pounds sterling, (the interest of his English funds) a Dutchman who owes
a thousand pounds sterling in London, buys his bill; must he not pay the
creditor of England, not only the intrinsic value of the bullion
contained in the thousand pounds sterling, but also the difference
between the thousand pounds sterling in coin, and the bullion it
contains, according to the price of it in the London market? This
difference then, received by the proprietor of the English funds, is
clear gain to him, and is no loss to the nation; it is a loss to the
Dutchman.
Farther, every Dutchman who pays his debts to people residing in
England, must suffer the same loss; that is, he must pay the coinage,
which at present the state makes him a present of.
From this I think it is plain, that while the balance of trade is
favourable to England, or at par, all remittances made by foreigners, to
pay their English debts, must pay the coinage.
The operation of this principle has not a little contributed to
facilitate the establishment of the French credit.
[Sidenote: How the imposition of coinage advances the credit of France.]
When France borrows, especially in war time, foreigners can remit to
Paris the money they lend nearly at par with bullion. Then they pay
little or no coinage; and when peace is restored, the coin rising in its
value, they gain annually several _per cent._ upon their draughts for
their interest, to wit, all the advanced value of the coin, at no loss
to France.
[Sidenote: Quest. 4. Is the plan we have proposed effectual towards
preserving the pound sterling invariable?]
QUEST. IV. Is the preserving the pound sterling at the mean value of a
determinate weight of fine gold, and fine silver, a sure method of
realizing the unit of money of accompt, so as to preserve it at all
times invariable?
[Sidenote: Answ. No; but seems to be the best relative to material
money.]
ANSW. I apprehend it is not; although it seems to be the best that can
be devised, upon supposition that the metals are to be made use of, as
the most proper substance for realizing the scale.
I have said, in the beginning of this book, that the use of the scale
was to measure the relative value of things alienable. Now the metals
themselves being of the number of things alienable, and their proportion
of value being nowise determined, but liable to augmentations and
diminutions, as well as that of grain or any other commodity, no scale
which is attached to them can measure any thing but their weight and
fineness, and consequently can be no permanent measure for any thing
else.
[Sidenote: A scale of value realized in metal can never be exact;
because the metal itself varies in its value.]
Did the value of commodities rise and fall with respect to grains of the
fine metals, in the same proportion that they rise and fall with regard
to one another, the scale would be exact: but if the grains of metal can
acquire an increment, and a diminution of value, from circumstances
entirely peculiar to themselves, such circumstances must render the
scale they compose inaccurate in proportion.
[Sidenote: 1. From the manufacturing of it.]
[Sidenote: 2. From the interest of money.]
[Sidenote: 3. From the manners of a people.]
Now we have seen how the imposition of coinage enhances the value of
coin. The rising and sinking of the interest of money has the same
effect. The vicissitudes to which credit is liable has a prodigious
influence upon the value of the metals. The manners even of a people,
which can be determined by no principle, operate the same effect. When
people, for example, are given to hoarding, the metals come to be
demanded with more eagerness, that is, the competition to acquire them
is greater; consequently the value of them with respect to all
commodities, is greater than when they are purely considered as money of
accompt.
[Sidenote: The only exact scale of value is that which can measure the
metals like every other commodity.]
That scale, therefore, is the only just one, which measuring the value
of the metals, like that of every thing else, renders every individual
of a state equally rich, who is proprietor of the same number of
denominations of specie; whether his wealth be in gold, silver, or any
other property or commodity.
[Sidenote: Explanation of this proportion]
Now I agree that, at any given time, this is the case when the scale is
properly attached to the metals; but it is not permanently so. A
determinate property in land bears sometimes a greater, sometimes a less
proportion to a determinate property in money. When the scale is
attached to the metals, he who is proprietor, for instance, of a
thousand denominations in coin, becomes richer or poorer, according to
the fluctuation of the value of that commodity, the metals. Whereas when
the scale is not attached to any species of commodity, nothing can
change his proportion of wealth, except the augmentation or diminution
of the value of the whole state. This idea is not so distinct as I could
wish: let me illustrate it by an example.
[Sidenote: by an example,]
Suppose then three partners (A), (B), (C). They form a common stock by
equal shares; (A) contributes a thousand pounds sterling in current
specie, (B) the same value in corn, (C) a like value in broad cloth. Let
me suppose the measures of these commodities to be expressed by their
proper denominations; the metals by grains, the corn by bushels, the
broad cloth by yards. I suppose that at the end of the year 20 _per
cent._ is gained upon each article of stock; that is, 20 _per cent._
increase upon the grains of metal, 20 _per cent._ on the bushels of
grain, 20 _per cent._ on the yards of broad cloth. This supposition may
be allowed. I ask, if it would not be a much more equal way of dividing
this profit, to reduce the whole value of the grains, bushels, and
yards, to the then actual value in pounds sterling, and so to divide;
than if every man were to take his 20 _per cent._ out of that commodity
he had furnished to the co-partnership? This method of reducing all to a
common measure, is what I understand by an ideal scale of money of
accompt.
[Sidenote: and by an application to the bank of Amsterdam.]
The bank of Amsterdam pays none in either gold or silver coin, or
bullion; consequently it cannot be said, that the florin banco is
attached to the metals. What is it then which determines its value? I
answer, That which it can bring; and what it can bring when turned into
gold or silver, shews the proportion of the metals to every other
commodity whatsoever _at that time_: such and such only is the nature of
an invariable scale.
[Sidenote: How the locking up the coin in that bank renders the value of
it more stable.]
I confess I am not capable of analyzing all the complicated operations
of trade in such a distinct manner as to demonstrate how the universal
circulation of value, over the commercial world, should operate this
effect; and how the burying, as it were, a quantity of gold and silver
in a vault, should give a more invariable worth to a florin, whose value
depends upon it, than if the metal itself was to circulate in coin.
Thus far, however, I think I understand, that the impossibility of
profiting of the _rising_ value of one of the metals (which is buried)
ought to find a compensation at all times in avoiding the loss upon the
other, which sinks in its value.
Farther, the burying the coin both in gold and silver is in a manner
forming these two metals into one mass; this takes away the variation in
the proportion of their value, which principally disturbs the uniformity
of their operation as a scale. They cannot either be considered as
commodities, because they are taken out of commerce entirely; yet the
permanent value of them remains. Upon that the bank money is secured;
but it is not realized in it. In banks which pay in coin the case is
different; because the denominations in their paper are liable to all
the fluctuations incident to the coin in which they pay. The bank money,
therefore, of Amsterdam is pure money of accompt, and has nothing of
merchandize in it from the metals in the vaults. The paper of all banks
which pay, rises and falls in value, according to the currencies in
which their notes are acquitted.
I leave the farther delucidation of this mysterious affair to people of
better capacity, and of more extensive knowledge in those matters than I
can pretend to.
To conclude, no material money, let it be contrived as it will, is
exempted from vicissitudes in its value as a metal. This is proved by
the universal risings and sinkings in the price of commodities, in
consequence of circumstances peculiar to the coin. These risings and
sinkings of prices, I say, are properly risings and sinkings of the
value of the coin, and that again is a lengthening and contracting of
the equal parts of the scale of value which is attached to it. Now there
is no such thing as any vicissitudes in the prices _of all commodities_
with respect to bank money, although nothing is more common than
fluctuations in agio, with respect to current money; consequently, bank
money has a property and a stability in it, which no material money is
capable of acquiring, and for that reason it is preferable to it, and is
properly considered as the thing fixed.
[Sidenote: QUEST. 5. Will not the imposition of coinage in England
frequently stop the mint?]
QUEST. V. Will not the imposition of coinage in England prevent, upon
many occasions, the carrying bullion to be coined at the mint, when it
would be carried were the coinage free?
[Sidenote: ANSW. Certainly; when the balance of trade is unfavourable.]
ANSW. Without all doubt. When coinage is free, every man who imports
bullion runs with it to the mint; there it is proved, cut, and stamped
to his hand, and at no cost. Now to what purpose all this expence; why
carry bullion to be coined, while the balance of trade is against a
nation, since such bullion must be re-exported, together with a part of
the national stock of the metals? Besides, the coining of it gratis,
adds not the smallest value to the metals considered as a manufacture;
consequently, upon the exportation, the whole price of coinage is
entirely lost, and the national stock of coin is not thereby augmented;
nor would it be augmented while trade is unfavourable, were five hundred
mints kept constantly at work.
[Sidenote: But this is an advantage to England which France now enjoys.]
The imposition of coinage, therefore, has these good effects. First, it
prevents bullion from being coined, except when such coined bullion can
remain in the country and augment the national stock of coin. Secondly,
as has been said, it gives an additional value to the coin, even in
foreign countries, and thereby prevents it from being melted down
abroad, in order to be re-coined in other mints, and thus augment the
stock of coin in rival nations.
I believe no body ever imports louis d’ors to be coined in the English
mint (notwithstanding of the benefit there is in importing gold into
England from France, where the proportion of the metals is lower) yet
nothing is more common than to carry guineas to every foreign mint, at
the bare price of bullion. This is the reason why so little English
coin, and so much French coin is found in circulation, in countries
foreign to both these nations.
[Sidenote: The coin of France passes in other nations above its value as
a metal, and returns to France unmelted.]
Louis d’ors, in consequence of the high imposition of coinage in the
French mint, pass current, almost every where, for more than their
intrinsic value, even when compared with the coin of the very nation
where they circulate without the sanction of public authority; and when
that authority regulates their currency, according to their intrinsic
value, such regulation has the same effect as forbidding them
altogether; because the moment a money-jobber lays his hand upon them at
the statute value, he circulates them no more; but sends them either
back to France, or to some country where they pass, by a conventional
value, above their intrinsic worth. Thus louis d’ors, as well as all
French coin, are effectually prevented from being melted down, and so
soon as the balance of the French trade becomes favourable, they return
home.
[Sidenote: QUEST. 6. Is not this return a loss to France?]
QUEST. VI. Is not this return of louis d’ors to France, upon the balance
of their trade becoming favourable, a loss to France; since, in that
case, the balance of their trade is paid with a less weight of bullion
than it would be paid with, were their coin worth no more than bullion;
and secondly, because when the coin is exported to pay the balance, it
is exported upon the footing of bullion, and when it returns it is paid
back at an advanced price?
[Sidenote: Intricacy of this question.]
The difficulty of resolving this question proceeds from the complication
of circumstances in which it is involved; and the intention of proposing
it, is to shew how necessary it is, in practice, to combine every
circumstance in political problems.
[Sidenote: Resolution of it.]
I shall therefore observe, that since, at all times almost, French coin
passes (out of France) for more than its intrinsic value, it is not well
possible to suppose that, even during a wrong balance of the French
trade, their coin can ever fall so low as the price of bullion;
consequently the French by exporting their coin, upon such occasions,
above the value of bullion, that nation is a gainer of all the
difference. This operates a compensation of the loss (if any they
sustain) upon the return of their coin. In the second place, when the
balance becomes favourable for France, and when there is found a profit
in sending back the French coin, the demand that is made for it, by
those who want to pick it up in foreign countries, raises the value of
it there in circulation; this again favours the trade of France, and
makes the difference of paying what one owes to France in bullion at the
market price, or in louis d’ors at the advanced value, very
inconsiderable; which consequently prevents merchants from finding any
great advantage in sending back large quantities of it.
