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 melted 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.
[Sidenote: 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.
Footnote R:
This was writ in Germany, _anno_ 1759, when I was not well informed of
certain facts, and it is not worth while to make any alterations, as
it is only a supposition.
[Sidenote: 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.
[Sidenote: A demand for exporting bullion.]
II. 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.
[Sidenote: 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.
[Sidenote: 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.
[Sidenote: 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 what
weight, or of what metal. [Sidenote: 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 65_d._ _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.
[Sidenote: 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].
Footnote S:
See table, English coins, N^o. 6, & 7.
[Sidenote: 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 melted 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.
[Sidenote: 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.
[Sidenote: 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 into 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._
[Sidenote: 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.
[Sidenote: And several others, in consequence of the wearing of
the coin.]
But 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.
[Sidenote: 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.
The disorder, therefore, of the English coin has rendered the standard
of a pound sterling quite uncertain. To say that it is 1718.7 grains of
fine silver, is quite ideal. Who are paid in such pounds? To say that it
is 113 grains of pure gold, may also not be true; because there are many
currencies worse than the new guineas.
[Sidenote: Value of a pound sterling current.]
What then is the consequence of all this disorder? What effect has it
upon the current value of a pound sterling? And which way can the value
of that be determined?
[Sidenote: Determined by the operations of trade.]
The operations of trade bring value to an equation, notwithstanding the
greatest irregularities possible, and so in fact a pound sterling has
acquired a determinate value over all the world by the means of foreign
exchange. This is a kind of ideal scale for measuring the British coin,
although it has not all the properties of that described above.
[Sidenote: To the mean value of all the currencies.]
Exchange considers the pound sterling as a value determined according to
the combination of the values of all the different currencies, in
proportion as payments are made in the one or the other; and as debtors
generally take care to pay in the worst species they can, it
consequently follows, that the value of the pound sterling should fall
to that of the lowest currency.
Were there a sufficient quantity of worn gold and silver to acquit all
bills of exchange, the pound sterling would come down to the value of
them; but if the new gold be also necessary for that purpose, the value
of it must be proportionally greater.
All these combinations are liquidated and compensated with one another,
by the operations of trade and exchange: and the pound sterling, which
is so different in itself, becomes thereby, in the eyes of commerce, a
determinate unit, subject however to variations, from which it never can
be exempted.
Here is then the proof of what was said in the end of the first chapter,
that the wearing of one shilling had the effect of contributing towards
the diminution of the value of the pound sterling every where; a
proportion which, at first sight, has the air of a paradox, though, when
it is understood, nothing is more consistent with the ruling principles
of commerce.
[Sidenote: Exchange a good measure for the value of a pound
sterling.]
Exchange, therefore, in my humble opinion, is one of the best measures
for valuing a pound sterling, present currency. Here occurs a question.
Does the great quantity of paper money in England tend to diminish the
value of the pound sterling?
[Sidenote: The use of paper money not hurtful in debasing the
standard.]
I answer (according to my weak conceptions) in the negative. _Paper
money_ is just as good as gold or silver money, and no better. The
variation of the standard, we have already said, and I think proved,
must influence the interests of debtors and creditors proportionally
every where. From this it follows, that all augmentation of the value of
the money-unit in the specie must hurt the debtors in the paper money;
and all diminutions on the other hand must hurt the creditors in the
paper money, as well as every where else. The payments, therefore, made
in paper money, never can contribute to the regulation of the standard
of the pound sterling; it is the specie received in liquidation of that
paper money which alone can contribute to mark the value of the British
unit; because it is affixed to nothing else.
[Sidenote: The pound sterling not regulated by statute, but by the
mean value of the current money.]
From this we may draw a principle, _That in countries where the
money-unit is entirely affixed to the coin, the actual value of it is
not according to the legal standard of that coin, but according to the
mean proportion of the actual worth of those currencies in which debts
are paid_.
[Sidenote: Why exchange appears so commonly against England.]
From this we see the reason why the exchange between England and all the
trading towns in Europe has long appeared so unfavourable. People
calculate the real par, upon the supposition that a pound sterling is
worth 1718.7 grains troy of fine silver, when in fact the currency is
not perhaps worth 1638, the value of a new guinea in silver, at the
market proportion of 1. to 14.5; that is to say, the currency is but
95.3. _per cent._ of the silver standard of the 43d of Elizabeth. No
wonder then if the exchange be thought unfavourable.
[Sidenote: How the market prices of bullion marks the value of the
pound sterling.]
From the principle we have just laid down, we may gather a confirmation
of what we advanced concerning the cause of the advanced price of
bullion in the English market.
When people buy bullion with current money at a determinate price, that
operation, in conjunction with the course of exchange, ought naturally
to mark the actual value of the pound sterling with great exactness.
[Sidenote: Shillings at present weigh no more than 1⁄65 of a pound
troy,]
If therefore the price of standard bullion in the English market, when
no demand is found for the exportation of the metals, that is to say,
when paper is found for paper upon exchange, and when merchants, versed
in these matters, judge exchange (that is remittances) to be at par, if
then, I say, silver bullion cannot be bought at a lower price than 65
pence the ounce, it is evident that this bullion might be bought with 65
pence in shillings, of which 65 might be coined out of the pound troy
English standard silver; since 65 pence per ounce implies 65 shillings
for the 12 ounces or pound troy.
This plainly shews how standard silver bullion should sell for 65 pence
the ounce, in a country where the ounce of standard silver in the coin
is worth no more than 62; and were the market price of bullion to stand
uniformly at 65 _per_ ounce, that would shew the value of the pound
sterling to be tolerably fixed. All the heavy silver coin is now carried
off[T]; because it was intrinsically worth more than the gold it passed
for in currency. The silver therefore which remains is worn down to the
market proportion of the metals, as has been said, that is to say, 20
shillings in silver currency are worth 113 grains of fine gold, at the
proportion of 1 to 14.5 between gold and silver. Now,
as 1 is to 14.5, so is 113 to 1638.
so the 20 shillings current weigh but 1638 grains fine silver, instead
of 1718.7, which they ought to do according to the standard.
Footnote T:
This was writ during last war.
Now let us speak of standard silver, since we are examining how far the
English coin must be worn by use.
[Sidenote: and are worn 4.29 troy grains light of their standard
weight.f]
The pound troy contains 5760 grains. This, according to the standard, is
coined into 62 shillings; consequently, every shilling ought to weigh
92.9 grains. Of such shillings it is impossible that ever standard
bullion should sell at above 62 pence _per_ ounce. If therefore such
bullion sells for 65 _pence_, the shillings with which it is bought must
weigh no more than 88.64 grains standard silver; that is, they must lose
4.29 grains, and are reduced to 1⁄65 of a pound troy.
But it is not necessary that bullion be bought with shillings; no
stipulation of _price_ is ever made farther, than at so many pence
sterling _per_ ounce. Does not this virtually determine the value of
such currency with regard to all the currencies in Europe? Did a
Spaniard, a Frenchman, or a Dutchman, know the exact quantity of silver
bullion which can be bought in the London market for a pound sterling,
would he inform himself any farther as to the intrinsic value of that
money-unit; would he not understand the value of it far better from that
circumstance than by the course of any exchange, since exchange does not
mark the intrinsic value of money, but only the value of that money
transported from one place to another.
The price of bullion, therefore, when it is not influenced by
extraordinary demand (such as for the payment of a balance of trade, or
for making an extraordinary provision of plate) but when it stands at
what every body knows to be meant by the common market price, is a very
tolerable measure of the value of the _actual_ money-standard in any
country.
