PART I. THE PRINCIPLES OF MONEY DEDUCED AND APPLIED TO THE COIN OF GREAT BRITAIN.

INTRODUCTION.

In an inquiry like this, where, at almost every step, we find it branching out into new relations, which lead to different chains of consequences, it is of use to have recourse to every expedient for connecting the whole together.

For this purpose, an introductory chapter at the beginning of a new subject seems necessary.

The reader will have observed that the last chapters of the preceding book (those I mean which treat of the vibration of the balance of wealth and of circulation) have been writ with a view to introduce the subject of money.

524I thought it better to anticipate some principles by connecting them directly with those of trade, than to introduce this part of my subject as a new treatise.

The assistance our memory receives from such a distribution must compensate the inconvenience of a few repetitions.

I have, in the last chapters of the second book here referred to, had occasion to mention, and slightly to point out some essential differences between coin and paper money. I have shewn the great usefulness of the latter in supporting circulation.

Although, in giving the definition of paper money in the twenty-sixth chapter of the second book, I mentioned credit as being a term synonimous with it; yet this was done only for the sake of simplifying our ideas: one of the best expedients for casting light upon an intricate subject. It is now requisite to point out the difference between them.

Symbolical or paper money is but a species of credit: it is no more than the measure by which credit is reckoned. Credit is the basis of all contracts between men: few can be so simultaneous as not to leave some performance, or prestation, as the civilians call it, on one side or other, at least for a short time, in suspence. He therefore who fulfils his part, gives credit to the party who only promises to fulfil, and according to the variety of contracts, the nature of the prestations, or performances, therein stipulated, and the security given for fulfilling what is not performed, credit assumes different forms, and communicates to us different ideas. Paper credit or symbolical money, on the other hand, is more simple. It is an obligation to pay the intrinsic value of certain denominations of money contained in the paper. Here then lies the difference between a payment made in intrinsic value, and another made in paper. He who pays in intrinsic value, puts the person to whom he pays in the real possession of what he owed; and this done, there is no more place for credit. He who pays in paper puts his creditor only in possession of another person’s obligation to 525make that value good to him: here credit is necessary even after the payment is made.

Some intrinsic value or other, therefore, must be found out to form the basis of paper money: for without that it is impossible to fix any determinate standard-worth for the denominations contained in the paper.

I have found no branch of my subject so difficult to reduce to principles, as the doctrine of money: this difficulty, however, has not deterred me from undertaking it. It is of great consequence to a statesman to understand it thoroughly; and it is of the last importance to trade and credit, that the money of a nation be kept stable and invariable.

To circumscribe combinations as much as the nature of this subject will admit, I have in the first part adhered to a deduction of general principles, taking by way of illustration, as I go along, the present state of the British currency.

In the second part, I shall examine the effects of turning coin into a manufacture, by superadding the price of fabrication to its value; and point out the consequences of this additional combination upon exchange, and the interest of trading nations.

526

CHAP. I. Of Money of Accompt.

What money is.

I. The metals have so long performed the use of money, that money and coin are become almost synonimous, although in their principles they be quite different.

The first thing therefore to be done in treating of money, is, to separate two ideas, which, by being blended together, have very greatly contributed to throw a cloud upon the whole subject.

Definitions.

Money, which I call of account, is no more than an arbitrary scale of equal parts, invented for measuring the respective value of things vendible.

Money of account, therefore, is quite a different thing from money-coin, which is price, and might exist, although there was no such thing in the world as any substance which could become an adequate and proportional equivalent, for every commodity.

The subject therefore of the first chapter shall be, 1. To point out the principles which determine the value of things; 2. The use of an invariable scale to measure their value; 3. How the invention of money of account is exactly adapted for measuring the value on the one hand, and measuring the price on the other; and 4. How it preserves itself invariable amidst all the fluctuations, not only of the value of things themselves, but of the metals which are commonly considered as the measures of their value.

Money, a scale for measuring value.

1mo. Money of account, which I shall here call money, performs the same office with regard to the value of things, that degrees, minutes, seconds, &c. do with regard to angles, or as scales do to geographical maps, or to plans of any kind.

In all these inventions, there is constantly some denomination taken for the unit.

527In angles, it is the degree; in geography, it is the mile, or league; in plans, the foot, yard, or toise; in money, it is the pound, livre, florin, &c.

The degree has no determinate length, so neither has that part of the scale upon plans which marks the unit: the usefulness of all those inventions being solely confined to the marking of proportion.

Just so the unit in money can have no invariable determinate proportion to any part of value, that is to say, it cannot be fixed to any particular quantity of gold, silver, or any other commodity whatsoever.

The unit once fixed, we can by multiplying it, ascend to the greatest value; and when we descend below the subaltern divisions of this unit, we have the assistance of measures and weights, which render the operation easy. Thus in England, where a farthing is the lowest denomination of money, the grains of wheat are bought by measure, and cherries by the pound.

Principles which determine the value of things.

II. The value of things depend upon the general combination of many circumstances, which however may be reduced to four principal heads:

1mo. The abundance of the things to be valued.

2do. The demand which mankind make for them.

3tio. The competition between the demanders; and

4to. The extent of the faculties of the demanders. The function therefore of money is to publish and make known the value of things, as it is regulated by the combination of all these circumstances.

Prices not regulated by the quantity of money,

This proposition I think is self-evident, and it is susceptible of a thousand proofs; I shall only mention one.

Were there a determinate proportion between certain quantities of gold and silver, and certain quantities of other things vendible, I do not see how prices could vary while the proportion of quantity to quantity between metals and things remained the same.

528But if the desires of men to possess any particular commodity and the competition between them to acquire it be capable to raise a thing, formerly of the lowest value, to any height, and if the absence of these circumstances can debase a thing formerly of great value, to the lowest rate, is it not evident, that the price, that is, the gold and silver people possess (even allowing that it may upon many occasions promote a competition among them) can never be the measure of their fancies or caprices, which are what constitutes the value of things.

Substances are valued either according to their weight, their superficial measure, the measure of their bulk, or by the piece. These may be considered as the four classes of vendible corporeal commodities.

All the species of each class according to their different qualities of goodness, may be reduced to a proportion of value. A pound of gold, of lead, of different grains, of different butters, or of what you will, valued by the pound, may at any precise time, be reduced to a scale of proportional values, which the wants, demands, competition and faculties of buyers and sellers, keep in a perpetual fluctuation.

As far therefore, as an increase of the metals and coin shall produce an increase of demand, and a greater competition than before, so far will that circumstance influence the rise of prices, and no farther.

But by the relative proportion between commodities and the wants of mankind.

The value of commodities therefore, depending upon a general combination of circumstances relative to themselves and to the fancies of men, their value ought to be considered as changing only with respect to one another; consequently, any thing which troubles or perplexes the ascertaining those changes of proportion by the means of a general, determinate and invariable scale, must be hurtful to trade and a clog upon alienation. This trouble and perplexity is the infallible consequence of every vice in the policy of money or of coin.

Necessity of distinguishing between money and price.

529III. It may here be demanded what necessity there is to have recourse to such a metaphysical deduction upon so familiar a subject. Do we not see every where, that things are valued by silver and gold coin, and that there is no occasion to reject them at this time, in order to introduce an imaginary scale.

I answer, that nothing but necessity obliges me to introduce this imaginary scale, and that not with any intention to reject the service of the metals in performing the office of a measure, but as an assistance to our understanding for comprehending the doctrine of money, and for rightly distinguishing the ideas which are daily proposed to us by those who write and speak concerning its theory.

Could gold and silver coin exactly perform the office of money, it would be absurd to introduce any other measure of value; but there are moral and physical incapacities in the metals, which prevent their performing the function of a scale: and the common opinion being, that there are no such incapacities, makes it necessary to expose them in the clearest light, by shewing the exact difference between price (that is coin) considered as a measure, and price considered as an equivalent for value.

The inconsistencies which follow, when we depend blindly upon the infallibility of the metal’s discharging this double office, tend to confound the whole system of our ideas concerning those matters.

The moral as well as physical incapacities inherent in the metals, which prevent their performing exactly the office of money, shall be afterwards pointed out. I must at present explain a little farther the nature of this ideal money.

Money of account what and how contrived.

IV. Money, strictly and philosophically speaking, is, as has been said, an ideal scale of equal parts. If it be demanded what ought to be the standard value of one part? I answer, by putting another question; What is the standard length of a degree, a minute, a second?

It has none, and there is no necessity of its having any other than what by convention mankind think fit to give it. But so soon 530as one part becomes determined, by the nature of a scale, all the rest must follow in proportion.

