PART I. THE PRINCIPLES OF MONEY DEDUCED AND APPLIED TO THE COIN OF GREAT BRITAIN. (continued 3)
Reading edition
This, I think, very naturally accounts for the difference of opinion among the people of England, upon a matter of very general concern, and nothing is so easy as to reconcile all those interests by doing justice to every one, and injustice to none.
Application of principles to the change lately made by the Dutch with respect to their coin.
As an illustration of this subject, I shall cite a recent example of a change made in the circulation of Dutch ducats, executed by that wise nation, seemingly in direct opposition to the principles here laid down, and exactly consistent with those we are endeavouring to explode.
613The States General lately called down all the light ducats, and ordered them to go by weight, as bullion, without making any allowance to such as might suffer by it.
This regulation, and a new coinage of ducats, had the immediate effect of raising the value of that species of current money; consequently, it may be said, that debtors by that regulation have been proportionally hurt, by an act of one of the wisest governments in Europe, if our principles are admitted to be just. But before this conclusion can be drawn, circumstances must be examined.
Ducats in Holland are the price, not the measure of value, having no fixed legal denomination. The current silver coin is what the state, and all the mercantile interest attend to: and in proportion as this current silver coin or bank species is become light, the agio upon that currency has risen. The agio then, in combination with every currency, furnishes an invariable measure for value, as well as the bank money of Amsterdam; and to that every one attends who regards his interest.
The state, therefore, by this arbitrary measure, or sudden revolution on the ducats, did not hurt any debtor; because debtors never were obliged to give ducats in payment.
Will any one say that the Dutch silver currency, now that the agio is high, is of equal value in inland dealings as formerly when it was low: and must not the same argument hold with respect to the currency of Great Britain, although no such thing as agio be there known? Or will it be said, that because the Dutch, who have an invariable measure of value independent of their coin, make an arbitrary operation upon their currency, which is only price; that therefore the English, who have no invariable measure of value independent of their coin, may make a similar operation upon theirs?
All decisions in political questions depend upon circumstances.
Thus it is that circumstances influence our decisions upon all political matters; and principles well deduced do not cease to be true, although they appear contradictory to experience, in cases 614where every circumstance is not exactly known. For this reason, I shall be very far from deciding as to the part proper to be taken by the British government; I go no farther than to point out plain principles; it is the business of statesmen to apply them according to circumstances.
CHAP. XIII. In what Sense the Standard may be said to have been debased by Law, and in what Sense it may be said to have suffered a gradual Debasement by the Operation of political Causes.
These proportions appear contradictory.
In the course of this inquiry, the standard has been represented sometimes as having been debased by law, above thirty years ago, to 113 grains fine gold, at which it remains at present, and sometimes as having gradually declined for these many years.
These propositions are true, though they appear inconsistent, or at least inaccurate; and they must now be set in a clear light.
I have had no opportunity of tracing the progress of the variations as to the price of the metals in the English market from the beginning of this century; and to supply the want of exact observation, I have gone upon the following suppositions: 1. That while the guineas were left to find their own value (being regulated by the law below their worth, and not being considered as a lawful money) they naturally would fix themselves according to the market proportion of the metals. 2. That, at the time the standard was affixed to the guineas in conjunction with the silver, and both were made lawful money, the value of the guineas was exactly inquired into and regulated at their precise value.
Debased by law when affixed to the gold.
615From these circumstances I conclude, that after this affixing the standard to both species, the least variation in the proportion of the metals must have had the effect of throwing the standard (as I may call it) upon that metal which was the least valuable in the coin: and since it is certain, that for thirty years backward, at least, gold coin of equal denomination has been less valuable than silver, payments have been made, commonly, in gold, under the sanction of law, while the silver has been melted down or exported; for these reasons, I have frequently represented the standard as long ago debased by law to the value of 113 grains fine gold; and I believe I have advanced nothing but the truth.
Effects which the changing the proportion of the metals has upon melting the coin and regulating payments.
Here we may conclude, that it is impossible for any law to keep the standard attached both to the gold and the silver coin at once, without preserving constantly the market proportion of the metals at par, with the numerary value of the coins. The rise of silver for one week in the London market is a cause of the silver coin’s being melted; and during that week, all payments will be made in gold. If the week following, gold should rise above the proportion fixed in the coin, gold coin would be melted, and payments would be made in silver.
Payments made by bankers regulate all others.
I do not, at present, consider the small circulation either among the nobility, or among the commons; but I attend to the great circulation among bankers, who have all the specie in the nation in their hands once in a year; and I say, that the payments they make must influence those of all others. Every gentleman pays with the money his banker gives him: did the bank of England find its interest in paying in silver, would it not soon become plentiful in circulation, and would not payments begin to be made in it preferably to gold?
The standard, therefore, has been debased by law by being affixed to the gold, of which metal the pound sterling has uniformly, for these thirty years past, been worth 113 grains, in new guineas.
616But I have also said, that the standard has been gradually diminishing; consequently it might be objected, that if a pound sterling was, thirty years ago, equal to 113 grains of gold, if it has been ever since at that standard, and if it be to-day 113 grains of gold, it cannot be said to have been gradually diminishing. The answer is evident, when we reflect upon our principles.
The standard gradually debased, by the rising of the silver.
The standard affixed to the gold has been diminishing, because these 113 grains of gold have been diminishing in their value with regard to the silver. When the guinea, in 1728, was fixed at 21 shillings, the pound sterling was fixed thereby at 113 grains fine gold, as has been said; consequently, if that weight of gold was then worth 1718.7 fine silver, there was no debasement made by that statute: but in consequence of that statute, the debasement must take place the moment the silver rose in its value.
I am not authorized, by any fact, to advance, that at the time the guineas were brought down from 21 shillings 6 pence to 21 shillings, the metals in the coin were not put at the exact proportion they then bore in the English market. The great Sir Isaac Newton was the person consulted in that matter, and to criticise his decision without plain evidence, would be rash. All I shall say is, that in France the proportion then was 1 to 14½, although according to the English statute it was regulated as 1 to 15.21.
The proportion of the metals, in 1728, supposed to have been as 15.21 is to 1.
Let us therefore suppose, that in 1728, the metals were at the proportion of 1 to 15.21; and that 113 grains of fine gold were really worth 1718.7 grains of fine silver.
