« PreviousContinue »
the state of the law, that a light guinea may at present be sold for more than a heavy one. The manner, in which this fact is proved by Mr. Huskisson, may serve as a specimen of the clear and convincing character of his mode of illustration:
Ist. A pound, or twelve ounces of gold, by the law of this country, is divided into 44 guineas and a half, or 461. 148. 6d.
zdly. By this division, which is made at the publick expence, and without charge for coinage, nothing is added to the value of the gold; and nothing taken away from it.
3dly A pound of gold, therefore, and 461. 14s. 6d, being equiva lent, being in fact the same thing under different names, any circulating credit which purports to represent 461. 148. 6d. ought, by the law of this country, to be exchangeable at will for a pound of gold. 4thly No alteration has been made in this state of law except by. the act of 1797.
5thly. The professed and intended operation of the act of 1797. was not to diminish the quantity of gold for which any specifick amount of circulating credit ought to be exchangeable, but merely to suspend for a time the option of the exchange.
6thly. But the sum of 461. 14s. 6d. in our present paper, will procure in exchange for gold, only 10 ounces of that metal:- A pound of gold is now exchangeable for 561 in paper currency. Any commodity, therefore, which is equivalent to a pound of gold, is also equivalent to 561. in paper.
In follows that the difference between 561, and 461. 148. 6d. or between 12 and 10 ounces of gold, arises from the depreciation of the paper, and is the measure of that depreciation, as well with respect to gold, the universal equivalent, as to every other commodity.'
By law, a guinea which weighs less than 5dwts. Sgrs. is no longer a guinea. It is deprived of its quality of coin-It can no longer be tendered as money. But it may be sold for what it will fetch in the market as bullion, for the purpose of being melted down. By law, it is an offence punishable with severe penalties to melt
a guinea weighing more than 5dwts. 8grs. ; or to reduce it, by clipping, filing, or any other process, below that weight.
By law, a guinea of that weight cannot be exchanged for more. than the sum of 218., which sum in paper currency is worth at present dwts. 14 grs. of gold-To sell, or to buy guineas at a higher rate than 21s. each in Bank-paper, is an offence highly punishable.
For this last offence a man has recently been tried and convicted. If the guineas purchased by him had been light guineas, viz. guineas weighing upon an average 5 dwts. 7 grs. each, he might have bought and sold them without incurring any penalty.
The state of the law, therefore, is this The possessor of a heavy guinea, which is intrinsically worth about 248. 6d. in Bankpaper, who should exchange it for more than 21s. of that paper, would be liable to fine and imprisonment. The more fortunate possessor of a light guinea is entitled by law to exchange it for what it will fetch, which would be about 248, 3d.
A light guinea, therefore, cried. down, no longer current, no longer a legal tender, is, at the present moment, more valuable than a guinea of full weight, in the proportion of 24s. 3d. to 215.
The light guinea, by melting, is converted into 5 dwts. 7% grs. of bullion.
The heavy guinea being, by law, incapable of being converted into bullion, or of being reduced, by a diminution of quantity, into the more valuable shape of a light guinea, is equivalent to 4 dwts. 14 grs. of gold.-The difference of value in favour of the light guinea is 17 grains of gold.
This is the present state of our currency; and the operation of the laws by which it is regulated.
