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than it ought to have been. This over-valuation is estimated by the late Lord Liverpool to have been at the time equal to 4d. on the guinea, or to 1 per cent.; and as the real value of silver relatively to gold continued to increase during the greater part of last century, this difference, which even in the reign of George I. caused all considerable payments to be made in gold, became afterwards much greater. This error in the mint valuation of gold and silver was the cause that, during the long period from 1718 down to the late recoinage, no silver currency of the legal weight and fineness would remain in circulation. . The real value of silver coins relatively to gold coins, which were, equally with the former, made a legal tender by the proclamation of 1718, being underrated, they were no sooner issued than they found their way to the melting pot. None, therefore, but very light coins, remained in circulation; and when, in 1797, the further coinage of silver was forbidden, the silver currency was very much debased. But as this currency existed only in a limited quantity, it did not, according to the principle already explained, sink in its current value. Though so debased, it was still the interest of debtors to pay in the gold coin. If, indeed, the quantity of this debased silver coin had been very great, or if the mint had issued such debased pieces, it might have been the interest of debtors to pay in this debased money; but its quantity was limited, and it sustained its value; and gold, therefore, was in practice the real standard of cur
It is not to be imagined that the act of 1774, declaring that silver should not be a legal tender for any debt exceeding 251, unless by weight according to the mint standard, had any effect in causing the general employment of gold as a circulating medium; for, as Mr Ricardo has justly observed,
This law did not prevent any debtor from paying any debt, however large its amount, in silver currency fresh from the mint. That the debtor did not pay in this metal, was not a matter of chance, nor a matter of compulsion, but wholly the effect of choice. It did not suit him to take silver to the mint, but it did suit him to take gold hither. It is probable, that if the quantity of this debased silver in circulation had been enormously great, and also a legal tender, that a guinea would have been again, as in the reign of William III., worth 30s.; but it would have been the debased shilling that would have fallen in value, and not the guinea that had risen.
The absurdity of employing equally two metals as a legal tender for debts, or as a standard of value, was unanswerably
Principles of Political Economy, &c. p. 520.
demonstrated by Mr Locke and Mr Harris, and has been noticed by every subsequent writer; but so slow is the progress of improvement, that it was not till 1816 that it was enacted, that gold only should be a legal tender for any sum exceeding 21 shillings.
Whether, however, gold should, in preference to silver, have been adopted as the standard of exchangeable value, is a question which is not so easy of solution and on which there is a great diversity of opinion. Mr Locke, Mr Harris and Mr Ricardo, are decidedly of opinion, that silver is much better fitted than gold for a standard; while Dr Sinith, although he has not expressed himself explicitly on the subject, appears to think gold ought to be adopted in preference; and this opinion has been very ably supported by the late Lord Liverpool in his valuable work on the Coins of the Realm. '
It would be presumption in us to attempt to decide on a matter, respecting which the ablest political economists differ thus widely. We confess, however, that we are inclined to concur in opinion with those who think silver ought to be adopted as the standard. Whatever metal is set apart for this purpose, it will be a very difficult task to preserve the currency from falling into a deranged state, if it be not used as well in small as in large payments.
The integer,' says Mr Harris, and its several parts, should bear an exact and due proportion of value to each other; and this would be impossible, if they were made of different materials. There must be coins of about the value of shillings and sixpences; and it would be better if we had some that were still smaller: Those sorts of coins are the most frequently wanted, and there is no doing without them. But a coin of a shilling, or even of half-a-crown value, would be too small in gold; and, therefore, at present, gold is much too valuable for a standard of money. And it would be a ridiculous and vain attempt, to make a standard integer of gold, whose parts should be silver; or to make a motley standard, part gold and part silver.
Silver is also much more steady in its value than gold. Almost all foreign countries have adopted it as their standard; and the demand and supply is comparatively regular: while the substitution of paper as the general circulating medium, would entirely remove the great objection against silver,-its being too bulky to be advantageously used in large payments.
Whether gold or silver be adopted as the standard of our currency, that will not in the least affect its total value; for the quantity of metal employed as money, or the quantity of metal
* Essay on Money and Coins, Part 1st, p. 60.
for which paper is the substitute, must always be in an inverse proportion to the value of that metal. If gold be continued as the standard, fifteen times less of that metal than of silver would be required; or, which is the same thing, if the denomination of a pound were given to any specific weight of gold and silver, fifteen times more of such silver pounds would be required to serve as a currency, or as bullion to exchange for notes,-fifteen to one being about the proportion which gold bears in value to silver. And hence it would make no difference as to the expense of a paper currency, to which a subsidiary metallic currency, for the effecting of small payments, should be attached, whether the bullion to be given in exchange for notes, and the subsidiary currency, consisted of gold or silver. But as gold is too valuable, in proportion to its bulk, to be coined into pieces of the value of a shilling or a sixpence, and as it is desirable to have the subsidiary currency composed of the same metal with that for which paper should be rendered exchangeable, silver ought to be adopted as the standard.