By what progression the silver standard has been debased.
But the silver having risen, the standard, for this reason, has been thrown upon the gold, and has constantly remained at 113 grains (that is, in new guineas;) and as the metals have varied from the proportion of 1 to 15.21, to that of 1 to 14.5, by the same steps has the value of the pound sterling, in silver, changed from 1718.7, to 1638.5; which 1638.5 is to 113 as 14.5 is to 1: and were the proportion between gold and silver to come by slow degrees to the Chinese proportion of 1 to 10, the pound sterling would still 617remain at 113 grains of fine gold, as it has been since the year 1728; but the silver coin would either be melted down, or so rubbed away, as to make a pound sterling of it weigh no more than 1130 grains of fine silver, so as to bring it to the proportion of 10 to 1, together with the metals.
Does not this evidently shew the defect of fixing the standard either to one or to both the species?
As a farther illustration of this matter, which, because of its importance, cannot, I think, be too often repeated, I shall shew, in a very few words, how far people are mistaken, when they imagine that by reducing the guineas to 20 shillings, and re-coining the silver according to the plan proposed, the standard of the pound sterling will be brought to that of Elizabeth.
The standard of Elizabeth for the pound sterling, was 1718.7 grains silver, and 157.6 grains gold, both fine.
When Elizabeth fixed the standard of the pound sterling at 1718.7 grains of fine silver, the proportion of the metals, according to the table in the essay of money and coins above cited, was as 10.905 to 1; consequently that pound paid in gold was, in 1601, equal to 157.6 grains fine gold.
The gold standard of her pound worth, at present, 2285.3 grains fine silver.
Had, therefore, by accident, the standard been then fixed to the gold, in place of the silver, and had the silver ever since been considered as a commodity, the pound sterling at present would be worth 157.6 grains of fine gold, and consequently worth 2285.3 grains fine silver, at the proportion of 14.5 to 1; whereas, having been fixed to the silver, it has been kept at the old standard of 1718.7, and consequently is worth no more than 118.5 grains of fine gold.
The variation of the metals has produced three different standards of Elizabeth.
Now supposing that in the year 1601, three different payments of a pound sterling had been made, and locked up in a chest till this day, let us inquire what would be the value of each at present, were they to be melted down, and sold as bullion in the English market. The first payment I shall suppose to have been made in silver, to the value of 1718.7 grains fine silver, which make of standard silver 1858.06 grains; this sold at the rate of 61865 pence an ounce, the present supposed value of silver, at the rate |One worth £1 0 11⅜ present currency.| of the gold, when full weight, makes £1 0 11⅜. The second payment I shall suppose to have been made in gold,|Another worth £1 7 10⅞| to the value of 157.6 grains fine gold, which makes of standard gold 171.9 grains, this at the mint price of gold, that is, £3 17 10½ the ounce, makes of present sterling, £1 7 10⅞.
And a third worth £1 4 5⅛.
The third payment I suppose to have been made, one half in gold, one half in silver, which makes 859.36 grains fine silver, and 78.8 grains of fine gold, which, at the above conversions,
makes for the silver £0 10 511⁄16
And for the gold £0 13 117⁄16
Together £1 4 5⅛
The last is the true standard of Elizabeth for the pound sterling, and worth at present 2002 grains fine silver, and 138 ditto gold.
Here we have three different pounds sterling, produced purely by the variation in the proportion of the metals, although in 1601, they must have been absolutely the same. Which of the three, therefore, is the standard of Elizabeth? Is it not evident, that it can be no other than according to the value of that pound which was paid, half in gold, and half in silver? And is it not also plain, that this is the exact arithmetical mean proportional between the gold and the silver? Let the silver and the gold pounds be added together, they make £2 8 10¼; the half of which is the value of that pound which was paid half in gold, and half in silver, to wit, £1 4 5⅛ of the present gold currency, reckoning standard silver at 65 pence per ounce, and gold at the mint price. To realize this value exactly in gold and silver, while the proportion remains as 1 to 14.5, it would be proper to put into the pound sterling 2001.9 grains troy fine silver, and 138.04 grains of fine gold. These quantities of the metals would answer exactly to the value of £1 4 10¼, the mean proportional above mentioned.
Here then is the standard of Elizabeth: if it has any excellence in it above all others, it might be preferred.
But may vary at every moment.
619It must however be observed, that it will remain the standard only whilst the proportion of 1 to 14.5, upon which it has been established, shall remain unvaried between the metals; and it will vary from where it might be at present settled, in the same manner as it has varied at all times from the year 1601, to wit, according to the vicissitudes which shall happen in the proportion of the metals. But at every period of time, and in all different varieties of proportion between gold and silver, no problem is more easily resolved than that of the mean proportional between the gold and silver, the moment one knows the proportion of the metals at the time; as shall be demonstrated in a following chapter.
Gold rose during the whole 17th century;
During the whole seventeenth century, gold rose in its value; or to express this as the French writers do, the proportion of the metals was increasing, from that of 1 to 10.905, to that of 1 to 15; and in Spain it got up to that of 1 to 16. The standard, therefore being fixed by Elizabeth to the silver, was then attached to that metal which was the least sought for; and who knows whether the mercantile interest at that time, and in the succeeding reigns, did not find it their interest to keep it attached to the silver, for the same reason they now wish it attached to the gold?
and silver has risen since the beginning of this century.
Since the beginning of this century the metals have taken a different turn, and now the proportion is diminishing; that is to say, the value of silver is rising; the consequence of which is, that the mercantile interest would gladly have the standard fixed to the gold; because in this case, (the proportion of the metals being upon the diminishing hand) the standard of the pound will gradually diminish, and trading men will thereby gain, according to the principles above laid down.
From what has been said, the reader may reconcile me with myself, when I sometimes have spoken of the standard of the pound sterling, as having been debased by law thirty years ago, to 113 grains of gold; and when, upon other occasions, I have represented it as having descended by degrees to where it is at present. 620Had I involved my reasoning in all the distinctions which I have now explained, I should have lost my way, and perplexed my subject, instead of throwing light upon it. I shall hereafter examine how these circumstances may be attended to in a new regulation of the mint.
Providing the subject be well understood, men of capacity will be found to execute this great operation according to justice, in spight of the most perplexing combinations.
