Chapter XXX: Introduction (4)

Were that proposition true, the consequence drawn from it would be true also, to wit, that the loss by the wearing of the coin remains entirely suspended until the worn coin is all at once cried down. But if I can prove, that the wearing of the coin does not fall upon the person in whose hands it is found when cried down, except only so far as it happens to be below the mean weight of the whole currency, or so far as the person is a debtor, and unjustly obliged, by an arbitrary law, to pay what he had received in light, with heavy coin. If this, I say, be true, I hope it will follow, that there is not the least force in this objection. This consequence is plain.

It is certain, that by the wearing of the coin there is a loss incurred by somebody; if it be proved that it is not incurred by the person in whose hands the light coin is found when cried down, it must follow, that it has already fallen proportionally upon those who, in the mean time, have been considering it as of the standard value, while it has been really below it.

Here follows the proof of this proposition.

I shall suppose the silver coin of Great Britain is actually so worn as to be 5 _per cent._ lighter than its standard weight at a medium. If at that time the silver is ordered to be recoined of the standard weight, I say the currency, after the coinage, will be 5 _per cent._ better than before. Ought not then all merchandize to fall 5 _per cent._ in value upon this revolution.

Two men (A) and (B) have, the day before the calling in of the light specie, each a thousand pounds sterling of it in tale; (A) goes to market and buys corn with his thousand pounds, (B) keeps his coin, and next day is obliged to carry it to the mint, where he sells it at 5 _per cent._ discount; that is, for nine hundred and fifty pounds of new heavy silver coin. (B) after this operation goes to market; and finding grain fallen in the price 5 _per cent._ he with his nine hundred and fifty pounds, buys just as much as (A) had bought the day before with his thousand pounds. I ask what loss (B) has suffered in carrying his silver to the mint?

But if we suppose the thousand pounds in silver tale money, which (B) had, to be worn more than at the rate of 5 _per cent._ then he would lose all the difference; because the price of things would fall only according to the general proportion of the rise upon the value of the currency: but on the other hand, he would gain upon the supposition that his thousand pounds should happen to be less worn than the 5 _per cent._

Can any thing, therefore, be more absurd, than to appoint by law, that one, who shall at this time happen to be indebted for a thousand pounds, shall be obliged to pay this thousand pounds in heavy money, when he had borrowed it in light.

We have seen how (B) in buying corn with nine hundred and fifty pounds of the new coin, got as much as (A) had got the day before with his thousand. But suppose they had both bought grain the day before the crying down of the coin, (A) with his money, (B) with a note payable next day, how absurd must any law be, which should oblige (B), for one day’s credit, to pay at the rate of 5 _per cent._ increase of price; and this because of the accident of calling in of the money: an event he could neither foresee or prevent.

We may, therefore, conclude, that while the coin of a nation is upon the decline from the standard value of the unit (as it ought to be preserved by some invariable measure) those only through whose hands it circulates, lose upon what they have, in proportion to the debasement of the standard, while the coin remains in their hands.

[Sidenote: That inland dealings cannot support the standard where
there are money-jobbers or foreign commerce.]

_ANSW._ VII. It has been said, and I think proved, that in a trading nation, such as England is, nothing can long support the value of the money-unit (while affixed entirely to the coin, and while coinage is free) above the intrinsic value of the metals contained in it. I must now shew how the operations of foreign trade have the effect of regulating the value of the currency, in the hands even of those who consider coin merely as money of accompt; who give it and receive it by tale; and who never attend to the circumstances of weight, or proportion between the metals.

The price of commodities, in a trading nation, is not settled by private convention, but by market prices. Foreign markets regulate the price of grain, which regulates, in a great measure, that of every other thing; and the price of grain is regulated by the value which other nations pay for the pound sterling, by which the grain is bought. If, therefore, the lightness of the coin debases the value of the pound sterling in foreign markets, it must, for the same reason, raise the price of the grain bought with these pounds sterling; because the value of the pound sterling has no influence upon the value of grain abroad. The domestic competition between the merchants in the buying of the grain at home, informs the farmers of its value abroad; and they, without combination of circumstances, esteem it and sell it for inland consumption, at a value proportioned to what it bears in foreign markets; that is to say, proportioned to the actual value of the coin. Thus English farmers, although in buying and selling they do not attend to the weight of the coin, regulate their prices exactly as if they did.

I ask, What is meant by this expression, _that the lightness of the coins is no ways considered in any of our internal dealings with one another. Currency by tale refers only to the legal standard, as currency by weight doth to the coins themselves_? (Essay upon money, Part 2d, p. 79.) Will a person who considers his light shilling as a standard coin, buy more with it than if he considered it by its weight? Will any man in England sell cheaper to a porter, who never considered his shilling farther than to look at the King’s head, than he would to a Jew, who has had his shilling in a scale, and who knows to the fraction of a grain what it weighs? Which way, therefore, (in a trading nation) can money possibly be worth more than its weight? I comprehend very well how one shilling may be better than another to a money-jobber; but I cannot conceive how any shilling whatever, which passes by tale, be it light or weighty, can ever be worth more than according to the mean weight of the present currency. People, therefore, who know nothing of the value of money, may lose by giving away their heavy coin; but I cannot see how ever they can gain in their inland dealings, or how they can ever circulate their light coin for more than the value of the present currency.