Besides, when the coin returns, although it has an advanced value, it
has no advanced denomination. It was exported according to its numerary
value, and it returns upon the same footing. Farther, when the coin
returns as the price of French merchandize, for the same value it bears
in the country, I cannot discover a principle which can make this appear
to be a loss to France. The loss therefore must be upon the exportation
of the coin, not upon the return of it. But we have said that if it be
exported at a higher value than that of the bullion it contains, this
must imply a profit to France. Consequently, the remainder of loss upon
exportation must be apparent, not real: It is a loss to Frenchmen, who,
in exporting the coin below the full value of it (coinage included) lose
a part of what they had paid the King for the coinage; that is to say,
they lose it so far as they do not draw it back _in full_ from the
foreigners to whom they owe; [Sidenote: It is no loss to France.] but it
is no loss to France: on the contrary, it is a gain, as far as any part
of the coinage is drawn back; and this is the case as oft as the coin is
exported above the price of bullion.
[Sidenote: Another view of this question.]
Or in another view. This going out and returning of the French coin, may
be considered as a loss to France in this respect, that when the balance
of her trade is against her, when her coin loses of its advanced value
in payments made to strangers for the price of foreign commodities,
those who consume such commodities in France, must consume them at an
advanced price to themselves, but at no additional profit to foreign
suppliers; because as to these last, the French coin, with which we
suppose the commodities to be paid, having lost of its value every
where, cannot then purchase so much as at another time, and consequently
is not worth so much to the foreign supplier who receives it. For the
better understanding of what has been here said, attention is to be had
to the difference there is between a _national_ loss, and the loss
sustained by the individuals in a nation. The balance of trade is the
national profit, or the national loss; but the gains or losses of
individuals, may be compatible with either a right or a wrong balance of
the trade of the nation to which they belong. This will be fully
explained when we come to treat of exchange.
In this respect, therefore, France may be supposed to lose upon
exporting her coin, to wit, so far as she consumes foreign commodities
at an advanced value; but then I say, that in this case France loses the
whole price of the commodities, not the advanced price only; because she
loses the balance of her trade. Abstracted from that, I say she loses
nothing. Who loses then the advanced price? I answer, the consumer of
the commodity loses it, and I say that no body gains it. This is what,
in the eighth chapter of the second book, was called positive loss, and
it is owing to the annihilation of a part of the advanced value of the
coin, which the operations of commerce have effectuated.
In these respects only can France be considered as a loser upon
exporting her coin; but in having it returned upon her, when at an
advanced price above bullion, the loss is nothing; because the advanced
price then is a real value added to the coin, and there is no manner of
difference as to France, to receive, for the balance of her trade, an
hundred pounds weight of her own louis d’ors, or an hundred and eight
pounds of standard gold bullion, at such times as bullion is commonly
carried to the mint; because the one and the other weight of coin and
bullion will answer the same occasions both in the Paris market, and in
most trading towns in Europe.
From these principles we may gather how effectually the imposition of
coinage must prevent the melting down of the coin, providing a
sufficient attention is had to preserve the denominations of the coin in
both species at the exact proportion of the market price of the metals.
[Sidenote: QUEST. 7. If by over-rating gold, the English lose their
silver, Why should not France, by over-rating silver, lose
their gold?]
QUEST. VII. The two metals being only valued by one another, if the
English, by valuing the gold higher than the French do, occasion the
exportation of their silver, why should not the French, by valuing their
silver higher than the English do, occasion thereby the exportation of
their gold? And if the English, by over-rating their gold, prevent the
carrying silver to be coined at their mint, why should not the French by
over-rating their silver prevent the carrying gold to be coined in their
mint?
[Sidenote: ANSW. Because the English rate their gold above the value of
it in _their own market_, the French do not so with their
silver.]
ANSW. The English over-rate their gold not only with respect to other
nations, but with respect to the value of it in their own market;
whereas the French preserve, in their gold and silver coins, nearly the
proportion between the metals as they are sold in their own market.
In France no body can profit by melting down either of the species, in
order to sell it, with advantage, as bullion; but in England, by melting
the heavy silver coin, one may sell it in London for more gold than the
same coin not melted can purchase.
But here it is objected, that although the proportion between gold and
silver, in the English coin, were set upon a par with that of the metals
in the London market, still one species may be exported with profit,
providing the proportion be different in other nations.
There is little force in this objection, and were there any, it would be
an additional argument for the imposition of coinage; because by this
the exportation of either of the species, for the sake of any small
difference which may sometimes be found between the proportion of the
metals in the different markets of Europe, would be prevented. This
circumstance however requires a more particular examination.
It is a principle in commerce, that the demand for any commodity raises
the value of it; and every nation knows how to profit of a demand for
what they have.
[Sidenote: How the proportion of the metals is kept nearly the same in
all European markets.]
Whenever, therefore, one of the metals bears an under value in one
nation, below what it bears in another, that under value makes that
species more demanded by strangers, and it consequently rises in its
value, even at home.
[Sidenote: Because when home demand disturbs the proportion, foreign
trade brings it even again.]
By this principle the proportion between the metals in European markets
is kept nearly the same, and the small difference which is found does
not so much proceed from the demand of foreign trade, as from the taste
of the inhabitants. The foreign demand tends to set the proportion even
in all markets, and the internal demand for one metal preferably to
another, is what makes it vary.
The carrying the metals backwards and forwards is attended with risque
and expence; there is not, therefore, so much danger of a nation’s being
stripped of one of its species of current coin by such a trade, as there
is when the proportion of the market price of the metals is different,
at home, from that observed in the coin; because in the last case, every
one may profit of the disproportion, at the trifling expence of melting
down the rising species.
[Sidenote: Coin of gold and silver should be proportioned to the rate of
the market at home,]
From this we may conclude, that nations ought to regulate the proportion
of the metals in their coin, according to the market price of them at
home, without regard to what it is found to be in other nations; because
they may be assured, that the moment any difference in the market price
shall begin to be profited of, that very demand will alter the
proportion, and raise the market price of the metal sought for by
foreigners. While the coin, therefore, is kept at the proportion of the
market at home, and while the denominations of both species are made to
keep pace with it, it will be utterly impossible for any nation to hurt
another by any such traffic in the metals.
[Sidenote: and nations cannot fix that proportion by any convention
among themselves.]
We may farther conclude, that it is to no purpose for nations to agree
by treaty upon a certain proportion between silver and gold in their
coins: it is the several market prices every where which alone can
regulate that proportion, and the only method to keep matters even
between them, is to make the denominations in both species keep an equal
pace with the price of the metals in their own market.
[Sidenote: Why is the proportion of the metals so different in England
and Asia?]
Here it is farther objected, that were these principles just, there
would not be found so great a disproportion as there actually is,
between the value of gold and silver in Europe, and in the empire of
China.
To this I answer, that the principles are just, and that this difference
proceeds from incidental circumstances which I shall now point out.
[Sidenote: Answer to this.]
First then, the European trade hardly penetrates into that vast empire.
2. The lowness of the proportion between gold and silver is maintained
by the high internal demand for silver in China. 3. The India trade
being every where in the hands of companies, there is not so great a
competition between the sellers of silver, in the Chinese market, as if
that trade were open to every private adventurer; consequently the price
of it is not so liable to be diminished. And last of all, the expence of
carrying silver thither, and the long lying out of the interest, would
put a stop to the trade, were the proportion between the metals to rise
in China. This prevents competition still more between the different
European companies, and consequently prevents the rising of the
proportion.
I need not observe, I suppose, that the term _rising of the proportion_,
denotes the rising of the price of silver; as when being at that of 1 to
10, it comes, for example, to that of 1 to 11. This term has been
already explained.
[Sidenote: QUEST. 8. Is it the interest of Princes to debase the
standard of their coin?]
QUEST. VIII. Is it the interest of Princes to debase the standard of
their coin?
ANSW. This question has been already touched upon in the twelfth chapter
of the first part. Perhaps some farther observations upon it may not be
found superfluous.
In order to set it in a fair light, I shall begin by reducing it to its
ruling principle.
The question turning entirely upon the _interest_ of Princes, I shall
take no notice of the iniquity of such a measure with respect to their
subjects; but shall confine it purely to the _interest_ they may have in
exercising this branch of prerogative.
[Sidenote: ANSW. It is their immediate interest to debase it when they
are debtors, and to raise it when creditors, but always
unjust.]
I answer then, as I have hinted above, that it is their _interest_ to
debase the standard of their coin when they are in the situation of
debtors; and it is their _interest_ to raise the standard when they are
in the situation of creditors.
Debasing the standard I have explained to be the diminution of the
intrinsic value of the unit below what it was before, either by raising
the denomination, augmenting the alloy, or diminishing the weight of the
coin.
Now since Princes pay their servants by denominations, that is, by money
of accompt, the more they augment the denomination of the coin they
possess, the more they gain upon what they have at the time. But they
lose proportionally upon their revenue ever after; because the rents and
duties levied on their subjects being also paid by denominations, the
Prince loses every year on his income what he had gained upon one
operation.
From this we may draw a principle, that Kings who have begun to debase
the standard, ought to go regularly on every year, as long as they find
themselves in the state of debtors; and when they come to alter their
situation, and become of the class of creditors, it is then their
interest to raise the standard. This must be a little further explained.
[Sidenote: Who are debtors and who creditors, and how Princes who
incline to rob their subjects may avoid robbing themselves at
the same time.]
It has been abundantly proved, that increasing the denomination, or
debasing the standard, must constantly be advantageous to the whole
class of debtors; consequently, Princes, who are upon certain occasions
obliged to lay out more than they receive, may then be considered as
being of that class. Whoever receives from another what the other is
obliged to pay him, may be considered as a creditor; whoever gives to
another what the other is intitled to demand of him, may be considered
as a debtor. Those, therefore, who both pay and receive, are, upon the
whole, either debtor or creditor, according to the side which
preponderates. He who is obliged annually to pay more than he annually
receives, must be obliged either to run in debt, to borrow, or to take
from a fund already formed (a treasure). The maxim therefore is, first
to fill the exchequer with the annual income; then to debase the
standard; and last of all to pay. The debts paid, and the current
expence brought within the income; then is the time to raise the
standard. This operation is like that of the ram; he runs back in order
to advance again with more force.
[Sidenote: Example of a Prince who is now employing this engine against
his enemies, not his subjects.]
The great master of government and political oeconomy well understands
this doctrine. He is now spending his treasure, not his income. He is
then in the state of the debtors, and accordingly is regularly every
year debasing the standard of the S——n coin. This debasement, I suppose,
regularly takes place after the contributions for the year are paid. So
soon as the war is over, and that this oeconomical Prince shall return
to the state of creditor, he will, I suppose, suppress the currency of
all this bad money, and restore the standard. That is to say, he has
during the war been ruining all the class of creditors in permanent
contracts (the S——n nobility) and when the peace is re-established their
own Prince may indemnify them, if he pleases, by restoring the former
value of the unit. All sudden revolutions are hurtful; but necessity has
no law[3].
Footnote 3:
Writ in the year 1760.
This, in a few words, is, I think, the answer to the question proposed.