Let me here recapitulate a few positions, which we may now have occasion to apply.
Some positions recapitulated.
I. The standard is debased by being fixed by statute to 113 grains of fine gold, not by the act of fixing it, but by the rising of the silver since that time, which the statute could not prevent: and gold being now the metal the least sought for, is become the standard of the pound sterling, and regulates its value so, that no silver coin, which is above the proportion of the gold, can remain in currency.
II. That according as the proportion of the metals shall diminish from what it is at present, the standard will still fall lower with respect to silver, but will remain fixed with respect to gold, at 113 grains.
III. That the true value of the pound sterling will always be found in the mean proportion between 113 grains fine gold, and 1638.5 grains fine silver.
IV. That if light guineas are allowed to pass current, the standard will fall below the 113 grains, and the price of gold bullion will rise above £3 17 10½ in the English market.
V. That upon calling in the light guineas afterwards, a hurt will be done to all those who have contracted during their currency.
621
CHAP. XIV. Circumstances to be attended to in a new Regulation of the British Coin.
I think I have sufficiently laid open all the principles which can influence a new regulation of the British standard, as far as a change may influence either the value of the money-unit, or the interests within the state.
As to the first, it has been said above, that if, by the future regulation, any change whatsoever shall be made upon the value of the money-unit, as it stands at present, the adopting any other whatsoever is a thing purely arbitrary.
The adopting the standard of Elizabeth has an air of justice.
To people who do not understand the nature of such operations, it may have an air of justice to support the unit at what is commonly believed to be the standard of Queen Elizabeth, to wit, at 1718.5 grains of fine silver.
Advantages of that of Mary I.
The regulating the standard of both silver and gold to 11⁄12 fine, and the pound sterling to four ounces standard silver, as it stood during the reign of Queen Mary I. has also its advantages, as Mr. Harris has observed. It makes the crown piece to weigh just one ounce, the shilling four penny weight, and the penny eight grains; consequently, were the new statute to bear, that the weight of the coin should regulate its currency upon certain occasions, the having the pieces adjusted to certain aliquot parts of weight, would make weighing easy, and would accustom the common people to judge of the value of money by its weight, and not by the stamp.
In that case, there might be a conveniency in striking the gold coins of the same weight with the silver; because the proportion 622of their values would then constantly be the same with the proportion of the metals. The gold crowns would be worth at present, 3l. 12s. 6d. the half crowns 1l. 16s. 3d. the gold shillings 14s. and 6d. and the half 7s. and 3d. This was antiently the practice in the Spanish mints.
I have, in one place, mentioned the pound troy as the best weight of all for the pound sterling; and so it would be, were the pound sterling, by its nature, susceptible of being fixed to any determinate quantity of the metals. But what I there suggested was only thrown out to shew, that the choice of any other value than the present is a matter of no consequence, when all interests within doors are properly taken care of, and when confusion and perplexity are avoided in making the alteration.
Conversions necessary in every case.
The interests within the state can, I think, be nowise perfectly protected but by permitting conversions of value from the old to the new standard, whatever it be, and by regulating the footing of such conversions by act of parliament, according to circumstances. The intention of this chapter is to point out some circumstances to which it would be proper to attend; and to propose a scheme of establishing a new standard, which might perhaps render conversions and regulations less necessary.
Schemes are here proposed, not to be adopted, but as a means of setting this important matter in different lights, and thereby, perhaps, of furnishing hints to some superior genius, who may form a plan liable to fewer inconveniences than any I can devise.
Every interest within the state to be examined.
For this purpose, I shall examine those interests which will chiefly merit the attention of government, when they form a regulation for the future acquitting of permanent contracts already entred into. Such as may be contracted afterwards will naturally follow the new standard.
Landed interest examined.
The landed interest is, no doubt, the most considerable in the nation. Let us therefore examine, in the first place, what regulations it may be proper to make, in order to do justice to this great 623class, with respect to the land-tax on one hand, and with respect to their lessees on the other.
The valuation of the lands of England was made many years ago, and reasonably ought to be supported at the real value of the pound sterling at that time, according to the principles already laid down. The general valuation, therefore, of the whole kingdom will rise according to this scheme. This will be considered as an injustice; and no doubt it would be so, if, for the future, the land tax be imposed as heretofore, without attending to this circumstance; but as that imposition is annual, as it is laid on by the landed interest itself, who compose the parliament, it is to be supposed that this great class will, at least, take care of their own interest.
Were the valuation of the lands to be stated according to the valuation of the pound sterling of 1718.7 grains of silver, which is commonly supposed to be the standard of Elizabeth, there would be no great injury done: this would raise the valuation only 5 per cent. and the land tax in proportion.
There is no class of inhabitants in all England so much at their ease, and so free from taxes, as the class of farmers. By living in the country, and by consuming the fruits of the earth without their suffering any alienation, they avoid the effect of many excises, which, by those who live in corporations, are felt upon many articles of their consumption, as well as on those which are immediately loaded with these impositions. For this reason it will not, perhaps, appear unreasonable, if the additional 5 per cent. on the land tax were thrown upon this class, and not upon the landlords.
With respect to leases, it may be observed, that we have gone upon the supposition that the pound sterling, in the year 1728, was worth 1718.7 grains of fine silver, and 113 grains of fine gold.
There would, I think, be no injustice done the lessees of all the lands in the kingdom, were their rents to be fixed at the mean proportion 624of these values. We have observed how the pound sterling has been gradually diminishing in its worth from that time, by the gradual rise of the silver. This mean proportion, therefore, will nearly answer to what the value of the pound sterling was seventeen years ago; that is to say, in 1743; supposing the rise of the silver to have been uniform: and seventeen years, I apprehend, is not much above the mean proportion of the time elapsed of all the leases entred into with the landed interest of England.
It may be farther alleged in favour of the landlords, that the gradual debasement of the standard has been more prejudicial to their interest in letting their lands, than to the farmers in disposing of the fruits of them. Proprietors cannot so easily raise their rents upon new leases, as farmers can raise the prices of their grain, according to the debasement of the value of the currency. We have shewn how the operations of trade communicate their influence to country markets; but as the cause of the rise of prices is not rightly understood by country people, and as it is commonly ascribed rather to accident than to any thing permanent, it is easy to perceive how such a circumstance must be prejudicial to the landed interest. These combinations are too complicated to fall under any calculation, and nothing but the wisdom and penetration of the legislature is capable of estimating them at their just value.