We may, therefore, lay down the following principles: _1mo_, That, in a trading nation such as Great Britain, where coinage is free, the value of tale-money is exactly in proportion to the mean weight of the whole currency. _2do_, That the money-unit being only affixed to the coin, is exactly in proportion to its weight. _3tio_, That when the intrinsic value of all the coin is not in the exact proportion of its denomination, the operations of trade will strike the average, or mean proportional. _4to_, That when this is done, those who pay by tale, in coin which is worth more than the mean proportion, are really losers; and those who pay by tale in coin below that value, are really gainers, whether they know it or not.

[Sidenote: That public currency supports the authority of the
coin, not the value of the pound sterling.]

_ANSW._ VIII. The authority given to coin, by its being every where received in the King’s offices, is entirely confined to its currency, and not to its value. The consequence of its being received at the exchequer according to tale; makes coin which is not worth a pound sterling pass as if it were so. This debases the value of the pound, but gives no additional value to the coin. Is not this debasing the standard by authority, since it may oblige a creditor who lent 100 _l._ to accept of 95⁄100 of the value, as a legal payment.

The pounds sterling paid into the exchequer are no better, nor will they buy more of any commodity, than the worst pound sterling that ever came out of the hands of a money-jobber; and therefore contribute nothing to keep up the value of the coin. Merchants who know the value of coin, are those who regulate prices; and the public sale of one hundredth, nay of one thousandth part of a commodity sold by retail through all the nation, is sufficient to regulate the price of it every where. If this be true, to suppose that a pound sterling being regulated by statute, can add any thing to its value; or that my right is left unviolated, when I have been every day for these forty years giving my pound for what I ought to buy for 19 shillings of Queen Elizabeth’s standard, is as ideal a representation of the value of right as any thing I have ever heard.

If it be said, that this right implies a title to be indemnified by a reformation, or a restitution of the standard, for the loss I have sustained by the gradual debasement of it: I reply, that a state must examine the nature of my claim, and do me justice, without all doubt; but it does not follow as a consequence, that because a creditor in an old contract has been a loser by his debtor, that therefore all the creditors in the nation should share in the benefit of his restitution, at the expence of debtors, from whom they have suffered no loss.

[Sidenote: That the scheme is similar to, tho’ not the same with
that of Lowndes.]

_ANSW._ IX. I own the scheme proposed is pretty much the same with that proposed by Mr. Lowndes; and I must here give a satisfactory answer how a project so solidly refuted in 1695, can possibly be eligible in 1760.

[Sidenote: Lowndes reasoned upon wrong principles;]

First then, I say, that the question was not then understood. Mr. Lowndes put it upon a wrong issue, and supported his argument upon wrong principles. He insisted, that his scheme implied no debasement of the former standard. He ascribed the rise of the price of bullion to the rise of the intrinsic value of silver, and not to the lightness of the coin with which it was bought. He always supposed, that the stamp, and not the substance, made the currency. A light shilling and a heavy one were both shillings, according to him. He proposed reducing the weight of the silver coin 20 _per cent._ below the standard of Elizabeth, because he was ashamed to propose more; but a reduction of 33 _per cent._ or rather 50, would hardly have brought the pound sterling to the mean value of the silver currency at that time.

[Sidenote: Locke attended to supporting the standard, without
attending to the consequences.]

Mr. Locke, on the other hand, supposed the whole dispute to rest upon one point, to wit, Whether or not Mr. Lowndes’s scheme implied a debasement of the standard? He reasoned upon sound principles, and with good sense; but he did not turn his attention to the only object which fixes ours at present, to wit, the interests of those who are engaged in permanent contracts.

Mr. Lowndes’s great argument for reducing the standard was, that silver bullion was risen to 6 _s._ 5 _d._ _per_ ounce, (_that is, that it might have been bought with 77 pence of shillings of 1⁄77 part of a pound troy_) and therefore he was of opinion, that the pound troy should be coined into 77 shillings; which was diminishing the value of the pound sterling about 20 _per cent._ or 1⁄5. Mr. Locke answered him very well, that the 77 pence were paid in clipped money, and that those 77 pence were not in weight above 62 pence standard coin. This answer is quite satisfactory. But I ask, whether Mr. Locke would have been of opinion that any man who had borrowed 1000 _l._ sterling in this clipped money, ought to have been obliged, upon a reformation of the standard, to pay back 1000 _l._ sterling in standard weight? These gentlemen, Mr. Lowndes and Mr. Locke, examined very slightly the influence which altering the standard might have upon the interest of debtors and creditors; which is the only consideration that makes the reformation difficult to adjust at present. So great an influence in every political matter has the change of circumstances! Credit then was little known; consequently the mass of debts in England was small: now it is universally established, and the mass of debts active and passive is very great, and forms a very considerable interest in Great Britain.