The first step being perfectly optional, people may adjust one or more of those parts to a precise quantity of the precious metals; and so soon as this is done, and that money becomes realized, as it were, in gold and silver, then it acquires a new definition; it then becomes the price, as well as the measure of value.

It does not follow from this adjusting the metals to the scale of value, that they themselves should therefore become the scale, as any one must readily perceive.

But in former times, before the introduction of commerce, when mankind had less occasion to measure value with a scrupulous exactness, the permanent nature of the metals rendred them sufficiently correct, both to serve as the scale, and as the price in every alienation. Since the introduction of commerce, nations have learned the importance of reducing their respective interests and debts, to the nicest equations of value; and this has pointed out the inconvenience of admitting the metals, as formerly, to serve both as the measure and the price in such operations.

Just so geographers and astronomers were long of opinion, that a degree of the equator was a determinate length to measure every degree of latitude upon the globe.

They then considered the earth as a sphere, and no great inconveniency was found to result from this supposition. But as accuracy made a progress, that measure was found to be incorrect. Degrees of latitude are now found to be of different lengths in different climates; and perhaps in time, it will be found that no two degrees of any great circle described upon the globe, are in a geometrical equality.

That money, therefore, which constantly preserves an equal value, which poises itself, as it were, in a just equilibrium between the fluctuating proportion of the value of things, is the only permanent and equal scale, by which value can be measured.

Examples of it.

531Of this kind of money, and of the possibility of establishing it, we have two examples: the first, among one of the most knowing; the second, among one of the most ignorant nations of the world. The bank of Amsterdam presents us with the one, the coast of Angola with the other.

A florin banco has a more determinate value than a pound of fine gold, or silver; it is an unit which the invention of men, instructed in the arts of commerce, have found out.

Bank money.

This bank money stands invariable like a rock in the sea. According to this ideal standard are the prices of all things regulated; and very few people can tell exactly what it depends upon. The precious metals, with their intrinsic value, vary with regard to this common measure, like every other thing. A pound of gold, a pound of silver, a thousand guineas, a thousand crowns, a thousand piastres, or a thousand ducats, are sometimes worth more, sometimes worth less of this invariable standard; according as the proportion of the metals of which they are made vary between themselves.

No adulterations in the weight, fineness, or denominations of coin have any effect upon bank money. These currencies which the bank looks upon as merchandize, like every other thing, are either worth more or less bank money, according to the actual value of the metals they are made of. All is merchandize with respect to this standard; consequently, it stands unrivalled in the exercise of its function of a common measure.

Angola money.

The second example is found among the savages upon the African coast of Angola, where there is no real money known. The inhabitants there reckon by macoutes; and in some places this denomination is subdivided into decimals, called pieces. One macoute is equal to ten pieces. This is just a scale of equal parts for estimating the trucks they make. If a sheep, e. g. be worth 10, an ox may be worth 40, and a handful of gold dust 1000.

532Money of account, therefore, cannot be fixed to any material substance, the value of which may vary with respect to other things. The operations of trade, and the effects of an universal circulation of value, over the commercial world, can alone adjust the fluctuating value of all kinds of merchandize, to this invariable standard. This is a representation of the bank money of Amsterdam, which may at all times be most accurately specified in a determinate weight of silver and gold; but which can never be tied down to that precise weight for twenty-four hours, any more than to a barrel of herrings.

CHAP. II Of Artificial or Material money.

Usefulness of the precious metals for making of money.

I. From infancy of the world, at least as far back as our accounts of the transactions of mankind reach, we find they had adopted the precious metals, that is silver and gold, as the common measure of value, and as the adequate equivalent for every thing alienable.

The metals are admirably adapted for this purpose; they are perfectly homogeneous: When pure, their masses, or bulks, are exactly in proportion to their weights: No physical difference can be found between two pounds of gold, or silver, let them be the production of the mines of Europe, Asia, Africa, or America: They are perfectly malleable, fusible, and suffer the most exact division which human art is capable to give them: They are capable of being mixed with one another, as well as with metals of a baser, that is, of a less homogeneous nature, such as copper. By this mixture they spread themselves uniformly through the whole 533mass of the composed lump, so that every atom of it becomes proportionally possessed of a share of this noble mixture; by which means the subdivision of the precious metals is rendred very extensive.

Their physical qualities are invariable; they lose nothing by keeping; they are solid and durable; and though their parts are separated by friction, like every other thing, yet still they are of the number of those which suffer least by it.

If money, therefore, can be made of any thing, that is, if the proportional value of things vendible can be measured by any thing material, it may be measured by the metals.

Adjusting a standard, what?

II. The two metals being pitched upon as the most proper substances for realizing the ideal scale of money, those who undertake the operation of adjusting a standard must constantly keep in their eye the nature and qualities of a scale, as well as the principles upon which it is formed.

The unit of the scale must constantly be the same, although realized in the metals, or the whole operation fails in the most essential part. This realizing the unit is like adjusting a pair of compasses to a geometrical scale, where the smallest deviation from the exact opening once given must occasion an incorrect measure. The metals, therefore, are to money what a pair of compasses is to a geometrical scale.

This operation of adjusting the metals to the money of account, implies an exact and determinate proportion of both metals to the money-unit, realized in all the species and denominations of coin, adjusted to that standard.

The smallest particle of either metal added to, or taken away from any coin, which represents certain determinate parts of the scale, overturns the whole system of material money. And if, notwithstanding such variation, these coins continue to bear the same denominations as before, this will as effectually destroy their usefulness in measuring the value of things, as it would overturn 534the usefulness of a pair of compasses, to suffer the opening to vary, after it is adjusted to the scale representing feet, toises, miles, or leagues, by which the distances upon the plan are to be measured.

Debasing and raising a standard, what.

III. Debasing the standard is a good term; because it conveys a clear and distinct idea. It is diminishing the weight of the pure metal contained in that denomination by which a nation reckons, and which we have called the money-unit. Raising the standard requires no farther definition, being the direct contrary.

The alteration of a standard, how to be discovered.

IV. Altering the standard (that is raising or debasing the value of the money-unit) is like altering the national measures or weights. This is best discovered by comparing the thing altered with things of the same nature which have suffered no alteration. Thus if the foot of measure was altered at once over all England, by adding to it, or taking from it, any proportional part of its standard length, the alteration would be best discovered, by comparing the new foot with that of Paris, or of any other country, which had suffered no alteration. Just so, if the pound sterling, which is the English unit, shall be found any how changed, and if the variation it has met with be difficult to ascertain, because of a complication of circumstances, the best way to discover it will be to compare the former and the present value of it with the money of other nations which has suffered no variation. This the course of exchange will perform with the greatest exactness.

Of alloy.

V. Artists pretend, that the precious metals, when absolutely pure from any mixture, are not of sufficient hardness to constitute a solid and lasting coin. They are found also in the mines mixed with other metals of a baser nature, and the bringing them to a state of perfect purity occasions an unnecessary expence. To avoid, therefore, the inconvenience of employing them in all their purity, people have adopted the expedient of mixing them with a determinate proportion of other metals, which hurts neither their fusibility, malleability, beauty, or lustre. This metal is called alloy, 535and being considered only as a support to the principal metal, is accounted of no value in itself. So that eleven ounces of gold, when mixed with one ounce of silver, acquires, by that addition, no augmentation of value whatever.

This being the case, we shall, as much as possible, overlook the existence of alloy, in speaking of money, in order to render language less subject to ambiguity. I must except such cases, where the considering the mass of the compound metal, according to its weight, can be accompanied with no inconvenience.

CHAP. III. Incapacities of the Metals to perform the office of an invariable measure of value.

They vary in their relative value to one another.

I. Were there but one species of such a substance as we have represented gold and silver to be: were there but one metal possessing the qualities of purity, divisibility, and durability; the inconveniences in the use of it for money would be fewer by far than they are found to be as matters stand.

Such a metal might then, by an unlimited division into parts exactly equal, be made to serve as a tolerable steady and universal measure. But the rivalship between the metals, and the perfect equality which is found between all their physical qualities, so far as regards purity, and divisibility, render them so equally well adapted to serve as the common measure of value, that they are universally admitted to pass current as money.

All measures ought to be invariable.

What is the consequence of this? That the one measures the value of the other, as well as that of every other thing. Now the moment any measure begins to be measured by another, whose 536proportion to it is not physically, perpetually, and invariably the same, all the usefulness of such a measure is lost. An example will make this plain.

