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• Prefatory Note to Volumes Iii and Iv
• Pamphlets and Papers Written For Publication 1809–1811
• Note On the Bullion Essays
• The Price of Gold Three Contributions to the Morning Chronicle1809
• The Price of Gold 1
• [first Reply to ‘a Friend to Bank-notes’] to the Editor of the Morning Chronicle.1
• [second Reply to ‘a Friend to Bank-notes’] to the Editor of the Morning Chronicle.1
• [appendix to ‘the Price of Gold’
• [a Reply By Trower]
• [a Further Reply By Ricardo]1
• The High Price of Bullion 1810– 11
• Three Letters to the Morning Chronicle On the Bullion Report 1810
• [three Letters On the Bullion Report] Report of the Bullion Committee1to Theeditor of the Morning Chronicle.
• [on Sir John Sinclair’s ‘observations’] Bullion Report1to Theeditor of the Morning Chronicle.
• [on Mr Randle Jackson’s Speech] Bullion Report1to Theeditor of the Morning Chronicle.
• Reply to Mr. Bosanquet’s ‘practical Observations On the Report of the Bullion Committee’, 1811
• Chapter I: Preliminary Observations.—mr. Bosanquet’s Objections to the Conclusions of the Bullion Committee Briefly Stated.
• Chapter II: Mr. Bosanquet’s Alleged Facts, Drawn From the History of the State of Exchange, Considered.
• Chapter III: Mr. Bosanquet’s Alleged Facts, In Supposed Refutation of the Conclusion That a Rise In the Market Price of Bullion Above the Mint Price Proves a Depreciation of the Currency, Considered.
• Chapter IV: Mr. Bosanquet’s Objections to the Statement, That the Balance of Payments Has Been In Favour of Great Britain, Examined.
• Chapter V: Mr. Bosanquet’s Argument to Prove That the Bank of England Hasnotthe Power of Forcing the Circulation of Bank Notes—considered.
• Chapter VI: Observations On the Principles of Seignorage.
• Chapter VII: Mr. Bosanquet’s Objections to the Proposition, That the Circulation of the Bank of England Regulates That of the Country Banks, Considered.
• Chapter VIII: Mr. Bosanquet’s Opinion—that Years of Scarcity and Taxes Have Been the Sole Cause of the Rise of Prices, Excessive Circulation No Cause—considered.
• Chapter IX: Mr. Bosanquet’s Opinion, That Evil Would Result From the Resumption of Cash Payments—considered.
• Appendix
• Notes On Bentham’s ‘sur Les Prix’ 1810– 1811
• Notes On the Bullion Report and Evidence 1810
• (a): [notes On the Report of the Bullion Committee]
• (b): [rough Notes On the First Part of the Minutes of Evidence]
• (c): [notes On the Minutes of Evidence] Minutes of Evidence
• Notes On Trotter’s ‘principles of Currency and Exchanges’ 1810
• Observations On Trower’s Notes On Trotter 1811
• Observations On Vansittart’s Propositions Respecting Money, Bullion and Exchanges 1811
• Appendix

OBSERVATIONS ON VANSITTART’S PROPOSITIONS RESPECTING MONEY, BULLION AND EXCHANGES
1811

NOTE TO ‘OBSERVATIONS ON VANSITTART’

Ricardo’s Observations on Vansittart’s Propositions on the Bullion Report appear to have been written between 26 April and 3 May 1811. The MS, which is among Ricardo’s Papers, covers seven quarto pages. It has been printed in Minor Papers on the Currency Question, ed. by J. H. Hollander, Baltimore, The Johns Hopkins Press, 1932, pp. 111–17.

The Bullion Report, though published in August 1810, was not discussed in the House of Commons until the following year. On 5 April 1811 it was agreed, on Horner’s proposal, that the debate on the Report should take place on 29 April; later, however, the debate was postponed to 6 May.

The debate on Horner’s Resolutions began on 6 May and ended with the defeat of all his Resolutions on 9 May. That on Vansittart’s Propositions began on 13 May and ended on 15 May with their adoption, after Horner’s amendments had been negatived.

The first ten of Vansittart’s Propositions (which is as far as Ricardo’s comments go), in their original version, are here printed in square brackets and in smaller type before the respective comments.

OBSERVATIONS ON THE PROPOSITIONS RESPECTING MONEY, BULLION AND EXCHANGES

[Vansittart’s Counter-Resolutions, dated 26 April 1811.]1

[I. That the right of establishing and regulating the legal Money of this Kingdom hath at all times been a Royal Prerogative, vested in the Sovereigns thereof, who have from time to time exercised the same as they have seen fit, in changing such legal Money, or altering and varying the value, and enforcing or restraining the circulation thereof, by Proclamation, or in concurrence with the Estates of the Realm by Act of Parliament: and that such legal Money cannot lawfully be defaced, melted down or exported.