Princes have for several centuries, in almost every nation in Europe,
been gradually debasing the standard of their money-unit; and the debts
they have contracted during the debasement have constantly been an
argument against the restoring it. But had they first regulated all
their debts upon the footing of the last debasement, stipulating with
their creditors that they were to be paid upon the footing of the then
currency, that is to say, according to the French stile, _au cours du
jour_ of the stipulation; they then might, without any advantage to
their creditors, and with great profit to themselves, have restored the
standard, and so prepared the means of executing the same operation as
before, upon a new emergency.
[Sidenote: Writers against this practice have used wrong arguments to
dissuade Princes from it.]
Those who have writ against this practice of debasing the standard, have
made use of wrong arguments to dissuade Princes from following such a
measure. They have first represented it as hurtful to their own
interest. This we have seen is not always true. They have also
endeavoured to prove that it is vastly prejudicial to commerce. This is
the great point laboured by Dutot, in his _Reflexions Politiques sur le
Commerce_; but to very little purpose. All the facts and arguments he
has produced to prove (by the source of exchange) that the variations
made in France in the standard value of their crown of three livres did
hurt to the trade of that nation, prove nothing at all, as it would be
easy to shew, were this a proper place. The hurt done to manufactures is
greater; but, in a trading nation, those establishments being under the
influence and direction of merchants, who are perfectly instructed as to
every consequence of such alterations, the manufacturers, after a very
short time, raise their prices to the full proportion of the increase in
the denomination of the coin.
[Sidenote: The proper arguments against it are three.]
The real inconveniencies which proceed from this exercise of power, may
be reduced to three.
[Sidenote: 1. It disturbs the ideas of a people with regard to value.]
1_mo_, It disturbs the ideas of a whole nation with regard to value, and
gives an advantage in all bargains, to those of the society who can
calculate, over those who cannot.
[Sidenote: 2. It either robs the class of debtors or of creditors.]
2_do_, It robs the whole class of debtors when the standard is raised;
and it robs the whole class of creditors when it is debased.
[Sidenote: 3. It ruins credit.]
3_tio_, It ruins credit; because no man will borrow or lend, in a
country where he cannot be sure of receiving back the value of his loan;
or of being in a capacity of clearing himself by paying back the value
he had borrowed.
[Sidenote: This last circumstance will probably put an end to the
practice.]
This last circumstance has overturned the whole scheme in France.
Princes would go on debasing their standard as formerly, could they do
it and preserve their credit. But who will lend a shilling to a Prince
if he suspects he will pay him back, perhaps, with sixpence? The Prince
above mentioned does not borrow; and as he is the only one in this
situation, he may debase his standard: but others cannot venture upon
such a step.
[Sidenote: Quest. 9. What is the best form to be given to coin?]
QUEST. IX. What is the best form to be given to coin?
[Sidenote: Difference between medals and coins.]
ANSW. The intention of coinage, _for circulation_, being to ascertain
the quantity of the fine metals in every piece, and not to represent the
effigies of the sovereign, we see a manifest difference every where
between the impressions struck upon medals, and those of the current
coin: in the first, the head is raised, in the last, it is purposely
made flat.
[Sidenote: Of indenting the impression.]
Antiently, the impression put upon some of the English coins was a
cross; which being indented upon the penny, instead of being raised,
occasioned these pieces frequently to be broken into four parts. This is
said to have given rise to the denomination of farthings, or fourth
parts. The indenting the impression upon the coin, is no doubt a
preservative against its wearing; but as it is liable to other
inconveniences, and is so repugnant to custom, it would be ridiculous,
perhaps, to propose it.
I shall reduce, therefore, all I have to propose as a supplement to what
has been said already on this subject, to a very few observations.
[Sidenote: The less the surface, the wearing is the less.]
1_mo_, The less surface any piece has in proportion to its mass, the
less it is worn in circulation; and as all coin is made cylindrical,
that whose form approaches nearest to the cylinder, whose height is
equal to its diameter, must have the least. Coin therefore ought to be
made thick, and for this reason louis d’ors are of a better form than
guineas, and guineas of a far better form than ducats. Were it easy to
give the surface a spheroidal form on both sides, rendring the coin
thicker in the middle than at the edges, the surface would be thereby a
little more diminished.
[Sidenote: The advantage of heavy pieces for the greater part of the
coin; yet small denominations are useful, in some cases, for
preventing the rise of prices.]
2_do_, The great credit of paper in England, is a vast advantage in many
respects. It renders coin less necessary. While that credit subsists,
large payments will always be made in paper; and this renders the
coinage of gold in large heavy pieces less necessary. The coin,
therefore, in England, ought to be calculated for the easy changing of
bank notes, not with a view to the making great payments in it. For this
purpose, two and three pound pieces might be full as convenient as
single guineas, and half guineas might be proscribed. Small
denominations of gold coin lead to expence, and tend to raise the prices
of such commodities as people of fashion pay immediately out of their
own pockets. As for the silver, the same principles are to be observed.
Crown pieces are very convenient in payments, and have a great advantage
over shillings and sixpences in point of surface. The practice in France
of coining the greatest part of their silver in such pieces abundantly
shews how few of the lesser denominations (that is shillings, &c.) are
necessary for carrying on circulation.
[Sidenote: Mixt metal better than copper for small denominations, as
appears from the practice in Germany.]
3_tio_, The copper coin of England is exceedingly bulky, in order to
give it an intrinsic value. This makes many people ashamed to carry it;
consequently increases expence, and raises the price of many things for
the reason already given.
What inconveniency could there possibly be in making pence of a mixed
metal of a much lower standard than the other coin. The coin would be
less bulky, and the intrinsic value might be preserved. This is the
custom all over Germany. The lower denominations of the coin are all of
different fineness. The standard for what they call the _gros_; the 7,
the 10, the 17, the 20 creutzer pieces, are all of different fineness;
but still in the same sum, in whatever coin it is paid, according to the
laws, there ought to be found the same quantity of fine silver. This
enables them to coin pieces of very small denominations which have
however the same intrinsic value with the other denominations of the
coin, and which are neither of an unwieldy bulk, or of an inconvenient
smallness. This is the regulation in Germany: I do not say that the
regulation is well observed.
Farthings of copper are good and convenient; a few of these ought always
to be preserved in favour of the lower classes of the people, who
thereby are enabled to keep down the prices of the small necessaries of
life: a matter of the greatest importance to a trading nation.
Nations ought to copy from one another what is good and convenient, and
should be above the thraldom of little prejudices in favour of
established customs, which have frequently nothing but custom to
recommend them.
[Sidenote: Mixed metal never to be bagged up with fine.]
4_to_, It must be observed that upon adopting the German regulation as
to pence, such coin must not be allowed to be put up in bags of coin
delivered by weight; nor made a legal tender beyond the value of the
lowest silver coin.
------------------------------------------------------------------------
CHAP. VII.
_Of the Regulations observed in France, with regard to Coin, Bullion,
and Plate._
It now only remains, that I lay before the reader what I have been able
to gather, upon good authority, concerning the regulations in some of
the principal nations of Europe, with regard to their mint: and this so
far only as is necessary for illustrating our subject, and confirming
the principles we have been laying down.
[Sidenote: The marc is the unit of French weight at the mint.]
The unit of weight in the French mint, is the _Marc_; composed of eight
ounces, every ounce containing 576 grains. The marc consequently
contains 4608 grains of Paris weight, called _poids de marc_.
[Sidenote: The remedy of weight upon silver what.]
By this weight the bullion is delivered to, and the coin is taken from
the workmen in the mint, to whom the King gives an allowance of 36
grains upon the weight of every marc of coin delivered. This allowance
is called _le remede de poids_.
A marc therefore of French silver coin, is not to be reckoned at 4608
grains, but at 4572 grains effective.
[Sidenote: The standard of fineness is 11 fine to 1 alloy.]
The _Titre_ or title, as the French call it, or the standard of their
silver coin, is 11 parts fine to 1 part alloy. At this rate we shall
find in this _Marc_ of coin, consisting of 4572 grains standard silver,
4191 grains of fine silver, and 381 grains of alloy.
[Sidenote: Remedy of alloy what.]
But the workmen have also an allowance of 3 grains upon the fineness,
which introduces a new equation.
The mass of silver in the French mint (when we speak of the fineness) is
supposed to be divided into 12 deniers, and every denier into 24 grains;
which, in this acceptation, are both denominations of proportion, not of
weight.
Any mass of silver, therefore, of whatever weight, must be supposed to
contain 12 × 24 = 288 grains of proportion; consequently, were the
standard exactly 11 deniers fine, the proportion would be marked thus,
264 grains fine, to 24 alloy; but since there is an allowance of 3
grains of proportion, called _le remede d’alloy_, this brings the
proportion to be as 261 is to 27. This is the exact standard of French
silver coin, and answers to 10 deniers and 21 grains fine, which is the
term used in the mint.
To find, therefore, the number of grains of fine silver in a marc of the
French silver coin, we must state this proportion, 288 : 261 :: 4572 :
4143.38.
[Sidenote: Quantity of fine silver in a marc, as delivered at the mint.]
The marc, therefore, of coined silver, after all deductions for alloy,
and for _remede de poids_, contains of fine silver 4143.38 grains _poids
de marc_.
[Sidenote: Into what coined.]
This _marc_ is coined into 8 great crowns and 3⁄10 of a crown, value in
the coin 49 livres, 16 sols.
If therefore 4143.38 grains of fine silver, be worth 49 livres 16 sols,
4608 grains (or a marc of fine silver) will be worth 55 livres 6 sols 9
deniers.
[Sidenote: Mint price of a marc of fine silver.]
But the mint price of fine silver is 51 livres 3 sols 3 deniers.
The difference, therefore, between the mint price of fine silver, and
the price of it in the coin, will shew exactly the expence of coinage;
consequently there is withheld for the expence of coinage and duty of
seignorage (all which deductions and impositions are called _le trait
des monnoyes_) 4 livres 3 sols 6 deniers upon every marc of fine silver.
To know how much this makes _per cent._ state it thus,
51.162 : 55.38 :: 100 : 108.2.
[Sidenote: The price of coinage 8⅕ per cent. upon silver.]
So that in France there is 8.2 _per cent._ deducted upon the coinage of
silver, as has been said. Let us next examine the regulations as to the
gold.
[Sidenote: Remedy of weight upon gold.]
The marc, as above, is the unit of weight for the gold, and contains, as
has been said, 4608 grains, of which 15 grains are allowed to the
workmen for the _Remede de poids_: remains of standard gold in the marc
4593 grains.
[Sidenote: The fineness of standard gold.]
The fineness is reckoned by carats (not a weight, but a denomination of
proportion) for the gold, as the denier is for the silver. Fine gold is
said to be, as in England, of 24 carats. The carat is divided into 32
parts, so 32 × 24 = 768, are the parts into which any given mass of gold
is supposed to be divided, when we speak of the standard fineness.
[Sidenote: The remedy of alloy upon gold.]
The standard of French gold is the same with that of silver, to wit,
11⁄12, or 22 carats fine. Upon this the workmen are allowed 12⁄32 parts
of a carat, for the _Remede d’alloy_; which reduces the standard to
210⁄32 carats fine, to 12⁄32 carats alloy. This expressed according to
the division above mentioned, stands thus, 692 parts fine to 76 alloy.
To find, therefore, the number of grains of fine gold in a marc of the
coin, we must state the following analogy.