A foot of measure is a determinate length. An English foot may be compared with the Paris foot, or with that of the Rhine; that is to say, it may be measured by them; and the proportion between their lengths may be expressed in numbers; which proportion will be the same perpetually. The measuring the one by the other will occasion no uncertainty; and we may speak of lengths by Paris feet, and be perfectly well understood by others who are used to measure by the English foot, or by the foot of the Rhine.

Consequences when they vary.

But suppose that a youth of twelve years old takes it into his head to measure from time to time, as he advances in age, by the length of his own foot, and that he divides this growing foot into inches and decimals: what can be learned from his account of measures? As he increases in years, his foot, inches, and subdivisions, will be gradually lengthening; and were every man to follow his example, and measure by his own foot, then the foot of a measure now established would totally cease to be of any utility.

This is just the case with the two metals. There is no determinate invariable proportion between their value; and the consequence of this is, that when they are both taken for measuring the value of other things, the things to be measured, like the lengths to be measured by the young man’s foot, without changing their relative proportion between themselves, change however with respect to the denominations of both their measures. An example will make this plain.

Let us suppose an ox to be worth three thousand pounds weight of wheat, and the one and the other to be worth an ounce of gold, and the ounce of gold to be worth exactly fifteen ounces of silver: If the case should happen, that the proportional value between gold and silver should come to be as 14 is to 1, would not the ox, and 537consequently the wheat, be estimated at less in silver, and more in gold, than formerly? I ask farther, if it would be in the power of any state to prevent this variation in the measure of the value of oxen and wheat, without putting into the unit of their money less silver and more gold than formerly.

Defects of a silver standard.

If therefore any particular state should fix the standard of the unit of their money to one species of the metals, while in fact both the one and the other are actually employed in measuring value; does not such a state resemble the young man, who measures all by his growing foot. For, if silver, for example, be retained as the standard, while it is gaining upon gold one fifteenth additional value; and if gold continues all the while to determine the value of things as well as silver, it is plain that, to all intents and purposes, this silver measure is lengthening daily, like the young man’s foot, since the same weight of it must become every day equivalent to more and more of the same commodity; notwithstanding that we suppose the same proportion to subsist, without the least variation, between that commodity and every other species of things alienable.

Arguments in favours of it.

After having exposed the matter in this light, I think it can hardly, with reason, be urged, that notwithstanding it be admitted that gold and silver may change their proportion of value with regard to one another, yet still this does not prevent silver from remaining the standard, without any inconvenience; for the following reasons.

1mo. Because, when it is considered as a standard, it never ought to be looked upon as changing its value with regard to gold; but that gold ought to be considered as changing its value with regard to silver.

2do. Because being the measure itself, it is absurd to consider it as the thing measured; that therefore it retains all the requisites of an invariable scale; since it measures all things according to the proportion they bear to itself, which physically never can vary. And,

5383tio. That a person who has borrowed a certain weight of silver from another, is obliged to repay the same weight of silver he had borrowed; although at that time silver should be of greater value than when he borrowed it.

Answers to these arguments.

I answer to the first argument: That if in fact silver becomes of more or less value with respect to merchandize, with respect to gold, and with respect to bank money, by there being a greater or less demand for it than there was before; I cannot see how calling it a standard, can remove this inconvenience, which is inseparable from the nature of the thing; nor how we can change a matter of fact, by changing our language, and by saying, that merchandize, gold, and bank money, become of more value, or of less value, with respect to silver, in proportion as the demand for them is greater or less. This language we must use, although we know for certain that these things remain in the exact relative proportion of quantity and demand as before: And although it should evidently appear, that a demand for silver has raised the price of it, with respect to every thing it measured the day before.

If the yard in a mercer’s shop should be subject to such revolutions, in consequence of the wood it was made of; and if in measuring a piece of stuff to a customer, which the mercer had bought by this yard the day before for 50 yards, he should find the piece measure but 40, it would not be easy to persuade him, I believe, that his piece was become shorter; but suppose he should have the curiosity to measure over again all the pieces in his shop, and that he should find exactly one fifth diminution upon the length of every one, would he not very rationally conclude that his yard was grown longer, and would he not run immediately to his neighbour’s shop and compare it?

As to the second argument, I agree that silver may at all times very exactly measure the value of things with respect to itself; but this gives us no idea of an universal measure.

539I can measure the proportion of the length of things, with any rod or with any line, the length of which I know nothing about; but no body calls this measuring, because I cannot compare the things measured, with any other thing which I have not measured with the same rod or line, as I might easily do, had I measured with a foot, yard, or toise; consequently the intention of measuring in such a case is almost entirely lost.

To the third argument, I answer, that I subscribe very willingly to the truth of that proposition; providing that by silver is understood the bare metal, without attending to its additional quality of the universal standard measure of value. But if I borrow the silver not as bullion, but as coin (the common measure of value) then I say, that I overpay in giving back the same weight I had received. Is there any thing more familiar than such examples? I borrow 100l. from my neighbour, he proposes to give so much of the value in grain; I accept. The price of grain rises about the term of payment; can I be obliged to repay an equal quantity of grain in payment of a proportional part of what I owe? By no means; because I did not receive the grain as any thing but as a species of money. But if I borrow some quarters of grain to be repaid in harvest, then I am obliged to restore grain for grain, because in that case I did not receive the grain as money, but as a commodity.

Usefulness of an universal measure.

Buying and selling are purely conventional, and no man is obliged to give his merchandize at what may be supposed to be the proportion of its worth. The use, therefore, of an universal measure, is, to mark, not only the relative value of the things to which it is applied as a measure, but to discover in an instant the proportion between the value of those, and of every other commodity valued by a determinate measure in all the countries of the world.

Were pounds sterling, livres, florins, piastres, &c. which are all money of account, invariable in their values, what a facility would it produce in all conversions, what an assistance to trade! But as they are all limited or fixed to coins, and consequently vary from 540time to time, this example shews the utility of the invariable measure which we have described.

They have two values, one as coin, and one as metals.

There is another circumstance which incapacitates the metals from performing the office of money; the substance of which the coin is made, is a commodity, which rises and sinks in its value with respect to other commodities, according to the wants, competition, and caprices of mankind. The advantage, therefore, found in putting an intrinsic value into that substance which performs the function of money of account, is compensated by the instability of that intrinsic value; and the advantage obtained by the stability of paper, or symbolical money, is compensated by the defect it commonly has of not being at all times susceptible of realization into solid property, or intrinsic value.

In order, therefore, to render material money more perfect, this quality of metal, that is of a commodity, should be taken from it; and in order to render paper money more perfect, it ought to be made to circulate upon metallic or land security. The expedient with regard to the metals shall find a place in this inquiry (in the chapter of miscellaneous questions at the end of this book, article 4th). What regards the paper is foreign to our purpose, and belongs to the doctrine of credit.

Smaller inconveniences attending material money.

II. There are several smaller inconveniences accompanying the use of the metals, which we shall here shortly enumerate, reserving the discussion of all the consequences they draw along with them, until we come to consider the operations of trade and money, upon the complicated interests of mankind.

It wears in circulation.

1mo. No money made of gold or silver can circulate long, without losing of its weight, although it all along preserves the same denomination. This represents the contracting a pair of compasses which had been rightly adjusted to the scale. Such a defect must appear striking, when we reflect upon the principles (already laid down) which necessarily influence the fixing of a standard.

It is inaccurately coined.

5412do. Another inconvenience proceeds from the fabrication of money. Supposing the faith of Princes who coin money to be inviolable, and the probity, as well as capacity, of those to whom they commit the inspection of the fineness of the metals to be sufficient, it is hardly possible for workmen to render every piece exactly of a proper weight, or to preserve the due proportion between pieces of different denominations; that is to say, to make every ten sixpences exactly of the same weight with every crown piece and every five shillings struck in a coinage. In proportion to such inaccuracies, the parts of the scale become unequal.

The coinage adds to its value without adding to its weight.

3tio. Another inconvenience, and far from being inconsiderable, flows from the expence requisite for the coining of money. This expence adds to its value as a manufacture, without adding any thing to its weight. I shall take notice, in the proper place, of the consequences which attend this inconvenience, even to nations where coinage is free.

The value of it may be arbitrarily changed.

4to. The last inconvenience I shall mention, is, that by fixing the money of account entirely to the coin, without having any independent common measure (to mark and control these deviations from mathematical exactness, which are either inseparable from the metals themselves, or from the fabrication of them) the whole measure of value, and all the relative interests of debtors and creditors, become at the disposal not only of workmen in the mint, of Jews who deal in money, of clippers and washers of coin, but they are also entirely at the mercy of Princes, who have the right of coinage, and who have frequently also the right of raising or debasing the standard of the coin, according as they find it most for their present and temporary interest.