II. —That the Promissory Notes of the Governor and Company of the Bank of England are engagements to pay certain sums of Money in the legal Coin of this Kingdom; and that for more than a century past, the said Governor and Company were at all times ready to discharge such Promissory Notes in legal Coin of the Realm, until restrained from so doing on the 25th of February 1797, by His Majesty’s Order in Council, confirmed by Act of Parliament.

III. —That the Promissory Notes of the said Company have hitherto been, and are at this time, held to be equivalent to the legal Coin of the Realm, in all pecuniary transactions to which such Coin is legally applicable.]

3^d. The Promissory Notes of the Bank of England cannot justly be said to be at “this time held to be equivalent to the legal coin of the Realm” when the coin is bought at a prem^m. of 6 and 7 pc^t.,—and when it is prevented from openly rising to 15 or 18 pc^t. (its real and intrinsic value above paper) by the terror of the law which deters all men of character from engaging in a traffic which is disreputable and illegal. Whilst the law can be enforced the currency may be depreciated 50 pc^t., and yet the coin and paper may preserve the same value as currency.

[IV.—That at various periods, as well before as since the said Restriction, the Exchanges between Great Britain and several other Countries have been unfavourable to Great Britain: and that during such periods, the prices of Gold and Silver Bullion, especially of such Gold Bullion as could be legally exported, have frequently risen above the Mint price; and the coinage of Money at the Mint has been either wholly suspended or greatly diminished in amount: and that such circumstances have usually occurred, when expensive Naval and Military operations have been carried on abroad, and in times of public danger or alarm, or when large importations of Grain from foreign parts have taken place.]

4^th. At no period have the exchanges before the restriction been more unfavourable to Great Britain than 5 or 7 pc^t. or the expences attending the transportation of bullion. Neither did the price of gold bullion in bars, whilst the coin was undebased rise above the mint price excepting in the years 1783 and 4 when it exceeded the mint price about one penny halfpenny.

[V.—That such unfavourable Exchanges, and rise in the price of Bullion, occurred to a greater or less degree during the wars carried on by King William the 3d. and Queen Ann; and also during part of the Seven years war, and of the American war; and during the War and Scarcity of grain in 1795 and 1796, when the difficulty increased to such a degree, that on the 25th of February 1797, the Bank of England was restrained from making payments in Cash by His Majesty’s Order in Council, confirmed and continued to the present time by divers Acts of Parliament; and the Exchanges became afterwards still more unfavourable, and the price of Bullion higher, during the scarcity which prevailed for two years previous to the Peace of Amiens.]

5^th. Though the exchanges were unfavourable and gold bullion rose above the mint price during the Wars of King William and Queen Anne, this happened only1 occasionally and in a moderate degree, all which occurrences may be satisfactorily explained—from the acknowledged state of the debasement of the coin. That this was the principal cause is abundantly proved by the fact of the price of gold falling below the mint price and the exchanges rising above par immediately on the reformation of the coin. During the seven years war the gold coin then the principal measure of value had become debased which will account for the price of gold having occasionally been as high as £4. 1. 6. The exchange was, though as low as 31.10 in 1760, never below the real par. The relative value of gold and silver was in the market at this time as 14 to 1. Gold was a legal tender in England and a pound sterling in gold was probably of less value in the market than the silver in 31/10 of Hamburgh. The real par of exchange between England and Hamburgh when the relative market value of gold and silver, agrees with the relative mint value viz as 1 to 15.07, is 35/1,—con- sequently when the relative value is as 1 to 14 the real par is 32/7. Now if we take into our consideration the debased state of the English coin in the year 1760 it is probable that the exchange when at 31/10 was really favourable to England.

At no period in the American War did the price of bar gold exceed the mint price excepting in 1783 when it was as high as £3. 18. p^r. oz. 1½d. above the mint price. The exchanges were at this time never more than 3½ pc^t. below par, the lowest exchange with Hamburgh being 31/5, whilst the relative value of gold and silver was as 1 to 14 and consequently the real par 32/7. In 1795 and 6 neither the price of bar gold nor of foreign coin exceeded £3. 17. 6 nor were the exchanges at any period lower than 32/4, the relative value of gold and silver being as 1 to 14, and the real par 32/7. In 1797 when the Bank of England was restrained from making payments in Cash the exchanges were considerably in favour of England, and the price of gold 4½d. under the mint price.