768 : 692 :: 4593 : 4138.48.
[Sidenote: The marc into what coined.]
The marc of gold coin therefore contains, after all deductions, 4138.48
grains of fine gold.
This marc is coined into 30 louis d’ors of 24 livres each, value in all
720 livres.
If therefore 4138.48 grains of fine gold be worth in the coin 720
livres, the marc of fine gold, or 4608 grains, will be worth 801 livres
12 sols.
[Sidenote: Mint price of a marc of fine gold.]
But the mint price of fine gold is 740 livres 9 sols 1 denier.
The difference, therefore, between the mint price of fine gold, and the
worth of it in the coin, (viz. 61 livres 3 sols 2 deniers) will shew
exactly the price of coinage.
If we ask how much this makes _per cent._ we may state it thus,
740.409 : 801.68 :: 100 : 108.2.
[Sidenote: The price of coinage 8⅕ per cent. upon gold.]
So in France there are 8.2 _per cent._ deducted for coinage of the gold.
By the foregoing calculations it appears, that the King takes above 8
_per cent._ upon the coinage both of gold and silver.
[Sidenote: Which no way stops the mint.]
For many years past there have been no violent methods used to bring
bullion to the mint, and yet we see, by the dates upon the French coin,
what great quantities have been struck both of gold and silver. This is
a most convincing proof, I think, that the imposition of coinage, when
properly laid on, is no interruption to the mint; and being a matter of
fact well determined, is a confirmation of that principle.
[Sidenote: Of the proportion of the metals.]
Let us next examine the proportion between the value of the metals, both
in the coin and at the mint.
For this purpose we must compare the mint prices in one equation, and
the value of the gold and silver coin in another.
[Sidenote: How to discover it.]
At the mint, a marc of fine silver is paid 51.162 livres, and a marc of
fine gold 740.409 livres; consequently 51.162 : 740.409 :: 1 : 14.47.
A marc of fine silver, in the coin, is worth 55.38 livres; a marc of
fine gold, in the coin, is worth 801.68 livres. We may therefore state
thus, 55.38 : 801.68 :: 1 : 14.47.
[Sidenote: The proportion is as 1 to 14.47.]
The proportion, therefore, both at the mint and in the coin is the same;
and is nearly as the French writers state it, to wit, as 1 is to 149⁄19,
but more exactly as 1 to 14.47, which is very nearly as 1 to 14.5.
[Sidenote: Gold contained in a louis d’or, and silver in a crown of 6
livres.]
From these computations we find the exact quantity of fine gold in a
louis d’or, and of fine silver in a great crown, or piece of 6 livres.
In the louis d’or there are 137.94 grains fine, and 153.1 standard gold.
In the great crown there are 499.22 fine, and 550.843 standard silver.
[Sidenote: Proportion of a French grain weight to a troy grain.]
Farther, by the most exact calculations I have been able to make, after
comparing the accounts which French writers give of the proportion of
the English troy grain, with the grain of the Paris pound, and the
accounts which English writers give of the proportion of French grains,
with those of the troy pound; and after checking these accounts with the
most accurate trials, by weighing and taking a mean proportion upon all,
I find that a French grain _poids de marc_, is to an English grain troy,
as 121.78 is to 100. See the table. What a shame it is, that such
proportions can only be guessed at by approximations, in the age in
which we live!
To discover, therefore, the number of troy grains of fine gold in a
louis d’or, state thus, 121.78 : 100 :: 137.94 : 113.27.
[Sidenote: Proportion between the louis and the guinea.]
Now a guinea contains 118.651 troy grains of fine gold, and yet, in
almost every country in Europe, the louis d’or, in time of peace, passes
for as much as the guinea, when both are of good weight. This is a
matter of fact well known, and is a confirmation of another principle
which I have laid down, to wit, that the imposition of coinage gives an
advanced value to a nation’s coin, even in foreign countries.
[Sidenote: Of the fineness of French wrought plate.]
The fineness of the French silver wrought into plate, is different from
that of the coin. The fineness of the coin we have said to be 10 deniers
and 21 grains, or 261 parts fine, to 27 alloy; and the value of a marc
of it (when the 36 grains of remedy of weight is deduced) is 49 livres
16 sols, which makes the full marc of 4608 grains to be worth 50 livres
4 sols. The standard of the plate is 110⁄24 deniers, or 274 fine, and 14
alloy. In order, therefore, to find the value of the plate, at the rate
of the coin, state thus, 261 : 50.2 :: 274 : 52.7; consequently silver
plate in France, at the rate of the coin, is worth 52 livres 14 sols.
When goldsmiths sell their plate, they ought regularly to charge, for
the metal, the current price of the market; but as that is constantly
varying, the King, for their encouragement, has fixed the value of the
marc of it at 52 livres, which is only 14 sols per marc below the value
of the coined silver, including the price of coinage. Consequently, were
goldsmiths to melt down the coin in order to make plate of it, they
would lose 14 sols per marc, besides the expence of reducing the melted
coin to the standard of the plate. Goldsmiths, therefore, in France,
will never melt down the coin when they can find bullion in the market,
at the price of 14 sols per marc below the value of the coin; and we
have seen that the price imposed on coinage generally reduces the
bullion to near 8 _per cent._ below coin: but supposing them to melt it
down, there is no loss to the state, because the coinage is already
paid.
[Sidenote: Goldsmiths profit by the imposition on coinage,]
By this regulation, goldsmiths profit by the imposition of coinage;
because the mint price of silver being 8 _per cent._ below the value of
the coin, and that keeping the price of bullion low, goldsmiths gain
upon the sale of their wrought plate, all the difference between the
price they pay for bullion when they make their provision of it, and the
price they are allowed to sell it at when wrought.
Another consequence of this regulation is, that there is no competition
occasioned between the mint and the goldsmiths, to the prejudice of the
latter. No body will carry bullion to the mint while there is the least
demand for it to make it into plate. This consequence is plain.
[Sidenote: And never find the mint in competition with them for the
metals.]
Bullion can never fall lower than mint price; consequently, the mint may
rather be considered as receiving the bullion upon an obligation to pay
a certain price for it, than as demanding it in the market. The smallest
demand, therefore, from the goldsmith, will raise the price of bullion
when it stands at mint price; because he who has it, will never give it
to any body who has occasion for it, without some small advantage above
what the mint must give him for it; but the mint price being fixed, no
competition can come from that quarter, and therefore the advanced price
the goldsmith gives must be very small.
[Sidenote: Advantages of the French regulations.]
Upon the whole, the regulations in France appear (so far as I comprehend
them) admirably well contrived to serve every purpose. They prevent the
melting down and exporting of the coin; they prevent bullion from being
coined, when it cannot remain in the kingdom; they give an advanced
value to that part of the nation’s coin which must be exported for the
payment of the balance of trade; and they recall it home when the
balance becomes favourable. They prove an encouragement to the industry
of goldsmiths; there is a sufficient check put upon their melting down
the specie; and there is no discouragement given to private people from
making plate, because the silver in the plate is sold by the goldsmith,
a small matter below its intrinsic worth when compared with the coin.
The only thing to be reformed is the remedies allowed by the King upon
the weight and fineness; because it tends to perplex calculations, and
is not at all necessary. When exactness can be procured, it ought to be
procured; and as the workmen regularly profit of all the remedies
allowed them, it is a proof that they have no occasion for any
indulgence to make up for their want of dexterity.
I shall make no mention of the duty of _controle_ upon wrought plate.
This I consider as an excise upon a branch of luxury; consequently, the
examination of it belongs to the doctrine of taxation, and is foreign to
that of money.
It has been said above, that the imposition of coinage (occasioning the
coin of France to circulate, almost at all times, above its intrinsic
value as bullion, even in foreign countries) prevented bullion from ever
rising in the Paris market to the price of coin. This principle I also
find confirmed by facts.
[Sidenote: High price of bullion in the Paris market during the year
1760.]
Foreign gold of 22 carats fine, sold in the Paris market (December 13th,
1760) at 712 livres the marc. In order to find the value of the marc of
fine gold, state thus, 22 : 712 :: 24 : 776.7. Now the marc of fine gold
in the coin, we have seen to be 801.12 sols. So at this time, when
France is engaged in a most expensive war, while she is daily exporting
immense quantities of both gold and silver coin, to pay her armies and
subsidies, the price of gold bullion in her market is 24 livres 18 sols
per marc below the value of her coin. Nothing but the advanced value of
her specie in foreign currency, could possibly produce such a
phænomenon. But when she was sending stamped ingots of gold to Russia,
in the month of September last, the price of the gold bullion of 22
carats then rose to 734 livres per marc, which for the marc of fine gold
makes 800 livres 14 sols, which is but 18 sols below the value of the
coin. The reason is plain: the coin sent to Germany, or Holland is
constantly returning to France, or at least may soon return, which
supports the high price of it in these countries; but what was sent to
Russia was plain bullion.
Before I conclude this chapter, I must say a word concerning the wearing
of the French coin by circulation.
[Sidenote: Present state of the wearing of the French silver coin.]
As paper money has no currency in France, by any public authority, all
payments must be made in coin. For this purpose the silver is more
commonly used than the gold; from which I am obliged to conclude, that
the silver must be somewhat over-rated in the coin, above the proportion
of the price of gold in the Paris market; but of this I have no exact
information.
The silver coin is put up in sacs of 200 great crowns, value 1200
livres. This sum on coming out of the mint, weighs, according to the
following equation, 23 marcs 7 ounces 152 grains. State thus, 8.3 great
crowns = 4572 grains standard silver; consequently, 200 = 110168.6 = 23
marcs 7 ounces 152 grains.
These sacs, according to my information, weigh constantly at least 23
marcs 7 ounces, exclusive of the sac; so that the French silver currency
has not, at this time, lost above 152 grains upon the sac of 1200
livres, which is about 137⁄1000 per cent. This is a trifle upon a small
sum; but as no difference, however small, is a trifle upon a large sum,
a limit ought to be set to the farther diminution of the weight of the
currency, which might be accomplished easily, by ordering all sacs of
1200 livres to be made up to the weight of 23 marcs 7 ounces effective,
for the future. This would be, at present, no injury to the public,
there would be a sufficient allowance given for many years circulation
of the coin, and the degradation of it in time coming, would be
effectually prevented.
------------------------------------------------------------------------
CHAP. VIII.
_Of the Regulations observed in Holland, with regard to Coin and
Bullion._
[Sidenote: Present state of the Dutch currency.]
It comes next in order to examine how this matter stands in the states
of the United Provinces, and with this I shall conclude.
We shall here find the question infinitely more involved in
combinations, than hitherto we have found it. We shall find the most
sagacious people in the world, with regard to trade and money,
struggling with all the inconveniencies of an ill regulated coinage, and
an old worn out silver currency; carrying on their reckonings by the
help of agio; weighing their specie; giving allowance for light weight;
buying silver with silver, and gold with gold; as if it were impossible
to bring the value of these metals to an equation; and loading commerce
with an infinity of brokers, Jews, and cashiers, without the aid of
which it is impossible in Holland either to pay or to receive
considerable sums in material money.
