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NOTES ON TROTTER’S ‘PRINCIPLES OF CURRENCY AND EXCHANGES’ 1810 - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 3 Pamphlets and Papers 1809-1811 [1809]

Edition used:

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.

Part of: The Works and Correspondence of David Ricardo, 11 vols (Sraffa ed.)

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


NOTES ON TROTTER’S ‘PRINCIPLES OF CURRENCY AND EXCHANGES’
1810

NOTE ON ‘NOTES ON TROTTER’

Ricardo’s comments were probably written in December 1810 or soon after.

In the text printed below quotations from, or summaries of, the relevant passages of Trotter’s pamphlet have been prefixed to Ricardo’s Notes.

[NOTES ON TROTTER’S ‘PRINCIPLES OF CURRENCY AND EXCHANGES’]

[p. 7.] In the course of a brief sketch of the origins of money Trotter says that in England the goldsmiths’ notes were of the same value as the precious metals, so long as those who issued them were ‘capable of fulfilling’ their contracts.

Page 7. And obliged

[p. 12.] In the preceding pages Trotter has considered the functions of money.

12 Up to this page there is not a word with which I do not agree.

[p. 13.] There ‘is a limitation and an insuperable one, to the quantity of money in any given state of society’: ‘the aggregate of the sum, in gold, in silver, and in paper engagements, in each person’s pocket or house, will, in every state of such society, form the total of, and be the limit to, the currency of the country.’

13 Whilst money is not depreciated, and the nominal prices of commodities not raised. If with payments to the amount of 100 millions 10 millions be sufficient for circulation, no more than that sum will be used, unless the money be depreciated in value. The payments may by depreciation of money be increased to 200 millions nominally; in such case 20 millions of the depreciated money will be required for circulation.

[p. 14.] There is, therefore, an absolute security against redundancy of currency, since in every case ‘the check of a saturated circulation interposes; and the least excess beyond the wants of the public, estimated by each individual for himself, flows back upon the Bank of England or the country banker who occasions it.’

incapable of admitting more. Before the discovery of America the same portion of commerce which now requires three millions of money was carried on (confidence[,] credit, and the economy introduced by banking being supposed the same) by one million. The currency is no more saturated with 3 millions now than it was with one then. It might as reasonably be contended that the two millions would flow back to the mine which produced it, as that the notes of the Bank of England, under the present system should flow back to the issuers.

[p. 17.] There is consequently no need to feel anxious about the restriction of cash payments by the Bank of England, for ‘the circulation even of this apparently unfettered establishment is limited: its managers cannot induce the population within their sphere to carry in their pockets, or hoard in their bureaus, more of bank-notes than each man anticipates the want of for his own purposes.’

17 This would be true if the notes retained their value, but when abundant their value sinks, and a greater amount becomes necessary for the same amount of trade and commerce.

[p. 19.] In particular, the discount of bills, as one of the modes which the Bank employs for diffusing its notes, can never lead to an excessive issue, for ‘it is evident that the whole of the bills so discounted and transferred into the hands of the Bank will become due in two months, that they will then be sent out for payment, and that as many notes will be received by the Bank in their discharge, and be thus withdrawn from circulation, as were issued by that body at the time of their discount.’

19 The correctness of these arguments depend entirely on the fact of the paper retaining its value,—they take for granted the subject in dispute. There is no question that the effects would be as here stated, if the paper did not whilst it was abundant cause depreciation. (See page 15)

[p. 21.] A paper currency is infinitely preferable to gold, ‘which, depending on foreign influences, is liable to be often inconveniently reduced, and sometimes to be almost annihilated (as we now see it is) by our foreign exchanges turning against us.’

21 1. Impossible if not forced out by paper.

[pp. 20–21.] Whenever an unusual number of notes has been thrown into circulation, as it happens for instance at the quarterly payments of the public dividends, the immediate effect is to reduce the demand made to the Bank of England for issues upon discounting bills: ‘At such times the depositories of mercantile men being overcharged with banknotes, the owners seek for productive employment of the excess in discounting bills;... Exactly, therefore, by so much as the excess of its notes in the hands of the public at any moment amounts to, the Bank will immediately be abridged of its usual power of diffusion.’

