grenville, 25 April 1811, in Historical MSS Commission, Report on the MSS of J. B. Fortescue at Dropmore, 1927, vol. x, p. 131.)
[3 ]That Vansittart was ‘the godfather, but not the father’ of the famous third Resolution which equalizes Bank-notes with gold was disclosed by Canning in a speech in the debate on the Bank Charter, 13 Feb. 1826; but when challenged he declined to name the ‘father’ (Hansard, N.S., XIV, 331). According to the Dictionary of National Biography, article ‘Vansit- tart’, the Counter-Resolutions were ‘drawn up by the request of Perceval’.
[4 ]A third version, only slightly differing from the second, was printed under the date 14–15 May 1811.
[1 ]In the second version, besides some alterations in the statistics, Resolutions 6 and 7 are transposed; Ricardo’s comments follow the order of the first version.
[2 ]See also below, pp. 420, n. 2 and 421,n. 1.
[1 ]The first ten Propositions of Vansittart are here reproduced from the version of 26 April 1811, in Parliamentary Papers, 1810– 1811, vol. x.
[1 ]‘this happened only’ is written above ‘they were so’, which however is not del.
[1 ]See Pearse’s evidence, above, p. 357.
[1 ]‘and as low as’ is written above ‘and varied from,’ which however is not del.
These figures are from an Account ordered to be printed 22 Feb. 1811 (Parliamentary Papers, 1810â€“11, vol. x, NÂ°. 22).
[2 ]Replaces ‘1787’.
[1 ]‘that’ is ins. here by mistake.
[2 ]Replaces ‘10 millions’; an imperfect correction.
[1 ]The last two rates refer to the year 1797.
[1 ]Report, 8vo ed., p. 19.
[2 ]ib. p. 26.
[3 ]The Paper Pound of 1797–1821, London, 1919, p. xlii.
[4 ]See A. Brady, William Huskisson and Liberal Reform, Oxford, 1928 (‘The evidence of a few merchants, including N. M. Rothschild’, p. 25) and L. Stuart Sutherland, in Economic History Review, April 1932 (‘Mr. ,to be identified in all probability, as has been suggested, with Nathan Rothschild’, p. 378).
[5 ]I owe this comparison to Professor Hayek. evidence either in broken English, or in the patois of his country, thought fit to guard their readers against the poison of his representations.’
[1 ]Another false identification is suggested by the title of an anonymous pamphlet published many years later, at the time of the Bank Charter inquiry of 1832: The Evidence that WOULD have been given by Mr.—, Late a Continental Merchant, before the Committee of Secrecy Appointed to Inquire into the Expediency of Renewing the Bank Charter, London, Pelham Richardson, 1832. A note on the author’s own copy which is in the British Museum (8229. aaaa. 21/4) identifies him as John Cazenove (ca. 1788–1879), a member of the Political Economy Club and writer of several pamphlets on economic subjects, who was the son of a Geneva merchant migrated to London. Although the author describes himself in the same terms as the anonymous witness of 1810, they cannot be the same person, as they hold altogether different views on the subject; in any case Cazenove would have had no reasons for concealing his presence in London, and he could hardly have been ‘a very eminent’ merchant at 22 years of age.
[2 ]Sir John Sinclair, in his Observations on the Report of the Bullion Committee, 1810, p. 6, wrote: ‘They have also reported the evidence of an anonymous witness, contrary to the usage of Parliament, unless special reasons can be, and actually are assigned, for the concealment; and they seem to have laid peculiar weight on the doctrines of this nameless individual. Yet this unknown individual may be a foreigner, or a person usually resident abroad, who may not be so anxious, as a British merchant would necessarily be, to deliver opinions favourable to the prosperity of this country.’ On which the Quarterly Review for November 1810 (p.524) observed: ‘Now, for anything that Sir John has learned to the contrary, “this unknown individual may be a foreigner”; and yet the Committee have not, by printing his
[1 ]6 May 1811, Hansard, XIX, 836.
[2 ]7 May 1811, Hansard, XIX, 931.
[3 ]These were, as the description usually implied, London merchants trading to the Continent.
[4 ]See the evidence of J. L. Greffulhe, ‘Minutes of Evidence’, p. 61 and ofW. C. Chalmers, p. 135.
[5 ]See the evidence of T. Hughan, ‘a merchant, trading to the West Indies’, p. 55, and of S. Williams, ‘a Merchant trading to the United States of America’, p. 140.
[6 ]p. 77.
[1 ]pp. 83–4. Many others of his answers are equally significant as to his origin, e.g. (p. 78): ‘Taking Gold...at Hamburgh at what we call its par, which is 96 stivers banco for a ducat....’
[2 ]As Mr.— told the Committee, ‘when the French got possession of the North of Germany [they] passed severe penal decrees against a communication with this Country’ (p. 88).