The pound sterling, thus regulated at the mean proportion of its worth, as it stands at present, and as it stood in 1728, may be realized in 1678.6 grains of fine silver, and 115.76 grains fine gold; which is 2.4 per cent. above the value of the present currency. No injury, therefore, would be done to lessees, and no unreasonable gain would accrue to the landed interest, in appointing conversions of all land rents at 2½ per cent. above the value of the present currency.
Without a thorough knowledgeknowledge of every circumstance relating to Great Britain, it is impossible to lay down any plan. It is sufficient, 625here, briefly to point out the principles upon which it must be regulated.
The interest of the public creditors examined.
The next interest to be considered is that of the nation’s creditors. The right regulation of their concerns will have a considerable influence in establishing public credit upon a solid basis, by making it appear to all the world, that no political operation upon the money of Great Britain can in any respect either benefit or prejudice the interest of those who lend their money upon the faith of the nation. The regulating also the interest of so great a body, will serve as a rule for all creditors who are in the same circumstances, and will, upon other accounts, be productive of greater advantages to the nation in time coming, as we shall presently make appear.
In 1749, a new regulation was made with the public creditors, when the interest of the whole redeemable national debt was reduced to 3 per cent. This circumstance infinitely facilitates the matter, with respect to this class, since, by this innovation of all former contracts, the whole national debt may be considered as contracted at, or posterior to the 25th of December 1749.
Were the state by any arbitrary operation upon money (which every reformation must be) to diminish the value of the pound sterling, in which the parliament at that time, bound the nation to acquit those capitals and the interest upon them, would not all Europe say, that the British parliament had defrauded their creditors. If therefore the operation proposed to be performed should have a contrary tendency, to wit, to augment the value of the pound sterling, with which the parliament at that time bound the nation to acquit those capitals and interests, must not all Europe also agree, that the British parliament had defrauded the nation?
This convention with the antient creditors of the state, who, in consequence of the debasement of the standard, might have justly claimed an indemnification for the loss upon their capitals, lent at a time when the pound sterling was at the value of the heavy silver, 626removes all cause of complaint from that quarter. There was in the year 1749, an innovation in all their contracts, and they are now to be considered as creditors only from the 25th of December of that year.
I shall now give a sketch of a regulation which may be made, not only for the national creditors at present, but in all times to come, which, by setting money upon a solid footing, may be an advantage both to the nation, to the creditors, and to credit in general.
Let the value of the pound sterling be inquired into during one year preceding and one posterior to the transaction of the month of December 1749. The great sums borrowed and paid back by the nation, during that period, will furnish data sufficient for that calculation. Let this value of the pound be specified in troy grains of fine silver and fine gold bullion, without mentioning any denomination of money according to the exact proportion of the metals at that time. And let this pound be called the pound of national credit.
This first operation being determined, let it be enacted, that the pound sterling, by which the state is to borrow for the future, and that in which the creditors are to be paid, shall be the exact mean proportion between the quantities of gold and silver above specified, according to the actual proportion of the metals at the time such payments shall be made; or that the sums shall be borrowed or acquitted, one half in gold and one half in silver, at the respective requisitions of the creditors or of the state, when borrowing. All debts contracted posterior to 1749, may be made liable to conversions.
The consequence of this regulation will be the insensible establishment of a bank-money, the usefulness of which has been explained. Nothing would be more difficult to establish by a positive institutioninstitution than such an invariable measure, and nothing will be found so easy as to let it establish itself by its own advantages. This bank-money will be liable to much fewer inconveniences than 627that of Amsterdam. There the persons transacting must be upon the spot, here, the sterling currency may, every quarter of a year, be adjusted by the exchequer to this invariable standard, for the benefit of all debtors and creditors, who incline to profit of the stability of this measure of value.
This scheme is liable to no inconvenience from the variation of the metals, let them be ever so frequent, or hard to be determined; because upon every occasion where there is the smallest doubt as to the actual proportion, the option competent to creditors to be paid half in silver and half in gold, will remove.
Such a regulation will also have this good effect, that it will give the nation more just ideas of the nature of money, and consequently of the influence it ought to have upon prices.
If the value of the pound sterling shall be found to have been by accident less in December 1749, than it is at present; or if at present (upon the account of the war, and the exportation of the more weighty coin) the currency be found below what has commonly been since 1749, in justice to the creditors, and to prevent all complaints, the nation may grant them the mean proportion of the value of the pound sterling from 1749 to 1760; or any other which may to parliament appear reasonable.
This regulation must appear equitable in the eyes of all Europe, and the strongest proof of it will be, that it will not produce the smallest effect prejudicial to the interest of the foreign creditors. The course of exchange with regard to them will stand precisely as before.
A Dutch, French, or German creditor, will receive the same value for his interest in the English stocks as heretofore. This must silence all clamours at home, being the most convincing proof, that the new regulation of the coin will have made no alteration upon the real value of any man’s property, let him be debtor or creditor.
The interest of every other denomination of creditors, whose contracts are of a fresh date, may be regulated upon the same principles. 628But where debts are of an old standing, justice demands, that attention be had to the value of money at the time of contracting. Nothing but the stability of the English coin, when compared with that of other nations, can make such a proposal appear extraordinary. Nothing is better known in France than this stipulation added to obligations, argent au cours de ce jour, that is to say, that the sum shall be repaid in coin of the same intrinsic value with what has been lent. Why should such a clause be thought reasonable for guarding people against arbitrary operations upon the numerary value of the coin, and not be found just upon every occasion where the numerary value of it is found to be changed, let the cause be what it will.
Interest of trade examined.
The next interest we shall examine is that of trade, when men have attained the age of twenty one, they have no more occasion for guardians. This may be applied to traders: they can parry with their pen, every inconvenience which may result to other people from the changes upon money, provided only the laws permit them to do themselves justice with respect to their engagements. This class demands no more than a right to convert all reciprocal obligations, into denominations of coin of the same intrinsic value with those they have contracted in.
The next interest is that of buyers and sellers; that is, of manufacturers, with regard to consumers, and of servants, with respect to those who hire their personal service.