[Sidenote: A pound sterling worth at present no more than 1638
grains troy fine silver, according to the price of bullion;]
If it be therefore true, that a pound sterling cannot purchase above
1638 grains of fine silver bullion, it will require not a little logic
to prove that it is really, or has been for these many years, worth any
more; notwithstanding that the standard weight of it in England is
regulated by the laws of the kingdom at 1718.7 grains of fine silver.
[Sidenote: and according to the course of exchange,]
If to this valuation of the pound sterling drawn from the price of
bullion, we add the other drawn from the course of exchange; and if by
this we find, that when paper is found for paper upon exchange, a pound
sterling cannot purchase above 1638 grains of fine silver in any country
in Europe, upon these two authorities, I think, we may very safely
conclude (as to the matter of fact at least) that the pound sterling is
not worth more, either in London or in any other trading city, and if
this be the case, it is just worth 20 shillings of 65 to the pound troy.
[Sidenote: shillings coined at 65 in the pound troy, would be in
proportion with the gold,]
If therefore the mint were to coin shillings at that rate, and pay for
silver bullion at the market price, that is, at the rate of 65 pence
_per_ ounce in those new coined shillings, they would be in proportion
to the gold: silver would be carried to the mint equally with gold, and
would be as little subject to be exported or melted down.
It may be inquired in this place, how far the coining the pound troy
into 65 shillings is contrary to the laws of England?
[Sidenote: which shews that the standard has been debased,]
The moment a state pronounces a certain quantity of gold to be worth a
certain quantity of silver, and orders these respective quantities of
each metal to be received as equivalents of each other, and as lawful
money in payments, that moment gold is made a standard as much as
silver. If therefore too small a quantity of gold be ordered or
permitted to be considered as an equivalent for the unit, the silver
standard is from that moment debased; or indeed more properly speaking,
all silver money is from that moment proscribed; for who, from that
time, will ever pay in silver, when he can pay cheaper in gold? Gold,
therefore, by such a law is made the standard, and all declarations to
the contrary are against the matter of fact.
[Sidenote: and that the preserving it where it is, is no new
debasement.]
Were the King, therefore, to coin silver at 65 shillings in the pound,
it is demonstration _that by such an act_ he would commit no
adulteration upon the standard: the adulteration is already committed.
The standard has descended to where it is, by slow degrees, and by the
operation of political causes only, and nothing prevents it from falling
lower, but the standard of the gold coin. Let guineas be now left to
seek their value as they did formerly, and let light silver continue to
go by tale, we shall see the guineas up at 30 shillings in 20 years
time, as was the case in 1695.
[Sidenote: Proof that the standard has been debased by law,]
It is as absurd to say that the standard of Queen Elizabeth has not been
debased by enacting, that the English unit shall be acquited with 113
grains of fine gold, as it would be to affirm that it would not be
debased from what it is at present, by enacting, That a pound of butter
should every where be received in payment for a pound sterling; although
the pound sterling should continue to consist of 3 ounces, 17 penny
weights, and 10 grains of standard silver, according to the statute of
the 43 Elizabeth. I believe in that case most debtors would pay in
butter, and silver would, as at present, acquire a conventional value as
a metal, but would be looked upon no longer as a standard, or as money.
If therefore, by the law of England, a pound sterling must consist of
1718.7 grains troy of fine silver, by the law of England also, 113
grains of gold must be of the same value, but no law can establish that
proportion; consequently, in which ever way a reformation be brought
about, some law must be reversed; consequently, expediency, and not
compliance with law, must be the motive in reforming the abuse.
[Sidenote: and is at present reduced to the value of the gold.]
From what has been said, it is not at all surprising that the pound
sterling should in fact be reduced nearly to the value of the gold.
Whether it ought to be kept at that value is another question; and shall
be examined in its proper place. All that we here decide, is, that
coining the pound troy into 65 shillings would restore the proportion of
the metals, and render both species common in circulation. But restoring
the weight and proportion of the coin is not the difficulty, as I
conjecture, which prevents a reformation of the English coinage.
I have dwelt longer, perhaps, than what was necessary upon this
estimation of the present value of the pound sterling, and in setting
the matter in different lights, have been forced into repetitions. The
importance of that point in the present inquiry must plead my excuse.
------------------------------------------------------------------------
CHAP. IX.
_Historical account of the Variations of the British Coin._
[Sidenote: Purport of this treatise not to dictate, but to
inquire]
The whole purport of this part of my inquiry, is, to examine and
investigate the principles relating to money; to range them in order,
and to render them easily applicable to any combination of circumstances
which may occur. If I have applied my reasoning to the state of the
British coin, it has been with no intention to erect myself as a judge
of the interests of that nation, or with a design to point out to them
what measure is the most expedient to be followed. I am a stranger to
the true state of the question, and I reason only upon suppositions, not
from exact information; upon this footing I intend to proceed.
I shall take a view of every scheme which I think may be proposed as a
remedy against the disorder, and examine all the consequences which can
result from each, according to the influence of the different principles
under which they fall. _Circumstances hid_ from me will nevertheless
work their full effect, and may render the best deduced principles quite
delusive, when, without attending to _them_, we pretend to draw
conclusions.
[Sidenote: how the disorder in the coin may be remedied without
inconveniences,]
We have examined the nature of the disorder of the coin of Great
Britain, and such it certainly is, as demands some reformation. A nation
so justly renowned for knowledge, so thoroughly versed in the arts of
commerce, and so expert in every matter of calculation, cannot be
supposed to be at any loss for a method to remove the cause of the
disorder. The question is not, therefore, how to fix the standard, how
to restore the proportion between the metals in the coin, nor how to
render all the current money of its just weight. But the question is,
how to execute this without incurring greater inconveniences than those
at present felt.
If the smallest change should be made upon the present value of the
pound sterling, the operation is arbitrary; and those who either advise
it or execute it, would be answerable for every consequence. If the
consequences should prove salutary to the nation, the projector will
meet with applause; but if they should be attended with injustice, he
will merit blame; if with perplexity and confusion, he may very possibly
never see himself approved of.
The present disorder has proceeded from neglect on the part of
government; a neglect however which admits of an apology, for reasons
afterwards to be assigned. When an abuse creeps in by degrees, no
particular person can be charged with it: when it is to be corrected,
some person or other must undertake the work; and few are found who
incline to be volunteers in the service of the public, upon an occasion
where the interest of the nation is not clear and evident.
[Sidenote: by making the nation itself choose the remedy.]
The best way therefore to accomplish such a work, is, to put it into the
hands of the nation itself. When the people are fully instructed in the
matter, when the state of the question is laid before them in a clear
light, and stripped of all money-jargon, they will see the natural
consequences of every innovation; and when they have well considered of
them, they may resolve whether they will keep the pound sterling they
have, or whether they will take another.
[Sidenote: If the present standard is departed from, every other
to be pitched upon is arbitrary.]
The question to be determined, is, what the weight of the pound sterling
now is, and what it ought to be. If it be made different from what it is
at present, that operation must be conducted with justice and
impartiality. If a new standard is to be pitched upon, the choice is
quite arbitrary, as has been said; and were any weight to be preferred
to another, the best of any, no doubt, would be the pound troy of
standard silver. This was the pound sterling for many ages, and the most
that can be said for Queen Elizabeth’s act, is, that it is the last
_deliberate_ adulteration by law of the English coin.
The next question is, how to conduct that operation so as to do justice
to every man in the nation in contracts already entred into; how to do
justice to the creditors of Great Britain; how to do justice to Great
Britain with respect to her creditors; how to do all this, I say, and at
the same time to make an innovation upon the present state of the coin.