In the beginning of 1799 the exchange was both nominally and really favourable to England, being at 37/7. In the latter end of that year the price of silver had risen 10 pc^t. and then the currency of Hamburgh had risen relatively to that of England in the same proportion so that the exchange tho’ nominally 10 pc^t. unfavourable to England was really at par.— From this Period the exchange and price of bullion were operated on by the excessive issues of the Bank, which were after sufficient intervals corrected from time to time by the exportation of the coin.

[VI.—That during the period of 75 years, ending with the 1st of January 1796 and previous to the aforesaid restriction whereof, with the exception of some small intervals, Accounts are before the House, the price of Standard Gold in bars has been at or under the Mint price 34 years and 5 months; and above the said Mint price 39 years and 7 months; and that the price of Foreign Gold Coin has been at or under £3. 18. per oz. 31 years and 2 months, and above the said price 42 years and 10 months. And that during the same period of 75 years, the price of standard Silver appears to have been at or under the Mint price, 3 years and 2 months only.]

6^th. For a period of 22 years previous to 1^st. Jan^y 1796 that is to say from the recoinage in 1774, the price of gold in bars never exceeded the mint price excepting in the latter end of 1783 and beginning of 1784 when it rose to £3. 18—p^r oz. From 1717 when gold was declared a legal tender to 1774 it has generally been about £3. 18—p^r oz but occasionally rose to £4 and even to £4. 1 p^r oz.—This price is justly attributable to the debased state of the coinage. It is remarkable that the price of gold in coin seldom at these periods exceeded the price of gold in bars which I think is a satisfactory proof that the price of gold was occasioned by the state of the currency and not in consequence of a really unfavourable exchange and therefore any demand for gold abroad. Since the recoinage the price of gold in coin has frequently exceeded the price of gold in bars by 2 or 3/-. It would be a remarkable circumstance if one of the precious metals were not always above the mint price. In this country silver has been generally so circumstanced.

[VII.—That the unfavourable state of the Exchanges, and the high price of Bullion, do not, in any of the instances above referred to, appear to have been produced by the restriction upon Cash payments at the Bank of England, or by any excess in the issue of Bank Notes; inasmuch as all the said instances, except the last, occurred previously to any restriction on such Cash payments; and because, so far as appears by such information as has been procured, the price of Bullion has frequently been highest, and the Exchanges most unfavourable, at periods, when the issues of Bank Notes have been considerably diminished, and to have been afterwards restored to their ordinary rates, although those issues have been increased.]

7^th. The assertion in this resolution is by no means proved. If it is founded on Mr. Pearse’s statement it must be given up as that gentleman’s facts as well as his reasoning are incorrect.1

[VIII.—That during the latter part and for sometime after the close of the American war, during the years 1781, 1782 and 1783, the exchange with Hamburgh fell from 34.1 to 31.5, being about 8 per cent.; and the price of foreign gold rose from £3. 17. 6. to £4. 2. 3. per oz. and the price of Dollars from 5s. 4½. per oz. to 5s. 11¼. and that the Bank Notes in circulation were reduced between March 1782 and December 1782, from £9,160,000 to £5,995,000, being a diminution of above one third, and continued (with occasional variations) at such reduced rate until December 1784: and that the exchange with Hamburgh rose to 34.6, and the price of Gold fell to £3. 17. 6. and Dollars to 5s. 1½. per oz. before the 25^th February 1787, the amount of Bank Notes being then increased to £8,688,000.]

8. The price of foreign gold coin is frequently 2 or 3/- p^r. oz higher than bar gold being often wanted for particular markets. It appears that in the year 1781 the price of bar gold did not exceed £3. 17. 6 and gold in coin is once quoted £4. 0. 6. In 1782 bar gold did not exceed £3. 17. 9 and gold in coin is once quoted £4. 2.—In 1783 bar gold £3. 18— and foreign gold is in one month quoted as high as £4. 2. 3 and as low as1 £3. 17. 9. The exchange in 1781—varied from 34/1 to 31/11 a fall of nearly 7 pc^t. but during the same period silver rose 7 pc^t. viz. from 5/5½ which was the price when the exchange was 34/1 to 5/10 its price when the exchange was 31/11. In 1782 the exchange fell to 31/8 and silver rose to 5/11½. In 1783 the exchange fell to 31/5 and 31/6 and silver to 5/8½. In neither of these years was the real exchange more unfavourable to England than 3½ pc^t. —It should be remarked that the price of dollars was not 5/11¼ at the same period that the price of gold was £4. 2. 3. According to the wording of this resolution we should be induced to suppose that the fall of 8 pc^t. in the exchange occasioned both the high price of gold and the high price of dollars. When dollars were at 5/11¼ gold in bars was at £3. 17. 9 and foreign gold in coin £4.—. 1 and the exchange 31/10—the relative value of gold and silver being as 1 to 13.1—so that the real par of exchange was 31/- and consequently the then exchange of 31/10 favourable to England.

