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I: DRAFT OF A LETTER TO A NEWSPAPER ON THE EFFECTS OF PEEL’S BILL - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 5 Speeches and Evidence 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 5 Speeches and Evidence 1815-1823.
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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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DRAFT OF A LETTER TO A NEWSPAPER ON THE EFFECTS OF PEEL’S BILL
[After the meeting at Hereford in his honour (see above, p. 471), Joseph Hume went to Monmouth where he was admitted a freeman of the borough on 10 December 1821. A brief report of the proceedings was given in The Times of 17 December. Ricardo was not present on this occasion, when some of the speakers attacked him for his currency plan to the operation of which they attributed the fall in the prices of agricultural produce.
The following draft letter was intended for an unidentified newspaper which had reported those speeches: there is no evidence of its having been published or even sent.
A similar reply to the same attacks is in Ricardo’s letter to McCulloch of 3 January 1822; the latter used it as material for an article in the Scotsman (see below, IX, 140, n. 2).
The MS, in Ricardo’s handwriting, is in the Mill-Ricardo papers.]
In your account of what passed at the meeting at Monmouth when Mr. Hume was admitted a member of the Corporation of that city it appears that Mr. Moggridge and Mr. Palmer entered pretty fully into the question of the effect which had been produced on the circumstances of farmers by the operation of Mr. Peel’s bill passed in 1819 and Mr. Palmer in particular alluded to the opinion on that subject given by Mr. Ricardo at various times—he said that1
It appears to me Sir that the effects ascribed by those gentlemen to Mr. Peel’s bill by the great rise which has been occasioned in the value of money should rather be ascribed to a great fall in the value of the commodities of which they were speaking viz. Corn, cattle and the other raw produce of the earth. It is at all times exceedingly difficult when two commodities alter considerably in relative value to determine accurately to the alteration in the value of which it is principally to be ascribed, and the least which those gentlemen could have done would have been to have given their reasons for thinking that since 1819 gold had risen so enormously in value as they contended for. It must be recollected that gold is a commodity as well as corn and cattle, and that its price is equally operated upon by the rise and fall in the value of paper money not regulated by any standard. Mr. Palmer cannot deny that in 1819 when Mr. Peel’s bill [was passed]1 a quarter of wheat sold for 2 in paper money, at the same time it sold for £ in gold or for penny-weights in gold. At the present time a quarter of wheat sells for £ in gold or for pennyweights in weight. What is the cause of this difference,—it is owing entirely to the alteration in the value of gold say Mr. Moggridge and Mr. Palmer. I want to know to what cause they ascribe this alteration in the value of gold and on this subject they are silent, they give us no satisfaction whatever. If the question had been asked them at the Meeting when they delivered their opinions they would probably have said it is owing to the contracted quantity of paper currency,—but this would have been far from a satisfactory answer, for they were bound to shew how the contraction of a paper currency acted on the value of gold. Mr. Palmer alluded to the opinions given [by]3 Mr. Ricardo in the following terms—I regret that Mr. Ricardo was not present to answer for himself, but I think it would not be difficult to justify the opinions which were attacked. It will be recollected that Mr. Ricardo wrote a pamphlet to shew that a currency might be regulated by a metallic standard without the use of any other metal as money but silver and copper the latter for payments under a shilling the former4 for payments under a pound. For this purpose Mr. Ricardo proposed that the Bank should be obliged to give gold in bullion in exchange for their notes if of a certain amount on the demand of the holder of them. It was with reference to this plan that Mr. Ricardo was examined before the Committee on Bank Affairs and it is probable that seeing there was no necessity for the use of any gold in the circulation and being satisfied that the Bank had a sufficient quantity of that metal to answer all the demands that could be made on them on such a system of currency he answered that Did Mr. Ricardo mean by this that gold itself could not thereafter vary, and that if it did the currency which was to be1 regulated by the value of gold would not vary with it? quite the contrary, it is evident from the whole of the reasoning of the pamphlet in question that he considered gold as a variable commodity, as well as corn or any other merchandize, but his argument was, “adopt my system which will render all demand for gold unnecessary, and will therefore probably be unattended with any variation in the value of that metal, and then the whole variation in the value of money will be only equal to the difference between the value of paper and the value of gold or 5 pct.. You can now buy a quarter of corn with as much gold as is coined into £ for the same quantity of corn you are obliged to give £ in bank notes. Diminish the quantity of bank notes and you will raise them 5 pc. in value and when this is effected you will obtain a quarter of corn for £ in paper as well as in gold—the price of corn in gold will not be altered, its price in paper2 will fall 5 pct..” it is for Mr. Palmer to shew what is defective in this reasoning. Mr. Ricardo could not mean to say that no variation should thereafter take place in the value of gold, he must have known full well that the currency of every country regulated by a metallic standard was liable to all the variations of that standard. In Mr. Ricardo’s speeches on Mr. Peel’s bill, to which reference has been made, he said that we should be still liable to have our currency vary in proportion as the metal varied which was the standard, but that this was an inconvenience to which all metallic currencies were exposed—it was one to which France, Holland, Hamburgh and all those countries whose currencies were on the most solid system were exposed, and no case could even be imagined to exempt a currency from such variations.—It may be said that this is a good defence for Mr. Ricardo’s evidence before the committee, when he had reason to think that his plan was the one contemplated respecting the operation of which only he was examined, but it is not equally good for the opinion which he afterwards expressed in his speech when he had seen Mr. Peel’s bill and which was essentially different from his proposed plan as it provided for payments in coin in 1823 and therefore made a demand for gold obviously necessary and the rise of its value certain. To this Mr. Ricardo would probably answer that he saw no such obvious necessity for the demand for gold— that as he understood the bill no specie would be necessary till May 1823 four years distant from the time of discussion and he might confidently reply that if for 3 out of these 4 years his plan had a fair trial it would be found so efficient for all the objects of the most improved currency that the legislature would have altered the law and dispensed with specie payments altogether: In the speech to which allusion has been made I recollect he advised the Bank to sell gold instead of buying it so little did he think the quantity actually in the possession of the Bank inadequate for all the purposes of bullion payments.