Trade profits of the smallest defects in the coin.

Several of the inconveniences we have here enumerated, may appear trifling, and so they are found to be in countries where commerce is little known; but the operations of trade surpass in nicety the conceptions of any man but a merchant; and as a proof of this, it may be affirmed with truth, that one shilling can hardly lose a 542grain of its weight, either by fraud or circulation, without contributing by that circumstance, towards the diminution of the standard value of the money-unit, or pound sterling, over all England, as I hope to be able to shew both by reason and facts.

All and every one of these inconveniences to which coin is exposed, disappear in countries where the use of pure ideal money of account is properly established.

CHAP. IV. Methods which may be proposed for lessening the several inconveniences to which material Money is liable.

I. In this chapter, I shall point out the methods which may be proposed for lessening the inconveniences to which all coin is liable, in order thereby to make it resemble as much as possible the invariable scale of ideal money of accompt.

Use of theory in political matters.

To propose the throwing out of coin altogether, because it is liable to inconveniences, and the reducing all to an ideal standard, is acting like the tyrant who adjusted every man’s length to that of his own bed, cutting from the length of those who were taller than himself, and racking and stretching the limbs of such as he found to be of a lower stature. The use of theory in political matters is not only to discover the methods of removing all abuses, it must also lend its aid towards palliating inconveniences which are not easily cured.

Five remedies against the effects of the variation between the value of the metals.

The inconveniences from the variation in the relative value of the metals to one another, may in some measure be obviated by the following expedients.

5431mo. By considering one only as the standard, and leaving the other to seek its own value, like any other commodity.

2do. By considering one only as the standard, and fixing the value of the other from time to time by authority, according as the market price of the metals shall vary.

3tio. By fixing the standard of the unit according to the mean proportion of the metals, attaching it to neither; regulating the coin accordingly; and upon every considerable variation in the proportion between them, either to make a new coinage, or to raise the denomination of one of the species, and lower it in the other, in order to preserve the unit exactly in the mean proportion between the gold and silver. This idea is dark, but it shall afterwards be sufficiently explained.

4to. To have two units, and two standards, one of gold, and one of silver, and to allow every body to stipulate in either.

5to. Or last of all, to oblige all debtors to pay one half in gold and one half in the silver standard.

I have here proposed the attaching the standard to one of the species, as a remedy against the effects of variation between the metals, because when that is done, the consequences are not so hurtful as when the unit is affixed to both, as I shall prove in its proper place.

The regulating the proportion of that metal which is considered as merchandize, to the other which is considered as the standard, upon every variation in the market price of bullion, as well as the other expedient of striking the unit according to the mean proportion, is an endless labour, and implies a necessity either of perpetually recoining, or of introducing fractions of value into the current coin, which cannot fail to embarrass circulation.

The establishing two units, the one of gold, and the other of silver, does not render the unit of money any more invariable than before; all that can be said for this expedient, is, that money becomes thereby more determinate, and that people who enter into permanent contracts are, at least, apprised of the consequences of the varying of 544the proportion of the metals, and may regulate their interests accordingly.

The last expedient of making debtors pay half in gold and half in silver, would answer every inconvenience, providing all creditors were supposed to melt the money down upon receiving it, in order to sell it for bullion; but as that is not the case, it would be proper, together with this expedient, to be also very exact in observing the market proportion of the metals in the coin; because it cannot be supposed, that every small payment can be made in both species, and wherever this is omitted, every former inconvenience may take place.

Remedies against the other inconveniences.

II. The other imperfections of coin have been already enumerated. They relate either to its wear, the want of exactness in the fabrication, the price of coinage, or the opportunity thereby afforded to Princes to adulterate and change the standard.

Against the wearing of the coin.

1mo. As to the first the best expedients are, 1. To strike the greatest part of the coin in large solid pieces, having as little surface as possible, consistently with beauty and ease of fabrication.

2. To order large sums (of silver at least) to circulate in bags of determinate sums, and determinate weights, all in pieces of the larger denominations.

3. To make all light coin whatsoever go by weight, upon the requisition of the person who is to receive it.

Against inaccuracy of coinage.

2do. As to the inaccuracy of the fabrication, there is no other remedy than a strict attention in government to a matter of so great consequence.

Against the expence of coinage.

3tio. The price of coinage principally affects the interest of nations with regard to foreign trade; consequently, trading states should endeavour, as nearly as possible, to observe the same regulations with their neighbours, in every thing which regards the coin. The consequence of this inconvenience to those within the society is unavoidable, and therefore no remedy can be proposed.

Against arbitrary changes on the value of coin.

5454to. The establishment of public credit is the best security against all adulterations of the standard. No fundamental law can bind up a Prince’s hands so effectually as his own interest. While a Prince lives within his income, he will have no occasion to adulterate the coin; when he exceeds it, he will (in a trading nation) have recourse to credit, and if once he establishes that, he must give over meddling with the standard of his coin, or he will get no body to lend him any more. The only Prince who can gain by adulterating of the standard, is he who seeks for extraordinary supplies out of a treasure already formed.

These are, briefly, the expedients to be put in practice by those governments which have the prosperity of their subjects at heart. The infinite variety of circumstances relating to every state can alone decide as to those which are respectively proper to be adopted by each. Our business at present is to point out the variations to which the value of the money-unit is exposed, from every disorder in the coin; and to shew that as far as the value of the unit shall appear affected by them, so far must material money in such a case be defective.

CHAP. V. Variations to which the Value of the Money-unit is exposed from every disorder in the Coin.

I. Let suppose, at present, the only disorder to consist in a want of the due proportion between the gold and silver in the coin.

How the market price of the metals is made to vary.

This proportion can only be established by the market price of the metals; because an augmentation and rise in the demand for 546gold or silver has the effect of augmenting the value of the metal demanded. Let us suppose that to-day one pound of gold may buy fifteen pounds of silver; if to-morrow there be a high demand for silver, a competition among merchants, to have silver for gold, will ensue, they will contend who shall get the silver at the rate of fifteen pounds for one of gold: this will raise the price of it, and in proportion to their views of profit, some will accept of less than the fifteen pounds. |The variation ought to be referred to the rising metal, and never to the sinking.| This is plainly a rise in the silver, more properly than a fall in the gold; because it is the competition for the silver which has occasioned the variation in the former proportion between the metals. Had the competition for gold carried the proportion above 1 to 15, I should then have said that the gold had risen.

As it is, therefore, the active demand for either gold or silver which makes the price of the metals to vary, I think language would be more correct (in speaking concerning the metals only) never to mention the sinking of the price of either gold or silver. As to every other merchandize, the expression is very proper; because the diminishing of the price of one commodity, does not so essentially imply the rise of any other, as the sinking of one of the metals must imply the rising of the other, since they are the only measures of one another’s worth. I would not be here understood to mean that the term sinking of the price of gold or silver is improper; all I say is, that the other being equally proper, and conveying with it the cause of the variation (to wit, the competition to acquire one metal preferably to the other) may be preferred, and this the rather, that from using these terms promiscuously (gold has fallen, in place of silver has risen) we are apt to believe, that the falling of the price of the metal, must proceed from some augmentation of the quantity of it; whereas it commonly proceeds from no other cause than a higher demand than formerly for the other.

Let us now suppose that a state having, with great exactness, examined the proportion of the metals in the market, and having 547determined the precise quantity of each for realizing or representing the money-unit, shall execute a most exact coinage of gold and silver coin. As long as that proportion continues unvaried in the market, no inconvenience can result from that quarter, in making use of the metals for money of account.

How the money-unit of account is made to vary in its value from the variation of the metals.

Consequences of this.

But let us suppose the proportion to change; that the silver, for example, shall rise in its value with regard to gold; will it not follow, from that moment, that the unit realized in the silver, will become of more value than the unit realized in the gold coin?

But as the law has ordered them to pass as equivalents for one another, and as debtors have always the option of paying in what legal coin they think fit, will they not all choose to pay in gold, and will not then the silver coin be melted down or exported, in order to be sold as bullion, above the value it bears when it circulates in coin? Will not this paying in gold also really diminish the value of the money-unit, since upon this variation every thing must sell for more gold than before, as we have already observed?

The true unit is the mean proportional between the value of the metals.

Consequently, merchandize which have not varied in their relative value to any other thing but to gold and silver, must be measured by the mean proportion of the metals, and the application of any other measure to them is altering the standard. If they are measured by the gold, the standard is debased; if by silver, it is raised, as shall presently be proved.

