217.: ricardo to trower1[Reply to 216] - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 7 Letters 1816-1818 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 7 Letters 1816-1818.
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.
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.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
ricardo to trower
[Reply to 216]
London 9 May 1817
I write although I can give you little information on the subject of your inquiry. I understand it is proposed that the managers of the three Provident Institutions in London, shall meet for the purpose of agreeing on some general regulations, at which it will no doubt be discussed whether it will be expedient to alter the rules, to enable us to avail ourselves of the privelege about to be granted of obtaining debentures at a fixed rate of interest, with a return of the money at the will of the trustees. It appears to me so desireable that the depositor should be secured in the receipt of the precise sum of money which he may originally deposit that notwithstanding there are great objections against the limiting each man’s deposit to £50, it should be agreed to, if on no other condition this advantage is to be obtained. This point has not yet been discussed, nor offered for discussion in our particular establishment, and probably will not be till the clause has been approved by Parliament.
I am very much surprised at Ministers sanctioning such a clause, for it cannot be doubted that if the amount of deposits should become very large, it will not only subject the country to a considerable tax, but may on the breaking out of a war very much embarrass the financial operations. Suppose that a sum as large as 3 millions of debentures should be issued by the Bank in return for deposits made by trustees, when 3 pcts. are at 85, Governmentwould by purchasing 3 pcts. obtain only 3½ pc. on 3 millions for which they would be paying to the holders of debentures more than 4½ pc, thus losing £30,000 pr. ann., and when 3 pcts. fell to 60 they would be called upon for the payment of this sum of 3 millions at a very inconvenient time, as to obtain it they would lose the difference between 85 at which they bought, and 60 at which they would be forced to sell or £750,000. Now though I am a friend to these Institutions I do not think that they are deserving of these extraordinary bonuses, particularly as I am persuaded that this loss to the public would not act as any great encouragement to savings. The depositors whether they received 5, 4 or 3 pc. for their money would be of little importance in determining them to economical habits.
With respect to the moral influence of these Institutions do you think that a depositor will feel that he has an equal stake in the country and is therefore interested in its peace and good government whether he have £5 in the funds or in a government debenture? In that respect I can see no difference.
Mr. Elwin is engaged to dine with me on monday next when I shall give him your message. I shall not I think see him before.
Mrs. Ricardo joins with me in kind regards to Mrs. Trower
Very truly yrs.