[21] 2. This is true if applied to a short period. Between the moment of the overissues of notes and their depreciation, there will necessarily be something like a glut of money in the market, but as soon as depreciation takes place, there is no longer a redundancy of money.

[pp. 23–24.] Trotter quotes the admission of the Bullion Report ‘that a part [of the small notes issued since the restriction of cash payments] must be considered as being introduced to supply the place of the specie which was deficient at the period of suspending cash-payments’; to this he objects that ‘this admission is evidently insufficient. In considering what void is filled up by small notes, our concern is not with the degree of deficiency of gold at the time of suspension, but with the actual amount of the void at this moment, after thirteen years of great waste by melting and exportation.’

24 1 This is perfectly a correct way of stating it, and should have been adhered to in Page 50.

[p. 24.] ‘Now, so far from a part of this new description of notes being sufficient, the whole of it is unequal to supply the decrease of specie in the last thirteen years’.

[24] 2 May not small notes to any requisite amount be obtained at the Bank in exchange for large notes?

[p. 25.] Trotter’s conclusion on this point is ‘that the whole of the excess (if there be any) of Bank of England paper is to be found in the class of notes which are above the value of five pounds’.

25. 1. Perfectly correct

[p. 25.] Trotter then estimates that ‘the mixed circulation of London before 1797, in gold and Bank of England notes, could not be less than sixteen millions and a half.’

[25] 2 Certainly not so much, or the present circulation could not be depreciated.

[pp. 25–26.] ‘It is now twenty millions, exclusive of the small portion of gold which yet remains, being an increase of about one- fourth.

‘But in the same period has there been no change whatever in the condition of society? has there been no addition to the population within the sphere of the Bank’s circulation? has there been no greater number of commercial transactions to adjust, or larger public revenue to remit into the Exchequer? In each of these, singly, I think I see almost a sufficient demand to draw forth the additional sum in dispute’.

26 1. Has the trade increased a fourth as well as the money, if not the increase of money is excessive.

2 Taxation does not require any addition of money, or if any so little as not to be worth computing

[p. 26.] Another circumstance involves an increased use for notes: ‘Above seven hundred country banks, which formerly held in gold the sum which they deemed it prudent to keep as a deposit in their command, now retain that portion in Bank of England paper, thus attracting a great permanent issue of bank-notes to districts to which they never reached before.’

[pp. 27–28.] Trotter reverts to the increase of wealth during the period after the restriction of cash payments: ‘Not only there are more considerable merchants, more bankers, more agents, more dealers in every species of property, in the period under consideration; but each man’s transactions are numerically and actually increased.’

‘He has, in most instances, more rent to pay, more taxes, and more for the purchase of most articles of consumption; while, on the other hand, there is an equal increase in his receipts. In the upper ranks of society, except to those who unfortunately have only fixed incomes, there are every where increased rents of land, increased profits of trade; while, in the lower ranks, there are increased wages in every employment.’

27 1 Much is owing to depreciation

2Do.

28 1 Caused by the depreciation of the currency. If money were depreciated 50 pct., the wages of labour would rise, and the same argument might be used. The point in dispute is constantly taken for granted.

[p. 28.] ‘I think I have shown the existence of a restricting principle in our nature and habits, which, by limiting the quantity of money in every man’s pocket or possession to the amount he finds necessary for his daily exchanges, limits, by consequence, the whole circulation of the realm.’

[28] 2 This principle limits the proportion of the value of money to the value of goods, but does not limit its absolute quantity.

[p. 29.] Trotter objects to the assertion of Bullion Committee that the only adequate provision against an excess of paper- currency is the convertibility of all paper into specie, which he shows to be a practical impossibility: ‘If, in times of the greatest abundance of specie, the public, from any cause, had called upon the Bank, and upon every country banker, for the sum declared in their notes to be held on the usual condition of repayment on demand, the Bank of England and the country banker must have been alike incapable of fulfilling the letter of their engagements.’

29 1 Of this the Committee were aware. The check against excess is convertibility of paper into gold whenever its value became less than gold coin. There never could be any temptation to demand gold coin for all the notes in circulation, unless the bank should lose all credit with the public.