If to prevent the inconvenience of melting down the silver, the state shall give up affixing the value of their unit to both species at once, and shall fix it to one, leaving the other to seek its price as any other commodity, in that case no doubt the melting down of the coin will be prevented; but will ever this restore the value of the money-unit to its former standard? Would it, for example, in the foregoing supposition, raise the debased value of the money-unit in the gold coin, if that species were declared to be the standard? It would indeed render silver coin purely a merchandize, and by allowing it to seek its value, would certainly prevent it from 548being melted down as before; because the pieces would rise conventionally in their denomination; or an agio, as it is called, would be taken in payments made in silver; but the gold would not, on that account, rise in its value, or begin to purchase any more merchandize than before. Were therefore the standard fixed to the gold, would not this be an arbitrary and a violent revolution in the value of the money-unit, and a debasement of the standard?

If, on the other hand, the state should fix the standard to the silver, which we suppose to have risen in its value, would that ever sink the advanced value which the silver coin had gained above the worth of the former standard unit, and would not this be a violent and an arbitrary revolution in the value of the money-unit, and a raising of the standard?

The only expedient, therefore, as has been said, is in such a case to fix the numerary unit to neither of the metals, but to contrive a way to make it fluctuate in a mean proportion between them; which is in effect the introduction of a pure ideal money of account. This shall be farther explained as we go along.

The unit to be attached to the mean proportion, upon a new coinage, not after the metals have varied.

I have only one observation to make in this place, to wit, that the regulation of fixing the unit by the mean proportion, ought to take place at the instant the standard unit is affixed with exactness both to the gold and silver. If it be introduced long after the market proportion between the metals has deviated from the proportion established in the coin, and if the new regulation is made to have a retrospect, with regard to the acquitting of permanent contracts entred into, while the value of the money-unit had attached itself to the lowest currency, in consequence of the principle above laid down, then the restoring the money-unit to that standard where it ought to have remained (to wit, to the mean proportion) is an injury to all debtors who have contracted since the time that the proportion of the metals began to vary.

This is clear from the former reasoning. The moment the market price of the metals differs from that in the coin, every one 549who has payments to make pays in that species which is the highest rated in the coin; consequently, he who lends, lends in that species. If after the contract, therefore, the unit is carried up to the mean proportion, this must be a loss to him who had borrowed.

It is better to affix the unit to one than to both metals.

From this we may perceive why, in the first article of the preceding chapter, it was said, that there was less inconvenience from the varying of the proportion of the metals, where the standard is fixed to one of them, than when it is fixed to both. In the first case, it is at least uncertain whether the standard or the merchandize-species is to rise; consequently it is uncertain whether the debtors or the creditors are to gain by a variation. If the standard species should rise, the creditors will gain; if the merchandize-species rises, the debtors will gain; but when the unit is attached to both species, then the creditors never can gain, let the metals vary as they will: if silver rises, then debtors will pay in gold; if gold rises, debtors will pay in silver. But whether the unit be attached to one or to both species, the infallible consequence of a variation is, that one half of the difference is either gained or lost by debtors and creditors. The invariable unit is constantly the mean proportional between the two measures.

I intended to have postponed the entring upon what concerns the interests of debtors and creditors in all variations of the coin, until I came to treat particularly of that matter; but as it is a thing of the greatest consequence to be attended to, in every proposal for altering or regulating the coin of a nation, it will, perhaps, upon that account, bear a repetition.

Variation to which the money-unit is exposed, from the wearing of the coin.

II. To render our ideas as distinct as possible, we must keep them simple. Let us now suppose that the metals are perfectly well proportioned in the coin, but that the coin is worn by use.

If this be the case, we must either suppose it to be all equally worn, or unequally worn.

If all be equally worn, I think it needs no demonstration to prove, that the money-unit which was attached to the coin, when 550weighty, (drawing its value from the metals contained in it) must naturally diminish in its value in proportion as the metals are rubbed away.

If the coin be unequally worn, the money-unit will be variously realized, or represented; that is to say, it will be of different values, according to the weight of the pieces.

The consequence of this is the same as in the disorder of the proportion of the metals: debtors will choose to pay in the light pieces, and the heavy will be melted down. In proportion, therefore, to this disorder, will the value of the unit gradually descend. This was the great disorder in England in 1695; while the standard of the pound sterling was affixed to the silver only, the gold being left to seek its own value.

Variations to which the money-unit is exposed, from the inaccuracy in the fabrication of the money.

III. Since the invention of the money wheel, the inaccuracy in the fabrication is greatly prevented. Formerly, when money was coined with the hammer, the mint-masters weighed the coin delivered by the workmen, in cumulo, by the pound troy weight, without attending very exactly to the proportion of the pieces. At present exactness is more necessary, and every piece must be weighed by itself.

It is of very great consequence that all the pieces and denominations of coin be in exact proportion to that of their current value, which is always relative to the money-unit of accompt. When any inequality happens there, it is easy to perceive how all the pieces which are above the proportion of their just weight, will be immediately picked up, and melted down, and none but the light ones will remain in circulation.

This, from the principles already laid down, must proportionally diminish the value of the money-unit.

From what has been observed concerning the deviations in the coin from the proportion in the market price of the metals, and from the legal weight, we may lay down this undoubted principle, That the value of the money-unit of accompt is not to be sought for in the statutes 551and regulations of the mint, but in the actual intrinsic value of that currency in which all obligations are acquitted, and all accompts are kept.

Variations to which the money-unit is exposed, from the imposition of coinage.

IV. As I have at present principally in view to lay down certain principles with regard to money, which I intend afterwards to apply to the state of the British coin; and as these principles are here restricted to the effects which every variation in the coin has upon the value of the unit of money in accompt, I shall in this place only observe, as to the imposition of coinage,

That coin being necessary in every country where the money-unit is attached to the metals, it must be procured by those who are obliged to acquit their obligations in material money.

If, therefore, the state shall oblige every one who carries the metals to the mint to pay the coinage, the coin they receive must be valued, not only at the price the metals bear in the market, when they are sold as bullion, (or mere metal, of no farther value than as a physical substance) but also at the additional value these metals receive in being rendred useful for purchasing commodities, and acquitting obligations. This additional value is the price of coinage.

When coinage is imposed, bullion must be cheaper than coin.

If, therefore, in a country where coinage is free, as in England, this coinage shall come to be imposed, the money-unit continuing to be affixed as before to the same quantity of the metals, ought to rise in its value; that is, ought to become equal to a greater quantity of every sort of merchandize than before; consequently, as the rough metals of which the coin is made are merchandize, like every other thing, the same number of money-units realized, or represented in the coin, ought to purchase more of the metals than before: That is to say, that in every country where coinage is imposed, bullion must be cheaper than coin.

This proposition would be liable to no exception; were it true that no debt could be exacted but in the nation’s coin; because in that case, the creditor would be constantly obliged to receive it at its full value.

Exception from this rule.

552But when nations owe to one another, the party debtor must pay the party creditor in his coin: the debtor, therefore, is obliged to sell his own coin for what he can get for it, and with that he must buy of the coin of his creditor’s country, and with this he must pay him.

Let us, to avoid abstract reasoning, take an example: and we cannot choose a better than that of England and France. In England, coinage is free, in France it costs 8²⁄₁₀ per cent. as shall be made out in its proper place.

France owes England 1000l. sterling. In paying the bullion contained in this sum, either in gold or silver, in the market of London, the debt is paid; because the coiningcoining of it costs nothing. Here France acquits her debt cheaper than by sending her own coin as bullion; because the bullion she sends is not worth an equal weight of her coin.

England owes France 20,000 livres. In paying the bullion contained in this sum, England is not quit; she must also pay France 8²⁄₁₀ per cent. in order to put it into coin.

I reserve the farther examination of all the intricate consequences of this principle, until I come to the application of it, in the Second part.

Variation to which the money-unit is exposed, by the arbitrary operations of Princes in raising and debasing the coin.

V. The operation of raising and debasing the coin is performed in three ways.

1mo, By augmenting or diminishing the weight of the coin.

2do, By augmenting or diminishing the proportion of alloy in the coin.

3tio, By augmenting or diminishing the proportion between the money (coin) and the money of accompt, as if every sixpence were called a shilling, and every twenty sixpences a pound sterling.

The French call this increasing or diminishing the numerary value: and as I think it is a better term than that of raising or sinking the denomination, I shall take the liberty now and then to employ it.

553These three operations may be reduced to one, and expressed by one term: they all imply the augmenting or diminishing the weight of the pure metals in the money-unit of accompt.