Interest of buyers and sellers examined.
The interest of this class requires a most particular attention. They must, literally speaking, be put to school, and taught the first principles of their trade, which is buying and selling. They must learn to judge of price by the grains of silver and gold they receive. They are children of a mercantile mother, however warlike the father’s disposition may be. If it be the interest of the state that their bodies be rendred robust and active, it is no less the interest of the state, that their minds be instructed in the first principle of the trade they exercise.
629For this purpose, tables of conversion from the old standard to the new must be made, and ordered to be put up in every market, in every shop. All duties, all excises, must be converted in the same manner. Uniformity must be made to appear every where. The smallest deviation from this will be a stumbling block to the multitude.
Not only the interest of the individuals of the class we are at present considering, demands the nation’s care and attention in this particular; but the prosperity of trade and the well being of the nation, are also deeply interested in the execution.
The whole delicacy of the intricate combinations of commerce, depends upon a just and equable vibration of prices, according as circumstances demand it. The more therefore the industrious classes are instructed in the principles which influence prices, the more easily will the machine move. A workman then learns to sink his price without regret, and can raise it without avidity. When principles are not understood, prices cannot gently fall, they must be pulled down; and merchants dare not suffer them to rise, for fear of abuse, even although the perfection of an infant manufacture should require it.
Interest of the bank examined.
The last interest I shall examine is that of the bank of England, which naturally must regulate that of every other.
Had this great company followed the example of other banks, and established a bank-money of an invariable standard, as the measure of all their debts and credits, they would not have been liable to any inconvenience upon a variation of the standard.
I am not sufficiently versed in English affairs to be able to sift out every reason which that company may have had to neglect a thing which other companies have found of such importance.
An attention to the circumstances of the time of its institution, and to others relative to the principles of English government with regard to money, may help us to guess at what other people, who have access to be informed, may discover with certainty.
630The bank of England was projected about the year 1694, at a time when the current money of the nation was in the greatest disorder, and government in the greatest distress, both for money and for credit. Commerce was then at a very low ebb, and the only, or at least the most profitable trade of any, was jobbing in coin, and carrying backwards and forwards the precious metals from Holland to England. Merchants profited also greatly from the effects which the utter disorder of the coin produced upon the price of merchandize.
At such a juncture the resolution was taken to make a new coinage, and upon the prospect of this, a company was found, who, for an exclusive charter to hold a bank for 13 years, willingly lent the government upwards of a million sterling at 8 per cent. (in light money I suppose) with a prospect of being repaid both interest and capital in heavy. This was not all: part of the money lent, was to be applied for the establishment of the bank, and no less than 4000 pounds a year was allowed to the company, above the full interest, for defraying the charge of management.
Under such circumstances the introduction of bank-money was very superfluous, and would have been very impolitic. That invention is calculated against the raising of the standard; but here the bank profited of that rise in its quality of creditor for the money lent, and took care not to commence debtor by circulating their paper, until the effect of the new regulation took place in 1695. That is after the general recoinage of all the clipped silver.
From that time till now, the bank of England has been the basis of the nation’s credit; and with great reason, has been constantly under the most intimate protection of every minister.
The value of the pound sterling, as we have seen, has been declining ever since the year 1601, the standard being fixed to silver during all that century, while the gold was constantly rising. No sooner had the proportion taken another turn, and silver begun to rise, than the government of England threw the standard, virtually, 631upon the gold, by regulating the value of the guineas at the exact proportion of the market, whether at the instigation of the bank, or not, I shall not pretend to determine. By these operations, however, the company has constantly been a gainer (in its quality of debtor) upon all the paper in circulation; and therefore has lost nothing by not having established a bank-money.
The interest of this great company being established upon the principles we have endeavoured to explain, it is very evident that the government of England never will take any step in the reformation of the coin, which in its consequences can prove hurtful to the bank. Such a step would be contrary both to justice and to common sense. To make a regulation which, by raising the standard, will prove beneficial to the public creditors, to the prejudice of the bank (which I may call the public debtor) would be an operation upon public credit, like that of a person who is at great pains to support his house by props upon all sides, and who at the same time blows up the foundation of it with gun-powder.
We may therefore conclude, that with regard to the bank of England, as well as every other private banker, the notes which are constantly payable upon demand, must be made liable to a conversion at the actual value of the pound sterling at the time of the new regulation.
That the bank will gain by this, is very certain; but the circulation of their notes is so swift that it would be absurd to allow to the then possessors of them, that indemnification, which naturally should be shared by all those through whose hands they have passed, in proportion to the debasement of the standard during the time of their respective possession.
Having now shortly examined the several interests within the state, according to that combination of circumstances, which, with lame information, I can form to myself, I must again observe that other circumstances, to which I am a stranger, will nevertheless operate their effects. These must be carefully examined, and 632strictly attended to, before the proper regulation can be established.
My reasoning has proceeded entirely upon the supposition that the reformation of the standard implies a change upon the intrinsic value of the unit of money of accompt, and that strict justice is to be done to every one, so as to render the change neither profitable or hurtful to any, but such as have been unjustly gainers or losers by the former disorder in the coin.
Inconveniences attending all innovations.
No quality in a statesman is more amiable or more admirable, than justice and impartiality in every step which can affect the complicated interests of the people he governs. Such however is the nature of human society, that the inconveniences resulting from every innovation, do frequently more than overbalance all the advantages which are obtained from the closest attention to material and distributive justice upon such occasions. For this reason, innovations are to be avoided as much as possible, especially when by their nature they must be sudden.
Argument for preserving the standard at the present value.
Were the pound sterling preserved at its present value, it would, no doubt, be a plain adulteration of the former standard, and yet I do not know if it would be a more unpopular measure than another which might restore it, and at the same time do justice to every interest within the state; because I apprehend that the greatest hurt done to most people, with regard to their pecuniary interest, consists in the change. Every one feels a sudden change, but those only who reflect and who combine, perceive the consequences of a gradual one.
That every change must either hurt the bank or the public creditors.
Besides these considerations which are in common to all states, the government of Great Britain has one peculiar to itself. The interest of the bank, and that of the creditors, are diametrically opposite: every thing which raises the standard hurts the bank, every thing which can sink it, hurts the creditors: and upon the right management of the one and the other, depends the solidity of public credit. For these reasons I am apt to believe, that, without the 633most certain prospect of conducting a restitution of the standard to the general advantage, as well as approbation of the nation, no minister will ever undertake so dangerous an operation.