This is not the case at present, and is a danger against which no human prudence can wholly guard us.

[pp. 29–30.] ‘The actual degree of convertibility of paper before the Restriction Act’ was excessive in ordinary times and insufficient in periods of popular alarm. ‘The truth is, as the times become more secure, and more confidence prevails, there will always be a greater proportion of paper’.

30 1 This is no argument against the fact of an over- issue of paper.

[p. 30.] If paper ‘is not convertible into gold, is it therefore of no value? is there nothing of intrinsic worth into which those who are fearful of its security may convert it in the temporary absence of this one article? Yes, into every thing that men desire, or that gold can purchase’.

[30] 2 All this is allowed but it is contended that it cannot be exchanged for so much of those things which man desires, or as gold can purchase, as it would do under a better system. We do not say that paper currency is good for nothing but that it is not so good as it would and ought to be.

[pp. 31–32.] ‘Why should we be thus tenacious of payment in gold, which the next moment it would be our business not to hoard or to enjoy, but again to send forth in purchase of some one or other of these very objects we now so much set at nought?... Although, in theoretical discussions, we are pleased with a supposed power of calling for our debts in the precious metals, it is obviously impossible to exercise that power to any extent.’

31 It is not fair to charge us with wanting gold; we contend that we should not want it nor take it, if we could get it. We wish only to have the right to obtain it as an effectual security against the depreciation of our property.

32 1 We have no childish affection for gold more than for paper. Not a complaint would be heard if the paper was not depreciated.

[p. 32.] ‘Had the paper part of our currency retained its value only by its convertibility into gold, it must have fallen gradually for the last twenty years; during which time the proportion it contains of the precious metals has been declining. In the last ten years, it ought, by this rule, to have fallen above a half; and, judging by the power of conversion it now possesses, a bank-note of one pound ought not to be worth five shillings; yet we see our notes retaining their original credit, commanding every article at their original value, and exchanging for our coin itself in every transaction in which they meet.’

3 It is not correct to say that they command every article at their original value. Our complaint is that they do not.

[pp. 32–33.] ‘The truth appears to be, that all excess of paper-currency is restrained by the causes we have stated; and its convertibility into gold, in a very small degree, is sufficient for convenience, as well as for preserving it from depreciation.’

33. 1 This is our argument.

[p. 33.] Trotter sums up the conclusions so far attained:

‘That there is no excess in the paper circulation of the country;

‘That there is a sufficient check and control over the issues of paper from the Bank of England and from country banks; and

‘That the currency of the country is in no degree depreciated by the use of paper.’

[33] 2 All these conclusions are without proof.

[p. 34.] It is true that the currency in England has lost some part of its value. This is due, first to gold itself having lost a part of its value, compared with commodities, throughout Europe: ‘Let us put the saddle on the right horse, and not blame paper for a fault which is, in part, ascribable to gold itself.’

34 But let us fairly state how much is owing to one cause, how much to the other.

[p. 35.] Secondly, to the increase of population: ‘In a country insulated as ours now is, by political as well as natural circumstances, every increase of population must make an increase in the demand for all the articles which land and industry produce. To raise the former, worse soils and more unfavourable situations must be taken into cultivation; and the produce therefore will be obtained, and must be sold, at an increased expense. To create the latter, men must be paid at a higher rate of wages, because in every state of society, and especially in one progressive, as that of England is, men must receive somewhat above what is necessary for their support; and the expense of that support will be regulated principally by the cheapness or dearness of food.’

35 Every increase of population must arise from an increase of capital, and has a tendency to lower the prices of commodities and therefore the wages of labour, not to raise them.

[p. 36.] Thirdly, to the burden of taxation.

36 Taxation has some effect no doubt, but will not account for the rise in the price of gold.

[p. 37.] Trotter denies that the rise in prices is due to the facility with which commercial men can procure notes from the Bank of England, and thus heighten the price of every article: ‘An increase of capital (which this is to the small degree in which it exists) never raises the price of commodities, but has exactly the opposite effect’.