It is very true that what must appear an inextricable perplexity to a
stranger, is really none at all to the Dutch. Trade is there so well
reduced to system, and every branch of it so completely furnished with
hands to carry it forward, that the whole goes on mechanically, and
though at a great additional expence to trade in general, yet at none to
the merchant; because he regularly sums up all this extraordinary
expence upon his dealings, before he superadds his own profit upon the
operation. Were therefore all this unnecessary expence avoided, by a
proper regulation of the coin, the consequence would be, to diminish the
price of goods to strangers, as well as to the inhabitants, to leave the
profits upon trade, relative to the merchants, exactly as before; and to
increase, considerably, the trade of the republic, by enabling them to
furnish all commodities to other nations cheaper than they can do, as
matters stand; but were this plan put in execution, the consequence
would also be, to take bread from all those who at present live by the
disorder, which ought to be removed.
Of the regulations in the Dutch mint.
[Sidenote: Regulations in the Dutch mint.]
The unit of weight in the Dutch mint, is the marc _Holland’s troes_, or
gold weight.
[Sidenote: Their unit of weight is the marc Holland’s troes.]
This weight is about 1½ _per cent._ lighter than 8 ounces English
weight, without coming to the most scrupulous exactness.
This marc is divided into 8 ounces; every ounce into 20 engles; every
engle into 32 aces or grains. The ounce therefore contains 640, and the
marc 5120 aces. By this weight, bullion is bought, and the coin is
delivered at the mint, or weighed in circulation, when weighing is
necessary.
[Sidenote: The _remede_ of weight on silver.]
The mint delivers the silver coin by the marc weight; but from the full
weight, there is deducted as a _remedy_, one engles and one ace, or 33
aces: so the marc of the mint, by which they deliver the silver,
contains 5087 aces, in place of 5120.
[Sidenote: The fineness of silver is different in different coins.]
The fineness of the Dutch silver is various, according to the species. I
shall here, for the greater distinctness, take notice only of the
fineness of the florins; because it is the best and the most standard
coin, used in the payments of foreign bills of exchange, leaving the
other varieties of their specie to be considered afterwards.
[Sidenote: Florins are 11⁄12 fine with one grain of remedy.]
By florins I mean (besides the florin pieces) those also of 30 stivers,
and the 3 florin pieces, the standard of which is all the same, to wit,
11⁄12 fine with one grain of remedy.
[Sidenote: How they reckon their silver standard.]
The mass of silver in the Dutch mint, (when we speak of the fineness) is
supposed to be divided into 12 pence, and every penny into 24 grains, as
in France.
Any mass of silver, therefore, of whatever weight, is supposed to be
divided into 288 parts; consequently by 11⁄12 fine with one grain of
remedy, is meant, that there are 263 of these parts _fine_, and the
remaining 25 parts of _alloy_. This is the exact standard of the Dutch
florins.
To find therefore the number of grains of fine silver in the marc
weight, as it is delivered at the mint, we must state this proportion,
288 : 263 :: 5087 : 4645.4.
[Sidenote: Exact quantity of fine silver in a marc weight of Dutch
florins as they come from the mint.]
The marc therefore of coined silver florins, after all deductions for
alloy, and for remedies of weight and of fineness, contains of fine
silver 4645.4 aces Hollands troes.
This marc is ordered to be coined into 237⁄331 florins. If therefore
4645.4 aces of fine silver be worth 237⁄331 or (in decimals, for the
sake of facilitating calculation) 23.2024 florins, then the full marc or
5120 aces of fine silver will be worth 25.572 florins by this analogy,
4645.4 : 23.2024 :: 5120 : 25.572.
[Sidenote: Mint price of fine silver.]
But the mint price of the marc of fine silver is 25.1 florins. The
difference, therefore, between the mint price of fine silver, and the
price of it in the coin, will shew exactly the expence of coinage. State
thus,
The price of a marc of fine silver in the coin _fl._ 25.572
Price of ditto as paid by the mint 25.1
————
Price of coinage 0.472
To know how much this makes _per cent._ state thus,
25.1 : 25.472 :: 100 : 101.48
[Sidenote: Price of coinage in Holland is about 1½ _per cent._ on
silver.]
So that in Holland there is not quite 1½ _per cent._ taken upon the
coinage of silver florins. Let us next examine the regulations as to
gold coin.
[Sidenote: Of the Dutch gold coins.]
There are in Holland two species of gold coins of different weights,
fineness, and denominations, to wit, the _Ducat_ and the _Rider_; we
must therefore examine them separately.
[Sidenote: The ducat has no legal denomination.]
The ducat is what they call a _negotie pfenning_, that is, a coin struck
under the authority of the state, in all the mints, and of a determinate
weight and fineness; but not a legal money in payments, because it has
no _legal_ denomination.
Ducats are delivered by the marc weight as the silver; but there is a
remedy of weight deducted of one engle per marc. So the marc of ducats,
as delivered by the mint, weighs but 5088 aces.
[Sidenote: The fineness 23 carats 8 grains.]
The fineness of the ducats is (as in the empire) of 23 carats 8 grains;
but in Holland they allow one grain of remedy.
[Sidenote: How the fineness is reckoned.]
The standard of the gold is reckoned by carats and grains: 24 carats are
called fine gold, and every carat is divided into 12 grains; so let the
mass of gold be of what weight soever, it is always supposed to contain
288 parts, that is, 12 × 24: at this rate the fineness of ducats is 283
parts fine gold, and 5 parts alloy.
[Sidenote: Fineness of the ducats of the empire.]
The imperial ducats ought to be 284 parts fine, 3 parts silver, and one
part copper, without any remedy; but in Holland the assayers bring the
gold to the fineness of 23 carats and 8 grains; then they suppose that
what remains is all silver, and they take their remedy by adding one
grain of copper. Dutch ducats are therefore something in the fineness,
though nothing in the weight below the regulations of the empire.
[Sidenote: Exact quantity of fine gold in a marc weight of Dutch ducats
as they come from the mint.]
To find the number of grains of fine gold in the marc weight, as it is
delivered from the mint, we must state this proportion,
288 : 283 :: 5088 : 4999.6.
The marc, therefore, of gold coined into ducats, after all deductions
for alloy, and for the remedies of weight and fineness, contains 4999.6
aces of fine gold. This marc is ordered to be coined into 70 ducats.
If, therefore, 4999.6 aces of fine gold, be worth 70 ducats, then the
full marc of 5120 aces of fine gold will be worth 71.687 ducats, by this
proportion, 4999.6 : 70 :: 5120 : 71.687.
[Sidenote: Mint price of fine gold.]
But the mint price of the marc of fine gold is 71 ducats.
The difference, therefore, between the value of a marc of fine gold in
ducats, and the price given by the mint for the same quantity of fine
gold bullion, shews the expence of coinage. State thus,
Price of the marc of fine gold in ducats 71.687 ducats
Mint price of the marc ditto 71
——————
Price of coinage 0.687
To know how much this makes _per cent._ state thus,
71 : 71.687 :: 100 : 100.96.
[Sidenote: Price of coinage upon ducats about 1 per cent.]
So that there is not quite 1 _per cent._ taken in Holland upon the
coinage of their gold ducats.
[Sidenote: The price of coinage upon both species should be the same.]
But upon the silver florins there is (as we have seen) near 1½ _per
cent._ consequently, there is an encouragement of 1½ _per cent._ given
for carrying gold to the mint preferably to silver; which, in my humble
opinion, is ill judged. I allow that the expence of coining a sum in
silver is greater than the expence of coining the same sum in gold; but
I think it is better to allow an additional profit to the mint upon the
gold, than to disturb the equality of intrinsic value which ought to be
contained in the same sum coined in gold and silver. But indeed,
according to the present state of the Dutch mint, this small
irregularity is not much to be minded, as we shall see presently.
[Sidenote: The Rider]
_Riders_ are a coin but lately used in Holland. Formerly, the Dutch had
no legal gold coin, silver was their standard; and ducats as a _negotie
pfenning_ (as they call them) found their own value, having no
determinate legal denomination, as has been said.
[Sidenote: has a legal denomination, and is a lawful tender in payments
to ⅓ of the sum,]
But of late the States have coined this new species of gold, to which
they have given a fixed denomination, and the authority of a legal coin,
to be received in all payments, so far as one third of the sum to be
paid; the other two thirds must be paid in silver: but of this more
afterwards, our present business being to examine the weight,
denomination, and fineness of this species.
[Sidenote: is coined always by the state and for the state; so there can
be no mint price.]
_Riders_ are coined by the State alone, no private persons carrying
bullion to the mint for that purpose; the coinage, therefore, not being
open to the public, it is in vain to seek for a mint price. They are
delivered at the mint by tale, not by weight; so we must inquire into
the statute weight, fineness, and denominations of this species, in
order to discover the quantity of fine gold which is contained in the
florin of this currency: this we shall compare with the florin in the
ducat, and so strike an equation between the florin in this standard
coin, and in the other, which finds its own price, according to the
fluctuation of the metal it is made of.
[Sidenote: Regulations as to the fineness, denomination, and weight of
riders.]
A marc of fine gold struck into riders circulates for 374 florins. This
is the regulation as to the weight.
The standard is exactly 11⁄12 fine, or 22 carats, without any remedy.
The denomination is 14 florins for every rider, the half rider in
proportion. To discover therefore the quantity of fine gold in a rider,
we must first divide 374 by 14, which will give the number of riders in
the marc fine, viz. 26.714 riders; then we must say, if 26.714 riders
contain a marc of fine gold, or 5120 aces, how much will one rider
contain? The answer is 5120⁄26.714 = 191.65.
[Sidenote: Quantity of fine gold in a florin of riders.]
Divide this by 14, and you have the number of aces of fine gold
contained in a florin of this currency, 191.65⁄14 = 13.69.
Here then is the exact weight of the fine gold contained in one florin
of the currency in riders.
[Sidenote: To put the ducat upon a par with riders it should circulate
for 5 florins 4⅛ stivers.]
Let us now examine how much a ducat ought to pass for, in order to be
upon a par with the currency of the riders.
We have seen that a marc of fine gold is coined into 71.687 ducats. That
number of ducats, therefore, to be upon a par with the riders, should be
worth 374 florins. Divide, therefore, this last number by the first, you
have 374⁄71.687 = 5.217 florins, which is a little more than 5 florins
4⅛ stivers.
[Sidenote: Utility of not fixing the denomination of ducats.]
Were the States, therefore, to give a fixed denomination to ducats, they
ought to be put at that value; but the trade of Holland requires that
this coin should be allowed to fluctuate, according to circumstances.
The great demand at present (1761) for _gold_ to send to the armies
preferably to silver, on account of the ease of transportation, has
raised the value of that metal, perhaps ¼ _per cent._ above what it
would otherwise be. If then ¼ _per cent._ be added, it will bring the
ducat to the present current value, to wit, 5.4⅜ florins. If, therefore,
in order to bring the currency of ducats upon a par with the riders,
they were fixed at 5.4⅛ florins, it is very plain, that no more would be
sent away in payment at that rate, because of the present advanced value
of gold; consequently, none would be coined; the mints would be stopped,
and the armies would be paid in guineas and Portugal gold; the melting
and recoining of which keeps all the mints in Holland in constant
occupation.
This, besides employing and giving bread to a number of hands,
multiplies the Dutch currency, at a time when they have so great
occasion for it.
Let us next examine the proportion of the metals in the coin.
[Sidenote: How to find the proportion of the metals in the coin of
Holland, and a wonderful phænomenon in the value of ducats.]
