THE CURRENCY.

LETTER TO THE EDITOR OF THE SPECTATOR. [Continued from the last Number, p. 301 ] 8. In process of time, the gold which had been liberated found other chan- nels of consumption, and ceased, or nearly ceased, to fall in price ; while fresh and great issues of paper money continuing to be made, the value of this latter kind of property now began to fall even as compared with gold, and, of course, fell yet more when compared with other kinds of property.

ILLUSTRATIONS.

Increase in the Amount of Bank of England Notes in circulation: the increase in Country Bankers' Notes, Bills ofExchange, Eft. being probably in aspect a degree.

Average for the Ten Years ending 1797 Ten Millions. Amount in 1813 Twenty-four Millions.

Prices in 1790* and 1813

Wheat per bushel.

s. d. Meat per lb.

d.

Butter per lb.

d.

Oatmeal per bushel.

s. d.

Gold per ounce.

g. s. d.

Labourer's Wage per day.

s. d.

1790.... 6 9 .... 4 .... 64 .... 5 3 .... 3 17 104 ....

1 0

1813 .... 14 4 .... 9 .... 15 .... 13 3 .... 5 8 0 .... 2 5

Comparative Value of a One Pound Note in the years 1790 and 1813.

1790. 1813.

Wheat. 3 bushels 14 bushels.

Meat. 60 lbs. 27 lbs.

Butter 35 lbs. 16 lbs.

Oatmeal 4 bushels 14 bushel.

Gold 123 grains 78 grains. Labourer's time 20 days 84 days.

9. During the time that an inconvertible paper currency was in use, the 4* I am aware that prices in the year 1790 were somewhat lower than the average of the ten years ending 1797; but I have not access at this time to documents giving that -average.

,

agricultural, manufacturing, tredieg, and miniinereiil poiters of the cogh* were vastly increased : great quantities of land, hitherto waste, were brought into cultivation ; the iron and cotton manufactures, and manufactures of many other kinds, were very greatly extended; and ships, docks, and canals, multiplied ht every direction. 10. The existence of the War, with its waste of property and waste of use.. ful labour, together with the restrictions on coinmerce which It produced, and the mischievous effects on trade and manufactures, caused by the burdensome taxes raised to maintain it, instead of being, as many have asserted, the cause of the increase in the productive and accumulative powers of the country, was cone stantly destroying accumulation and checking production, to an enormous extent

i ; and required an mmense power to counteract its effects.

11. This counteracting power was the inconvertible paper currency ; potency consisting in the facilities which it afforded for representing property of every kind, and thereby of readily effeeting exchanges. 12. During the time of the inconvertible paper currency, the population of the country greatly increased ; prices of goods, and the habits and expectations of people became conformable to it • the salaries of all Government officers, the pay of the Army and Navy, the salaries of the Judges, &c tee. were raised in proportion to the decreased value of bank-paper; the taxes were consequentlz

raised in '

the same proportion • loans were borrowed in the new standard ; an in a word, the engagements of the whole of society, whether made by agricultu- ralists, manufacturers, merchants, landowners, or capitalists, were formed on terms which showed the absence of any expectation that the then existing are rangement of the currency would be altered.

EXAMPLE.

In the year 1814, a Government loan of the enormous amount of thirty mil- lions sterling was contracted, and on the following terms. For every hundred. pound in notes advanced to Government, the lender was credited with 170/. in the Three per Cent. Consols, and 10/. in the Four per Cents. ; which was the same thing as Government engaging to pay the lender an interest of about 5/. Ils. 6d. per cent. on the money advanced. This rate of interest (which is decidedly high, considering the security offered), shows the entire absence of a suspicion on the part of the lender that a still higher rate of interest would soon be paid : nor could he have had any expectation that Government would soon voluntarily offer to bind itself to pay him back a much larger sum than he had advanced,-that on the one hand the five notes and a half in which the yezuly interest was paid (for every 100/. advanced), would, instead of being worth only 92 grains of gold each, as heretofore, be equivalent to 123 grains each; while on the other -hand, the180/. of stock, instead of being paid off (as it was borrowed) in 100 pound-notes each worth 92 grains, would in a few years en- title the holder (as it has in fact entitled him), to 130 pound-notes, each worth

123 e of gold ! In other words, who will venture to maintain that the loan of 30,000,000/. in 1814, was advanced under the expectation that, for every 9,200 grains of gold lent to Government, 18,400 grains of gold would be paid. backand that, too, in addition to receiving a very high interest until the debt was discharged !

13. Parliament having, after the war, unwisely determined that all paper money should be convertible into gold at the will of the owner, such standard should have been fixed upon as would have kept money at the same value as heretofore : that is, it should have been so arranged, in fixing the stand:ad, that any sum of money, as 101., should be worth no inure corn, meat, iron, labour, Pec. than heretofore.

14. This fair standard would have been at least as low as 92 grains of gold to the pound-note; since the value in gold of the pound-note, even when gold was not required for circulation, awl consequently when the gold market was well stocked, had actually been much lower than 92 grains for each pound-note.