For my own part, I confess that, if absolutely driven to the necessity of deciding between the alternative, of suffering the present state of things to continue, or of resorting at once to the stale and wretched expedient of either raising the denomination or lowering the standard of our currency, in any fixed and limited proportion, I should not hesitate to prefer the latter. This expedient, I admit, though not unfrequently practised, in former and less-enlightened periods of the history of this and other nations, is now universally and justly reprobated and eandemned, as too disgraceful in its principle, and too ruinous in its policy, to be resorted to, even by governments the most arbitrary in their internal administration, and the most destitute of more substantial resources. - Yet one difference would be this: that, the injury once done, the fraud once committed, the extent of the evil would be known and ascertained. Prices at home, and abroad, once accommodated to the change in the value of our currency, all uncertainty and consequent speculation upon a farther derangement would cease. Creditors, annuitants, and all who possess incomes, fixed in their amount by a contract of any description, would be able to measure the extent of their loss. All future leases, and bargains for time, would be made with a reference to this definite alteration in the common measure of all exchangeable commodities. Salaries and wages of every description would be more speedily and more proportionably compensated for the change.—The existing evil, on the contrary, of which the present measure may be reckoned at about 15 per cent., is indefinite, uncertain, and fluctu ating, though progressive in its growth. It has consequently a greater tendency to derange and unsettle all the transactions of society, and to depress the labouring classes, and all who derive their incomes from salary or wages of any description."
Mr. Huskisson is more friendly to country-banks, than Mr. Ricardo and several other writers on the same side of the question. The obligation on those Banks to pay their paper in notes of the Bank of England places them, he conceives, with respect to the amount of their issues, in nearly the same situation in which the Bank of England itself was, when it was under the necessity of paying in guineas. This is perhaps too. absolutely stated by Mr. H., since it appears from the evidence
before the Bullion-Committee, that the country people would often be induced to change a country-bank-note for cash, when to change it for Bank of England paper does not, in their opinion, at all mend the matter. However, we agree with Mr. Huskisson in his main argument that the extent of country-issues is, in a great measure, regulated by the previous extent of Bank of England issues; and that, were the parentstock restored to its former soundness, we should have little to fear from these ramifications. We are also much disposed to assign as a primary (though we confess a remote) cause of the late failures of country-banks, the dereliction, on the part of the Legislature, of the two safeguards enjoined by Dr. Smith; we mean, the prohibition of notes under the value of five pounds, and the obligation to pay in cash on demand. It is true that these safeguards existed in 1793, a year in which failures took place to a much greater extent than could be in Dr. Smith's contemplation when he declared them to be the only restrictions requisite on paper-currency: but we must pause, nevertheless, before we can join in a recommendation. of the guarantees. and deposits for which, since the mercantile disasters of the present year, it has become fashionable to cell, as preliminary to the establishment of a banking-house.-From the subject of country-banks, Mr. Huskisson passes to the favourite argument of Sir John Sinclair and others, that bullion is dear because a particular demand for it prevails on the Continent. This topic having been already treated in our last Number, we shall here confine our extracts from Mr. Huskisson to one passage; which begins with an example of spirited reasoning, and concludes with some judicious remarks on the state of our coin:
It is assumed that gold is very dear on the continent.-Dear, in exchange for what? For the gold coin of the continent? Such an assertion would be ridiculous. - Dear, in exchange for any depreciated paper? This is very probable in several parts of the continent, but is surely not the criterion to which we shall be referred —Dear, in exchange for all other commodities? Is this a fact? Where is the evidence of it? Are cloth, corn, iron, or any other leading articles, twenty per cent. cheaper on the continent, than they were, if paid for in gold? Certainly not. And if they were so on the continent, has not the drain lasted long enough to bring matters to a level, and produce the same effect in this country? Has the price of commodities, in this country, fallen within these two years? Is not the contrary notoriously the fact ?
Nothing appears to me to indicate that the value of gold, in reference to ordinary commodities, has increased in the general market of Europe; that increase must have been confined within very narrow limits.-The annual produce of the gold mines, it is
true, appears not to have been so large, during the last half century, as at some former periods; but the supply does not seem to have suffered any diminution of late years. The relative value of gold to silver may have been, in some trifling degree, increased. The quantity of silver lately imported from America has been unusually large; while the demand from the East Indies and China has altogether ceased: nay, I am informed that a large supply of dollars was imported from the latter country, by the fleet recently arrived from Canton. Every presumption, therefore, is, that the value of silver continues progressively, though slowly, to decrease in Europe. This alteration in the relative value of the two precious metals, may render it necessary, hereafter perhaps, to change the proportion which they now bear to each other in our Mint regulations. It was once my intention, in the course of this discussion, to have made some observations on the state of our silver coin, and the many serious inconveniences which are brought upon the community, (particularly upon the lower classee) from its scarcity, as well as from its debasement; and also to have stated my ideas on the subject of a new silver coinage. But a very little reflexion will satisfy every reader that, in the present state of things, and so long as we have no fixed standard of value for our currency, it would be absurd, and almost impracticable, to send into circulation any new coinage. The present evil, therefore, admits of no remedy; but will rather increase, so long as the depreciation of our currency is suffered to continue; when that shall cease, it will be time enough to consider what should be done in respect to our silver coin. The want of it is an evil of no trifling moment in our money-system, but secondary, as well in point of importance as in order of time, to the question now under consideration.'