Mr. Ricardo cannot fairly be held responsible for the narrow views, and obstinate prejudices of the Bank of England. He could not contemplate that the Bank would so narrow the circulation of paper as to occasion such a rise in its comparative value to gold and the currencies of other countries as to make the influx of gold into this unexampled in amount. He could not foresee that they would immediately provide themselves with so large a1 quantity of gold coin as to make it incumbent on them to apply to the legislature to permit them to withdraw all their small notes and fill the circulation with gold coin even so early as the middle of 1821—this is what Mr. Ricardo could not anticipate—he relied on there being no demand for gold and the Bank by their injudicious measures occasioned a demand for many millions. He supposed that the reverting from a currency regulated by no standard, to one regulated by a fixed one, the greatest care would be taken to make the transition as little burthensome as possible, but the fact is that if the object had been to make the alteration from the one system to the other as distressing to the country as possible no measures could have been taken by the Bank of England so well calculated to produce that effect as those which they actually adopted.
In saying this it must not be supposed that I agree with Mr. Moggridge and Mr. Palmer that any thing like the effect which they compute has been produced on the value of the currency by reverting to specie payments. I am of opinion with Mr. Ricardo that if the Bank had followed the obvious course of policy which they ought to have pursued this great measure might have been accomplished with no other alteration in the value of money but 5 pct., but by the course which they did adopt and the demand which they in consequence occasioned for gold bullion they have raised the value of that metal about 5 pct. more and consequently that the whole alteration in the value of the currency since 1819 has been about 10 pct.. My reason for thinking that the demand for gold has caused a rise of 5 pc. in that metal is nearly the same as that expressed by Mr. Tooke in his evidence before the Agricultural committee. This rise in the value of gold it must always be remembered is not confined to this country, it is common to all, and if the standard of all were gold and not silver, the money of all would have varied 5 pct.. What cannot be too often insisted on is that that paper money has only increased in value 5 pc. more than gold—it could not have increased more because it is now on a par with gold and in 1819 and for 4 years before 1819 had not been depressed more than 5 pc. below gold. When Mr. Palmer says therefore that money has altered 50 pct. in value in consequence of Mr. Peel’s bill he must mean that Paper money has risen 50 pct. and gold bullion 45 pct.. If this be true all commodities in this country as well as in every other ought to have varied 45 pc. as compared with gold—Does he or any other man believe this to be the fact? Are the people of France, Germany, Italy, Spain, Holland and Hamburgh obliged to give nearly double the quantities of commodities for the purchase of a given weight of gold. Can the Stock holder with the same money dividend procure double the quantity of all the commodities he desires—it is notoriously otherwise and how men with such good understandings as Mr. Moggridge and Mr. Palmer can be made the dupes of such an absurd theory I am at a loss to conceive.
That raw produce is frightfully depressed no one can deny but that this depression is either wholly or in any very great part occasioned by the rise in the value of money is not made out by any plausible arguments. Corn and raw produce are not exempted from a fall of value more than other commodities and if it be true that they have fallen 50 pct. 40 of that 50 pct. fall is entirely owing to causes which have operated on their value. Such variations are by no means uncommon. In 1792—wheat was at 39/- in 1800—134/- 1804 52/- 1808 81/- 1812 140/- 1814 67/- 1816—53/- 1817—109/- and it cannot be pretended that these variations were occasioned by the altered value in money. That some part of these variations may be imputed to variations in the value of money is not disputed, but while money varied 10 pc. corn varied 100 pc. and why may not the same have occurred now. Those who deny this are bound to give some reason for their opinion— hitherto they have given none.
[1 ]Blank in MS.
[1 ]Omitted in MS.
[2 ]Blank in MS, here and below.
[3 ]Omitted in MS.
[4 ]In MS ‘latter’.
[1 ]‘to be’ replaces ‘on his plan’.
[2 ]In MS ‘gold’.
[1 ]‘so large a’ replaces ‘a sufficient’.