Here we must adhere closely to the regulations of the mint above
mentioned, and only determine what the proportion of the metals would
be, were the coin of Holland, both gold and silver, of standard weight,
and were it the practice to pay for the metals at the mint,
indifferently in either species. But neither of these suppositions are
to be admitted: First, because the silver coin is not of its due weight;
and in the second place, because the mint never buys gold bullion but
with gold coin, nor silver bullion but with silver coin. This is the
infallible consequence of a coinage ill regulated in what relates to the
proportion of the metals, which ought respectively to be put into the
same sum, in the two different species.
It would be endless to examine the proportion of the metals, with
respect to every species of their coin. It would also be incorrect to
examine it as to the ducats; because that species has no fixed legal
denomination; and the proportion of the metals is to be discovered by
the denomination of the coins only.
Ducats pass current among the people for 5 florins 5 stivers; but with
merchants, who buy them as merchandize, their value is continually
varying. At present (September 1761) the new coined ducats brought in
bags from the mint, which never have circulated, are bought for 5
florins 4⅝ stivers; those which have circulated (were it for a day)
fall, from that very circumstance, to 5 florins 4⅜ stivers; which is a
diminution of near ¼ _per cent._ of their value. This phænomenon shall
afterwards be accounted for.
[Sidenote: Were all the coin of full weight, the proportion would be as
1 to 14.62.]
This being the case, we have no method left to judge of the proportion
of the metals in the coin of Holland, but by the proportion of fine gold
and fine silver found in the same sum, paid in florins of full weight,
and in new riders; the one and the other coined according to the
regulations of the mint above mentioned.
It has been shewn that a marc of fine gold in riders, circulates for
_f._ 374, and that a marc of fine silver in florins, circulates for _f._
25.572; divide the first by the last, you have the proportion as 1 to
14.62: But we shall afterward discover a circumstance, not taken notice
of in this place, which will reduce the proportion lower.
[Sidenote: Quantity of fine silver in a florin piece.]
From the above calculations, we may easily discover the exact quantity
of fine silver and fine gold contained in a Dutch florin, whether
realized in silver florin pieces, in gold riders, or in ducats. As this
will be of use when we come to examine the par of exchange, it will not
be amiss to set before the reader, the exact state of that particular
before we proceed. We have said that whoever receives _f._ 25.572 in
silver florins of full weight, receives a marc of fine silver, which
contains 5120 aces. Divide the last sum by the first, you have 200.21
aces of fine silver for the florin.
[Sidenote: Quantity of fine gold in a florin of riders.]
Whoever receives _f._ 374 in gold riders, receives a marc of fine gold,
which contains 5120 aces. Divide the last sum by the first, you have
13.69 aces of fine gold for the florin.
[Sidenote: Investigation of this proportion as to the ducat;]
We have seen that ducats fluctuate in their value, having no legal
denomination, which obliged us to state the current value of a marc of
them at 71.687 ducats, not being able to express that value in florins;
because of the unsettled denomination of that species. Let us now
specify that value in florins, upon three suppositions. The first, that
the ducat is worth what it passes for among the people, to wit, 5_f._
5_st._ The second, at the value of new ducats from the mint, to wit,
5_f._ 4⅜_st._ The last, at the merchant price of good ducats, which have
circulated, to wit, 5_f._ 4⅜_st._
In the first case (the ducat at 5_f._ 5_st._) 71.687 ducats are worth
376.35 florins, this being the value of a marc of fine gold in ducats,
and the marc containing 5120 aces; divide the last by the first, you
have 13.604 aces of fine gold for the florin.
In the second case (the ducat at 5_f._ 4⅝_st._) 71.687 ducats are worth
375.04 florins; by which number divide 5120 as before, you have 13.651
aces of fine gold for the florin.
In the last case (the ducat at 5_f._ 4⅜_st._) 71.687 ducats are worth
374.11; by which number dividing 5120, you have 13.685 aces of fine gold
for the florin, which comes within a trifle of the florin in riders.
[Sidenote: by which it appears that the late war has raised the value of
gold, and set the market price of the metals in Holland at 1
to 14.785.]
But now (in June 1762) I learn, that the course of new ducats from the
mint in the Holland-market, is got up to 5_f._ 5½_st._ In this case,
71.687 ducats are worth 378.1 florins; by which number dividing 5120, as
before, you have 13.541 aces of fine gold for the florin.
If we seek here the proportion between the gold and silver, we must
state thus. If a florin in ducats contain 13.541 aces of fine gold, and
a florin in silver coin contain as above 200.21 aces of fine silver,
then 13.541 : 200.21 :: 1 : 14.785. So the effect of this war has
already been to raise the value of gold 1.12 _per cent._ above what it
was esteemed to be, when the riders were coined.
The proportion as to riders is, as before, 1 to 14.62.
[Sidenote: Which is a rise upon the value of gold of 1.12 per cent.]
The present proportion as to ducats is 1 to 14.785.
14.62 : 100 :: 14.785 : 101.12.
I must farther observe upon this subject, that although we have seen
that the ducats which have circulated for ever so short a while, when
bought at 5_f._ 4⅜_st._ produce for the florin 13.685, (which is more
than is produced by the new coined ducats fresh from the mint) we are
not from this to conclude, that the former are intrinsically a cheaper
currency than the latter. I have been at all the pains imaginable to
weigh these ducats against others fresh from the mint; and also to
compare their weight with what it ought to be by the regulation; and I
have constantly found near ¼ _per cent._ difference between them. This
is entirely owing to the nature of the coin. The ducat has a large
surface in proportion to its weight; it carries a very sharp impression,
full of small points; the cord about the edges is exceedingly rough; so
that the least rubbing, breaking off those small points, diminishes the
weight of the piece near ¼ _per cent._ which is clear loss, not only to
the proprietor, but to the state, and to all the world. Besides, those
who are obliged to go to the mint for new ducats, are supposed to bear
the greatest weight of the coinage of a piece which, having no legal
denomination, is left afterwards to seek its own value, according to
that of the metals at the time.
[Sidenote: The intention of this minute detail is in order to calculate
the real par of the coins of Europe.]
As I have entred into this minute detail of the weight of fine silver
and fine gold contained in the Dutch florins, with a view to facilitate
the calculation of the par of the metals contained in the coins of
Holland, and those of other nations; I must next mention the proportion
between the aces in which we have expressed the weight of the Dutch
specie, and the grains in use in some of the principal nations with
which they trade: These I take to be England, France, and Germany.
[Sidenote: Proportion between the mint weights of Holland, England,
France, and Germany.]
The reduction of weights to mathematical exactness, is beyond the art of
man; and to this every one, who ever tried it, must subscribe. I have
been at all the pains I am capable of, to bring those weights to an
equation; and here follows the result of my examination into that
matter.
By all the trials and calculations I have made, I find that 5192.8 aces
Holland-troes; 3840 grains English troy weight; 4676.35 grains Paris
poid de marc; and 4649.03 grains Colonia (which is the gold weight of
the empire) are exactly equal.
I reckon by the lowest denomination of these several weights, to wit,
their grains; to avoid the endless perplexity of reducing to a
proportion, their pounds, marcs, and ounces, which bear no regular
proportion to their grains.
[Sidenote: Par of a pound sterling, in weighty silver, with Dutch
florins in riders is 11 florins 12 stivers.]
To give some examples of this method of calculating the exact par of the
metals contained in the coin of those nations, reduced to the weights of
Holland, I shall state the following computations.
A pound sterling in silver, by the statute of the 43d of Elizabeth, is
1718.7 grains troy fine; to know how many aces Holland-troes that makes,
state thus, 3840 : 5192.8 :: 1718.7 : 2324.1.
Divide 2324.1 by 200.21, (the number of aces contained in a silver
florin) you have for the par of the pound sterling, _f._ 11.609.
[Sidenote: Par of the pound sterling in gold with ditto, is 11 florins 3
stivers and ⅕.]
A pound sterling in guineas, by the statute fixing guineas at 21
shillings, contains 113 grains troy fine; to know how many aces
Holland-troes that makes, state thus,
3840 : 5192.8 :: 113 : 152.8.
Divide 152.8 by 13.69, (the number of aces contained in a gold florin in
riders) you have for the par of the pound sterling in guineas, _f._
11.161.
[Sidenote: Par of a French louis d’or with the same florin, is 11
florins 3 stivers and ¾.]
A French louis d’or contains 137.94 grains poid de marc fine gold; to
know how many aces Hollands that makes, state thus,
4676.35 : 5192.8 :: 137.94 : 153.17.
Divide 153.17 by 13.69, (the number of aces contained in a gold florin
in riders) you have for the par of the louis d’or, _f._ 11.188.
[Sidenote: Par of 24 livres French in silver with the same florin, is 11
florins 1½ stiver.]
24 livres French, contain 1996.88 grains poids de marc of fine silver;
to know how many aces Hollands that makes, state thus,
4676.35 : 5192.8 :: 1996.88 : 2217.4.
Divide 2217.4 by 200.21, (the number of aces in a silver florin) and you
have for the par of 24 livres French silver, _f._ 11.076.
[Sidenote: Great balance of trade against France, in September 1761.]
The French silver here is less valuable in Holland than the gold: this
is no proof that the proportion between the metals in the respective
coins of these two nations is different (we shall soon find it to be
very exactly the same); but this preference in favour of the French
gold, is owing to the temporary demand for gold on account of the war;
for which reason no French silver coin appears at present in Holland. I
write in September 1761.
I must also observe, that at this time the course of louis d’ors is
11_f._ 4_st._ which is little or nothing above the real par of the metal
they contain; which in peaceable times is not the case. This proves how
strongly the balance of trade is against France with respect to Holland,
as it has reduced her specie to the price of bullion: it is not so in
Germany.
[Sidenote: Low value of the pound sterling in Holland, in 1761.]
The low value which a pound sterling has borne for these several years
in exchange, and the great fall of its worth in Holland of late, when it
has been at 10_f._ 10_st._ is no argument against the high conversion I
have given it, to wit, above 11_f._ 12_st._ Were there nothing but
silver coin in England, and were it all of standard weight, exchange
would frequently run even above that value in peaceable times; because
the silver coin in Holland is light, and I have reckoned it as if it
were of full weight.
It will be observed, that the par upon the gold does not quite amount to
11_f._ 4_st._ the reason of which is the great disproportion in the
British coin, between the intrinsic value of a pound sterling in silver,
and in gold, when both are of standard weight; the latter being near 5
_per cent._ worse than the former, when the proportion of the metals is
supposed to be at 14½. But at present there are no sterling pounds in
silver money; there is no silver in England in any proportion to the
circulation of trade; and therefore the only currency by which a pound
can be valued, is the guinea.
[Sidenote: Owing to the lightness of the gold coin in England at that
time,]
It has been said, and I think sufficiently proved, that the price of the
metals in the market, shew very exactly the weight of the currency in
nations where coinage is free, when there is no severe prohibition (_put
in execution_) against the exportation of the coin. This I take to be
the case in England. Now gold there has risen of late to 4_l._ 0_s._
8_d._ per ounce; from which I conclude, that the guineas with which it
is bought, or with which bank notes are paid, are at present so light,
that 4_l._ 0_s._ 8_d._ of them do not weigh above an ounce, (the good
guineas are exported) whereas an ounce of new guineas is worth no more
than 3_l._ 17_s._ 10½_d._
Gold, therefore, which now sells for 4_l._ 0_s._ 8_d._ would certainly
be worth no more than 3_l._ 17_s._ 10½_d._ were English gold coin of its
proper weight: and the price of it will come down to that value, in
proportion as circumstances shall call back the heavy guineas.