I have no account of the Bank notes in circulation in the years 1781. 2. 3.2 —Was the circulation in March 1782 of 9,160,000 a temporary or had it been a permanent amount?— what was the state of it in Jan^y. 1782, in Jan^y. 1783.1 An increase of a month or two can produce no permanent nor even a temporary effect.—I should like to see the account of Bank notes in circulation up to 1790.2 —Mr. Vansittart wishes his readers to suppose that the price of gold did not fall to £3. 17. 6; dollars to 5/1½; and the exchange did not rise to 34/6 till the increase of Bank notes in 1787 to 8,688,000,— but it appears that in Jan^y. 1784, bar gold and foreign gold were no higher than £3. 18— p^r. oz., from May 1784 to August 1785 neither of them were above £3. 17. 10½ and from that period till 1792 they were never higher than £3. 17. 6. In 1784 Dollars were at 5/1 and in 1785 as low as 5/- and the exchange was at 34/10 in 1784 and at 35/6 in 1785.

[IX.—That the Amount of Bank Notes in February 1787 was £8,688,000, and in February 1791 £11,699,000; and that during the same period, the sum of £10,704,000 was coined in Gold; and that the Exchange with Hamburgh rose about 3 per cent.]

9. Did the exchange during the periods alluded to in these resolutions vary beyond the limits laid down as the true principle by the Report,—this is the test by which they ought fairly to be tried. Who has denied that the exchange may be 1 or 2 pc^t. or even more at one time in favour of Hamburgh, and at another 1 or 2 pc in favour of London. Who again has denied that during a period of successful commerce1 an increase of 3 or 4 millions of circulating medium may not be wanted? This might have been occasioned too by a diminution generally in the market of the world of the value of the precious metals. The coinage from 1787 to 1791 inclusive from foreign gold did not exceed £4,000,000 that from light guineas cannot be considered as an augmentation to the currency. Mr. Vansittart states the whole at 10,704 millions.2

[X.—That between the 25^th of February 1795, and the 25^th of February 1797, the amount of Bank Notes was reduced from £13,539,000 to £8,640,000, during which time the exchange with Hamburgh fell from 36 to 35, being about 3 per cent., and the said amount was increased to £11,855,000, exclusive of £1,542,000 in Notes of £1. and £2. each on the 1st of February 1798, during which time the Exchange rose to 38.2, being about 9 per cent.]

10. In January 1795 the circulation of Bank notes was from 10 to 12 millions[,] in March it was as high as 14 millions but was immediately reduced to about 10 millions, it continued during the whole year between 10 and 11 millions except for one fortnight when it exceeded it. It was not till after July 1796 that the amount of notes was lowered to below 9,500,000[,] for the rest of the year it varied from 9,500,000 to about 9,000,000. The exchange fell in 1795 from 36 at which it was in Feb^y. to 32/10 in July. In the end of 1796 the exchange rose again to 34/7, the price of silver being at 5/4 and 5/6 and gold £3. 17. 6 the exchange was uniformly above par.

The average amount of notes in Jan^y. 1795 was 11 millions[,] in Feb^y. about 10 millions, in March 11,700, in April 11,100, in May 10.200, June 9,800, July 10,250, Aug 10600, —Sep 10,500,—Oct^r 10400, Nov 10750, D^cr 11,900, Jan 96 10300, Feb 10,350, Mar 9,800, Ap 10500, May 10,100, June 9,400, July 9,400 and continued about 9 millions till Feb 1797,—in which year the exchange rose to 38/2. It must be observed that the price of standard silver fell this year to 5/0½ so that the real par was perhaps not less than 36 or 37.

It appears then that it was between Ap^l. 1796 and Feb^y. 1797 that the amount of notes was reduced from 10,500 to 8,640, and that the exchange rose from 32/7 the price in Jan 1796 to 36/8 in April and 38/- in Sep^r.,1 the earliest period perhaps at which the effects of the reduction of the amount of the circulation would be felt by the exchange.

[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.

[o]. 147).

[

These figures are from an Account ordered to be printed 22 Feb. 1811 (Parliamentary Papers, 1810–11, vol. x, N°. 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.