[Sidenote: People imagine the present standard is the same with
that of Queen Elizabeth.]
Debasing the standard is odious in the opinion of every mortal; and it
seems also to be the opinion of many, that every regulation which shall
not carry the value of a pound sterling, to the value of the silver
appointed to enter into it by the statute of Queen Elizabeth, is a
debasing of it from what it is at present.
In order to cast more light upon the historical part of the English
coinage, I shall here lay together some short observations upon the
state of that question from the reformation to the present time.
[Sidenote: Debasements of the standard during the reformation.]
Henry VIII. and Edward VI. during the violent convulsions of the
reformation, so sophisticated the fineness of the coin, and so curtailed
the weight of it, that all proportion of value was lost.
[Sidenote: Raised by Edward VI.]
This run the whole nation into inextricable confusion, and forced the
ministers of the young King Edward, in 1552, to restore the purity of
the metals, and to raise the weight of the coin in the pound sterling,
from 220 grains troy of fine silver, to which it was then debased, to
1884. Mary reduced it to 1880 grains, at which it stood during her
reign. [Sidenote: Debased by Elizabeth.] From this Elizabeth raised
it in the second year of her reign to 1888 grains; and in the 43d she
passed the famous statute by which it was debased to 1718.7, the present
legal silver standard. [Sidenote: Supported by her successors,]
During the reign of James I. trade began to take root in England; and
this pointed out the necessity of preserving the standard of their money
invariable. The confusions occasioned by the former adulterations left a
strong impression on the minds of the English nation in the succeeding
reigns, a statute which had been preserved without alteration for many
years acquired in time great authority, and the standard continued
constantly attached to the silver. Gold was occasionally coined; but
circulated only under a conventional value, and was not made a legal
money. The interests of trade at last required a more extensive
circulation, and King Charles II. when he first coined guineas,
determined a value for their currency, in order to compass that end: but
very well observing that without fixing the gold at a price below its
true proportion to the silver, there was no possibility of preventing it
from becoming also a standard for the pound sterling, and thereby
introducing a confusion, the guinea was valued no higher than 20
shillings, and allowed to find its own value above that price.
The guinea accordingly fluctuated in its value; sometimes at 22
shillings, which marks the proportion of the metals at 1 to 15.84,
sometimes at 21_s._ 6_d._ which marks the proportion at 1 to 15.6, at
last at 21 shillings, which marks the proportion as 1 to 15.2, and now
it is worth no more than its original statute value, to wit, 20
shillings, which marks the proportion as 1 to 14.5. These conversions
are formed upon the supposition, that in all the variations the
shillings are of the statute weight, and that the guinea circulated
according to the market proportion of the metals; two circumstances
which are by no means to be depended on.
[Sidenote: until it was debased by the clipping after the
revolution.]
About the time of the revolution, silver money had begun to be coined
with the wheel, or fly-press, (which prevented the frauds to which coin
was formerly exposed from clipping and washing) and then the custom of
weighing the current money went into disuse. But as at that time there
were still great quantities of the hammered money remaining, the
clippers profited of the inattention of the public, and fell to work
with the hammered money. The consequence of this was, that those who
were obliged to pay, paid in clipped money; the value of the pound
sterling fell to the rate of the then currency; all weighty coin was
locked up or melted down; the guineas rose to 30 shillings, and 100_l._
sterling, which in silver ought to weigh above 32 pounds troy, did not
commonly exceed one half.
The kingdom at this time was involved in a war, and was annually obliged
to borrow large sums, paid in those pounds sterling currency, which were
worth no more than 2⁄3 of a guinea, or 14 shillings of such currency as
the present of 65 to the pound troy. This is evident, since the guinea
was then worth 30 shillings, or 1½ pound sterling; and that at present
it is worth 21 shillings of 65 to the pound troy.
[Sidenote: Lowndes’s scheme refuted by Locke, the standard raised
to that of Elizabeth, and the consequences of that measure.]
Lowndes contended strongly for having the pound sterling reduced 20 _per
cent._ Locke insisted upon the old standard of Queen Elizabeth: the
latter carried his point. A new coinage was made in 1695, and the
government acquitted a great part of the debts they had contracted from
the revolution (which had been paid them at the value of between ten and
fourteen shillings present currency) at the rate of 20 shillings of the
standard of Queen Elizabeth. This is the matter of fact: whether this
was doing justice to the nation, I leave every man to determine. It must
not however be believed that there was no reason for this extraordinary
step. By the raising of the standard, the state gained considerably upon
the score of taxes, as well as the creditors upon their capitals and
interest; and the nation, which was the principal loser, was pleased;
because their standard was not debased: thus all the three parties were
satisfied.
Upon this coinage in 1695, the coin was once more set upon a solid
footing: all money was of weight, and the pound was rightly attached to
the silver standard. Upon that footing it remained, until the guinea was
made a legal coin, and fixed at its then supposed intrinsic worth: here
is the æra of the present confusion.
[Sidenote: Silver has been rising from the beginning of this
century.]
From the beginning of this century, silver has been rising in its price.
In 1709, the French found it as 1 to 15, in the great coinage, by edict
of the month of May; and so early as 1726, they found the proportion to
be nearly as 1 to 14½, and fixed their coinage accordingly.
[Sidenote: The English standard has been debased by law, since
1726.]
We may therefore conclude, that from 1726, at least, if not several
years before, a pound sterling ought to have been worth at least 118½
grains troy of fine gold, according to the proportion of the silver
standard; and yet from the inattention of government, it has constantly
been suffered to be acquitted with 113. Has not this been a plain
debasement of the standard for near 40 years, which we can ascertain? If
it is at this time restored to where it was, will not that be raising it
from what it is at present?
[Sidenote: The trading interest chiefly to be blamed for this
neglect.]
We have seen, from a deduction of the plainest principles, the utter
impossibility of keeping an unit, which ought to be invariable, attached
at once to the two metals, which are constantly varying between
themselves. To this the state has not attended, nor has it probably been
sufficiently informed of it, by those who were most capable, but least
interested to point out the consequences.
[Sidenote: Debasing the standard chiefly affects permanent
contracts,]
The variations of the standard affect chiefly those who are engaged in
permanent contracts, which is not the case of trading men: the
obligations they contract are in a perpetual fluctuation, and by the
assistance of their pen, they avoid the inconveniences which other
people, who do not calculate, are liable to.
The rising of the value of silver has been all along advantageous to
this class; and it would be still more advantageous to them were
government to allow guineas at this time to seek their own value; as we
shall observe in its proper place. Every thing which tends gradually and
insensibly to debase the value of the money unit, and promote confusion,
is advantageous to merchants. When this debasement proceeds by slow
degrees, it is not to be discovered but by foreign exchange; _because at
home there is no invariable standard for money, as there is for every
other kind of measure_. This shall be proved.
The unit therefore being solely attached to the coin, must vary as it
does.
[Sidenote: and prevents prices from rising as they should do.]
Now the value of the coin has varied imperceptibly; and this is the
reason why people imagine that such variations or debasements of the
standard are not of great consequence. The greatest mistake any person
can labour under! By this imperceptible debasement, prices do not rise
as they ought to do; the ignorant, and those who do not perceive the
gradual diminution, keep to the same nominal prices as formerly, and the
merchants profit in the mean time. Is not this sacrificing the interest
of all the people of England to that of the trading part of it?