A more easy method of making a change upon the standard.
I shall now propose an expedient which may remove at least some of the inconveniences which would result from so extensive an undertaking as that of regulating the respective interests in Great Britain by a positive law, upon a change in the value of their money of accompt.
Suppose then, that before any change is made in the coin, government should enter into a transaction with the public creditors, and ascertain a permanent value for the pound sterling for the future, specified in a determined proportion of the fine metals in common bullion, without any regard to money, of accompt, or to any coin whatever.
This preliminary step being taken, let the intended alteration of the standard be proclaimed a certain time before it is to commence. Let the nature of the change be clearly explained, and let all such as are engaged in contracts which are dissolvable at will upon the prestations stipulated, be acquitted between the parties, or innovated as they shall think proper, with certification, that posterior to a certain day, the stipulations formerly entred into, shall be binding according to the denominations of the money of accompt in the new standard.
As to permanent contracts, which cannot at once be fulfilled and dissolved, such as leases, the parliament may either prescribe the methods and terms of conversion; or a liberty may be given to the parties to annul the contract, upon the debtor’s refusing to perform his agreement according to the new standard. Contracts, on the other hand, might remain stable, with respect to creditors who would be satisfied with payments made on the footing of the old standard. If the rise intended should not be very considerable, no great injustice can follow such a regulation.
634Annuities are now thoroughly understood, and the value of them is brought to so nice a calculation, that nothing will be easier than to regulate these upon the footing of the value paid for them, or of the subject affected by them. If by the regulation land-rents are made to rise in denomination, the annuities charged upon them, ought to rise in proportion; if in intrinsic value, the annuity should remain as it was.
CHAP. XV. Regulations which the Principles of this Inquiry point out as expedient to be made by a new Statute for regulating the British Coin.
Let us now examine what regulations it may be proper to make by a new statute concerning the coin of Great Britain, in order to preserve always the same exact value of the pound sterling realized in gold and in silver, in spite of all the incapacities inherent in the metals to perform the functions of an invariable scale or measure of value.
1. Regulation, as to the standard.
I shall not pretend to determine the precise standard which government may prefer as the best to be chosen for the value of a pound sterling in all future times; but let it be what it will, the first point is to determine the exact number of grains of fine gold and fine silver which are to compose it, according to the then proportion of the metals in the London market.
2. As to the weight.
2. To determine the proportion of these metals with the pound troy, and in regard that the standard of gold and silver is different, let the mint price of both metals be regulated according to the pound troy fine.
3. Mint price.
3. To fix the mint price within certain limits: that is to say, to leave to the King and Council, by proclamation, to carry the mint 635price of bullion up to the value of the coin, as is the present regulation, or to sink it to per cent. below that price, according as government shall incline to impose a duty upon coinage.
4. Denominations.
4. To order that silver and gold coin shall be struck of such denominations as the King shall think fit to appoint; in which the proportion of the metals above determined, shall be constantly observed through every denomination of the coin, until necessity shall make a new general coinage unavoidable.
5. Marking the weight on the coin.
5. To have the number of grains of the fine metal in every piece marked upon the exergue, or upon the legend of the coin, in place of some initial letters of titles, which not one person in a thousand can decypher; and to make the coin of as compact a form as possible, diminishing the surface of it as much as is consistent with beauty.
6. Liberty to stipulate payment in gold or silver.
6. That it shall be lawful for all contracting parties to stipulate their payments either in gold or silver coin, or to leave the option of the species to one of the parties.
7. Creditors may demand payment half in gold and half in silver.
7. That where no particular stipulation is made, creditors shall have power to demand payment, half in one species, half in the other; and when the sum cannot fall equally into gold and silver coins, the fractions to be paid in silver.
8. Regulations as to sale.
8. That in buying and selling, when no particular species has been stipulated, and when no act in writing has intervened, the option of the species shall be competent to the buyer.
9. Ditto, as to payments to and from banks, &c.
9. That all sums paid or received by the King’s receivers, or by bankers, shall be delivered by weight, if demanded.
10. All coin to be of full weight when paid away.
10. That all money which shall be found under the legal weight, from whatever cause it may proceed, may be rejected in every payment whatsoever; or if offered in payment of a debt above a certain sum, may be taken according to its weight, at the then mint price, in the option of the creditor.
11. Liberty to melt and export coin, but death to clip or wash.
11. That no penalty shall be incurred by those who melt down or export the nation’s coin; but that washing, clipping, or diminishing 636the weight of any part of it shall be deemed felony, as much as any other theft, if the person so degrading the coin shall afterwards make it circulate for lawful money.
To prevent the inconveniences proceeding from the variation in the proportion between the metals, it may be provided,
12. Rule for changing the mint price of the metals.
12. That upon every variation of proportion in the market price of the metals, the price of both shall be changed, according to the following rule.
Let the price of the pound troy fine gold in the coin be called G.
Let the price of ditto in the silver be called S.
Let the new proportion between the market price of the metals be called P.
Then state this formula:
G/2P + S/2 = to a pound troy fine silver, in sterling currency.
S/2 × P + G/2 = to a pound troy fine gold, in sterling currency.
This will be a rule for the mint, to keep the price of the metals constantly at par with the price of the market; and coinage may be imposed as has been described, by fixing the mint price of them at a certain rate below the value of the fine metals in the coin.
13. When to change the mint price.
13. As long as the variation of the market price of the metals shall not carry the price of the rising metal so high as the advanced price of the coin above the bullion, no alteration need be made on the denomination of either species.
14. Rule for changing the denomination of the coins.
14. So soon as the variation of the market price of the metals shall give a value to the rising species, above the difference between the coin and the bullion; then the King shall alter the denominations of all the coin, silver and gold, adding to the coins of the rising metal exactly what is taken from those of the other. An example will make this plain.