37 An increase of Capital never raises the prices of commodities, but an increase of money unaccompanied by an increase of Capital invariably does. Can there be an increase of population without an increase of Capital having preceded it?, yet in Page 35 we are told that an increase of population will occasion a rise in the prices of commodities, and in the wages of labour.

[p. 38] The competition of merchants, who buy to sell again, cannot heighten prices, since every merchant, in the offer he can afford to make, is limited ‘by the price which he expects to obtain in selling again. So far, indeed, from this increased capital being the occasion of high prices, it is one of the principal means of keeping them down;—a competition of capitalists, like a competition of manufacturers, restricts their respective profits.... Agreat capital is the principal advantage which any country has in entering into a competition of sales with other nations; it makes roads, it erects machinery, it promotes canals....’

38. The same cause, namely, an increase of money which will induce him to give a higher price for goods, will secure him one proportionally higher when he sells again. A competition of Capitalists keeps down prices, but money is not Capital. An increase of Capital is attended with all the benefits enumerated; an increase of money to be retained in circulation is unattended with any benefit whatever.

[p. 39.] Part II opens with a summary of the results reached so far:

‘Having shewn that the amount of our currency is fixed by an impassable boundary, which precludes the possibility of excess; having shewn that the convertibility of the portion which is paper, into that which is of the precious metals, was always limited; having shewn that (except in times of alarm, when it might be better if there were none) a very moderate degree of convertibility is necessary for the common purposes of life; and appealing to every man’s experience, that, in the small, indeed, but frequent exchanges in which gold and silver now mix, paper and these precious metals pass at a like value, thus establishing a standard for the former; it follows, that our currency is not now depressed by the use of paper.’

39. 1. This has not been shewn

2. Not frequent exchanges.

[pp. 39–40.] ‘But I am desired to take a guinea, and to melt it down; and I am shewn that the moment it is freed from the stamp of law,—as soon, in short, as it becomes bullion,—it rises in value; and that that portion of gold, which yesterday exchanged only for a one-pound note and one shilling, now exchanges for the same note, and four shillings and sixpence.

‘This evidently must proceed from one of two causes; it must proceed from the currency of which it late made a part having fallen below its usual value, or from gold in the shape of bullion, which it has now become, having risen above it.’

It has been shown that it is not the former of these causes; and therefore there can be no doubt that ‘bullion has risen above its ordinary price to the whole extent of the disparity’.

[p. 40.] It is an ‘exploded belief, that gold is an unvarying standard.’

[40] 2. Who has asserted that gold is an unvarying standard of value? There is no unvarying standard in existence. Gold is however unvarying with regard to that money which is made of gold, and this proceeds from its being at all times convertible without expence into such money, and also from money being again convertible into gold bullion. If an ounce of gold bullion from being worth 15 ounces of silver rises to the value of 30 ounces of silver, an ounce of gold coin will do the same.

[p. 41.] Gold is in fact subject to variations: ‘Since the discovery of America, and the influx which the mines of that part of the world have poured upon Europe, its value has fallen in this country to one-third’.

41. 1. The discovery of the American mines though they had quadrupled the amount of gold would not have sunk its price, whilst the mint price has not altered, and whilst it was measured by gold coin.

[p. 41.] Gold ‘is also subject to some variation from locality: in America, where it is recently dug from the mine, it must necessarily be cheaper than in Europe, which it reaches with all the expenses of freight and hazard attending upon so long a conveyance.’

[41] 2 In America it is cheaper than in Europe but not cheaper measured in gold money. It is cheaper in labour,— cheaper in most goods or it would not be exported from thence.

[p. 42.] But on the whole, gold is the ‘best approximation to a perfect standard.... We have hitherto experienced very littleinconvenience from such local and temporary alterations; nor shall we now from that we witness, if we do not create inconveniences by improper interference.’

42. 1. We have unfortunately created inconveniences by improper interference already. A second interference is necessary in consequence of the first.

[p. 42.] Without entering into the intricacies of foreign exchanges, it must be evident to every man, who will consider the subject, that when a country, like an individual, makes purchases more in value than it sells in return, that country must, for the moment, remain in debt to the extent of the difference.’

