STATE OF THE REVENUE—STATE OF THE COUNTRY. TO THE EDITOR
OF THE SPECTATOR.
28th Jauuary 1843.
SIR—Since my letter was written which appears in your paper today, the correspondence between Sir ROBERT PEEL and the Birmingham Chamber of Commerce has been published. Will you allow me to make one or two brief remarks upon it, lest it should be thought our objects are similar. It is pre- posterous to think we should at this day be justified in paying off the ancient debts of the country in the values at which they were contracted, seeing that they have perhaps almost entirely changed hands. Yet this is what the Bir- mingham people propose—in short, a regular confiscation. I ask to pay off the debts of the country in the values at which they were contracted : but as every transfer must be considered a new contract, and as no general measure can adapt itself to the various dates of the different transfers, I consider them all as new contracts, at the values of the day ; and all I contend for is, that we must be wiser for the future, and that when we adopt measures which increase the value of money, we must adopt counter-measures to prevent the increase of debts thereby. We ought to have reduced the coin when we altered the Tariff last year, and we ought to reduce it if ever we repeal the Corn-laws or reduce the Tariff further : and it ought to be done, not afterwards, but con- temporaneously.
There can be no other pretext for altering the coin except for the purpose of maintaining contracts made in that coin at integrity, or as a measure of taxa- tion. And 1 utterly disclaim the dishonesty of any purpose like that of the Birmingham Chamber. There is, however, this analogy between the creation of inconvertible paper and the reduction of the coinage, that the tendency of both is to lower the value of money; and it is true that either measure might be applied for the honest purpose which I propose, as well as for the dishonest one the Chamber proposes. But let it be observed—and this is what I wish to call your attention to— that inconvertible money can only increase the circulation by falling to a dis- count All who have well thought on the subject know that the quantity of money, either gold or convertible into gold, which can circulate in any country, depends not on the will of governments, but upon the quantity of gold existing in the market of the world, which is distributed by a natural and not a human law.
If a quantity of convertible paper is issued, it replaces and expels from the country nearly an equal quantity of gold, and certainly sends quite an equal quantity out of circulation ; the difference between the "nearly " and the "quite" being locked up at the banker's. Inconvertible paper becomes current by being legalized as a tender for debts; no otherwise, as all experience proves. Now, though I believe that inconvertible paper, if issued in quantities even considerably less than our present circulating currency, would very speedily fall to a discount, yet, admitting for the sake of argument that it would not fall, I say—
First, That in however small a quantity it was issued, it would immediately replace some other money, either gold or convertible paper, (no doubt the latter, for the paper is always full); and therefore it would not increase the circula- tion, nor raise prices, and not answer either of the above purposes, good or bad. Secondly, If issued in quantity equal to our present convertible paper, it would either drive all that paper in, or drive so much paper in, and so much gold abroad, as together would be equal to its quantity. Still it would answer no purpose in the way intended, for the circulation would still be the same in amount.
Thirdly, If issued in quantity equal to our whole present circulation, or in ex- cess of it, it would drive in, expel, and utterly extinguish the whole : but then, as it would represent or purport to represent more than the natural quantity of gold, which the natural market of the world allots to this as to all other kingdoms according to their commerce, it is inevitable that it must fall to a discount ; or in other words, that the sovereign would then sell for more than its nominal value, as guineas did during the war. But it is true that then it would raise prices, and the depreciation of money would be accomplished whether for good or bad.
Now, it appears to me, that even if applied to the honest purpose which I advocate—
First, This would be a very sneaking and cowardly way of effecting it. Secondly, It would, if not extinguish, at least entirely change the constitu- tion of all our banking establishments. Thirdly, It would lead to a great waste of gold, a real capital, for which we should get nothing adequate in exchange. For, admitting it to be true, as Dr. SMITH supposes, (though I do not entirely believe it so,) that the gold which the first issue of paper, in the first days of paper, sent abroad, may have been expended rather in the purchase of capital for the employment of native in- dustry than in the purchase of articles for immediate consumption ; the same position never could be true, at least not practically and beneficially true, of that last portion of the gold which is forced out of the country by the excess of paper, and which is sure to be recalled almost immediately where paper is convertible, and might always be recalled where the paper was inconvertible, by the least contraction of the amount. And, surely, we have had experience enough, since 1820, of the evils of a fluctuating currency. Surely the bank- ruptcies of those who, in times of temporary easiness of money, speculate and lose, much more than counterbalance, in national and personal suffering, the profits of those who gamble and win. Fourthly, It would be a substitution of a non-elastic for an elastic currency. The country does not always require the same quantity of money. Many causes interfere : even Christmas-bills, dividend-days, tax-collection, change the market—and think you good and bad harvests do not? We should be substituting an artificial for a natural law. Gold regulates itself according to the demand ; but who should regulate (he quantity of the inconvertible paper, and say when the people should have more, and when less? A Board of Govern- ment Commissioners? And would they prove as wise and learned, and as good-natured, as the Bank of England ? or would they be more hard-hearted, like Poor-law Commissioners ?
But, lastly, I protest against this Brummagem manufacture for this reason, that if adopted, there is no doubt that, after the miseries attending the experi- ment and its failure, it would ultimately entail upon us the further misery of another return to cash payments. The space you were so kind as to allow me in your last paper was so liberal, that I add not another word.
I am, yours, &c. X. Erratum in the last letter—p.83, 2d column, 19th line from the bottom : for "freeholder "read "fundholder."
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