Let us suppose that the coinage has been made according to the proportion of 14.5 to 1; that 20 shillings, or 4 crown pieces, shall 637contain, in fine silver, 14.5 times as many grains as the guinea, or the gold pound, shall contain grains of fine gold. Let the new proportion of the metals be supposed to be 14 to 1. In that case, the 20 shillings, or the 4 crowns, will contain 1⁄29 more value than the guinea. Now since there is no question of making a new general coinage upon every variation, in order to adjust the proportion of the metals in the weight of the coins, that proportion must be adjusted by changing their respective denominations according to this formula.
Let the 20 shillings, or 4 crowns, in coin, be called S. Let the guinea be called G. Let the difference between the old proportion and the new, which is 1⁄29, be called P. Then say,
S - P/2 = a pound sterling, and G + P/2 = a pound sterling.
By this it appears that all the silver coin must be raised in its denomination 1⁄58, and all the gold coin must be lowered in its denomination 1⁄58; yet still S + G, will be equal to two pounds sterling, as before, whether they be considered according to the old, or according to the new denominations.
But it may be observed, that the imposition of coinage rendering the value of the coin greater than the value of the bullion, that circumstance gives a certain latitude in fixing the new denominations of the coin, so as to avoid minute fractions. For providing the deviation from the exact proportion shall fall within the advanced price of the coin, no advantage can be taken by melting down one species preferably to another; since, in either case, the loss incurred by melting the coin must be greater than the profit made upon selling the bullion. The mint price of the metals, however, may be fixed exactly, that is, within the value of a farthing upon a pound of fine silver or gold. This is easily reckoned at the mint; although upon every piece in common circulation the fractions of farthings would be inconvenient.
15 How contracts are to be fulfilled, after a change in the denominations has taken place.
15. That notwithstanding of the temporary variations made upon the denomination of the gold and silver coins, all contracts 638formerlyformerly entred into, and all stipulations in pounds, shillings, and pence, may continue to be acquitted according to the old denominations of the coins, paying one half in gold, and one half in silver; unless in the case where a particular species has been stipulated; in which case, the sums must be paid according to the new regulation made upon the denomination of that species, to the end that neither profit or loss may result to any of the parties.
16. The weight of the several coins never to be changed, except upon a general recoinage of one denomination at least.
16. That notwithstanding the alterations on the mint price of the metals, and in the denomination of the coins, no change shall be made upon the weight of the particular pieces of the latter, except in the case of a general recoinage of one denomination at least: that is to say, the mint must not coin new guineas, crowns, &c. of a different weight from those already in currency, although by so doing the fractions might be avoided. This would occasion confusion, and the remedy would cease to be of any use upon a new change in the proportion of the metals. But it may be found convenient, for removing the small fractions in shillings and sixpences, to recoin such denominations all together, and to put them to their integer numbers, of twelve, and of six pence, without changing in any respect their proportion of value to all other denominations of the coin: this will be no great expence, when the bulk of the silver coin is put into 5 shilling pieces.
How this will preserve the same value to the pound sterling at all times, and how fractions in the denominations of coin may be avoided.
By this method of changing the denominations of the coin, there never can result any alteration in the value of the pound sterling: and although fractions of value may now and then be introduced, in order to prevent the abuses to which the coin would otherwise be exposed, by the artifice of those who melt it down, yet still the inconvenience of such fractions may be avoided in paying, according to the old denominations, in both species, by equal parts. This will also prove demonstratively that no change is thereby made in the true value of the national unit of money.
17. Small coins to be current only for twenty years, and larger coins for forty years or more.
17. That it be ordered that shillings and sixpences shall only be current for twenty years, and all other coins, both gold and 639silver, for forty years, or more. For ascertaining which term, there may be marked, upon the exergue of the coin, the last year of their currency, in place of the date of their fabrication. This term elapsed, or the date effaced, that they shall have no more currency whatsoever; and when offered in payment, may be received as bullion at the actual price of the mint, or refused, at the option of the creditor.
18. All foreign coin to pass for bullion only.
18. That no foreign coin shall have any legal currency, except as bullion at the mint price.
By these or the like regulations may be prevented, 1mo, The melting or exporting of the coin in general. 2do, The melting or exporting one species, in order to sell it as bullion, at an advanced price. |Consequences of these regulations.|3tio, The profit in acquitting obligations preferably in one species to another. 4to, The degradation of the standard, by the wearing of the coin, or by a change in the proportion between the metals. 5to, The circulation of the coin below the legal weight. 6to, The profit that other nations reap by paying their debts more cheaply to Great Britain than Great Britain can pay hers to them.
And the great advantage of it is, that it is an uniform plan, and may serve as a perpetual regulation, compatible with all kinds of denominations of coins, variations in the proportion of the metals, and with the imposition of a duty upon coinage; or with the preserving it free; and farther, that it may in time be adopted by other nations, who will find the advantage of having their money of accompt preserved perpetually at the same value, with respect to the denominations of all foreign money of accompt established on the same principles.
A TABLE OF COINS,
Shewing the Quantity of Fine Metal contained in them.
The number of grains of fine metal in every coin is sought for in the regulations of the mint of the country where it is coined, and is expressed in the grains in use in that mint: from that weight it is converted into those of other countries, according to the following proportions:
3840 Troy-grains, 4676.35 Paris-grains, 5192.8 Holland-aces or grains, and 4649.06 Colonia-grains, are supposed to be equal weights; and the coins in the table are converted according to those proportions.
Table of Coins, reduced to Grains of fine Metal, according to the Troy, Paris, Colonia, and Holland-weights.
Gold Coins.
Troy. Paris. Colonia. Holland.
English Coins.
1 A Guinea by statute — 144.46 143.65 160.45
2 A Crown by statute — — — —
3 A Shilling by statute — — — —
4 A Silver Pound sterling by statute 1601
5 A Gold Pound sterling by statute 1728 113. 137.61 136.8 152.8
6 A Silver Pound sterling in currency = 20⁄65 lib. troy — — — —
7 A Silver Pound sterl. at the proportion of gold to silver as 1 to 14½ 113. 137.61 136.8 152.8
8 A Gold Pound sterling at the same proportion of 1 to 14½ 118.4 144.18 143.34 160.11
9 A Pound sterling at the mean proportion in gold and in silver 115.769 140.98 140.16 156.55
10 A Shilling current = 1⁄65 of a pound troy — — — —
11 A Guinea in silver, or 21 shillings standard weight — — — —
12 A Guinea at the proportion of 1 to 14½, worth in silver — — — —
13 A Pound troy, or 12 ounces English weight 5760. 7019.2 6973.5 7789.2
French Coins.