The competition between the merchants betrays the secret to the
multitude from time to time; but they ascribe the appearances to a wrong
cause; they think every thing is growing dearer, whereas the reason is,
that price (i. e. coin) is growing lighter: and as this disorder is
always going on, the merchants, being the first informed of the progress
of the decline of the value of the coin, must constantly be in the way
to profit of the ignorance of those who have not the opportunity of
measuring the value of the coin they receive by any standard measure.
This being the case, it is no wonder that the trading part of the nation
has not informed government of a disorder which has brought, by slow
degrees, the pound sterling to about 95 _per cent._ of its former value.
This is a short review of the vicissitudes of the English coin from the
reformation to this day: and it is at the same time an apology for the
neglect of the British administration in a matter of so great
consequence.
------------------------------------------------------------------------
CHAP. X.
_Of the disorder of the British Coin, so far as it affects the
Circulation of Gold and Silver Coin; and of the Consequences of reducing
Guineas to Twenty Shillings._
I must now take notice of the inconveniences which this disorder has
occasioned to the public, and of the consequences which might follow
upon adopting the remedy proposed[U] for removing it, to wit, by fixing
the currency of guineas at 20 shillings, without recoining the silver at
the standard of Elizabeth.
Footnote U:
By Mr. Harris, in his _Essay on Money and Coins_.
[Sidenote: Why silver coin is so scarce.]
The great inconvenience felt by the public is the scarcity of silver
coin, occasioned by the disproportion of the metals. No mortal will
ever, as matters stand, carry silver to be coined; that which is worn by
circulation, is not sufficient, even for changing gold, much less for
all those small payments which, in the course of business, are
absolutely necessary. This being the case, all considerable payments
must be made in guineas; and as there are great numbers of these already
become light by use, all the weighty are picked up, and either exported,
or perhaps frequently melted down: so that, in general, the current
specie of England is not sufficient for the occasions of the nation.
[Sidenote: Consequences of fixing the guinea at 20 shillings, with
regard to circulation,]
The great scarcity of silver coin in England, being evidently occasioned
by the disproportion between the metals in the coin, it has been
proposed to remedy that disorder all at once, by crying down the value
of guineas to 20 shillings, without making a new coinage, or taking any
measures for preventing the horrid consequences which would follow upon
such a step, as matters stand at present. Whoever inclines to read all
that may be said in favour of this operation, may consult Mr. Harris’s
_Essay upon Money and Coins_, Part II. p. 84. et seq.
My intention is not to refute the sentiments of particular people, but
to trace out the principles I have laid down, and to apply them to the
removing such objections as I think either plausible in themselves, or
which may appear plausible to people who do not thoroughly understand
those matters.
I shall then, in the first place, examine what consequence this bringing
down the legal currency of guineas to 20 shillings would have upon
common voluntary circulation; that is to say, buying and selling,
abstracting from unvoluntary circulation which takes place when people
are about to pay, or acquit obligations; two things totally different in
themselves, and which ought carefully to be set asunder.
[Sidenote: will make coin disappear altogether.]
The consequences of reducing guineas to 20 shillings, without a
re-coinage of the silver, will be, 1. To fix the standard of the pound
sterling to the mean proportion of the worn out silver money in present
currency. 2. To make the light guineas, which are below the value of 20
old shillings, to pass by tale for pounds sterling; though intrinsically
not worth the new guineas. 3. To occasion the melting down of all the
new guineas. And 4. When once the coin is brought to consist of nothing
but old unequal pieces, to occasion the heaviest of these to be melted
down in their turn, until at last coin must disappear altogether.
If to supply specie, government shall send silver or gold to be coined
at the mint at the legal standard, the moment it appears, the old
shillings and the light gold will buy it up, and it will be thrown into
the melting pot. This will stop even the melting down of the more
weighty pieces of the old specie; because (by this trade) they will
become more valuable; since in currency they will be an equivalent for
the new specie of full standard weight. No private person surely will
carry either of the metals to the mint, because there they would receive
but 62 shillings or 44½ guineas for their troy pound of the respective
metals, whereas in the market they will get a greater number of old
shillings and guineas to buy, weight for weight, which will serve the
same purpose in circulation.
[Sidenote: How light shillings are bought by weight.]
Let not my reader laugh at the scheme of buying old shillings at the
market by weight. The thing is done every day. For whether I sell my
silver bullion for 65 shillings _per_ pound (paid in shillings, guineas,
or bank-notes) or buy old shillings weight for weight, it is quite the
same thing. The reason why people do not sell the old shillings by the
pound, is only because they are not all of the same weight, although
they be all of the same value in circulation; but they sell their
bullion, as it were, against old worn shillings reduced to a mean
proportion of value; which sale of bullion is virtually buying old
shillings at market by weight. A man, therefore, who can with a pound of
silver bullion buy the value of 65 old shillings, will certainly never
employ it to buy 62 heavy ones from the mint, which are no where worth
more, except in the melting pot. The same is true of the gold.
[Sidenote: Consequences as to circulation with merchants and
bankers.]
I have endeavoured to shew by the plainest arguments, that no silver
coin, the value of which is above the value of any other currency within
the kingdom, can remain in circulation, or can escape the money-jobber
and the melting pot. I think this is a point pretty well agreed on all
hands; because it is the argument made use of against those who propose
to introduce shillings of base metal into circulation, as an expedient
for procuring change for the gold: a scheme so entirely repugnant to all
the principles of money, that I have taken no notice of it.
[Sidenote: That guineas would still pass current for 21
shillings:]
If, therefore, it be true, that the shillings are really worth no more
than 1⁄21 of a guinea, what effect would the law, reducing guineas to 20
shillings, have as to merchants? Guineas would pass as before with every
banker in London for 21 shillings, and 21 shillings for a guinea.
[Sidenote: That the standard would be affixed to the light silver,
as it was in 1695:]
But as we suppose no new coinage set on foot, and that the light silver
would continue to pass current by tale, as at present, what security
would there be for the pound sterling not falling every year lower? The
standard would then be entirely affixed to the old silver; and no man
would pay in guineas at 20 shillings, any more than he will now pay in
silver of standard weight. The only expedient then to obtain coin would
be, to allow guineas to seek their own value. Upon this they would rise
to 21 shillings, which is their intrinsic worth. In this case, would not
the shillings, by becoming lighter, become of less value in proportion
to the guinea? Was not this the case 1695? Did not this abuse raise the
price of guineas, and proportionally debase the worth of the pound
sterling?
[Sidenote: That merchants would gain by it;]
As every thing, therefore, which gradually debases the standard, must be
advantageous to those who can avail themselves of it, so the making gold
a merchandize, while the bulk of the nation has no standard to measure
it with, must be advantageous to those who have a sure one, to wit, the
foreign exchange.
[Sidenote: debtors would be ruined.]
Besides the evident tendency such a measure would have to debase the
standard, below the present value, it would be accompanied with the most
ruinous consequences to all the class of debtors. I shall beg leave to
state an example. A person is debtor, I shall suppose, for a great sum,
100,000_l._ his creditor demands payment. He offers guineas at the
current and conventional value of 21 shillings, the creditor refuses the
offer; he offers bank notes, refused: it is no excuse to say that
100,000_l._ of silver coin cannot be picked up; he who owes must find
it. The creditor tells him that the mint is open. Here the debtor is
obliged either to part with his guineas at 20 shillings value, or to
carry silver, which costs him 65 shillings the pound troy, to the mint,
and to pay it to his creditor at the rate of 62. There would be still
some consolation, if, from such a hard necessity, the state were to be
provided with weighty coin; but that is not the consequence. The
creditor is no sooner paid in silver, than he throws his coin into the
melting pot, and then sends the bullion to market to be sold at 65 pence
the ounce in bank notes.