[42] 2. A country generally speaking never does this,— and if it did so the exchange would not be affected till the debtor country was preparing to make the payment, and then it would not vary beyond the limits stated by the bullion Committee.

[p. 44.] But there is a limit to the extent of the advances which England can obtain: something must therefore be remitted, and since the exportation of commodities from England is made impossible by political barriers, and gold is easily transported and concealed, ‘the first thing that feels the impulse of an unfavourable exchange is this very gold, which the Committee would seem to think unsusceptible of influence.

‘What then follows this demand for gold? All the train of appearances which result from a demand for other articles: it becomes more and more scarce—it gets higher and higher in price.’

44 This is the fallacy. If the preceding position could be admitted gold might rise in value, but not in price whilst measured in gold coin or in bank notes accurately representing such coin,—particularly if one class of the community had no scruple to evade the law, and exported or melted the coin as best suited their convenience.

[p. 45.] The ‘scanty fund’ of gold deposited in the Bank of England is ineffectual ‘to settle the heavy balance of payments we are every day incurring’.

45. This paragraph is indisputable.

[p. 46.] Referring to the licences granted for the import of specie, Trotter asks: ‘Could Government have found the precious metals as it could have done shoes, or clothing, or provisions, in England, would it have had recourse to such modes?’

46. 1. Yes if the trade were advantageous.

[p. 46.] ‘Whenever the imports and the foreign expenses of this or any other country exceed its exports, its exchanges will be unfavourable, and gold dear; whenever the reverse is the case, when our exports exceed our imports and foreign charges, our exchanges must be favourable, and gold cheap. How then can that be considered as an undeviating measure, which is thus ever affected by circumstances so uncontrollable?’

[46] 2. True but within the limits specified by the committee.

3. Was it not allowed, Page 15, that the issues of paper forced the exportation of gold. Would not the reduction of their amount check exportation, and if carried sufficiently far produce importation

[p. 47.] To the question, why during the long series of years when the balance of trade was favourable to England, the price of gold had not fallen, Trotter answers: ‘When the balance of trade was against the Continent, it had always the option to pay its debts in whatever best suited our market, and, consequently, there never could be any redundancy of this, more than of any other article of commerce; as soon as the measure of our wants became full, the surplus would flow back to where it was more desired, and other articles would be selected, more suited to our market.’

47. 1. This is a just principle, but why does it not make gold revert back to us from the continent? The abundance of paper. For the same reasons that there could be no redundancy here, there could, under a sound system, be no deficiency.

[p. 47.] ‘But it will be said this theory does not hold good at the present moment. The measure of the Continental market is admitted to be full: gold, therefore, not being dear there, there cannot be the usual attraction of a high price to excite exportation from England; yet the tendency of the current is strongly that way.’

[47] 2. This would be difficult to admit under any circumstances, but is wholly impossible whilst any commodities are imported. If commodities are imported for gold, the conclusion that gold is dearer abroad is inevitable.

[p. 48.] ‘At this time, and in this country, gold is dear’.

48. It is dearer compared with the depreciated currency, but cheaper compared with all other things.

[p. 49.] During those periods between 1797 and 1810 in which the foreign exchanges were unfavourable, gold rose in price.

49. It is not denied any where, that with a low exchange gold has a tendency, with the present legal restraint, to become more valuable than an equal weight of coin, and an opposite tendency with a high exchange; but the effects are very limited.

[p. 50.] By comparing the circulation of bank-paper with the price of gold, Trotter finds decisive proof that there is no correspondence between them. In the years 1797, 1798 and 1799, when there was an addition of 5½ millions to the circulation, ‘gold never altered its price’. Further, in the years 1800–1802, the circulation increased 23 per cent., and gold rose in value only 4, 5 and 6 per cent. In the years 1803–1807, when ‘a further increase of issues took place to the extent of a million and a half, gold bullion became cheaper’.

50. 1. How much of this was in small notes? It has been acknowledged, Page 24, that they should be left out of the account. Besides in the year 1797 the currency was much below its natural level as the exchange and the coinage will indicate.

2. The effects of the increased issues of the years 1800, 1, 2, 3, 4, 5, 6 and 7 were at length but not immediately counteracted by the exportation of bullion.