It would require a separate treatise, to investigate all the artifices which have been contrived, to make mankind lose sight of the principles of money, in order to palliate and make this power in the sovereign of changing the value of the coin, appear reasonable. But these artifices seem to be at an end, and Princes now perceive that the only scheme to get money when occasion requires, is to preserve their credit, and to allow the coin, by which that credit is reckoned to remain in a stable condition. There are still, however, examples of such operations to be met with; for which reason I shall subjoin, towards the end of this book, a particular inquiry into the interest of Princes with regard to the altering the value of their coin, which is a synonimous term with that of altering the value of the unit of money.

CHAP. VI. How the Variations in the intrinsic value of the unit of Money must affect all the domestic Interests of a Nation.

How this variation affects the interests of debtors and creditors.

I. We have briefly pointed out the effects of the imperfections of the metals in producing a variation in the value of the unit of accompt, we must now point out the consequences of this variation.

If the changing the content of the bushel by which grain is measured, would affect the interest of those who are obliged to pay, or who are intitled to receive, a certain number of bushels of grain for the rent of lands; in the same manner must every variation 554in the value of the unit of accompt affect all persons who, in permanent contracts, are obliged to make payments, or who are intitled to receive sums of money stipulated in multiples or in fractions of that money-unit.

Every variation, therefore, upon the intrinsic value of the money-unit, has the effect of benefiting the class of creditors, at the expence of debtors, or vice versa.

This consequence is deduced from an obvious principle. Money is more or less valuable in proportion as it can purchase more or less of every kind of merchandize. Now without entring a-new into the causes of the rise and fall of prices, it is agreed upon all hands, I suppose, that whether an augmentation of the general mass of money in circulation has the effect of raising prices in general, or not, any augmentation of the quantity of the metals appointed to be put into the money-unit, must at least augment the value of that money-unit, and make it purchase more of any commodity than before; that is to say, if 113 grains of fine gold, the present weight of a pound sterling in gold, can buy 113 pounds of flour; were the pound sterling raised to 114 grains of the same metal, it would buy 114 pounds of flour; consequently, were the pound sterling augmented by one grain of gold, every miller who paid a rent of ten pounds a year, would be obliged to sell 1140 pounds of his flour, in order to procure 10 pounds to pay his rent, in place of 1130 pounds of flour which he sold formerly to procure the same sum; consequently by this innovation, the miller must lose yearly ten pounds of flour, which his master consequently must gain. From this example, I think it is plain, that every augmentation of metals put into the pound sterling, either of silver or gold, must imply an advantage to the whole class of creditors who are paid in pounds sterling, and consequently, must be a proportional loss to all debtors who must pay by the same denomination.

A mistake of Mr. Locke.

555I should not have been so particular in giving a proof of so plain a proposition, had it not escaped the penetration of the great Mr. Locke.

In 1695 there was a proposal made to the government of England, to diminish the value of the pound sterling by 20 per cent. by making a new coinage of all the silver, and by making every shilling ⅕ lighter than before. The author of this project (Mr. Lowndes) having given his scheme to the public, was answered by Mr. Locke, That this debasing the value of the money-unit was effectually defrauding all the landed interest of 20 per cent. of their rents. Lowndes replied, that silver was augmented 20 per cent. in its value, and that therefore the pound sterling, though reduced 20 per cent. in its weight of pure silver, was still as valuable as before. This proposition Mr. Locke exploded with the most solid reasoning, and indeed nothing could be more absurd, than to affirm, that silver had risen in value with respect to itself. But though Mr. Locke felt that all the landed interest, and all those who were creditors in permanent contracts, must lose 20 per cent. by Mr. Lowndes’s scheme, yet he did not perceive (which is very wonderful) that the debtors in these contracts must gain. This led him to advance a very extraordinary proposition, which abundantly proves that the interests of debtors and creditors, which are now become of the utmost consequence to be considered attentively by modern statesmen, were then but little attended to, and still less understood.

We find in the 46th page of Mr. Locke’s Farther Considerations concerning the raising the value of Money, that Mr. Lowndes had affirmed in support of his scheme, that this new money would pay as much debt, and buy as many commodities as the then money which was one fifth heavier. Then adds Mr. Locke, “What he says of debts is true; but yet I would have it well considered by our English gentlemen, that though creditors will lose ⅕ of their principal and use, and landlords will lose ⅕ of their income, yet the debtors and tenants will not get it. It may be asked, who will get it? Those, 556I say, and those only, who have great sums of weighty money (whereof one sees not a piece now in payments) hoarded up by them, will get it. To these, by the proposed change of our money, will be an increase of ⅕ added to their riches, paid out of the pockets of the rest of the nation.”

If the authority of any man could prevail, where reason is dark, it would be that of Mr. Locke; and had any other person than Mr. Locke advanced such a doctrine, I should have taken no notice of it.

Here that great man, through inadvertency, at once gives up the argument in favour of his antagonist, after he had refuted him in the most solid manner: for if a man, who at that time had hoarded heavy money, was to gain ⅕ upon its being coined into pieces ⅕ lighter, Mr. Locke must agree with Mr. Lowndes, that a light piece was as much worth as a heavy one.

Those who had heavy money at that time locked up in their coffers, would gain no doubt, provided they were debtors; because having, I shall suppose, borrowed 4000l. sterling in heavy money, and having it augmented to 5000l. by Mr. Lowndes’s plan, they might pay their debt of 4000l. and retain one thousand clear profit for themselves. But supposing them to have no debts, which way could they possibly gain by having heavy money, since the 5000l. after the coinage, would have bought no more land, nor more of any commodities, than 4000l. would have done before the coinage.

When the value of the unit is diminished, creditors lose; when it is augmented, debtors lose.

We may therefore safely conclude, that every diminution of the metals contained in the money-unit, must imply a loss to all creditors; and that in proportion to that loss, those who are debtors must gain.

That on the contrary, whatever augmentation is made of the money-unit, such augmentation must be hurtful to debtors, and proportionally advantageous to creditors.

In the preceding chapters, I have laid down, with as much distinctness as I am capable of, the most general principles which influence 557the doctrine of money, and to those I think every other may be applied.

The combination, however, of these principles with one another, occasions a surprizing variety of problems, relating to money, coin, and bullion, which are difficult to resolve, only by the difficulty there is found in applying them to the rule.

In order therefore to render this inquiry more useful, I shall now apply the principles I have laid down, to the state of the British coin, and to the resolution of every question which shall occur during the examination of the disorder into which it has fallen. A deviation from the standard weight of the coin, and proportion of the metals (small if compared with what was common in former ages) has introduced very great obstructions in the circulation of the two species, and presents very great inconveniencies when there is any question of removing them by a new regulation of the mint.

The most distinct method of treating such matters, is, to consider all coin as reduced to the weight of the pure metals; and to avoid the perplexity of different denominations of weights, I shall examine all by the troy grain.

The interests I intend to combine in this matter not being confined to those of England alone, I have entred into the most accurate calculation possible, with regard to the coin of those nations which I shall have occasion to mention, and to compare with that of England. These I have reduced to a general table which is inserted at the end of this volume. The reader may have recourse to it upon every occasion where mention is made of the conversion of money into grains of silver and gold, and thereby form to himself a far better idea of many things than I could otherwise have given him.

558

CHAP. VII. Of the disorder in the British Coin, so far as it occasions the melting down or the exporting of the Specie.

Defects in the British coin.

The defects in the British coin are three.

1mo. The proportion between the gold and silver in it is found to be as 1 to 15²⁄₁₀, whereas the market price may be supposed to be nearly as 1 to 14½.

2do. Great part of the current money is worn and light.

3tio. From the second defect proceeds the third, to wit, that there are several currencies in circulation which pass for the same value, without being of the same weight.

4to. From all these defects results the last and greatest inconvenience, to wit, that some innovation must be made, in order to set matters on a right footing.

I shall take no notice of the inaccuracies of fabrication, because these are inseparable from the imperfections of human art, and as long as they are not very considerable, no profit can be made in discovering them, and therefore no bad consequence can result from them.

Of the standard of the English coin and money-unit.

The English, besides the unit of their money which they call the pound sterling, have also the unit of their weight for weighing the precious metals.

This is called the pound troy, and consists of 12 ounces, every ounce of 20 penny weight, and every penny weight of 24 grains. The pound troy, therefore, consists of 240 penny weight, and 5760 grains.

The fineness of the silver is reckoned by the number of ounces and penny weights of the pure metals in the pound troy of the 559composed mass; or in other words, the pound troy, which contains 5760 grains of standard silver, contains 5328 grains of fine silver, and 432 grains of copper, called alloy.