[Sidenote: Consequences as to the bank.]
He next goes to the bank, and demands payment of his notes, It is not to
be supposed that there is old worn silver enough there to pay all the
notes in circulation. The bank must be in the same situation with every
debtor, it must send silver to the mint; not as perhaps at present to be
afterwards exported, or to furnish work for the mint and then to be
melted down again, but to acquit the notes which it had issued in lieu
of light silver, or guineas at 21 shillings. The creditor melts down his
new silver again, sells it as bullion for bank notes as before, and
returns upon the hank with a new demand.
[Sidenote: Reducing guineas to 20 shillings, is the same as making
them a commodity.]
It is the same thing as to this last supposition, whether the guineas be
left as merchandize to seek their value, or be fixed at 20 shillings;
for no man upon earth will give a heavy guinea for 20 shillings present
currency; and if debtors were obliged to pay at that rate, the hardship
would be exactly the same as in the foregoing supposition; for the
difference in paying with heavy silver or with good guineas at 20
shillings, is no more than that of 1718.7 to 1719.9; a guinea, which
weighs 118½ grains fine gold, being worth 1719.9 grains of fine silver,
according to the proportion of 1 to 14½, and a pound sterling, according
to statute, is worth no more than 1718.7 grains of the same metal.
We may therefore conclude, that the scheme of reducing guineas to 20
shillings must proceed upon the supposition of a new coinage of all the
silver: without this, the same confusion as to the coin would remain as
formerly; a new disproportion of the metals would take place; no body
would pay in gold, as at present no body will pay in silver.
------------------------------------------------------------------------
CHAP. XI.
_Method of restoring the Money-unit to the Standard of Elizabeth, and
the Consequences of that Revolution._
[Sidenote: How to fix the pound sterling at the standard of Queen
Elizabeth.]
I come now to the proposal of restoring the standard to that of the
statute of Elizabeth, which is in other words the same with what has
been proposed in bringing down the guineas to 20 shillings; only that it
implies a new coinage of all the silver specie and of all the old gold.
Nothing is more easy than to execute this reformation.
I. The first step is to order all coin, gold and silver, coined
preceeding a certain year, to pass by weight only.
II. To preserve the mint price of silver as formerly, at 5 _s._ 2 _d._
the ounce, and to fix that of gold at 3 _l._ 14 _s._ 2¼ _d._
III. To order the pound troy standard silver to be coined as formerly,
into 62 shillings, and the pound of gold into 44½ guineas.
IV. And last of all, to order these guineas to pass for 20 shillings.
Thus the standard is restored to the value of the silver by the statute
of Elizabeth, the metals are put at within a mere trifle of the
proportion of 1 to 14½: all the coin in the kingdom is brought to
standard weight: no profit will be found in melting or exporting one
species preferably to another: exchange will answer, when at par, to the
real par (when rightly calculated) of either silver or gold, with
nations, such as France, who observe the same proportions: and the pound
sterling will remain attached to both the gold and silver, as before.
[Sidenote: The consequences of this reformation will be to raise
the standard 5 _per cent._]
The consequences of this reformation will be, that the pound sterling
will be raised from 1638 grains fine silver (the value of the present
worn silver currency) to 1718.7; and from 113 grains fine gold (the
present gold currency) to 118.644; that is to say, the value of the
pound sterling will be raised upon both species 4.9 _per cent._ above
the value of the present. This all creditors will gain, and all debtors
will lose. From the day of the regulation, the exchange upon all the
places in Europe will rise 4.9 _per cent._ in favour of England, and
every man who is abroad, and who draws for the rents of his estate, will
yearly gain 4.9 _per cent._ upon his draughts or remittances made to
him. Whether prices in England will fall in proportion I do not know;
one thing is pretty certain, that every article bought for foreign
exportation will fall; for this good reason, that merchants will not be
the dupe of this innovation, nor will they buy with heavy money at the
same rate they were in use to buy with light. Justice will be done to
all gentlemen whose ancestors let their lands in the reign of Queen
Elizabeth, or at any time since, when gold and silver were at the
proportion of 1 to 14½, and when the silver coin was at its standard
weight. All taxes imposed by pounds, shillings, and pence, will be
raised; all those imposed at so much _per cent._ of the value will stand
the same, but will appear to sink in the denomination; that is, they
will produce as much value, but fewer pounds, shillings, and pence, than
before. The nation will lose 4.9 _per cent._ upon the whole capital and
interest of the public debts; this the creditors will gain. The bank
will gain in its quality of creditor upon the public, and will lose
(together with all the bankers in England) 4.9 _per cent._ upon all
their circulating paper. All annuitants, landlords, and creditors of
every denomination, whose contracts are under 30 years standing, will
gain. All debtors, mortgagors, tenants, whose contracts are of a fresher
date, will lose. All merchandize whatsoever ought to fall 4.9 _per
cent._ in its value; and every farthing any thing falls less in its
price is lost to the consumers.
These are some of the most evident consequences which must result from
this plan of reformation, and the nation is the best judge how far they
will contribute to her advantage.
Either this reasoning is just, or all the principles I have laid down
are false from the beginning.
[Sidenote: Every interest in a nation equally entitled to
protection,]
A wise nation, I apprehend, is actuated by a spirit of justice. Every
class, every denomination of inhabitants is equally entitled to the
protection of a good government. Whatever step of administration can
profit one set of men, to the detriment of another, is ill combined:
whatever step can do justice to one set of men who have wrongfully
suffered loss, to the detriment of another who have unjustly gained, is
well combined. Upon these principles it is impossible to approve of the
operation we have described. It is a political hodge-podge: it is, as it
were, throwing all the interests of Great Britain into a bag, and
drawing them as in a lottery.
[Sidenote: Those who suffer by the debasement of the standard,]
We must, therefore, enter into a more particular examination of those
opposite and jarring interests; we must inquire into the interests which
have suffered, and which continue to suffer, from the actual debasement
of the standard, and into those which must suffer upon a restitution of
it according to the plan proposed. When we are informed concerning the
sufferers, we shall easily perceive who must be the gainers.
Those who suffer by the debasement of the standard, are
_1mo._ Every person who is creditor in a contract entered into before
the debasement of the standard.
_2do._ In proportion as the disorder in the coin continues, and as the
currency becomes lighter, every man who sells to merchants is a loser.
In a trading nation such as England, it is not possible that any
currency can long sustain itself by virtue of the stamp, at a higher
value than its intrinsic worth. Whoever therefore, from a habit of
selling any particular merchandize, continues to consider a currency
which is daily becoming lighter as remaining at the same value, is
deceived in his dealings by every man who is instructed in the matter of
fact.
[Sidenote: ought only to benefit by the restitution,]
Those, I think, are the only persons who are really losers by the
debasement of the standard, and who have a right to be redressed.
I must not omit however, to mention another set of people infinitely
more considerable than both, who think fit to rank themselves in this
class, without having the smallest pretension to enter into it.
These are such who would be gainers, were the government of England to
restore the standard upon the supposition that justice required it,
without giving themselves the trouble to examine into the merits of that
important question.
[Sidenote: and not the whole class of creditors,]
Of this class are all the public creditors, all enjoying any salary,
pension, or pay whatsoever for personal service; all annuitants,
landlords, &c. In short, every man in the kingdom, so far as he is a
creditor upon any public or private interest.