In those days the landed interest, and the interest of the crown, were only attended to. Trade at that time was almost at a stop, and had been ruined by a piratical war. The evil was past a remedy, consistent with justice. Credit was very low, and daily declining, and demanded an instant reformation of the coin. Restoring the standard was the most favourable, both for the landed interest and the exchequer; and so it was gone into. The nation, and every debtor, was robbed by their creditors; but they did not perceive it; and what we do not see, seems to do us no harm. The question, therefore, is very different: circumstances must constantly be examined, and according to these every political question must be decided.

I have already observed, how the introduction of milled coin had the effect of introducing the clipping of that part which had been coined with the hammer. Guineas, at the revolution, (if I am well informed) passed for 21 shillings and sixpence. Gold was then to silver, over all Europe, rather above the proportion of 1 to 15, as appears by the famous regulation in 1690, called the convention of Leipzick, when the German coinage was settled; and it appears also by the proportion observed in France; and in Spain it was still higher, being as 1 to 16. At this rate we may be certain, that at the revolution the English silver was standard weight; because the guinea being left to seek its own price above 20 shillings, the statute value, did not rise above 21 shillings 6 pence, which marks the proportion to have been as 15.6 is to 1. The guinea, therefore, would not have failed to have risen higher, had the silver coin been light.

From 1692 to 1695, that is, in _three years time_, (Locke’s Farther Consid. p. 74.) the progress of clipping went on with such rapidity, that guineas rose from 21 shillings 6 pence, to 30 shillings; and according to a very sensible letter which lies before me, signed G. D. and printed in 1695, intituled, _A Letter from an English merchant at Amsterdam, to his friend in London_, I find there was at that time no determinate value at all for the pound sterling: so great was the difference of the currencies! As a proof, he says, that _100 pounds sterling in silver, which ought to weigh 32 pounds troy, weighed then commonly between 14 and 18_. At which rate guineas were very cheap at 30 shillings: they were worth above 40 shillings: and Davenant says, that five millions then borrowed by the state did not produce the value of two millions and a half.

[Sidenote: Political circumstances are greatly changed.]

It would be foreign to the present purpose to enter into a particular disquisition, in order to shew the difference between the political state of England then, and at present: let it suffice to remark in general,

I. That there was then no possibility of determining what the current value of a pound sterling was. It varied every month, and was daily declining. At present it is nearly of the same standard as it has been for many years.

II. The money-unit then had nothing to preserve it at any determinate value. The silver, to which it was affixed, was clipped three times in a year, while the gold sought its value as a commodity. At present the gold cannot vary: the guinea is fixed, and must pass for 21 shillings, let the silver be ever so light; and this gives a determinate value to the pound sterling.

III. In 1695, the whole disorder had been coming on with rapidity; at present it has advanced with imperceptible steps: consequently,

IV. At that time the number of permanent contracts which stretched beyond the æra of the debasement of the standard, were many; at present they are few.

V. In 1695, a money’d interest was hardly known. The rich had their money in their chests; now they have it in their pocket-book.

VI. The different between the currency and the legal standard in 1695, was one half: at present it is one twentieth.

VII. The debts of the nation did not then exceed 12 millions: now they exceed 140[V].

Footnote V:

In 1766.

VIII. Many sums then had been borrowed on assignments of certain branches of the excise, the amount of which was uncertain, and deficiencies (which in such cases are unavoidable) were not made good to the creditors. At present all is paid in determinate sums of pounds sterling.

IX. And lastly, the question was not understood. Locke and Lowndes _felt_, but did not _see_ distinctly, wherein the difference of their sentiments consisted: and those who only _feel_ never describe with perspicuity.

It was then generally imagined that a _pound_ could never be more than a _pound_; but at present people know how to reckon coin by grains, and see clearly that 1718 is more than 1638.

For these reasons I apprehend, that a scheme, similar to that proposed by Mr. Lowndes, may now be mentioned without offence; that the people of Great Britain are just now as good judges of what is for their interest, as they were in 1695. And if the decision of a former parliament is alledged in favour of the old standard, I answer, that such arguments are only good, when people are disposed to pay a greater deference to the sentiments of their fathers than their own; which I am apt to believe is not the case at present.

[Sidenote: Reconciliation of the two opinions.]

If these answers are found satisfactory, we may conclude, that in whatever way the disorder of the British coin is removed, the change ought to be made in such a manner as neither to benefit or to prejudice any, but such as have lost or gained by the debasement of the standard. Lest, however, that these answers should be perplexing only, without drawing conviction along with them, (which in matters of dispute is frequently the case) I shall say something farther upon this subject, with a view to reconcile two opinions, which are perhaps more opposite in appearance than in reality.

I have already apprized the reader, that I pretend to reason only upon principles, not upon exact information of facts. Circumstances which are hid from me, will nevertheless work their full effect, and may render the best deduced principles delusive, when, without attending to them, we pretend to draw conclusions.