Thus standard silver is 11 ounces 2 penny weights of fine silver in the pound troy, to 18 penny weights copper, or 111 parts fine silver to 9 parts alloy.

Standard gold is 11 ounces fine to one ounce silver or copper employed for alloy, which together make the pound troy; consequently, the pound troy of standard gold, contains 5280 grains fine, and 480 grains alloy, which alloy is reckoned of no value.

A pound sterling by statute contains 1718.7 grains troy, fine silver.

This pound of standard silver is ordered, by statute of the 43d of Elizabeth, to be coined into 62 shillings, 20 of which make the pound sterling; consequently the 20 shillings contain 1718.7 grains of fine silver, and 1858.06 standard silver.

The guinea 118.644 grains of fine gold.

The pound troy of standard gold, ¹¹⁄₁₂ fine, is ordered by an act of King Charles II. to be cut into 44½ guineas; that is to say, every guinea contains 129.43 grains of standard gold, and 118.644 of fine gold, and the pound sterling, which is ²⁰⁄₂₁ of the guinea, contains 112.994, which we may state at 113 grains of fine gold, as has been said.

Coinage in England free.

The coinage in England is entirely defrayed at the expence of the state. The mint price for the metals is the very same with the price of the coin. Whoever carries to the mint an ounce of standard silver, receives for it in silver coin 5s. 2d. or 62d. whoever carries an ounce of standard gold receives in gold coin 3l. 17s. 10d½. the one and the other making exactly an ounce of the same fineness with the bullion. Coin, therefore, can have no value in the market above bullion; consequently, no loss can be incurred by those who melt it down.

When the guinea was first struck, the government (not inclining to fix the pound sterling to the gold coin of the nation) fixed the guinea at 20 shillings, (which was then below its proportion to the 560silver) leaving it to seek its own price above that value, according to the course of the market.

By this regulation no harm was done to the English silver standard; because the guinea, or 118.644 grains fine gold being worth more, at that time, than 20 shillings, or 1718.7 grains fine silver, no debtor would pay with gold at its standard value, and whatever it was received for above that price was purely conventional.

The standard not attached to the gold coin, till the year 1728.

Accordingly guineas sought their own price until the year 1728, that they were fixed a-new, not below their value as at first, but at what was then reckoned their exact value, according to the proportion of the metals, to wit, at 21 shillings, and at this they were ordered to pass current in all payments.

Consequence of this regulation to debase the standard.

This operation had the effect of making the gold a standard as well as the silver. Debtors then paid indifferently in gold as well as in silver, because both were supposed to be of the same intrinsic as well as current value; in which case no inconvenience could follow upon this regulation. But, in time, silver came to be more demanded; the making of plate began to prevail more than formerly, and the exportation of silver to the East Indies increasing yearly, made the demand for it greater; or perhaps brought its quantity to be proportionally less than before. This changed the proportion of the metals, and by slow degrees they have come from that of 1 to 15.2 (the proportion they were supposed to have when the guineas were fixed and made a lawful money at 21 shillings) to that of 14.5 the present supposed proportion.

The consequence of this has been, that the same guinea which was worth 1804.6 grains fine silver, at the time it was fixed at 21 shillings, is now worth no more than 1719.9 grains of fine silver according to the proportion of 14½ to 1.

That debtors will not pay in silver but in gold.

Consequently, debtors, who have always the option of the legal species in paying their debts, will pay pounds sterling no more in silver but in gold; and as the gold pounds they pay in, are not intrinsically worth the silver pounds they paid in formerly, according 561to the statute of Elizabeth, it follows that the pound sterling in silver is really no more the standard, since no body will pay at that rate, and since no body can be compelled to do it.

Besides this want of proportion between the metals, the silver coined before the reign of George I. is now become light by circulation; and the guineas coined by all the Princes since Charles II. pass by tale, though many of them are considerably diminished in their weight.

Let us now examine what profit the want of proportion, and the want of weight in the coin can afford to the money jobbers, in melting it down or exporting it.

Did every body consider coin only as the measure for reckoning value, without attending to its value as a metal, the deviations of gold and silver coin from perfect exactness either as to proportion or weight, would occasion little inconvenience.

That some people consider coin a money of accompt,

Great numbers indeed, in every modern society, consider coin in no other light, than that of money of accompt, and have great difficulty to comprehend what difference any one can find between a light shilling and a heavy one; or what inconvenience there can possibly result from a guinea’s being some grains of fine gold too light to be worth 21 shillings standard weight. And did every one think in the same way, there would be no occasion for coin of the precious metals at all; leather, copper, iron, or paper, would keep the reckoning as well as gold and silver.

others consider it as a metal.

But although there be many who look no farther than at the stamp on the coin, there are others whose sole business it is to examine its intrinsic worth as a commodity, and to profit of every irregularity in the weight and proportion of metals.

By the very institution of coinage, it is implied, that every piece of the same metal, and same denomination with regard to the money-unit, shall pass current for the same value.

It is, therefore, the employment of those money jobbers, as I shall call them, to examine, with a scrupulous exactness, the precise 562weight of every piece of coin which comes into their hands.

Operations of money jobbers when the coin deviates from the market proportion of the metals, or from the legal weight.

The first object of their attention, is, the price of the metals in the market: a jobber finds, at present, that with 14.5 pounds of fine silver bullion, he can buy one pound of fine gold bullion.

They melt down when the metals in it are wrong proportioned.

He therefore buys up with gold coin, all the new silver as fast as it is coined, of which he can get at the rate of 15.2 pounds for one in gold; these 15.2 pounds silver coin he melts down into bullion, and converts that back into gold bullion, giving at the rate of only 14.5. pounds for one.

By this operation he remains with the value of ⁷⁄₁₀ of one pound weight of silver bullion clear profit upon the 15½ pounds he bought; which ⁷⁄₁₀ is really lost by the man who inadvertently coined silver at the mint, and gave it to the money jobber for his gold. Thus the state loses the expence of the coinage, and the public the convenience of change for their guineas.

And when the coin is of unequal weight.

But here it may be asked, Why should the money jobber melt down the silver coin, can he not buy gold with it as well without melting it down? I answer, he cannot; because when it is in coin, he cannot avail himself of its being new and weighty. Coin goes by tale, not by weight; therefore, were he to come to market with his new silver coin, gold bullion being sold at the mint price I shall suppose, viz. at 3l. 17s. 10½d. sterling money per ounce, he would be obliged to pay the price of what he bought with heavy money, which he can equally do with light.

He therefore melts down the new silver coin, and sells it for bullion, at so many pence an ounce, the price of which bullion is, in the English market, always above the price of silver at the mint, for the reasons now to be given.

Why silver bullion is dearer than coin.

When you sell standard silver bullion at the mint, you are paid in weighty money; that is, you receive for your bullion the very same weight in standard coin; the coinage costs nothing; but 563when you sell bullion in the market, you are paid in worn out silver, in gold, in bank notes, in short, in every species of lawful current money. Now all these payments have some defect: the silver you are paid with is worn and light; the gold you are paid with is over-rated, and perhaps also light; and the bank notes must have the same value with the specie with which the bank pays them, that is, with light silver or over-rated gold.

It is for these reasons, that silver bullion, which is bought by the mint at 5s. 2d. per ounce of heavy silver money, may be bought at market at 65 pence^[Q] the ounce in light silver, over-rated gold, or bank notes, which is the same thing.

Because that species has risen in the market price as bullion, and not as coin.

Farther, we have seen how the imposition of coinage has the effect of raising coin above the value of bullion, by adding a value to it which it had not as a metal.

Just so when the unit is once affixed to certain determined quantities of both metals, if one of the metals should afterwards rise in value in the market, the coin made of that metal must lose a part of its value as coin, although it retains it as a metal. Consequently, as in the first case, it acquired an additional value by being coined, it must now acquire an additional value by being melted down. From this we may conclude, that when the standard is affixed to both the metals in the coin, and when the proportion of that value is not made to follow the price of the market, that species which rises in the market is melted down, and the bullion is sold for a price as much exceeding the mint price, as the metal has risen in its value.

If, therefore, in England the price of silver bullion is found to be at 65 pence the ounce, while at the mint it is rated at 62; this proves that silver has risen ³⁄₆₅ above the proportion observed in the coin, and that all coin of standard weight may consequently be 564melted down with a profit of ³⁄₆₅. But as there are several other circumstances to be attended to, which regulate and influence the price of bullion, we shall here pass them in review the better to discover the nature of this disorder in the English coin, and the advantages which money jobbers may draw from it.

What regulates the price of bullion.

The price of bullion, like that of every other merchandize, is regulated by the value of the money it is paid with.