To facilitate the verification of this point, I shall first observe,
that the difference between 4_l._ 0_s._ 8_d._ and 3_l._ 17_s._ 10½_d._
is 4.57 _per cent._ The English gold currency, therefore, at the time
standard bullion was worth 4_l._ 0_s._ 8_d._ must have been worn 4.57
_per cent._ Guineas, when of full weight, weigh 129.43 grains of troy
weight; if such guineas are worn 4.57 _per cent._ they ought to weigh no
more than 123.23 grains troy. Now let any man try the experiment, and
put an old guinea, taken by chance (not picked out) into a scale, and
see whether it has not been worn down to 123.23 grains; and let him also
examine whether the _greatest part_ of the guineas, at the time when
gold bullion has got to so high a price, are not of King George I. and
his predecessors: these I call old.
Besides these there are other circumstances to be attended to. Men who
job in coin, pick up all the worst guineas they can when they go to
market; or if they buy with paper, we may decide, that the bank at that
time pays in guineas not above the weight of 123.23 grains troy; for if
the bank paid with guineas of a greater weight, he who had occasion to
carry his paper to market to buy gold bullion, would certainly rather go
to the bank, and afterwards melt down their guineas. Were the bank of
England never to pay but in gold of full weight, and were the
exportation of guineas free, it is impossible that gold should ever rise
above the mint price, which is 3_l._ 17_s._ 10½_d._
As a farther confirmation of the justness of the high valuation I have
put upon a silver pound sterling of standard weight, I shall observe,
that a new guinea passes in Holland (at the time when the exchange is at
10_f._ 10_st._) for 11_f._ 11_st._ and every body knows, that such a
guinea in England is not above the intrinsic value of a silver pound
sterling of full weight. If then I can get 11_f._ 11_st._ for a new
guinea, I ought to get as much for a new silver pound sterling, since
the intrinsic value of both is the same, when the proportion of gold to
silver is as 1 to 14½. Now this guinea must be worth more than 11_f._
11_st._ because the Jews, who carry them to the mint, give that price
for them (I have disposed of them to Jews at that value[4]); and as the
coinage of ducats costs, as we have seen, near 1 _per cent._ the guinea
is intrinsically worth 2 stivers more, that is 11_f._ 13_st._ but as
gold at present bears an advanced price upon account of the war, and
that the proportion between gold and silver is in Holland above 1 to
14½, these are the reasons why the guinea, in Holland, is at present
something above the intrinsic value of a silver pound sterling, which we
have stated at _f._ 11.609, a trifle above 11_f._ 12_st._
Footnote 4:
This was writ in Holland.
[Sidenote: and not to the wrong balance of their trade, as is alledged.]
Let me here observe, by the bye, that all the pounds remitted from
Holland to England, for filling the subscription for 12 millions of last
year, cost the remitters but about 10_f._ 10_st._ for the pound
sterling. If this low course of exchange be owing (as some pretend) to a
wrong balance of trade against England, and not (as I pretend) to the
lightness of the gold currency; then we must allow, that the expence of
the German war (which is what alone carries off coin out of the kingdom)
must have exceeded all the profits of the English commerce, which I
apprehend to be at present immense; and also all the money lent by
foreigners towards the loan of 12 millions. I leave to others more
knowing than myself, to determine if such a supposition be admissible.
If it be rejected, let any man reflect how absurd it would be to raise,
at this time, the standard of the pound sterling to the old value; and
to repay at 11_f._ 12_st._ such sums as have been borrowed at the value
of 10_f._ 10_st._ or in other words, to make a present to the Dutch
creditors of above 11 _per cent._ upon account of a loan for a year or
two.
[Sidenote: Defects of the silver currency of Holland.]
Having now given as good an account as I can of the Dutch coin,
according to the regulations of the state, I shall next point out the
defects of their silver currency, and shew the consequences which result
from them. As for the gold, it is at present perfectly well regulated.
The riders are all exact in their weight, fineness, and denomination;
the ducats are all now recoined of legal weight and fineness; and the
denomination not being fixed, they serve, in a trading nation, as a
merchandize, of which the weight and fineness are well ascertained. The
only defect, therefore, I can discover in the Dutch gold currency, is
the form of the pieces. They have too much surface in proportion to
their weight, and the impression is too sharp; both which contribute
greatly to the wearing of the coin.
[Sidenote: Account of this currency.]
The silver currency of Holland is of two sorts. The bank species, and
the current species. Here it must be observed, that by bank _species_ is
not meant Amsterdam _banco_, or bank money, but certain coins which are
called _bank species_. These are,
Pieces of 3 guilders.
————— 30 stivers.
————— 20 stivers.
These are called _groff gelt_, as being the good specie, of which
hitherto we have only spoken. Sums to be paid in bank species, must be
composed of ⅔ of this currency, and of ⅓ of what follows, viz.
Riders of 14 florins.
Dutch half crowns of 28 stivers.
Ses t’halves of 5½ stivers.
I have put in the riders, though a gold coin, in order to give a
compleat enumeration of all the kinds of these bank species.
[Sidenote: Regulations for the payment of foreign bills in coin.]
Foreign bills drawn on Rotterdam in banco (i. e. bank species) are often
received _there_, in any of the above species, without regard to the ⅔
which ought to be groff gelt; but when the holder of the bill desires
the acceptor (which the latter cannot refuse) to write it off to his
credit in the current bank of Rotterdam, and that he has there no stock,
then, if he brings in specie to the bank, it must be as above specified.
[Sidenote: Ditto for current bills.]
Current bills, not specified by the word _banco_, are generally paid
according to the following proportion:
3⁄10 in schillings of 6 stivers.
1⁄10 in dubleties of 2 stivers.
6⁄10 in good silver.
[Sidenote: Ditto for merchandize.]
Merchandize are paid with all kinds of Dutch silver, ⅒ only in
dubleties, and ⅓ gold, less or more, or sometimes none, according to
agreement.
[Sidenote: The denominations of the several silver currencies not
proportioned to their intrinsic value.]
From this exposition of the matter, it is very evident, that all these
currencies must be of different intrinsic values, in proportion to their
denomination; otherwise, why all this trouble about regulating the
proportion to be received in payments? [Sidenote: Cause of this.] This
proceeds from two causes: first, from the wearing of the pieces; the
second, from the disproportion of the fineness in pieces of the same
weight and denomination.
[Sidenote: Regulations concerning the weighing of silver species in
banks current.]
As to the first, to wit, the wearing of the coin, I shall observe, that
the three denominations of the good silver, to wit, the 3 guilder
pieces, the 30 stiver pieces, and the 20 stiver pieces, are put up
promiscuously in the same bags; being of the same fineness, and
consequently of the same value, in proportion to their weight. These
bags contain 600 florins each, and the legal and full weight, with which
they are weighed at the bank current of Rotterdam, is 25 marcs 5 ounces
and 10 engles. Now the exact weight of a florin, according to the
regulation, is, as we have said, 200.21 aces fine; then the 600 florins
ought to weigh 120126 aces fine, which at the standard of 263 parts fine
to 25 alloy, is 131545 aces standard: by this analogy, 263 : 120126 ::
288 : 131545; which is equal to 25 marcs 5 ounces 10 engles and 13 aces.
So the weight at the bank is but 13 aces lighter than in strictness it
ought to be; which is so small a difference, that it could hardly turn a
scale with such a weight suspended in it: for which reason, I suppose,
it is left out, for the sake of the even reckoning of 25 marcs 5½
ounces.
Did these bags of silver coin come up to the full weight, then the
silver currency in Holland would be good as to those pieces; but as the
greatest part of them are old, having been struck with the hammer, and
are of unequal weight, having been coined (_al marco_) in the old
fashion, when coin was weighed by the marc, and not as at present piece
by piece, it is impossible they should be of legal weight: the bank,
therefore, allows 2 ounces of remedy in receiving those sacs, that is,
they put 2 ounces into the scale with the sac, and if they find that the
sac is still light, but that the deficiency does not exceed one ounce
more than the remedy, they throw out the coin and reckon it over; and if
the tale be just, and that none of the pieces appear to have been
clipped, they receive it as if it were of due weight: if it prove above
3 ounces short of the just weight, they do not receive it.
[Sidenote: All allowances for light weight are an abuse.]
Here is a palpable abuse, from a disorder in the coin. If a sac is ever
so little too light, why allow it to pass, as if it were of due weight?
Nothing is so easy as to order such deficiency to be made good by the
deliverer. Weights are made for exactness, and all remedies are aukward
and incorrect.
This allowance must open a door to malversations in a country like
Holland, where there is almost no milled silver coin. The old hammered
money was not weighed at the mint, as has been said, piece by piece: it
was sufficient that every marc of it answered to the legal denomination:
under such a regulation, it is very plain, that there must be many
pieces above the legal weight, as well as many pieces below it. Is it to
be supposed that money-jobbers will not profit of that inequality, by
reducing the heavy pieces to their standard weight, when by such an
action they cannot be convicted of any crime? This is one abuse.
By reducing the heavy pieces to their legal weight, the currency is
degraded; because that which is taken from these ought to be left to
compensate what the light pieces fall short. The bank, therefore, by
giving the remedy, gives a kind of sanction to this malversation.
[Sidenote: Frauds of money-jobbers in Holland.]
Farther, if a money-jobber gets some sacs above the current weight, is
it to be doubted but he will reduce them as near as he can to the lowest
weight received at the bank? And if he should mistake, and reduce them
too low, he has still an expedient for cheating the public, which shall
be mentioned presently.
[Sidenote: The best silver coin in Holland is, upon an average, 1 per
cent. too light.]
Now let us suppose, that the specie we are speaking of is, upon an
average, only 2 ounces _per_ sac below the standard. If it be no more,
this circumstance does great honour to the money-jobbers. Such a
deficiency, however, amounts to within a mere trifle of 1 _per cent._ Is
not this an object of great importance, upon all the silver specie of
Holland; especially as the remedy given by the current bank, is a tacit
permission given to every body who has address, to rob so much from all
the weighty coin?
[Sidenote: From which it follows, that the actual proportion of the
metals in their coin is as 1 to 14.479.]
Now let us, by the way, correct the former calculation we made upon the
proportion of the metals in the Dutch coin. We said above, that a marc
of fine gold in riders circulated for _f._ 374, and that the same weight
of silver circulated for _f._ 25.572, which gave for the proportion 1 to
14.62; but here we find that the marc of silver has lost by fraud and
wear 1 _per cent._
Now the marc of silver being 5120 aces, if they have lost 1 _per cent._
there will remain 5068.8 aces. If these 5068.8 aces, therefore,
circulate for _f._ 25.571, the full marc must be worth in the coin _f._
25.83.