Now, such circumstances in the present case there must certainly be; otherwise every body in England would agree, that the standard is at present actually debased, and that the restitution of it would effectually be raising it from what it has been for these many years. Upon this supposition, the consequences we have drawn must be allowed by every body to be just and natural.

Nothing, I think, is more certain, than that all men would be of the same opinion upon every proposition, were such propositions well understood, and did all parties make the application of them to the same object, and in the same sense.

If this be true, let me try to give a reason how it happens that there are different sentiments in England upon the method of restoring the standard.

[Sidenote: The question in dispute is not understood.]

I. First then, the question is not understood; and the principal thing which obscures people’s ideas concerning it, is their constantly attending to the denominations of the money of accompt, instead of attending to the denominations of the coin. These two things are universally confounded. A pound sterling is always a pound sterling, no doubt; but the grains of silver which compose one pound sterling are not the same in number with those which compose every pound sterling. Now, the moment money is realized in the metals, and that the standard measure of value is affixed to them, let them be worn or not, it is very evident that nothing but the grains of the metal in the several pieces can represent the scale by which the coin becomes a measure of value. Whenever, therefore, people lose sight of this undoubted truth, and begin to measure by the denominations of the ideal money of accompt, without examining whether that value be exactly realized or not, it is just the same thing as if they were to measure a length upon a plan without adjusting their compasses to the scale, and upon a bare supposition that the opening they had, by accident might answer to the length they were to measure.

[Sidenote: The true characteristic of a change in the standard is
not attended to.]

II. The state, in every country almost, is negligent in instructing the people of the consequences of every variation in the coin; and likewise negligent in providing against the inconveniences which result from all changes in those matters. It is not to be supposed that the common people can exactly comprehend the consequences of making a pound sometimes consist of more silver and sometimes of less. When the pieces are heavy however, they weigh them in their hand, and say _this is good money_; but when they find that they must give as much in tale of this good money to pay their debts, as if it had been light, they _feel_ a regret, but they do not _see_ the injustice of such a regulation.

Farther, when people find that upon a reformation of the coin they are still obliged to acquit their obligations with the same denominations as before, is it not very natural for sellers to insist upon having the former prices for all sorts of commodities. This is the reason why the universal experience of France (which nation has been more accustomed to variations in their coin, than England) proves that merchandize does not immediately rise and fall according to the variations of the coin. But the operations of foreign trade, which are immediately felt and profited of by the trading part of the nation, insensibly affect the dealings of the body of the people, and produce, after a certain time, those effects, which ought to have followed immediately upon the innovation.

[Sidenote: Principles will not operate their effect without the
assistance of the state.]

Now it is very certain that the principles we have been laying down will not, in practice, answer, unless the state should lend a hand, both by instructing their subjects in the nature of the change intended, and by interposing their authority to see justice done among them.

[Sidenote: When people understand one another, they soon agree.]

Those who oppose the doctrine we have been laying down, go upon the supposition that the law ought to order all obligations to be acquitted according to their denomination after the reformation of the standard. I go upon the supposition that it is just they should be acquitted according to the intrinsic value. Where then lies the difference between our sentiments? We are of the same opinion, as to the main question: for were it true that prices were not to sink 5 _per cent._ after the reformation, I should be the last man to propose, that debtors ought to be allowed conversions in paying with the new standard; and I suppose that those who support the contrary sentiment would be just as little inclined to oppose a conversion, upon the supposition that ninety five pounds, after the supposed reformation, were to be equivalent, to all intents and purposes, to a hundred at present.

[Sidenote: Permanent contracts are confounded with sale in this
dispute.]

III. The clearest and the best reasoners I have met with upon this subject, are apt upon some occasions to confound the two species of circulation which we have endeavoured carefully to distinguish; to wit, the involuntary which takes place in acquitting _contracts already made_, with the voluntary which takes place in common sales. As an example of this, and as a means of reconciling opinions, and not with any intention of entring upon refutations, I shall here extract a passage from Mr. Harris upon coins, Part II. p. 96. and insert in Italics what I think will explain the difference between our sentiments.

“You affirm (says he) that if the rate of a guinea be reduced one shilling, there would be a loss of the one and twentieth part upon all the guineas in the nation;” (_yes, as often as debtors might be obliged to give them to their creditors for pounds sterling_) “but that there would be no loss at all upon guineas, if they were ordered to pass for twenty one shillings, having in them no more silver than there is at present in twenty standard shillings.” (_no, certainly; because the debtor would pay his debt with the same number of guineas which he had borrowed._) "Strange, very strange indeed, that there should be such magic in the word shilling, and the number twenty one, as to make the same thing, only calling it by different names, have such different effects! It is scarce necessary to take any farther notice of such a mere jingle of words; but out of tenderness to these young logicians, but more out of regard to those who may be deceived by them, if any such there can be, I shall endeavour to shew, that our scheme is more favourable to them than their own.