But to this class I must beg leave to put a question: What title has any
person to receive in payment one grain of silver or gold more than he
had stipulated from his debtor at the time of contracting, because the
government of Great Britain thinks proper to make a new regulation with
respect to their coin? If it be true that every man has a right to
complain of the _debasement_ of the standard so far as he is thereby
defrauded of that weight of the fine metals which he was entitled to
receive, surely every man has a right to complain of the _rising_ of the
standard, who thereby becomes obliged to repay more weight of the fine
metals than ever he received value for.
In justice and in common sense, the raising of the standard of the coin
ought never to be allowed to benefit any person but those who have been
unjustly sufferers by the debasement of it, nor ought it ever to be
prejudicial to any person but to such as by the debasement have been
unjustly gainers.
[Sidenote: whose claim ought to be liable to a conversion,]
In every contrast where neither of the parties can produce any palpable
loss sustained by the former debasement of the standard, the alteration
ought to have no manner of effect. All debts of whatever kind, ought to
be liable to a fair conversion, as much as those contracted in guilders,
florins, livres, &c. when they come to be paid in pounds sterling. The
old and the new standards are not the same, because they carry the same
denominations of value, any more than a piastre is a pound, because they
begin with the same letter.
All the world must agree that the standard of queen Elizabeth is
debased, and that a pound sterling is no longer worth 1718.7 grains troy
fine silver. Every body must also agree that were the standard restored,
merchandize of every kind ought to fall in value.
[Sidenote: according to justice and impartiality.]
If therefore, after the restitution, a person who has merchandize to
buy, shall have the privilege to proportion his price according to the
change of money, why should another who is a debtor be in a worse
situation? Why should permanent contracts be obligatory according to
language, and momentary contracts, such as sale, be obligatory according
to things?
Two people hire each a servant, the one stipulates to pay twenty guineas
wages, the other stipulates twenty-one pounds sterling: the standard is
in a short time after restored in the manner we have been describing;
can any thing be more absurd, than that he who stipulated the twenty
guineas, shall be quit after the restitution, on paying the twenty
guineas as before, and that he who stipulated the twenty-one pounds
sterling, shall be obliged to pay twenty-one guineas?
What pretension therefore can any man who is possessed of a salary, an
annuity, or of a bond or other security for a sum due to him by another,
have to be paid the same number of pounds sterling stipulated at first,
when the pound comes to be increased in its intrinsic value 5 per cent.
above the value it had when the obligation was contracted?
------------------------------------------------------------------------
CHAP. XII.
_Objections stated against the Principles laid down in this Inquiry, and
Answers to them._
I hope it will be remarked, that I do not pretend that the coining the
pound troy standard silver into 65 shillings, or the making a new
coinage upon the old footing of 62, reducing the guineas to 20
shillings, and then allowing conversions from the old to the new
standard at a deduction of 5 per cent. upon permanent contracts formerly
entred into, is not a manifest debasement of the value of the pound
sterling, from what it was while affixed to the silver according to the
statute of Elizabeth. All I pretend to allege is, that neither of these
operations (which are nearly the same thing) would be a debasement of
the present value of the pound sterling, or of what it has been worth
for these thirty years past at least.
But as this opinion is by no means generally adopted, I must now do
justice to its adversaries, and set before the reader the several
objections which may be opposed to it.
[Sidenote: That a pound will always be considered as a pound.]
_OBJECTION_ I. That the force of habit is so strong in uniting the ideas
of value to the denominations of coin, that a pound sterling, whether it
be raised or no, will always carry along with it the same measure of
value: that merchandize will not sink in price according to the due
proportion of the rise: that if conversions are suffered, the confusion
will be endless; and that in the main, the diminution thereby operated
upon the _numerary_, will turn out a real diminution upon the
_intrinsic_ value.
[Sidenote: That the standard is not debased at present, being
affixed to the statute not to the coin.]
_OBJ._ II. That the disorder in the proportion of the coin, and the
wearing and lightness of the currency are not a real debasement of the
standard. That the money-unit preserves its intrinsic value, in virtue
of the statute of Elizabeth which establishes it. That it is false to
allege that the English standard is solely affixed to the coin, or that
it has no invariable measure to be compared with. That the pound
sterling is really fixed to that statute not to the coin; and therefore
that no variation of the coin, but only a variation of that statute, can
change the standard.
[Sidenote: That the pound sterling is virtually worth 1718.7
grains fine silver.]
_OBJ._ III. That the pound sterling is still virtually, and in many
respects worth the silver statute of Elizabeth, although traders in
bills of exchange, and jobbers in the metals may make it appear
otherwise. That consequently a new regulation either by the coinage of
silver at 65 shillings in the pound troy, or by admitting deductions of
5 per cent. upon the old standard, on pretence that a pound sterling is
worth no more at present than 1638 grains of fine silver, is not
preserving the standard at what it has been these thirty years, but
really a debasement of it from the present value.
[Sidenote: That these principles imply a progressive debasement of
the standard every new coinage.]
_OBJ._ IV. That if the rubbing and wearing of the coin be said to debase
the standard in spite of all statutes, and if every new coinage is to be
regulated by the weight of the former grown light, in order to support
the actual value of the money-unit, it is plain, that in time that unit
must be reduced to nothing.
[Sidenote: That the same argument holds for debasing the standard
measures of weights, capacity, &c.]
_OBJ._ V. That were the measures in common use, by wear and by
fraudulent practices, rendred less than the standard measures kept in
the exchequer, it would appear manifestly absurd, for that reason, to
diminish these standard measures. That for the same reason, while the
statute of Elizabeth subsists, it would be equally absurd to diminish
the silver standard of the pound sterling.
[Sidenote: That the wearing of the coin falls on them who possess
it at the crying down, but does not debase the standard.]
_OBJ._ VI. That debasing the standard by law is violently invading every
man’s property; that when the coin is debased by circulation, the loss
only falls upon him who happens to be in possession of any part of it at
the time it is cried down.
[Sidenote: That inland dealings, not the price of bullion, or
course of exchange, regulate the standard.]
_OBJ._ VII. That although merchants and money-jobbers may consider the
value of a pound sterling according to its weight of silver or of gold;
and although exchange and the price of bullion may make it appear to be
at present of no greater value than 113 grains of fine gold, and 1638
grains of fine silver; yet still in inland dealings it is worth its
standard weight, to wit, 1718.7 grains of silver; because the
inhabitants of England never consider their money by its weight, but by
tale. The currency by tale regards the standard, as currency by weight
regards the coins themselves.
That the quantity of money which goes abroad, or even the quantity of
foreign dealings, is so inconsiderable, when compared with domestic
circulation, that the value foreigners put upon English money can but
very little affect the value of it in the country.
[Sidenote: That public currency supports the value of the coin.]
_OBJ._ VIII. That the coin, though light, being received by the King in
all the public offices for its value, keeps up that value to the
standard, notwithstanding its being under the weight.
[Sidenote: That this scheme is the same with that of Lowndes.]
_OBJ._ IX. That the scheme proposed is the same with that proposed by
Lowndes in 1695, so fully refuted by Mr. Locke, and rejected by the
decision of the nation on a parallel occasion.
[Sidenote: Answers to these objections.]
In order to leave nothing unsaid which can tend to set this matter in a
clear light, I shall briefly give an answer to all these objections, in
the most distinct manner I am capable of. I have gathered them from
every quarter, particularly from Mr. Harris. I have endeavoured to state
them in all their force, and I shall answer them with candor, according
to the principles laid down, and according to uncontroverted matters of
fact.
[Sidenote: That a pound will be considered at its worth by all
debtors, and those who buy.]
_ANSWER TO OBJECTION_ I. Here I reply, that no habit any people can
contract, is strong enough to blind them with regard to their interest.