[3 ]This list, from a document of August 1807, is given in H. Hitzigrath, Die Kompagnie der Merchant Adventurers und die englische Kirchengemeinde in Hamburg 1611–1835, Hamburg, 1904, p. 62.
[4 ]‘Minutes of Evidence’, p. 97.
[5 ]ib. p. 105; see other allusions to these ‘extraordinary causes’, pp. 107 and 109.
[1 ]‘Appendix of Accounts’, p. 99; similar entries, for much smaller payments, in 1807, p. 101. In both cases the dates are no doubt those of the payment of the bills, which may have been (in the case of the 1807 bills, certainly had been) drawn during the previous year.
[ii] of the series Grosse Vermo¨gen).
[1 ]From an address (in German) of John Parish, jun. to the Emperor Francis, published by Ehrenberg, op. cit., pp. 117–18. No date is given, but it was apparently written several years after the events described, probably in1816.
[2 ]J. M. Johnson to C. C. Smith, from Gothenburg, 25 Nov. 1810. (Public Record Office, F.O. 7/92, quoted by C. S. B. Buckland, Metternich and the British Government from 1809 to 1813, London, 1932, pp. 131–2.) George Hammond was the permanent head of the Foreign Office under Canning till 1809.
[3 ]F.O. 7/93, unpublished.
[1 ]This account of Johnson’s mission is derived from Buckland, Metternich and the British Government, pp. 37–9.
[2 ]Buckland, op. cit., pp. 128 and 131.
[3 ]‘Minutes of Evidence’, pp. 101, 107 and 97.
[4 ]Ehrenberg, op. cit., p. 92.
[5 ]Referring to the influence of the quantity of paper on its price: ‘we have seen a strong instance of it last summer, when, from the extraordinary exertions of the Austrian Government....’ (‘Minutes of Evidence’, p. 86.)
[iii],p. 336. Gentz, in October 1816, described Parish as ‘unstreitig einer der ersten mercantilischen Ko¨pfe unserer Zeit’ (Gentz und Wessenberg, Briefe, ed. A. Fournier, 1907, quoted by Buckland, p. 132; see also Ehrenberg,p. 117, n.).
[r]. John Parish von Hamburg, jetzig. Besitzers der Herrschaft Senftenberg in Bo¨hmen’.
‘permanently multiplied beyond the gold and silver which’ was first written here, and then replaced by ‘so multiplied as to be permanently’, which was also deleted.
‘in your fav’ is del. here.
This sentence is inserted.
This sentence is ins.
‘its real amount’ replaces ‘it’.
‘even if’ replaces ‘unless’.
‘sufficiently’ is del. here.
The Note is del. and no number corresponds to it on Dumont’s MS.
‘depend on the’ is del. here.
Replaces ‘the £10,000 would not represent only the million of goods but 100 times’.
‘No other security’ is del. here.
Ricardo had first opened this Note with: ‘Does not all pecuniary revenue excepting’; then he deleted it and started again: ‘I feel some difficulty in distinguishing what the author means by “Capital Pecuniare”, and as the same sum of money forms successively the pecuniary revenue of many different people,—I cannot agree that it is the pecuniary revenue which constitutes the price of those articles of which the real revenue is composed. Suppose the real revenue of a society valued in money to be 100,000£, and 1000£ to be sufficient to circulate that revenue, it will then appear that the whole society will have the £1000 go thro’ their hands so often as to constitute a revenue of £100,000,—prices then’. This was also del.
‘any’ is del. here.
Ricardo had first written ‘parvienne’, but then altered it to ‘parviene’. In Dumont’s handwriting ‘parvient’ is hardly distinguishable from ‘parviene’.
This paragraph is ins. between Note 20 and the first Note 21: it seems to belong to the latter.
‘or any other’ is ins.
The whole paragraph is del.
The cross-reference is obscure, there being no Note 44 onLivre I, whilst Note 44 on Livre II deals with a different subject. Probably a mistake for ‘No 4’, meaning the second Note 21; see following footnote.
This note, which is misnumbered 21, presumably refers to Bentham’s 4th form of relative revenue, that is to say, to what immediately precedes the passage marked 22. Bentham’s grounds for including the wages of labour, or a part of them, in relative revenue are not given in Dumont’s MS; Dumont in a subsequent passage here omitted says that the explanation is wanting in Bentham’s original MSS and offers as his own conjecture: ‘les gages du travail pourroient être ane´antis— est-ce le cas que l’auteur entend quand on reduit l’ouvrier à l’esclavage?’
‘society’ is del. here.
i.e., Dumont’s note.
The whole Note is del. No number to correspond with it is written on Dumont’s MS.
Wealth of Nations, Bk. i, ch. iv; Cannan’s ed., vol. i,p.30.
‘But luxury if by that term we mean’ is del. here.
‘equally good’ is ins.