“It is self-evident that the nation would not lose one farthing upon all the gold it exported, by a reduction of the mint price of gold: for this reduction would not in the least debase the intrinsic quality of the gold, and every guinea that went into foreign parts, would fetch there as much afterwards, as it doth at present.”

What I have put in Italics clears up the opinion which the author endeavours to refute. He seems much surprized to find magic concealed under the word _shilling_, and _twenty one_, whereas there are no words more magical in all the jargon of astrology than in these, and in every term relating to the denominations of money of accompt. Is it not very magical, that the same quantity of silver at present found in twenty one light shillings, being coined into twenty standard shillings, should only acquit a pound sterling of debt, and that were it coined again into twenty one shillings, it would acquit one pound one shilling of debt? Nay more, were it coined into a hundred shillings, it would acquit a debt of five pounds.

The doctrine, therefore, which the author endeavours to combat in this place, is not so ridiculous as it appeared to him; but he has not, in this place, attended to the difference between paying what one owes, and buying merchandize in the course of foreign trade. Let me illustrate this by an example.

I come to my creditor with a guinea, and I say, I owe you twenty one shillings; there you have them. No, says my creditor, that piece is but twenty, by the new regulation; I must have one shilling more. There is no reasoning here, the denomination of the coin must decide between us, not the weight, not the intrinsic value of what I had borrowed. But I go to a shop to buy a hat, the hatter asks twenty shillings; I offer him a guinea and demand a shilling to be returned; says the hatter, That guinea is worth but twenty shillings: Very well, say I, if my piece of gold is worth no more than 20 shillings, your hat was, yesterday, worth a shilling less than it, and, consequently, to day is worth no more than 19 shillings.

In the last example, magic has no effect, and to such cases Mr. Harris has only attended in the passage cited; but in the first, the magical word of a statute, is capable to undo one half of the nation; although their ruin does not imply the exportation of a shilling out of the kingdom, or any benefit to foreigners, unless they be creditors to Great Britain.

[Sidenote: The interest of creditors is always the predominant,
and determines the opinion of a nation.]

IV. The sentiments which the people of England generally form upon this subject, are directed by those of the higher classes. These are all of the class of creditors, and very naturally retain sentiments analogous to their own interest. I am far from insinuating any thing here to the prejudice of this class; all I mean is, that upon an obscure point, people lean naturally to that side which favours themselves, especially when the nation’s interest, and the interest of justice, do not evidently declare against it.

I call the higher classes of a people creditors; because they live upon a fortune already made, and draw their income from permanent contracts: and those are the debtors, who are bound on the opposite side of such contracts. Besides these two interests, there is another which can never be at the mercy of any arbitrary regulation as to money: those, to wit, who live upon their industry, and who enter into no contract but that of sale: they regulate their prices according to the intrinsic value of the coin at the time; whereas the others who are engaged in permanent contracts, must regulate theirs according to the words of their contract, and the interpretation which the law puts upon those words. Every man therefore, whose fortune is already made, either in land, money, or salary, has an interest in seeing the standard raised, and those who are bound in permanent contracts with them, are those only who can be hurt by it.

Farther, the higher classes in Great Britain have always the penning of the law. Is it then surprising, to find the interest of creditors constantly attended to, in new regulations of the standard? When Princes arbitrarily debase the standard, they debase it because at such a time they are virtually in the class of debtors: their expence then exceeds their income. On the contrary, when wars come to cease, and when their expences are reduced within the compass of their revenue, they raise the standard: because they become then of the class of creditors.

This principle is a key to all the mystery of the raising and sinking of the numerary value of the French coin in former times, before public credit was established among them.

Now let us apply this reasoning to the present case.

Since in all changes upon the coin we find (of late) the interest of creditors constantly attended to in Great Britain, is it not very natural for people to reason upon the supposition that there is no injustice in raising the standard; and is it not natural to suppose that government will act upon the same principles in their future regulations of the standard, as upon the last occasion in 1695? Every one, therefore, whose fortune is made, finds it his interest to have the standard brought back to what it was formerly; and he does not perceive the injury such a regulation would do to his debtors. On the other hand, the merchants see plainly that if this standard should be restored upon an imaginary principle of justice, the prices of commodities will not fall as they ought to do, and as foreign trade requires they should; they are therefore against raising the standard, because it will be a prejudice to trade, a clog upon exportation, and therefore a loss to themselves.

This, I think, very naturally accounts for the difference of opinion among the people of England, upon a matter of very general concern, and nothing is so easy as to reconcile all those interests by doing justice to every one, and injustice to none.

[Sidenote: Application of principles to the change lately made by
the Dutch with respect to their coin.]

As an illustration of this subject, I shall cite a recent example of a change made in the circulation of Dutch ducats, executed by that wise nation, seemingly in direct opposition to the principles here laid down, and exactly consistent with those we are endeavouring to explode.

The States General lately called down all the light ducats, and ordered them to go by weight, as bullion, without making any allowance to such as might suffer by it.