[p. 51.] Therefore the opinion held by some persons, that the ‘currency is depreciated to the whole extent of the rise which bullion has experienced’ leads to ‘the most obvious absurdities.’

51. 1. I see no absurdity in such view.

[pp. 51–52.] From such an opinion, it would follow that in 1800 the currency of Great Britain became depreciated to the extent of 6 per cent., ‘and that, in 1805, with a greater proportion of paper, with a larger public debt, and with an extended war, the same currency, in all these respects less secure, recovered all the value it had lost.’

52. 1 Not the same currency but one reduced by the exportation of the coin.

[p. 52.] ‘Were such opinions just, it would follow also, that if Mr. Goldsmid, in executing any very urgent commission, should raise bullion two or three per cent. above the usual price, he would by such rash act strike off a million from the value of our currency: but the truth is, in all these instances it is only a few ounces of bullion that have got dearer or cheaper; our currency remains just the same.’

[52] 2. It is not the price given by Mr. Goldsmid “which will strike off a million from the value of our currency”, any more than an extravagant price for coffee will add to the value of that commodity, unless in both instances the prices given is the fair, steady market price of the commodity. If so it is of little consequence whether one ounce or a thousand ounces be actually purchased. It is not the purchase but the price which proves depreciation.

[p. 53.] Trotter then replies to those who urge that the holder of a bank-note, by the letter of his contract, is entitled at all times to the same weight of gold: ‘Independent of the injustice of placing the parties to any contract in a situation not in contemplation at the time of making such contract,...the very terms of the contract are against this reasoning. There is not in existence any note of the Bank of England, or of a country bank, engaging to pay a pound of bullion: the engagement such notes contain is to pay a certain portion of the coin of the realm; which coin, bereft as it is, and always has been, of exportability, is of the same value now that it was when it issued from the Mint; and never was intended to give to the possessor the fluctuating and now very unusual advantages of bullion, from which it is so distinctly separated by the law.’

53. 1. The Bank one of the parties have placed themselves there, and may extricate themselves from the consequences by diminishing the amount of their notes.

2. Whether intended or not the effect was such till the present period.

[p. 54.] A guinea, when melted into a small ingot, could be sold at £1. 4s. 6d.: ‘Let this ingot again receive the unvarying character of coin which the law gave it, and meant it should always retain; let it once more be secured by the Tower stamp from those influences which its exportability subjects it to, and which now affect it so much...—then that ingot, that guinea, will be of the value of this note and this shilling’.

54 This is assuming the point in dispute. Coin is degraded in this case by the tower stamp, and no efforts of Government can or ought to keep it in that state. It is bad policy and at the same time contrary to every principle of equity. Bank notes can be kept in their degraded state and are therefore subject to a depreciation from which coin is exempted.

[p. 55.] The Bullion Committee had shown that there was an exact correspondence between the price of bullion and the foreign exchanges. ‘The natural inference’ was ‘that they were cause and effect’; but the Committee had formed a different conclusion and pointed to ‘something in our domestic currency as the cause of both appearances.’

55. Where do the Committee say that they are not cause and effect. The exchange is affected by the Bank issues, and becomes in its turn the cause of the high price of bullion.

[p. 56.] ‘A high market-price of gold must continue just as long as the exchange is unfavourable, however long that may be: while we have an unfavourable balance to pay, we shall ever wish to pay it, amongst other things, in that article which is of cheapest conveyance; and that article will in consequence be dear’.

56. A high price in paper does not enable us to obtain that article; it is only a nominally not a really high price.

[p. 57.] ‘The exportable gold...has acquired a new power— that of paying at the cheapest rate a foreign debt—and consequently a new value;... That portion of our gold which is in coin, which we have barred from exportation, and, of course, from this accidental quality, remains as it was, at the Mint price’.

57. The current gold coin possesses the same power, and is used for such purposes by many without scruple. The author Page 15 has himself told us so. Gold coin cannot therefore sink much beneath the value of gold bullion.