Nothing is so familiar in many countries, as to raise and sink
arbitrarily the numerary value of the several denominations of coins;
but no sooner is the change made, than it becomes familiar, even to the
children of twelve and fourteen years old; and any person who has had
occasion to travel, must have been astonished at the acuteness of the
common people in their knowledge of the value of coins. The habit of
uniting ideas to old pounds sterling will, upon a restitution of the
standard only, be found in the heads of sellers and creditors; buyers
and debtors will very quickly learn to profit of a deduction of 5 _per
cent._ provided they are legally authorised to do it. It will greatly
depend upon government to oblige commodities to follow the just
proportion of their worth, by making conversions of the taxes, new
regulations of assize, for bread, beer, &c. and by putting into the
hands of the people convenient tables for that purpose. When the thing
is once understood, the execution will be easy.
[Sidenote: If the standard was affixed to the statute, people
would be obliged to pay by weight.]
_ANSW._ II. Could it be made out that the standard of the pound sterling
is affixed to the statute of Elizabeth, and not to the coin, this
objection would be invincible. But were the matter so, the payment of
all obligations might be exacted by weight of silver; because the
statute regulates nothing else. A man owes me a thousand pounds, he
makes me a legal offer of silver or gold coin to the current value, were
the standard affixed to that statute, I should have the privilege to
refuse both the current species, if light or ill proportioned, and
demand of him to weigh me down 1718700 grains of fine silver, or 1858060
grains weight of the nation’s silver coin.
As this is not the case, the standard is not affixed to the statute of
Elizabeth; consequently, not affixed to an invariable measure;
consequently, must vary according as the coin varies, to which alone it
is by law attached.
[Sidenote: No body can be obliged to pay 1718.7 grains of fine
silver for a pound sterling.]
_ANSW._ III. That if it is said, that the pound sterling is in any case
of the value of 1718.7 grains of fine silver, I am entitled to ask who
can force any man in Great Britain to pay him at that rate? But if it be
true on the contrary, that there is not any pound sterling due within
that kingdom which may not be legally acquitted with 113 grains of fine
gold, or with 1638 grains of fine silver, then I am authorised to state
the present value of the pound sterling at that rate. If this be the
case, then the addition of one grain of silver or of gold more, in a new
coinage, necessarily implies a raising of the standard.
[Sidenote: That it is not the regulation of the mint, but the
disorder of the coin which must debase the standard.]
_ANSW._ IV. This objection lies against the rubbing of the coin, not
against the regulation of the mint. I have frequently observed, that it
is the rubbing of the coin which of itself debases the standard, in
spite of the statute as it stands, but not in spite of what it might be.
There is no doubt, that as long as any nation permits her current coin
to pass below the standard weight, by virtue of the stamp, she by that
neglect, opens a door to the debasement of the standard, and totally
disappoints that part of the statute which regulates the weight;
consequently the act of making a new coinage afterwards, at the then
debased value, is not of itself a new debasement.
The new coinage, in that case, is a temporary interruption put to the
circulation of coin unequally worn, which is what occasions, more than
any thing, the progressive debasement of the standard; but it is no new
debasement in itself, nor is it any preservative against debasements for
the future.
If it be not provided by statute, that debtors shall make good the
weight of the coin with which they pay, in one way or other, of
necessity the state must either go on regularly debasing her standard
every new coinage, or be obliged to raise it by jerks, to the detriment
of all the debtors who have contracted during the preceding debasement.
[Sidenote: That people are obliged to measure by the standard
weight, but are not obliged to pay by the standard pound.]
_ANSW._ V. The comparison between the standard weights in the exchequer,
with the standard of the pound sterling, is not just. If a merchant
offers me grain, bullion, or cloth, by a measure which is not of the
legal content, weight, or length, I may refuse it. I have even an action
against him for fraudulent dealing, in case I shall have unwarily
accepted of the merchandize. But I cannot reclaim (as has been said) the
measure of the money-unit according to the statute.
Now let me suppose, that for 40 years no access could be got to the
standard measures of the exchequer, that during this time all the
measures of the nation should be debased; that notwithstanding this, the
landlords over all England should continue to stipulate their rents in
grain, by the debased bushel of their respective counties: if after 40
years of such confusion, the exchequer should be opened, and all
measures fitted to the standards, would it not be a horrid piece of
injustice not to allow both landlords and farmers who had entred into
leases within the 40 years, the liberty of converting their rents from
the _debased_ to the _standard_ bushel.
[Sidenote: That the loss upon light money when called in does not
fall upon the possessors.]
_ANSW._ VI. This objection proceeds entirely on the supposition, that it
is the _altering the statute_, and not the _rubbing of the coin_, or the
_changing the proportion of the market price of the metals_ which
debases the standard.
Were that proposition true, the consequence drawn from it would be true
also, to wit, that the loss by the wearing of the coin remains entirely
suspended until the worn coin is all at once cried down. But if I can
prove, that the wearing of the coin does not fall upon the person in
whose hands it is found when cried down, except only so far as it
happens to be below the mean weight of the whole currency, or so far as
the person is a debtor, and unjustly obliged, by an arbitrary law, to
pay what he had received in light, with heavy coin. If this, I say, be
true, I hope it will follow, that there is not the least force in this
objection. This consequence is plain.
It is certain, that by the wearing of the coin there is a loss incurred
by somebody; if it be proved that it is not incurred by the person in
whose hands the light coin is found when cried down, it must follow,
that it has already fallen proportionally upon those who, in the mean
time, have been considering it as of the standard value, while it has
been really below it.
Here follows the proof of this proposition.
I shall suppose the silver coin of Great Britain is actually so worn as
to be 5 _per cent._ lighter than its standard weight at a medium. If at
that time the silver is ordered to be recoined of the standard weight, I
say the currency, after the coinage, will be 5 _per cent._ better than
before. Ought not then all merchandize to fall 5 _per cent._ in value
upon this revolution.
Two men (A) and (B) have, the day before the calling in of the light
specie, each a thousand pounds sterling of it in tale; (A) goes to
market and buys corn with his thousand pounds, (B) keeps his coin, and
next day is obliged to carry it to the mint, where he sells it at 5 _per
cent._ discount; that is, for nine hundred and fifty pounds of new heavy
silver coin. (B) after this operation goes to market; and finding grain
fallen in the price 5 _per cent._ he with his nine hundred and fifty
pounds, buys just as much as (A) had bought the day before with his
thousand pounds. I ask what loss (B) has suffered in carrying his silver
to the mint?
But if we suppose the thousand pounds in silver tale money, which (B)
had, to be worn more than at the rate of 5 _per cent._ then he would
lose all the difference; because the price of things would fall only
according to the general proportion of the rise upon the value of the
currency: but on the other hand, he would gain upon the supposition that
his thousand pounds should happen to be less worn than the 5 _per cent._
Can any thing, therefore, be more absurd, than to appoint by law, that
one, who shall at this time happen to be indebted for a thousand pounds,
shall be obliged to pay this thousand pounds in heavy money, when he had
borrowed it in light.
We have seen how (B) in buying corn with nine hundred and fifty pounds
of the new coin, got as much as (A) had got the day before with his
thousand. But suppose they had both bought grain the day before the
crying down of the coin, (A) with his money, (B) with a note payable
next day, how absurd must any law be, which should oblige (B), for one
day’s credit, to pay at the rate of 5 _per cent._ increase of price; and
this because of the accident of calling in of the money: an event he
could neither foresee or prevent.