This regulation, and a new coinage of ducats, had the immediate effect of raising the value of that species of current money; consequently, it may be said, that debtors by that regulation have been proportionally hurt, by an act of one of the wisest governments in Europe, if our principles are admitted to be just. But before this conclusion can be drawn, circumstances must be examined.

Ducats in Holland are the _price_, _not_ the _measure_ of value, having no fixed legal denomination. The current silver coin is what the state, and all the mercantile interest attend to: and in proportion as this current silver coin or bank species is become light, the agio upon that currency has risen. The agio then, in combination with every currency, furnishes an invariable measure for value, as well as the bank money of Amsterdam; and to that every one attends who regards his interest.

The state, therefore, by this arbitrary measure, or sudden revolution on the ducats, did not hurt any debtor; because debtors never were obliged to give ducats in payment.

Will any one say that the Dutch silver currency, now that the agio is high, is of equal value in inland dealings as formerly when it was low: and must not the same argument hold with respect to the currency of Great Britain, although no such thing as agio be there known? Or will it be said, that because the Dutch, who have an invariable measure of value independent of their coin, make an arbitrary operation upon their currency, which is only price; that therefore the English, who have no invariable measure of value independent of their coin, may make a similar operation upon theirs?

[Sidenote: All decisions in political questions depend upon
circumstances.]

Thus it is that circumstances influence our decisions upon all political matters; and principles well deduced do not cease to be true, although they appear contradictory to experience, in cases where every circumstance is not exactly known. For this reason, I shall be very far from deciding as to the part proper to be taken by the British government; I go no farther than to point out plain principles; it is the business of statesmen to apply them according to circumstances.

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CHAP. XIII.
_In what Sense the Standard may be said to have been debased by Law, and
in what Sense it may be said to have suffered a gradual Debasement by
the Operation of political Causes._

[Sidenote: These proportions appear contradictory.]

In the course of this inquiry, the standard has been represented sometimes as having been debased by law, above thirty years ago, to 113 grains fine gold, at which it remains at present, and sometimes as having gradually declined for these many years.

These propositions are true, though they appear inconsistent, or at least inaccurate; and they must now be set in a clear light.

I have had no opportunity of tracing the progress of the variations as to the price of the metals in the English market from the beginning of this century; and to supply the want of exact observation, I have gone upon the following suppositions: 1. That while the guineas were left to find their own value (being regulated by the law below their worth, and not being considered as a lawful money) they naturally would fix themselves according to the market proportion of the metals. 2. That, at the time the standard was affixed to the guineas in conjunction with the silver, and both were made lawful money, the value of the guineas was exactly inquired into and regulated at their precise value.

[Sidenote: Debased by law when affixed to the gold.]

From these circumstances I conclude, that after this affixing the standard to both species, the least variation in the proportion of the metals must have had the effect of _throwing the standard_ (as I may call it) upon that metal which was the least valuable in the coin: and since it is certain, that for thirty years backward, at least, gold coin of equal denomination has been less valuable than silver, payments have been made, commonly, in gold, under the sanction of law, while the silver has been melted down or exported; for these reasons, I have frequently represented the standard as long ago debased by law to the value of 113 grains fine gold; and I believe I have advanced nothing but the truth.

[Sidenote: Effects which the changing the proportion of the metals
has upon melting the coin and regulating payments.]

Here we may conclude, that it is impossible for any law to keep the standard attached both to the gold and the silver coin at once, without preserving constantly the market proportion of the metals at par, with the numerary value of the coins. The rise of silver for one week in the London market is a cause of the silver coin’s being melted; and during that week, all payments will be made in gold. If the week following, gold should rise above the proportion fixed in the coin, gold coin would be melted, and payments would be made in silver.

[Sidenote: Payments made by bankers regulate all others.]

I do not, at present, consider the small circulation either among the nobility, or among the commons; but I attend to the great circulation among bankers, who have all the specie in the nation in their hands once in a year; and I say, that the payments they make must influence those of all others. Every gentleman pays with the money his banker gives him: did the bank of England find its interest in paying in silver, would it not soon become plentiful in circulation, and would not payments begin to be made in it preferably to gold?

The standard, therefore, has been debased by law by being affixed to the gold, of which metal the pound sterling has uniformly, for these thirty years past, been worth 113 grains, in new guineas.

But I have also said, that the standard has been gradually diminishing; consequently it might be objected, that if a pound sterling was, thirty years ago, equal to 113 grains of gold, if it has been ever since at that standard, and if it be to-day 113 grains of gold, it cannot be said to have been gradually diminishing. The answer is evident, when we reflect upon our principles.

[Sidenote: The standard gradually debased, by the rising of the
silver.]

The standard affixed to the _gold_ has been diminishing, because these 113 grains of gold have been diminishing in their value with regard to the _silver_. When the guinea, in 1728, was fixed at 21 shillings, the pound sterling was fixed thereby at 113 grains fine gold, as has been said; consequently, if that weight of gold was then worth 1718.7 fine silver, there was no debasement made by that statute: but in consequence of that statute, the debasement must take place the moment the silver rose in its value.