[pp. 57–58.] The Bullion Committee have stated that the ‘general rise of all prices, and in the market-price of gold, with a fall of foreign exchanges, will be the effect of an excessive quantity of circulating medium, not exportable to other countries, or convertible into a coin which is so.’ To this Trotter replies: ‘But, so long as the limitations I have explained exist, there can be no excess. Our circulating medium, when it was all of the precious metals, was never exportable,—consequently no change has taken place in this respect; and, in its present state, it is just as convertible into other coin, and into every thing that is valuable, as it ever was. One description of commodities alone have changed their relative price—those particularly fitted by their qualities for facility of transit; and surely it is not by comparing our currency with these only, that a fair test is offered of its deterioration.’

58. This is the point in dispute. I deny it.

[p. 59.] ‘Of what avail is it to us to know that gold would pay our Continental debt, at a loss of only 8 per cent. if we have not gold to the extent of that debt which we can export?’

59. But why have we not gold? The author has himself, Page 15, answered. The issues of banks have forced it out of the country.

[pp. 60–61.] The Bullion Committee, although they admit that there was an unfavourable balance of trade, state ‘—surely without cause—“that they find it difficult to resist an inference, that a portion, at least, of the late great fall in our exchanges, must have resulted, not from the state of trade, but from a change in the relative value of our domestic currency.”’

60 The author forgets that the Committee are of opinion that a favourable or an unfavourable balance of trade is controuled by the Bank issues.

[p. 63.] During the state of alarm in Ireland between 1799 and 1804, ‘Irish individuals and Irish families gave more and more for bills upon England; the exchange on this country got higher and higher, and gold rose in Dublin to a corresponding premium. It was not that an Irish gentleman, so alarmed, thought the Bank of Ireland had issued too many notes that he wished to exchange them for those of England; but because he wished the whole or some part of his property to be out of the reach of risks then peculiar to that part of the empire.’

63 Not because he thought so, but that alive to his interest he felt that in twenty guineas he possessed a value superior to £21. in notes.

[p. 64.] The alarm has been gradually subsiding, ‘till now we see in Ireland, what we ought to anticipate seeing in this country, relatively with the Continent, the exchange restored to par, and that, too, with a circulation of notes in Ireland as unlimited and as great as it was in the deprecated year of 1804.’

64. 1. The fact is, we have degraded our currency equally to that of Ireland, instead of raising that of Ireland up to ours. Two blacks will not make a white.

[p. 64.] ‘The case of the banking companies in Scotland seems at first view to be the most favourable to the arguments of the Committee; their fault was certainly in part that of over-issues’.

[64] 2. Over-issues are possible then! I wish the author had explained what in his opinion would be the effects of the over-issues of the Bank, if the case were possible. Would they be in any thing different from what we now see.

[p. 66.] The year 1793 was one of singular distress. ‘What was the real evil? It was not a want of the currency of the country then existing;...it was mutual confidence which was wanting, and the evil was cured by a restoration of that confidence.’

66 It was a want of currency which aggravated the evil arising from want of confidence. The issue of commercial Exchequer bills induced the Bank to advance money on them, which they would not have done on other securities.

[p. 70.] In his ‘Conclusion’ Trotter reverts to the Report of the Bullion Committee: ‘They recommend that, in two years, the Bank should resume its payments in gold, whether peace be restored or not. If peace shall then prevail, the order will have been superfluous, as the law unaltered already directs cash-payments in that event.’

70. 1. When peace comes we shall not want for advocates for a continuance of the restriction bill.

[p. 70.] ‘Should peace not be restored, the Bank...must add to our unfavourable balance by increasing our imports: they must raise the difficult supplies, which they will be obliged to provide for their cash-payments, by the most ruinous means to themselves; for they must purchase abroad, to bring it home, that very commodity which the whole trading world are seeking at home to send abroad.’

[70] 2. There would be no such necessity. A contraction of their notes would make others import gold.

[p. 70.] ‘Is it not apparent, that one supply, or one hundred supplies, will not suffice in the given state of exchanges?’

[70] 3. But the exchanges are controulable by the Bank issues

[pp. 70–71.] ‘Have we not seen at least eight or ten millions of our specie melted down and sent away in the last fifteen years’?