‘Minutes of Evidence’, 8vo ed., p. 81. On ‘Mr.—’ see below,p. 427 ff.
‘Minutes of Evidence’, 8vo ed., pp. 162–3, 164, 212, etc.
Last six words replace ‘which they can speedily turn into’.
This sentence replaces ‘but as the augmentation of money adds nothing to the real riches of a country, the annuity cannot be subject to any further variation from this cause.’
This sentence is ins.
‘and nothing reproduced’ is ins.
This sentence is ins.
The last five words are ins.
The remainder of the Note replaces ‘but I do not quite accord with the steps by which the author has arrived at it.’
The number 9½ appears on Dumont’s MS, but not on Ricardo’s. What is here assumed to be Note 9½, is written in Ricardo’s MS, upside down and without reference number, at the back of the page containing Notes 23 to 30 below: the assumption seems to be justified by the relevance of the comment to the text, as well as by the sequence implied in the opening of Note 10, ‘Here again’ etc.
‘The augmentation’ is del. in this place.
‘that the augmentation of goods is the only legitimate cause for an increase of money’ is written above the latter part of this sentence in the MS, but it is not clear whether it was intended as a correction or as an addition.
Replaces ‘Is not this saying what has been before explained that an increased commerce and capital’.
‘its depreciation’ is del. here.
The last six words are ins.
The remainder of this sentence replaces ‘The calculation here requires 15 pct. on the new capital.’
‘I cannot allow that money can be augmented’ is del. here.
Four earlier attempts at opening this Note were del. in succession: 1, ‘It would be a tax of’; 2, ‘A tax of two’; 3, ‘This tax would be’; 4, ‘Can this be called a tax? It would be a tax to the former possessors of money only a great [‘a great’ replaces ‘but the exact’] amount of which would be gained by other members of the society.’
Left unfinished in MS.
‘the augmentation of’ is ins.
‘The author supposes that we should retain the same’ is del. here.
Although this paragraph appears in the MS as part of Note 21, it was probably intended as a separate Note, commenting on the opening of the next Chapter (‘Accroissement des prix par disette’).
Above, p. 310.
‘I think the answer can not be doubtful.’ is del. here.
‘old’ is ins.
‘of increase’ is ins.
Replaces ‘That money has’. Ricardo obviously intended to delete ‘been’, two words below.
‘necessary to’ is written above ‘the cause of’, which however is not del.
‘it destroys all security’ is del. here.
‘real’ is ins.
‘quantity of the’ is del. here.
‘diminished’ is ins.
‘when’ is del. here.
‘increased’ is ins.
‘metallic’ is ins.
‘an increase of’ is ins.
‘land and’ is ins.
‘The produce of’ is ins.
Replaces ‘can make no difference.’
‘nearly’ is ins.
This sentence, first written as a literal translation of the French text, was subsequently altered as above.
Replaces ‘That inasmuch as’.
Replaces ‘it causes no’.
‘foreign’ is del. here.
Replaces ‘produced any effect’.
First written ‘An increased commerce and revenue requires an additional circulating medium, whilst it preserves the same value, it will therefore bear an increase of paper circulation’, then altered as above. Ricardo omitted however to strike out ‘requires an’ and ‘increase’.
‘therefore’ was ins. and then del. here.
Left blank in MS. The proportion was as 241 to 688, according to the ‘Scale of Discounts’ presented by the Bank to the Bullion Committee with the request that it should not be made public. It was however published in the Morning Chronicle of 15 Oct. 1810; see below, Appendix to Vol. IV.
See The Speech of Randle Jackson, Esq. delivered at the General Court of the Bank of England, held on the 20th of September, 1810, respecting the Report of the Bullion Committee...London, Butterworth, pp. 23–4; cp. above, p. 152.
Observations on the Report of the Bullion Committee. By the Right Honourable Sir John Sinclair, Bart., M.P., London, Cadell and Davies, 1810.
‘opinions’ is written above ‘evidence’, which however is not del.
Sinclair’s words are ‘Sanctioned by the authority of persons of practical detail’ (Observations,p. 28)
‘it can be supposed’ is ins.
‘could be’ is written above ‘were’, which, however, is not del.
Replaces ‘is never’.
‘excessive’ is del. here.
 See below, p. 375.
‘because if all such bills were discounted we might have four times the amount of paper that is now actually in circulation’ is del. here.
‘had permanently existed’ replaces ‘were possible’; and, in the next line, ‘might have been’ replaces ‘might be’.
‘As the guineas have been withdrawn and the small notes only substituted’ is del. here.
‘As the guineas have been withdrawn and the small notes only substituted’ is del. here.
‘probable’ is ins.
 ‘which circulates commodities’ is ins.
Replaces ‘If the mines of America had never been discovered’.
Replaces ‘she now possesses’.
‘not envy’ is del. here.
‘only’ is del. here.