I am not authorized, by any fact, to advance, that at the time the guineas were brought down from 21 shillings 6 pence to 21 shillings, the metals in the coin were not put at the exact proportion they then bore in the English market. The great Sir Isaac Newton was the person consulted in that matter, and to criticise his decision without plain evidence, would be rash. All I shall say is, that in France the proportion then was 1 to 14½, although according to the English statute it was regulated as 1 to 15.21.

[Sidenote: The proportion of the metals, in 1728, supposed to have
been as 15.21 is to 1.]

Let us therefore suppose, that in 1728, the metals were at the proportion of 1 to 15.21; and that 113 grains of fine gold were really worth 1718.7 grains of fine silver.

[Sidenote: By what progression the silver standard has been
debased.]

But the silver having risen, the standard, for this reason, has been thrown upon the gold, and has constantly remained at 113 grains (that is, in new guineas;) and as the metals have varied from the proportion of 1 to 15.21, to that of 1 to 14.5, by the same steps has the value of the pound sterling, in silver, changed from 1718.7, to 1638.5; which 1638.5 is to 113 as 14.5 is to 1: and were the proportion between gold and silver to come by slow degrees to the Chinese proportion of 1 to 10, the pound sterling would still remain at 113 grains of fine gold, as it has been since the year 1728; but the silver coin would either be melted down, or so rubbed away, as to make a pound sterling of it weigh no more than 1130 grains of fine silver, so as to bring it to the proportion of 10 to 1, together with the metals.

Does not this evidently shew the defect of fixing the standard either to one or to both the species?

As a farther illustration of this matter, which, because of its importance, cannot, I think, be too often repeated, I shall shew, in a very few words, how far people are mistaken, when they imagine that by reducing the guineas to 20 shillings, and re-coining the silver according to the plan proposed, the standard of the pound sterling will be brought to that of Elizabeth.

[Sidenote: The standard of Elizabeth for the pound sterling, was
1718.7 grains silver, and 157.6 grains gold, both fine.]

When Elizabeth fixed the standard of the pound sterling at 1718.7 grains of fine silver, the proportion of the metals, according to the table in the essay of money and coins above cited, was as 10.905 to 1; consequently that pound paid in gold was, in 1601, equal to 157.6 grains fine gold.

[Sidenote: The gold standard of her pound worth, at present,
2285.3 grains fine silver.]

Had, therefore, by accident, the standard been then fixed to the gold, in place of the silver, and had the silver ever since been considered as a commodity, the pound sterling at present would be worth 157.6 grains of fine gold, and consequently worth 2285.3 grains fine silver, at the proportion of 14.5 to 1; whereas, having been fixed to the silver, it has been kept at the old standard of 1718.7, and consequently is worth no more than 118.5 grains of fine gold.

[Sidenote: The variation of the metals has produced three
different standards of Elizabeth.]

Now supposing that in the year 1601, three different payments of a pound sterling had been made, and locked up in a chest till this day, let us inquire what would be the value of each at present, were they to be melted down, and sold as bullion in the English market. The first payment I shall suppose to have been made in silver, to the value of 1718.7 grains fine silver, which make of standard silver 1858.06 grains; this sold at the rate of 65 pence an ounce, the present supposed value of silver, at the rate [Sidenote: One worth £1 0 11⅜ present currency.] of the gold, when full weight, makes £1 0 11⅜. The second payment I shall suppose to have been made in gold,[Sidenote: Another worth £1 7 10⅞] to the value of 157.6 grains fine gold, which makes of standard gold 171.9 grains, this at the mint price of gold, that is, £3 17 10½ the ounce, makes of present sterling, £1 7 10⅞.

[Sidenote: And a third worth £1 4 5⅛.]

The third payment I suppose to have been made, one half in gold, one half in silver, which makes 859.36 grains fine silver, and 78.8 grains of fine gold, which, at the above conversions,

makes for the silver £0
10 511⁄16

And for the gold £0 13 117⁄16

—————

Together £1 4 5⅛

[Sidenote: The last is the true standard of Elizabeth for the
pound sterling, and worth at present 2002 grains fine silver,
and 138 ditto gold.]

Here we have three different pounds sterling, produced purely by the variation in the proportion of the metals, although in 1601, they must have been absolutely the same. Which of the three, therefore, is the standard of Elizabeth? Is it not evident, that it can be no other than according to the value of that pound which was paid, half in gold, and half in silver? And is it not also plain, that this is the exact arithmetical mean proportional between the gold and the silver? Let the silver and the gold pounds be added together, they make £2 8 10¼; the half of which is the value of that pound which was paid half in gold, and half in silver, to wit, £1 4 5⅛ of the present gold currency, reckoning standard silver at 65 pence _per_ ounce, and gold at the mint price. To realize this value exactly in gold and silver, while the proportion remains as 1 to 14.5, it would be proper to put into the pound sterling 2001.9 grains troy fine silver, and 138.04 grains of fine gold. These quantities of the metals would answer exactly to the value of £1 4 10¼, the mean proportional above mentioned.