We may, therefore, conclude, that while the coin of a nation is upon the
decline from the standard value of the unit (as it ought to be preserved
by some invariable measure) those only through whose hands it
circulates, lose upon what they have, in proportion to the debasement of
the standard, while the coin remains in their hands.
[Sidenote: That inland dealings cannot support the standard where
there are money-jobbers or foreign commerce.]
_ANSW._ VII. It has been said, and I think proved, that in a trading
nation, such as England is, nothing can long support the value of the
money-unit (while affixed entirely to the coin, and while coinage is
free) above the intrinsic value of the metals contained in it. I must
now shew how the operations of foreign trade have the effect of
regulating the value of the currency, in the hands even of those who
consider coin merely as money of accompt; who give it and receive it by
tale; and who never attend to the circumstances of weight, or proportion
between the metals.
The price of commodities, in a trading nation, is not settled by private
convention, but by market prices. Foreign markets regulate the price of
grain, which regulates, in a great measure, that of every other thing;
and the price of grain is regulated by the value which other nations pay
for the pound sterling, by which the grain is bought. If, therefore, the
lightness of the coin debases the value of the pound sterling in foreign
markets, it must, for the same reason, raise the price of the grain
bought with these pounds sterling; because the value of the pound
sterling has no influence upon the value of grain abroad. The domestic
competition between the merchants in the buying of the grain at home,
informs the farmers of its value abroad; and they, without combination
of circumstances, esteem it and sell it for inland consumption, at a
value proportioned to what it bears in foreign markets; that is to say,
proportioned to the actual value of the coin. Thus English farmers,
although in buying and selling they do not attend to the weight of the
coin, regulate their prices exactly as if they did.
I ask, What is meant by this expression, _that the lightness of the
coins is no ways considered in any of our internal dealings with one
another. Currency by tale refers only to the legal standard, as currency
by weight doth to the coins themselves_? (Essay upon money, Part 2d, p.
79.) Will a person who considers his light shilling as a standard coin,
buy more with it than if he considered it by its weight? Will any man in
England sell cheaper to a porter, who never considered his shilling
farther than to look at the King’s head, than he would to a Jew, who has
had his shilling in a scale, and who knows to the fraction of a grain
what it weighs? Which way, therefore, (in a trading nation) can money
possibly be worth more than its weight? I comprehend very well how one
shilling may be better than another to a money-jobber; but I cannot
conceive how any shilling whatever, which passes by tale, be it light or
weighty, can ever be worth more than according to the mean weight of the
present currency. People, therefore, who know nothing of the value of
money, may lose by giving away their heavy coin; but I cannot see how
ever they can gain in their inland dealings, or how they can ever
circulate their light coin for more than the value of the present
currency.
We may, therefore, lay down the following principles: _1mo_, That, in a
trading nation such as Great Britain, where coinage is free, the value
of tale-money is exactly in proportion to the mean weight of the whole
currency. _2do_, That the money-unit being only affixed to the coin, is
exactly in proportion to its weight. _3tio_, That when the intrinsic
value of all the coin is not in the exact proportion of its
denomination, the operations of trade will strike the average, or mean
proportional. _4to_, That when this is done, those who pay by tale, in
coin which is worth more than the mean proportion, are really losers;
and those who pay by tale in coin below that value, are really gainers,
whether they know it or not.
[Sidenote: That public currency supports the authority of the
coin, not the value of the pound sterling.]
_ANSW._ VIII. The authority given to coin, by its being every where
received in the King’s offices, is entirely confined to its currency,
and not to its value. The consequence of its being received at the
exchequer according to tale; makes coin which is not worth a pound
sterling pass as if it were so. This debases the value of the pound, but
gives no additional value to the coin. Is not this debasing the standard
by authority, since it may oblige a creditor who lent 100 _l._ to accept
of 95⁄100 of the value, as a legal payment.
The pounds sterling paid into the exchequer are no better, nor will they
buy more of any commodity, than the worst pound sterling that ever came
out of the hands of a money-jobber; and therefore contribute nothing to
keep up the value of the coin. Merchants who know the value of coin, are
those who regulate prices; and the public sale of one hundredth, nay of
one thousandth part of a commodity sold by retail through all the
nation, is sufficient to regulate the price of it every where. If this
be true, to suppose that a pound sterling being regulated by statute,
can add any thing to its value; or that my right is left unviolated,
when I have been every day for these forty years giving my pound for
what I ought to buy for 19 shillings of Queen Elizabeth’s standard, is
as ideal a representation of the value of right as any thing I have ever
heard.
If it be said, that this right implies a title to be indemnified by a
reformation, or a restitution of the standard, for the loss I have
sustained by the gradual debasement of it: I reply, that a state must
examine the nature of my claim, and do me justice, without all doubt;
but it does not follow as a consequence, that because a creditor in an
old contract has been a loser by his debtor, that therefore all the
creditors in the nation should share in the benefit of his restitution,
at the expence of debtors, from whom they have suffered no loss.
[Sidenote: That the scheme is similar to, tho’ not the same with
that of Lowndes.]
_ANSW._ IX. I own the scheme proposed is pretty much the same with that
proposed by Mr. Lowndes; and I must here give a satisfactory answer how
a project so solidly refuted in 1695, can possibly be eligible in 1760.
[Sidenote: Lowndes reasoned upon wrong principles;]
First then, I say, that the question was not then understood. Mr.
Lowndes put it upon a wrong issue, and supported his argument upon wrong
principles. He insisted, that his scheme implied no debasement of the
former standard. He ascribed the rise of the price of bullion to the
rise of the intrinsic value of silver, and not to the lightness of the
coin with which it was bought. He always supposed, that the stamp, and
not the substance, made the currency. A light shilling and a heavy one
were both shillings, according to him. He proposed reducing the weight
of the silver coin 20 _per cent._ below the standard of Elizabeth,
because he was ashamed to propose more; but a reduction of 33 _per
cent._ or rather 50, would hardly have brought the pound sterling to the
mean value of the silver currency at that time.
[Sidenote: Locke attended to supporting the standard, without
attending to the consequences.]
Mr. Locke, on the other hand, supposed the whole dispute to rest upon
one point, to wit, Whether or not Mr. Lowndes’s scheme implied a
debasement of the standard? He reasoned upon sound principles, and with
good sense; but he did not turn his attention to the only object which
fixes ours at present, to wit, the interests of those who are engaged in
permanent contracts.
Mr. Lowndes’s great argument for reducing the standard was, that silver
bullion was risen to 6 _s._ 5 _d._ _per_ ounce, (_that is, that it might
have been bought with 77 pence of shillings of 1⁄77 part of a pound
troy_) and therefore he was of opinion, that the pound troy should be
coined into 77 shillings; which was diminishing the value of the pound
sterling about 20 _per cent._ or 1⁄5. Mr. Locke answered him very well,
that the 77 pence were paid in clipped money, and that those 77 pence
were not in weight above 62 pence standard coin. This answer is quite
satisfactory. But I ask, whether Mr. Locke would have been of opinion
that any man who had borrowed 1000 _l._ sterling in this clipped money,
ought to have been obliged, upon a reformation of the standard, to pay
back 1000 _l._ sterling in standard weight? These gentlemen, Mr. Lowndes
and Mr. Locke, examined very slightly the influence which altering the
standard might have upon the interest of debtors and creditors; which is
the only consideration that makes the reformation difficult to adjust at
present. So great an influence in every political matter has the change
of circumstances! Credit then was little known; consequently the mass of
debts in England was small: now it is universally established, and the
mass of debts active and passive is very great, and forms a very
considerable interest in Great Britain.