If bullion, therefore, sells in England for 65 pence an ounce, paid in silver coin, it must sell for 65 shillings the pound troy; that is to say, the shillings it is commonly paid with, do not exceed the weight of ²⁄₆₅ of a pound troy: for if the 65 shillings with which the pound of bullion is paid weighed more than a pound troy, it would be a shorter and better way for him who wants bullion, to melt down the shillings and make use of the metal, than to go to market with them in order to get less.

We may, therefore, be very certain, that no man will buy silver bullion at 65 pence an ounce, with any shilling which weighs above ¹⁄₆₅ of a pound troy.

We have gone upon the supposition that the ordinary price of bullion in the English market is 65 pence per ounce. This has been done upon the authority of some late writers on this subject^[R]: it is now proper to point out the causes which may make it deviate from that value.

The intrinsic value of the currency.

I. It may vary and certainly will vary in the price according as the currency is better or worse. When the expences of a war, or a wrong balance of trade, have carried off a great many heavy guineas, it is natural that bullion should rise; because then it will be paid for more commonly in light gold and silver; that is to say, with pounds sterling, below the value of 113 grains fine gold, the worth of the pound sterling in new guineas.

A demand for exporting bullion.

565II. This wrong balance of trade, or a demand for bullion abroad, becoming very great, may occasion a scarcity of the metals in the market, as well as a scarcity of the coin; consequently, an advanced price must be given for it in proportion to the greatness and height of the demand. In this case, both the specie and the bullion must be bought with paper. But I must observe, that the rise in the price of bullion proceeds from the demand for the metals, and the competition between merchants to procure them, and not because the paper given as the price is at all of inferior value to the specie. The least discredit of this kind would not tend to diminish the value of the paper; it would annihilate it at once. Therefore, since the metals must be had, and that the paper cannot supply the want of them when they are to be exported, the price rises in proportion to the difficulties in finding metals elsewhere than in the English market.

Or for making of plate.

III. A sudden call for bullion, for the making of plate. A gold-smith can well afford to give 67 pence for an ounce of silver, that is to say, he can afford to give one pound of gold for 14 pounds of silver, and perhaps for less, notwithstanding that what he gives be more than the ordinary proportion between the metals, because he indemnifies himself amply by the price of his workmanship: just as a tavern-keeper will pay any price for a fine fish, because, like the goldsmith, he buys for other people.

Exchange raises, and the mint price brings down bullion.

IV. The mint price has as great an effect in bringing down the price of bullion, as exchange has in raising it. In countries where the metals in the coin are justly proportioned, where all the currencies are of legal weight, and where coinage is imposed, the operations of trade make the price of bullion constantly to fluctuate between the value of the coin and the mint price of the metals. This shall afterwards be sufficiently explained, in the second part.

Continuation of the operations of money-jobbers

Now let us suppose that the current price of silver bullion in the market is 65 pence the ounce, paid in lawful money, no matter of 566what weight, or of what metal. |Their rule for melting the coin.| Upon this the money-jobber falls to work. All shillings which are above ¹⁄₆₅ of a pound troy, he throws into his melting pot, and sells them as bullion, for 65d. per ounce; all those which are below that weight he carries to market, and buys bullion with them, at 65 pence per ounce.

What is the consequence of this?

That those who sell the bullion, finding the shillings which the money-jobber pays with perhaps not above ¹⁄₆₆ of a pound troy, they on their side raise the price of their bullion to 66 pence the ounce.

This makes new work for the money-jobber; for he must always gain. He now weighs all shillings as they come to hand; and as formerly he threw into his melting-pot those only which were worth more than ¹⁄₆₅ of a pound troy, he now throws in all that are in value above ¹⁄₆₆. He then sells the melted shillings at 66 pence the ounce, and buys bullion with the light ones, at the same price.

This is the consequence of ever permitting any species of coin to pass by the authority of the stamp, without controlling it at the same time by the weight: and this is the manner in which money-jobbers gain by the currency of light money.

The pence in guineas equal to the pence of shillings of 65 in the pound troy.

It is no argument against this exposition of the matter to say, that silver bullion is seldom bought with silver coin; because the pence in new guineas are worth no more than the pence of shillings of 65 in the pound troy: that is to say, that 240 pence contained in ²⁰⁄₂₁ of a new guinea, and 240 pence contained in 20 shillings of 65 to the pound troy, differ no more in the intrinsic value than 0.88 of a grain of fine silver upon the whole, which is a mere trifle^[S].

When guineas may be melted down with profit.

Whenever, therefore, shillings come below the weight of ¹⁄₆₅ of a pound troy, then there is an advantage in changing them for new guineas; and when that is the case, the new guineas will be 567melted down, and profit will be found in selling them for bullion, upon the principles we have just been explaining.

It would be very tedious to enumerate all the fraudulent operations which are occasioned by this defect of proportion between the metals in the coin, and by the unequal weight of coins carrying the same denomination.

Silver is exported preferably to gold.

We have already given a specimen of the domestic operations of the money-jobbers; but these are not the most prejudicial to national concerns. The jobbers may be supposed to be Englishmen; and in that case the profit they make remains at home; but whenever there is a call for bullion to pay the balance of trade, it is evident that this will be paid in silver coin, never in gold, if heavy silver can be got; and this again carries away the silver coin, and renders it at home so rare, that great inconveniencies are found for want of the lesser denominations of it. The loss, however, here is confined to an inconvenience; because the balance of trade being a debt which must be paid, I don’t consider the exportation of the silver for that purpose as any consequence of the disorder of the coin. But besides this exportation which is necessary, there are others which are arbitrary, and which are made only with a view to profit of the wrong proportion.

When the money-jobbers find difficulty in carrying on the traffic we have described, in the English market, because of the competition among themselves, they carry the silver coin out of the country, and sell it abroad for gold, upon the same principles that the East India company send silver to China, in order to purchase gold.

This hurtful, when done by foreigners.

It may be demanded, what hurt this trade can do to England, since those who export silver bring back the same value in gold? I answer, that were this trade carried on by natives, there would be no loss; because they would bring home gold for the whole intrinsic value of the silver. But if we suppose foreigners sending over gold to be coined at the English mint, and changing that gold 568into English silver coin, and then carrying off this coin, I think it is plain that they must gain the difference, as well as the money-jobbers. But it may be answered, that having given gold for silver at the rate of the mint, they have given value for what they have received. Very right; but so did Sir Hans Sloane, when he paid five guineas for an overgrown toad: he got value for his money; but it was value only to himself. Just so, whenever the English government shall be obliged to restore the proportion of the metals, (as they must do) this operation will annihilate that imaginary value which they have hitherto set upon gold; which imagination is the only thing which renders the exchange of their silver against the foreign gold equal.

But it is farther objected, that foreigners cannot carry off the heavy silver; because there is none to carry off. Very true; but then I say they have carried off a great quantity already: or if the English Jews have been too sharp to allow such a profit to fall to strangers, (which may or may not have been the case) then I say that this disorder is an effectual stop to any more coinage of silver for circulation.

CHAP. VIII. Of the disorder in the British coin, so far as it affects the value of the pound sterling currency.

Two legal pounds sterling in England.

From what has been said, it is evident, that there must be found in England two legal pounds sterling, of different values; the one worth 113 grains of fine gold, the other worth 1718.7 grains of fine silver. I call them different; because these two portions of the precious metals are of different values all over Europe.

And several others, in consequence of the wearing of the coin.

569But besides these two different pounds sterling, which the change in the proportion of the metals have created, the other defects of the circulating coin produce similar effects. The guineas coined by all the Princes since K. Charles II. have been of the same standard weight and fineness, 44½ in a pound troy of standard gold ¹¹⁄₁₂ fine: these have been constantly wearing ever since they have been coined; and in proportion to their wearing they are of less value.

If, therefore, the new guineas are below the value of a pound sterling in silver, standard weight, the old must be of less value still. Here then is another currency, that is, another pound sterling; or indeed more properly speaking, there are as many different pounds sterling as there are guineas of different weights. This is not all; the money-jobbers having carried off all the weighty silver, that which is worn with use, and reduced even below the standard of gold, forms one currency more, and totally destroys all determinate proportion between the money-unit and the currencies which are supposed to represent it.

Why any silver coin remains in England.

It may be asked, how, at this rate, any silver at all has remained in England? I answer, that the few weighty shillings which still remain in circulation, have marvellously escaped the hands of the money-jobbers; and as for the rest, the rubbing and wearing of these pieces has done what the slate might have done; that is to say, it has reduced them to their due proportion with the lightest gold.