If, however, it should be deemed inexpedient to change the standard, it would not be proper to make any alteration on the late act allowing a seignorage of 6 per cent. on the silver coin; as the exacting of this seignorage will, after bank notes have been rendered payable in gold bullion, prevent all risk of the sudden disappearance of the subsidiary currency. Neither, on the supposition that silver were to be assumed as the standard, could there be any valid objection against continuing the seignorage: For, as notes would be exchangeable for bullion, and not for coin, it would not cause any reduction of the standard, while it would have the beneficial effect of preventing the too great multiplication of the subsidiary currency.
But, whatever determination Parliament may come to on this point, we trust the ensuing Session will not be allowed to terminate without some decided step being taken to restore to the country its ancient security against fluctuations in the value of money, either by reverting to our old system of cash payments, or by adopting the preferable system which it has been our object to point out and explain. It is essential to the best interests of the nation, that our present disgraceful monetary system should be put an end to. We do not mean by this to throw out any reflection against the conduct of the Directors of the Bank of England. They have used the extraordinary and almost unlimited powers vested in them by the Restriction, with a moderation for which they are entitled to the public gratitude, and which could not rationally have been expected from the
unrestrained forbearance of any body of men. Still, however, it is certain, that, during the twenty last years, fluctuations, of the most ruinous nature, have taken place in the value of the currency. From 1809 to 1815, both inclusive, paper money was depreciated below its value in gold from 20 to 30 per cent. During this period, therefore, landlords whose estates were let, stockholders and annuitants of all descriptions, and, in short, all classes who could not raise the nominal value of their incomes proportionably to the fall in the real value of money, suffered a real diminution of their incomes, corresponding to the extent of the depreciation. The injustice that, in a different state of things, would have been done to the public creditors, who had lent the country gold, or paper equivalent to gold, by raising the denomination of the coin, however gross and palpable, would not have been greater than what was actually done in paying them with this depreciated paper. The depreciation, too, had well nigh put an end to the practice of granting long leases,―a practice to which, more than to any thing else, the high cultivation of the country is to be ascribed. Landlords would not let their farms for 20 or 30 years, when they saw the rapid advance that was every day taking place in prices. The length of leases was generally reduced to half the usual period; and clauses were introduced, giving the landlord a power to resume possession during their currency. Nothing but the prospect of a continued rise of prices, or, in other words, a continued depreciation of paper, could have induced tenants to enter into such stipulations. They were altogether subversive of a sober and steady spirit of industry, and were only fitted for the fictitious state of things in which they were adopted.
But the mischief occasioned by the sudden restriction of the paper currency, and the consequent rapid augmentation of its value, has been still greater than what was previously caused by its increase. It is to this that the late unprecedented destruction of agricultural capital, and the wide-spread misery by which the farming class has been nearly overwhelmed, is chiefly to be ascribed. The first fall in the price of agricultural produce, in the autumn of 1813, and in the early part of 1814, was certainly owing to importations from the Continent. But its fall, in the latter part of 1814 and 1815, was not so much owing to that circumstance, as to the universal reduction of the issues of the country banks, and to the failure of an immense number (about 240) of these establishments. That support on which too many of the agriculturists rested, was torn away at the time it was most necessary. Credit fell to the ground, mutual confidence entirely ceased, and the fall of the price of raw produce,
as it was chiefly occasioned by a rise in the value of money, was accompanied by a proportionable increase of rent. It was then that all the defects of the fictitious system, on which we had been proceeding, became apparent. Thousands, who but a twelvemonth before considered themselves wealthy, at once sunk, as if by enchantment, and, without any fault of their own, into the abyss of poverty!
With the exception of the misery occasioned by the destruction of the assignats in France, we do not think that the misery and subversion of private fortunes occasioned by the late sudden reduction of Bank paper in this country, has ever been paralleled. Nor was this misery of a temporary or evanescent character. Its pernicious effects will long continue to be felt, not only by individuals, but by the nation at large. During the period in which the depreciation was greatest, the State borrowed several hundred millions. And it will now have this money, which was borrowed when a bank note was not worth more than 14s. or 15s., to pay, when its value is at par. All those taxes, too, which were imposed when the currency was thus reduced, must now, though not nominally, be really increased. And it may be questioned, whether, making allowance for the difference in the value of money, the country was not less heavily burdened in 1812 and 1813, than it is at this moment, notwithstanding we have now got rid of the Income-tax and war malt duty.
On every account, therefore, it is of infinite importance that the value of the currency should be rendered as little fluctuating as possible; or, in other words, that the Bank should be obliged to give cash or bullion in exchange for its notes. When a public debt has been contracted, a depreciation of paper induces what is really equivalent to a national bankruptcy. Now surely it is too much to entrust any corporate body, however respectable, with the power of reducing the national credit to nothing, and of ruining all those living on fixed incomes. But it is still more dangerous to entrust them with the power of enriching annuitants and stockholders at the expense of the productive classes, or to arm them with the prerogative of imposing indefinite taxes: For they exercise that power most effectually, when, by diminishing their paper, and, consequently, raising its value, they reduce the money price of commodities, and oblige a farmer to sell two quarters of wheat, or a manufacturer two yards of cloth, to pay those taxes for which one had formerly sufficed. Such a power vested in the hands of a body unknown to the Constitution, and acting under no responsibility, is perfectly anomalous in a free country, and is altogether subversive of the security of property.