It has long been matter of surprize to political economists, that truths, which appear to them so plain as to be accounted the mere elements of their science, and which have many years ago been clearly proved by Dr. Smith, should remain unknown to our merchants and even to our statesmen. That such is the fact seems but too evident from the popularity attendant on the whimsical errors of Mr. Spence, and on the more serious errors of our Board of Trade: for which we can hardly account, otherwise than from the circumstance that political economy has not yet become a branch of education for either our merchants or our politicians; and that men, when immersed in the routine of business, and unaccustomed to the continued attention which is requisite for study, are not likely to be induced to invert their habits for so unattractive a pursuit. It happens accordingly that we often find the "Wealth of Nations" in the library, but seldom in the parlour; that its perusal is considered as a duty rather than a pleasure; and that the readers of Dr. Smith are disposed, as Dr. Johnson says of those of Milton, to "desert their master and seek for companions." In the mercantile world, particularly, a person may
possess a large acquaintance without numbering among them a single reader of that work, and may survey a much more extensive circle without the good fortune of discovering an individual who has had the perseverance to study it. Various reasons are alledged for escaping from this task. While one man goes the length of declaring that the book is all theory, a second will maintain that, however just in regard to the business of others, it has no application to his own; and a third, passing over the distinction between principles and events, will gravely advance that things are quite altered since the book was written. The knowlege that such prejudices were prevalent appears to have induced Mr. Huskisson to dwell on some popular errors of the mercantile system; particularly on the current notion that, in order to gain any thing by trading with a foreign country, we must import a money-balance from it. The refutation of this plausible idea has long been known to the learned but we have not met with an argument on the subject better adapted to the views of a plain man of business, than that which Mr. Huskisson has supplied:
It may, perhaps, be asked, if commerce is nothing more than an exchange of equivalents, and the Balance of Trade, taken for any length of time, only the measure of our foreign expenditure, in what way is a country enriched by trade? To those who may be disposed to ask this question, I would, in the first place, reply by putting one or two others. What is the internal trade of any country, that is the trade carried on between different districts of the same state within the limits of its territory, but an exchange of equivalents? Is this a trade by which the one gains and the other loses? by which Yorkshire is enriched at the expence of Kent? Then, if our internal trade be an exchange of equivalents, what is the distinction, in this respect, between it and foreign trade? What takes away this character from the latter?- and what, after all, is the latter?
To the question, how then are we enriched by trade? the answer appears to me as obvious, as it is consistent with this doctrine. The mind and faculties of man are constantly engaged in pursuit of his own happiness, and in multiplying the means of subsistence, comfort, and enjoyment. Trade, which effects the exchange of a part of the productions of the soil, industry, and talent of any one country, against those of the soil, industry, and talent of all other countries, is the great instrumeut of multiplying these means. By the aid of this exchange, not only those natural productions, which Providence has distri buted in abundance in one portion of the globe, and refused to some others, are rendered common to all; but the soil of every country, and of every portion of every country, is left at liberty to be cultivated principally, or wholly, if necessary, in raising those productions for which it is best calculated and adapted; those which by experience it has been found to afford of the best quality in the greatest abun dance, and at the least expence of capital and labour. Labour or E c
REV. DEC. 1810.