15. Instead of the standard of 92 grains of gold to the pound-note being fixed upon, the standard actually adopted was one of 123 grains to the pound-note.

It;. Assuming the increase made in the standard to be not more titan 133,1 per cent. (certainly below the truth), then, by the acts passed in the years 1815 and 1819 for resuming cash payments, and for &dile so at the standard of 1797, -that is, at a Standard. of 12;3 grains of gold to the puund-note,-all the taxes of the country, whether direct or indirect, all import duties, all tithes which bad been compounded for, all rents, whether of land or of houses, all mortgagee and debts of every kind-in a word, all money obligations of whatever descrip- tion-were, by those acts, increased by one third of their amount. 17.. If the Standard of 92 grains to the pound had been adopted, and at thesame time it had been decreed that ever peneon'e rent, taxes, debts, &c. should be increased by one third of their amount, the effect would not have been more un- just and ruinous than was the result of PEEL'S Bill of 1819, and its forerunner in 1815.

18. If for the attainment of any conceived advantage, or for any other reason, Parliament was doggedly bent on returning to the obsolete standard of 1797, all public or private claims should have been reduced in the same proportion as the value of money had been increased. Thus, the pay of the Army and Navy, the salaries of all public officers, &c. which had been increased on the ground of the reduced value of money, shouid have been cut down by one quarter. Take, fin instance, a salary of 400/. a year,-400/. if paid in gold at the rate of 123 grains per pound sterling would be worth rather more than 530/. paid in the standard of 92 grains to the pound; or, to state the thing differently, 400/. at the standard of 92 grains to the pound would be equal to WO/. at the standard. of 123 grains to the pound. 19. The nominal amount of the claims of the Fundholder, and of those of every other creditor, public and private, should have been reduced in the same proportion as the salaries of public officers, fec. should have been; that is, they should have been reduced by one quarter. 20. Those who suffered from the violent change in the standard were injured to a much greater extent than the gainers were benefited ; the latter being in general a wealthy class, the former containing among their numbers all the needy in the country.

21. It is not less absurd to defend the measure in question on the ground i that it was only taking money out of one pocket to put t into another, than it would be to apply the same argument to a case in which a rich highwayman robbed a poor traveller of part of the few coins his purse contained.

22. Considering the vast extent to which claims, formed before the passing of PEEL'S Bill, still remain undischarged, anti the great difficulty there would be in carrying into operation any plan for cutting them down to their just amount, (rents, salaries, &c. inclusive); considering also, that many of those now in the receipt of rents, salaries, interest on Funded property, &c. are the identical men who contracted to receive smaller payments; considering from this, the very questionable nature of the claims of the Fundholders upon any others thaex the irresponsible Government by which their money was borrowed and disbursed (some members of which Government acted to their own great emolument, in the double capacity;of borrower and lender) ; considering all the circumstances, there would be a great balance of advantage- in even Now undoing, as fax as possible, the effects of PEEL'S Bill. 23. The remedy could be much more easily and much more advantageou.sl, . brought about by an increased issue of paper money, and by a substitution .of small coins for those now in circulation, and by a consequent reduction of die standard, than by "an equitable adjustment." 24. As an immediate step-towards accomplishing the end proposed, it would be adviseable to appoint a Board of Control over the Bank of F.ngland. (Asa

itusie or be retyuusliee to Parliament), and to eecree that Bank of EnVend sh paper ould be consuidered a legal tender from all parties. excepting the ank Itself. The issue of one-pound notes, as well by private bankers as by the Bank of England, should be again legalized. And, further, a silver standard should be added to the gold stamilard • that is, the Bank of England, and, of course, private banks also, should be allowed the option of paying off their notes in either silver or gold. 25. The plan which it will be best to adopt when the arrangements can be matured, will be for a National Bank to be opened, with Branches throughout the United Kingdom. The profits to go into the public exchequer.. • This Bank to issue paper money ; but neither in the issue of paper 'money, nor in any other way, to have a monopoly.

26. The standard to be determined by taking a mean of the averages if "several staple articles of great,consumptinn. or use : such as corn, meat, sugar, rice, iron, copper, arid to these may he added gold and silver.

27. When the Value of paper tuoney rises above the mean average just de- scribed, its issues should increased ncreased until paper money. fills again to its right level. When, mi the other hand, the value of paper money sinks below the .mean average, a portion of the paper money in circulation should he cilled in. 28,. The paper money of the National Bank may either be convertible or in- convertible.

29. If it be determined that the paper shall be convertible, then the Bank should have an option of paying off its notes eiaier in gold or silver, or in fixed 'quantities of the other enumerated articles.. This latter payment, to which there would he BO inducement to resort, mitres a panic should arise, and the price of gold and silver consequently advance, would be most readily effected by means of orders on different tradesmen. The causes, however, of a panic would be so very much reduced, that the chance of a necessity arising fur a payment in "kind" would be very remote.

I am, Sir, yonrs respectfully, H.

27th March 1833,