Here then is the standard of Elizabeth: if it has any excellence in it above all others, it might be preferred.

[Sidenote: But may vary at every moment.]

It must however be observed, that it will remain the standard only whilst the proportion of 1 to 14.5, upon which it has been established, shall remain unvaried between the metals; and it will vary from where it might be at present settled, in the same manner as it has varied at all times from the year 1601, to wit, according to the vicissitudes which shall happen in the proportion of the metals. But at every period of time, and in all different varieties of proportion between gold and silver, no problem is more easily resolved than that of the mean proportional between the gold and silver, the moment one knows the proportion of the metals at the time; as shall be demonstrated in a following chapter.

[Sidenote: Gold rose during the whole 17th century;]

During the whole seventeenth century, gold rose in its value; or to express this as the French writers do, the _proportion of the metals was increasing_, from that of 1 to 10.905, to that of 1 to 15; and in Spain it got up to that of 1 to 16. The standard, therefore being fixed by Elizabeth to the silver, was then attached to that metal which was the least sought for; and who knows whether the mercantile interest at that time, and in the succeeding reigns, did not find it their interest to keep it attached to the silver, for the same reason they now wish it attached to the gold?

[Sidenote: and silver has risen since the beginning of this
century.]

Since the beginning of this century the metals have taken a different turn, and now the _proportion is diminishing_; that is to say, the value of _silver is rising_; the consequence of which is, that the mercantile interest would gladly have the standard fixed to the gold; because in this case, (the proportion of the metals being upon the diminishing hand) the standard of the pound will gradually diminish, and trading men will thereby gain, according to the principles above laid down.

From what has been said, the reader may reconcile me with myself, when I sometimes have spoken of the standard of the pound sterling, as having been debased by law thirty years ago, to 113 grains of gold; and when, upon other occasions, I have represented it as having descended by degrees to where it is at present. Had I involved my reasoning in all the distinctions which I have now explained, I should have lost my way, and perplexed my subject, instead of throwing light upon it. I shall hereafter examine how these circumstances may be attended to in a new regulation of the mint.

Providing the subject be well understood, men of capacity will be found to execute this great operation according to justice, in spight of the most perplexing combinations.

Let me here recapitulate a few positions, which we may now have occasion to apply.

[Sidenote: Some positions recapitulated.]

I. The standard is debased by being fixed by statute to 113 grains of fine gold, not by the act of fixing it, but by the rising of the silver since that time, which the statute could not prevent: and gold being now the metal the least sought for, is become the standard of the pound sterling, and regulates its value so, that no silver coin, which is above the proportion of the gold, can remain in currency.

II. That according as the proportion of the metals shall diminish from what it is at present, the standard will still fall lower with respect to silver, but will remain fixed with respect to gold, at 113 grains.

III. That the true value of the pound sterling will always be found in the mean proportion between 113 grains fine gold, and 1638.5 grains fine silver.

IV. That if light guineas are allowed to pass current, the standard will fall below the 113 grains, and the price of gold bullion will rise above £3 17 10½ in the English market.

V. That upon calling in the light guineas afterwards, a hurt will be done to all those who have contracted during their currency.

------------------------------------------------------------------------

CHAP. XIV.
_Circumstances to be attended to in a new Regulation of the British
Coin._

I think I have sufficiently laid open all the principles which can influence a new regulation of the British standard, as far as a change may influence either the value of the money-unit, or the interests within the state.

As to the first, it has been said above, that if, by the future regulation, any change whatsoever shall be made upon the value of the money-unit, as it stands at present, the adopting any other whatsoever is a thing purely arbitrary.

[Sidenote: The adopting the standard of Elizabeth has an air of
justice.]

To people who do not understand the nature of such operations, it may have an air of justice to support the unit at what is commonly believed to be the standard of Queen Elizabeth, to wit, at 1718.5 grains of fine silver.

[Sidenote: Advantages of that of Mary I.]

The regulating the standard of both silver and gold to 11⁄12 fine, and the pound sterling to four ounces standard silver, as it stood during the reign of Queen Mary I. has also its advantages, as Mr. Harris has observed. It makes the crown piece to weigh just one ounce, the shilling four penny weight, and the penny eight grains; consequently, were the new statute to bear, that the weight of the coin should regulate its currency upon certain occasions, the having the pieces adjusted to certain aliquot parts of weight, would make weighing easy, and would accustom the common people to judge of the value of money by its weight, and not by the stamp.

In that case, there might be a conveniency in striking the gold coins of the same weight with the silver; because the proportion of their values would then constantly be the same with the proportion of the metals. The gold crowns would be worth at present, 3_l._ 12_s._ 6_d._ the half crowns 1_l._ 16_s._ 3_d._ the gold shillings 14_s._ and 6_d._ and the half 7_s._ and 3_d._ This was antiently the practice in the Spanish mints.