71. 1. Yes; but caused by over-issues. Let paper be contracted and the inducement will cease. (See page 15)

[p. 71.] The regulations proposed in the Bullion Report, if ‘carried to the extreme of possibility,...would produce the most inconvenient effects:—it is within possibility, that the Bank, constantly coining and constantly importing to supply a waste greater than it could replace, might be obliged to declare its inability to keep out its notes at this expense, and might find itself under the necessity (I put an extreme case) of withdrawing its paper from circulation altogether. What then would be the result?’

[71] 2 An unbounded importation of gold would be the result; a measure by no means desirable. Our adversaries charge us with being unfriendly to a paper circulation,—this is not just,—it is of its abuse that we complain

[pp. 71–72.] ‘Either the public must be satisfied with a worse currency, and accept for their convenience the notes of private bankers to the extent of the void; or they must import twenty millions of the precious metals to perform the offices which bank- notes now execute so well.’

72. 1. Is not the principle of the Committee which is so often denied in this work acknowledged here. Viz that a reduction of notes, or rather their annihilation would cause the import of the precious metals, and consequently of a favourable exchange.

[p. 72.] ‘In the former case our exchanges would remain exactly as they are now; in the latter almost inconceivable case... we should, at the expense of a million a year in interest for the use of this expensive instrument, and of two or three millions in unfavourable exchanges to acquire it, bring up our currency to the war-price of bullion, which price, obtained by such sacrifices, it would again lose the hour after peace and free intercourse were restored.’

[72] 2. What is meant by “bringing up our currency to the war price of bullion”? Would the price of gold under the circumstances supposed be above £3. 17. 10½ pr. oz? If it were who would take any part of the 20 millions imported to the mint to be coined? The bank it must be remembered is supposed to have ceased to exist.

3. The measure would be improvident and ruinous, because the same good might be obtained with a very small sacrifice.

[p. 73.] The restriction of cash payments has indeed prevented the Bank of England from paying its notes in coin, but ‘it has left the law exactly as it stood before, with regard to the rest of the community: every individual stands precisely as he did before 1797, and is as liable to a settlement of his debt in the coin which the law alone acknowledges as he ever was.’

73 Can the consequences be contemplated, without the most fearful alarm, of every creditor insisting on payments being made to him in coin, to which by law he is entitled? Let them insist on this right and bank notes would be immediately at a great and acknowledged discount.

[p. 75.] The restriction has relieved the community ‘from the intolerable expense of purchasing gold only to coin, and of coining gold only to be melted down.’

75 We might have been secured from all such consequences by a reduction in the amount of paper, at any time since the alarm ceased in 1797.

[p. 76.] The restriction was ‘an act of the Legislature, adopted on public grounds, and in fulfilment of one of the duties of Government—to prevent or lessen a public evil in the exportation of our coin’.

76 But if those public grounds are proved to have ceased, should not the measure itself?

[pp. 76–77.] The efficient state of the currency ‘deserves our peculiar care; but we ought to watch it without any of those prejudices or alarms which we daily see in men otherwise intelligent, who impute our debts, our taxes, our commercial distresses, to some irregular action of this (to them) unintelligible machine.’

77 They justly distinguish what is imputable to this cause, and what to other causes. The machine is by no means unintelligible to those against whom it is charged,—I suspect the saddle is put on the wrong horse.

[p. 78.] The public ought to be unfettered in their choice between a gold and a paper currency. ‘That we have not now this choice is the result of political circumstances entirely out of our control.’

78. 1. Entirely within our control

[p. 78.] ‘It is not to be anticipated that the Power which now holds the Continent in bondage, and shuts its ports against our commerce, will always be able to exercise the same injurious sway. Whenever that ceases, and with it ceases the necessity of our late foreign expenditure, we shall again see the precious metals at their Mint price’.

[78] 2 I doubt much whether bullion can ever fall to its mint price, whilst the present amount of paper continues in circulation. I should say decidedly it could not (unless our commerce was greatly to increase) if the value of gold and silver did not fall in Europe equal to the depreciation of our paper. This would have the effect of increasing the currencies of other countries in the same proportion in which ours has been increased.