In order then to find the exact proportion of the metals in the Dutch
currency, we must divide 374 by 25.83, instead of dividing by 25.572, as
we did when we supposed the silver of full weight. Now 374⁄25.83 is =
14.479. So the proportion is as 1 to 14.479, the same, within a trifle,
of that received in France; which is as 1 to 14.47. But if we attend to
every circumstance, we shall find the proportion still lower than the
last calculation makes it; for in that, we have searched for it with
respect to the best silver specie in Holland; whereas we ought, in
strictness, to calculate the gold, against a mixture of ⅓ of less
valuable specie, with ⅔ of the good: but when computations cannot be
brought to perfect exactness, it is better not to attempt a calculation.
[Sidenote: Another abuse in the silver coin of Holland.]
Before I leave the consideration of the inequality in the weight of the
Dutch currency, I must take notice of another circumstance of
considerable importance.
No payments made in silver, below _f._ 600, are subject to be weighed;
any more than what circulates without being put up in bags. What
restraint, therefore, is there laid upon money-jobbers, with respect to
this part of the currency? When these gentlemen have occasion for money
bagged up, they take care that such specie shall be of the proper weight
to pass at the current bank, and as for all that is light, they either
employ it in payments below _f._ 600, or throw it into the common
circulation. This circumstance presents us then with two sorts of silver
currency in Holland; that which is bagged up, and weighty; and that
which is not, and light.
If we consider the trade of Holland, and the prodigious quantity of
payments made in current money, we shall find the quantity of silver
which circulates in loose pieces very small, in proportion to that which
is bagged up: the regulation therefore of weighing the bags is of
infinite importance; and were it not for that, the currency would be
debased in a very short time. But the cashiers, who are the great
depositaries of this currency, being obliged to deliver the bags of the
legal weight, they are thereby restrained from tampering with it: and
the bagging up, greatly preventing the wear, supports tolerably well the
weight of this old currency of hammered money.
[Sidenote: Reason of the great apparent scarcity in Holland of silver
coin.]
To people who do not attend to all these circumstances, there _appears_
a prodigious scarcity of silver currency in Holland. It is there as
difficult to get change for ducats, as it is in England to get change
for guineas; and yet, upon examination, we shall find, that the
intrinsic value of the silver coin, commonly given in exchange for the
gold species, is far below the value of the gold.
[Sidenote: A paradox to be resolved.]
Here then is a paradoxical appearance to be resolved; to wit, How it can
happen in trading nations, such as England and Holland, that in the
exchanging light silver coin for weighty gold coin, people should be so
unwilling to part with the silver, although really of less value than
the gold.
This is the case in both countries: thus it happens in England, where
there is so little silver currency; and the case is the same in Holland,
where there is a vast deal. Let me therefore endeavour to account for
these political phænomena.
Since the time I composed the former part of this inquiry into the
principles of money and coins, I have found, by the trials I made in
Holland upon the weight of the English silver currency, that shillings
are at present (1761) far below the weight of 1⁄65 of a pound troy,
which is what they ought to be, in order to make 21 of them equal in
value to a new guinea, according to the present proportion of the
metals. It is therefore demanded,
1_mo_, How it comes about that such shillings do not debase the value of
the English standard below that of the gold?
2_do_, Why are they so difficult to obtain, in change even for new
guineas, which are of more intrinsic value every where? And,
3_tio_, Why money-jobbers are not always ready to give them in exchange
for new guineas?
These appearances seem inconsistent with the principles above laid down;
and a reason must be given why these principles do not operate their
effect in this example.
[Sidenote: Solution of it.]
I answer, that circumstances are infinite, and must constantly be
attended to; and there are in the case before us several specialities
not to be overlooked; I shall therefore point them out, in my answers to
the three questions, as they lie in order.
As to the first, I answer, that these shillings are in so small a
quantity, in proportion to the gold species, that they cannot be
employed in _payments_. Now it has been said above, that _exchange_ (in
trade) regulates the value of the pound sterling, and considers it as a
determinate value, according to the combination of the intrinsic worth
of all the several currencies, _in proportion as payments are made in
one or the other_. Now (generally speaking) no commercial obligations
are acquitted in silver. I do not understand by the word _payments_, a
few pounds sterling sent from farmers in the country, perhaps in
payments of their rents to their landlords; nor what falls into the
public offices, in the payment of taxes. It is trade alone, and the
payment of bills of exchange between different countries, which can
ascertain the true value of that currency in which mercantile payments
are made. Were these worn-out shillings in such plenty as to allow bills
of exchange to be acquitted in them, I make no doubt but they would fall
below the value of the 1⁄21 of new guineas; every one would be glad to
dispose of them for guineas, at the rate of their currency; and guineas,
then, would be as difficult to be got for silver, as silver is now to be
had for guineas. This would bring the standard still lower than it is at
present; that is, below the value of the gold: but as payments cannot be
made in shillings, their currency cannot affect the standard.
The second question is, Why they should be so difficult to obtain in
change for guineas, which are above their value?
I answer, that it is not the intrinsic worth of the light shillings
which makes them valuable, and difficult to be got; but the utility they
are of in small circulation, forces people to part with their guineas
for a less valuable currency. These shillings I consider (now) as
_marks_, not as material money, fitted to a standard. Every body knows
the difference between _marks_ or _counters_, and _specie of intrinsic
worth_. The copper coin of most nations is marks, and passes current,
although it does not contain the intrinsic value of the denomination it
carries; nor ought it to be a legal tender in payments above a certain
sum. Such a regulation preserves its usefulness for small circulation,
and prevents it, at the same time, from debasing the standard, and
involving in confusion the _specific currency_ (as I may call the gold
and silver coins) when properly proportioned, and of just weight.
But shillings in England, although they be at present in a manner no
better than marks, because of their lightness; yet in the eye of the law
they continue to be lawful money, and a legal tender in payments. It is
therefore of great consequence that such shillings be not in too great
plenty. That would have been the case, had government come in to the
plan proposed for the coinage of shillings below the standard; such
shillings would have been coined abroad, and run in upon England, to the
great detriment of the nation; and although they had been proscribed in
payments, beyond a certain sum, yet they would have been so multiplied
in small payments, as to have furnished a means of buying up the gold
coin, and carrying it out of the country for an under-value. Whereas the
worn shillings do not produce that bad effect, from the scarcity of
them, and from the impossibility of imitating them in foreign mints[5].
Footnote 5:
It is commonly believed that shillings are coined at Birmingham, and
that government winks at the abuse, because of the great scarcity of
silver in England. I find no foundation for this belief, after the
inquiry I have made.
In the first place, Mr. Harris, who was the best assay-maker in
Europe, told me, that a bag of those shillings had been sent to the
mint by the Lords of the Treasury, to be tried by him: that he had
found them to be English standard, to the most scrupulous exactness:
that he did not believe any such correct assay could be made, except
at the mint: that all the engravers of the mint declared it was
impossible to imitate a worn shilling.
The trials I myself made were of a different nature. I examined the
shillings with a magnifying glass; and found almost every one
different in the impression, as well as in the weight. In some the
back-part of the head was worn, in others the face: none, in short,
were worn perfectly alike.
I put a handful of them into a coal fire; and taking them out when
red-hot, and throwing them on the hearth, I plainly discovered, on
many of them, some part of the arms of Great Britain appearing in the
cross upon the reverse, in a different colour from the ground of the
coin: in others indeed nothing could be seen: this was owing to the
degree of wearing. How then can any dye strike an impression upon a
coin, which answers all these appearances?
I communicated to Mr. Harris the trials I had made, and he was
perfectly satisfied, upon the whole, that no old shilling had ever
been counterfeited at Birmingham.
The answer to the third question, viz. Why money-jobbers are not always
ready to give old shillings for new guineas? is easy, from what has been
said. They cannot pick them up below the mean value of the currency;
because of the great demand there is for them in exchange for guineas;
therefore they can gain nothing by providing them for that purpose.
It comes next in order, to solve a similar phænomenon in Holland, where
there are great quantities of silver specie, and yet one can hardly find
change for a ducat, except in a shop, where one has occasion to buy
something.
This mystery is easily resolved. The great quantities of silver in
Holland consist of what is put up in bags of due weight, according to
the regulations mentioned above. This part of their currency is about ½
_per cent._ better, in intrinsic value, than ducats at 5_f._ 5_st._ tale
for tale; which is a sufficient reason not to part with it, in change
for ducats at that rate. But besides this bagged up bank specie, there
are many other sorts of old worn-out coin, of unequal weight and
fineness.
These serve as marks for the small circulation, and are not a legal
tender in all payments; such as foreign bills. What is the consequence
of this? Since this old specie carries denominations above its value,
when compared with the bagged-bank-silver coin, it serves to buy up this
good silver, when it falls into circulation; that is, it serves to buy
up, or to exchange, florin pieces, which are, as I have said, ½ _per
cent._ better than ducats at 5_f._ 5_st._ Such good silver pieces are
not very common in ordinary circulation; but as it frequently happens
that people receive silver in sacs, for their daily expence, who do not
mind the difference of ½ _per cent._ when they pay in this good money,
it circulates for a little time, until it falls into the hands of those
who know it, and bag it up again. Thus it happens in Holland, from the
disorder of their coin, that you may be paid a million sterling, if you
please, in good silver coin; and yet you find difficulty to procure
silver for a ducat, in the lightest, basest, and most aukward pieces
imaginable for reckoning. The bad consequences resulting from this
disorder, have been taken notice of in the proper place.
END OF THE THIRD BOOK.
------------------------------------------------------------------------
AN
INQUIRY
INTO THE
PRINCIPLES OF POLITICAL OECONOMY.
------------------------------------------------------------------------
BOOK IV.
OF CREDIT AND DEBTS.
PART I.
OF THE INTEREST OF MONEY.
------------------------------------------------------------------------
INTRODUCTION.
I come now to inquire into the principles of credit; a subject already
introduced in the 27th chapter of the second book, where I examined the
nature of circulation, and pointed out the principles, which direct a
statesman when and how to retard or accelerate its activity, according
as the political interests of his people may require.
In that chapter the object was, when and how either to extend or
restrain the use of credit, according to political circumstances. The
question now comes to be, what that credit is; upon what it is founded;
what the various species of it are; what the methods of establishing and
extending it, while in its infancy and vigour; how to sustain it when
overstretched; and last of all, how to let it fall as gently as
possible, when by no human prudence it can be longer supported?
Many political writers in treating of credit, represent it as being of a
very mysterious nature; owing its establishment to a confidence not
easily accounted for, and disappearing from the slightest unfavourable
circumstances.
That credit, in its infancy, is of a very delicate nature, I willingly
allow; as also that we have many examples which confirm the sentiments
of those who believe it to contain, in itself, something very
mysterious: but this proves no more, than that, in such cases, credit
(as I consider it, and as it will appear really to be) has not been
properly established. The cause of confidence has had nothing in it but
opinion, and when this is the case, credit is but a shadow; a thin
vapour, which may be dissipated by the smallest breath of wind.
They all agree that credit is no more than confidence, but they do not
examine how that confidence is to be established on a solid foundation.
The operations of credit are incompatible with the involved contracts of
the law, and with the spirit of intricate land-securities. The policy of
such contracts was analogous to the manners of the times which gave them
birth. Trade is a late refinement, in most nations of Europe, and
industry is still a later: the beginnings of both are slow,
imperceptible, and obscure. The instruments by which they are promoted,
are the lower classes of a people; such individuals appear to be of very
small consequence; and yet it is by the accumulation of many small
things only, that this huge fabric is erected.