1 A Louis d’or 113.27 137.94 137.13 153.17
2 A Crown of six livres — — — —
3 A Crown of three ditto — — — —
4 A Livre — — — —
5 A Louis d’or, or 24 livres in silver — — — —
6 A Marc of Paris weight, fine gold or silver 3783.87 4608. 4581.1 5116.9
7 A Marc of gold coin effective weight, in fine 3398.3 4138.5 4114.3 4593.4
8 A Marc of silver coin effective weight, in fine — — — —
German Coins.
1 A Carolin legal weight 115.45 140.6 139.78 156.12
2 A Ducat of the Empire ditto 52.8 64.37 64. 71.48
3 A Florin of Convention — — — —
4 A Dollar of Convention — — — —
5 A Dollar of Exchange, the Carolin = 9 flor. 42 kreutzers 17.85 21.74 21.615 24.14
6 A Florin current = 1⁄11 of a Carolin 10.54 12.84 12.77 14.26
7 A Carolin in Silver at the proportion of 1 to 14½ — — — —
Dutch Coins.
1 A Dutch Ducat 51.76 63. 62.67 70.
2 A Florin in silver — — — —
Silver Coins.
Troy. Paris. Colonia. Holland.
English Coins.
1 A Guinea by statute — — — —
2 A Crown by statute 429.68 523.2 520.2 581.
3 A Shilling by statute 85.935 104.65 104. 116.2
4 A Silver Pound sterling by statute 1601 1718.7 2093. 2080.8 2324.1
5 A Gold Pound sterling by statute 1728 — — — —
6 A Silver Pound sterling in currency = 20⁄65 lib. troy 1639.38 1996.4 1984.7 2216.
7 A Silver Pound sterl. at the proportion of gold to silver as 1 to 14½ 1638.5 1995.3 1983.7 2215.7
8 A Gold Pound sterling at the same proportion of 1 to 14½ 1718.7 2093. 2080.8 2324.1
9 A Pound sterling at the mean proportion in gold and in silver 1078.6 2041.2 2032.2 2269.9
10 A Shilling current = 1⁄65 of a pound troy 81.961 99.8 99. 110.82
11 A Guinea in silver, or 21 shillings standard weight 1804.6 2197.6 2184.8 2440.3
12 A Guinea at the proportion of 1 to 14½, worth in silver 1720.4 2095.1 2082.8 2326.4
13 A Pound troy, or 12 ounces English weight — — — —
French Coins.
1 A Louis d’or — — — —
2 A Crown of six livres 409.94 499.22 496.3 554.3
3 A Crown of three ditto 204.97 249.61 248.15 277.1
4 A Livre 68.34 83.23 82.74 92.42
5 A Louis d’or, or 24 livres in silver 1639.7 1996.9 1985.2 2217.4
6 A Marc of Paris weight, fine gold or silver 3783.87 4608. 4581.1 5116.9
7 A Marc of gold coin effective weight, in fine — — — —
8 A Marc of silver coin effective weight, in fine 3402.3 4143.4 4119.2 4600.9
German Coins.
1 A Carolin legal weight — — — —
2 A Ducat of the Empire ditto — — — —
3 A Florin of Convention 179.73 218.87 217.6 243.
4 A Dollar of Convention 269.59 328.31 326.4 364.5
5 A Dollar of Exchange, the Carolin = 9 flor. 42 kreutzers — — — —
6 A Florin current = 1⁄11 of a Carolin — — — —
7 A Carolin in Silver at the proportion of 1 to 14½ 1674. 2038.6 2026.8 2263.8
Dutch Coins.
1 A Dutch Ducat — — — —
2 A Florin in silver 148. 180.3 179·2 200.21
[The Binder is desired to place this TABLE at the End of Vol. I.
and not to cut off the Margin, but to fold it.]
END OF THE FIRST VOLUME.
Transcriber’s Note
Beginning on p. #362, there is an enumerated outline, summarized as having four parts (1), (2), (3) and (4). The indicated sections subsequently appear, inconsistently, as ‘1’ (arguably ‘I’), ‘II’, ‘3tio’ and ‘4to’. These have been retained, adopting ‘I’ for the first section.
A large table, appearing between pages 638 and 639, was, according to a bracketed note included in the text, to be bound at the end of Volume I. That wish has been granted. The Table itself has been redesigned to better display in this medium.
The table of contents mistakenly implies that two sections (‘The question in dispute is not understood’, and the section following) appear on p. 606. They appear a page later, on p.607. This has been corrected.
Spelling, generally, is not ‘corrected’, given the age of the text, unless there is a clear preponderance of an alternate more standard spelling. ‘Knowledge’ appears three times as ‘knowlege’, but more than twenty times with the ‘d’. Verbs ending with -er (‘enter’, ‘render’) are frequently spelled without the ‘e’ when used in other tenses, as ‘entred’, ‘rendring’, etc.
Diacritical marks in non-English languages are frequently missing, and have not been added.
On p. 388, a parenthetical remark beginning ‘(by throwing a part of the wealth...’ is not closed, and it is not obvious where the author intended it to close. It is left to the reader to close it.
Errors deemed most likely to be the printer’s have been corrected, and are noted here. The references are to the page and line in the original. The following issues should be noted, along with the resolutions.
P. 569 was mispaginated as p. 561, which has no impact on this version.
ix.12 Men of parts and knowle[d]ge Inserted.
xvii.4 a perfect knowle[d]ge of facts Inserted.
22.24 an entire depend[a/e]nce Replaced.
78.4 seven times that number, or than 201[,]887 Inserted.
137.17 no difference as to agricultu[t/r]e Replaced.
296.20 to enable it to undersel[l] Added.
301.5 after travelling over [eh/the] regions Most likely.
307.7 that the wor[l]d luxury Removed.
331.6 drain off the nation[’]s wealth Inserted.
368.30 as saleable as [houshold] furniture sic
506.7 and accounts bal[l]anced on both sides Removed.
518.26 lead me to inqu[i]re Inserted.
592.11 who is possessed of a sal[l]ary Removed.
624.31 Without a thorough knowle[d]ge Inserted.
635.2 or to sink it to per cent. below that price Missing.