Opening…

Part II

The principles of Money applied to trade.

CHAP. I. Consequences of imposing the price of coinage, and the Page duty of seigniorage, upon the coin of a nation, in so far as 1 they affect the price of bullion, and that of all other commodities,

Intricacy of this subject, 2

Recapitulation of some principles, —

The first introduction of coinage must make prices fall 3

Consequences of the exclusive privilege of coining, 4

A wrong balance of trade raises the price of bullion to the 5 value of coin,

And ought to raise proportionally the price of commodities, —

How traders obstruct the operation of this principle, while 6 the balance of trade continues fluctuating,

And how an overturned balance of trade attaches prices to 7 the denominations of coin,

How profits consolidate into prime cost, 8

And are preserved upon articles of home consumption, 9

But are torn away by foreign competition, for articles of — exportation,

How this hurts the industrious, and how the state may 10 indemnify them,

CHAP. II. Concerning the influence which the imposing the price 11 of coinage, and the duty of seigniorage, in the English mint, will have upon the course of exchange, and trade of Great Britain,

Theory of prices upon articles of exportation, —

How the course of exchange is regulated, 13

Price of exchange, what? —

Where coinage is free, the price of bullion ought to be — invariable,

And fluctuating where coinage is imposed, —

Bullion in England dearer than in France, 14

Because the price of it is kept up by the mint, —

And is allowed to fall in France 8 per cent. below the — coin,

This a wise regulation, —

England loses by this sometimes 8 per cent. upon her 15 trade with France,

And at a medium 4 per cent. as is proved by a matter of 17 fact,

Easy to be verified at all times by the price of bullion 18 and course of exchange in the Paris market,

When bullion is exported to England, exchange is against — France,

Course of exchange no rule for judging of the balance of — trade, but only of the value of coin,

The real par not to be calculated by the intrinsic value of 19 the coin, unless bills were drawn in weight of fine bullion,

OBJ. Exchange regulates the price of bullion, 20

ANSW. Denied: Exchange only raises its price, the mint — price pulls it down,

Balance upon the real par no mark of a balance upon — trade, proved by examples,

Balance of trade, what? 21

The real par of exchange to be fixed by the fluctuating — value of the coin, not by the permanent quantity of the bullion it contains,

Proof of this proposition, 22

Application of these principles to the English trade with 24 France,

CHAP. III. Is the loss which the course of exchange marks upon 25 the trade of Great Britain with France, real or apparent,

Reason for proposing this question, —

Suppositions, —

Principles, 25

How the paying for coinage affects the profits on goods 26 exported,

When the balance is favourable, 27

And how, when unfavourable, 28

How the paying for coinage affects the profits on goods — imported,

When the balance is favourable, —

And how, when unfavourable, —

The more trade is favourable, the more adviseable it is to 29 impose a price upon coinage,

CHAP. IV. Of the different methods of imposing coinage, and of 30 the influence they respectively have upon the value of the money unit, and upon the domestic interests of a nation,

Two ways of imposing coinage, —

Plan laid down in this chapter, 31

How coinage is imposed by authority, —

How by consent, —

When by authority, what the consequence, —

The metals are exported, —

How, in France, this is prevented in some measure, 32

French policy as to coin not generally understood, —

How coinage influences the price of inland commodities, 33

A case not to be resolved by this theory, but left to be — verified by experiment,

An objection answered, —

Coinage affects the price of bullion immediately, and that 34 of commodities indirectly,

Consequence of the price of coinage, when imposed with — consent,

That bullion is brought to the mint, when trade is 35 favourable,

How the mint price of the metals may be allowed to vary, 36

Influence of this method of imposing coinage, on the price 37 of commodities, and value of the pound sterling,

CHAP. V. How an experiment may be made to discover with 38 certainty the real effects of the imposition of coinage,

Plan of the experiment proposed, 39

The consequence of this will be, to recall the old guineas — from abroad,

During this experiment a close attention must be had to the 40 rate of prices,

And if they vary how to discover the true cause, —

Farther consequences of this experiment, —

Can we estimate the wealth of a nation by the quantity of 42 its coin?

Just as we can estimate a man’s estate by the weight of his 43 purse,

CHAP. VI. Miscellaneous questions and observations concerning 44 the doctrine of money and coin,

The use of a miscellaneous chapter at the end of a subject, —

QUEST. 1. Why does the doctrine of money appear so 45 intricate?

ANSW. Because it is perplexed with jargon, —

The denominations of coin are confounded with the intrinsic — value,

The terms metal, money, coin, bullion, and price, are all 46 considered as synonimous,

What is meant by metal? what by money? what by coin? — what by bullion? what by price?

Of the abuse of the terms rising and sinking, and of — the inaccuracy of speech,

Prices attached to the denominations of coin, 47

Coinage raises the value of coin, is a more proper — expression, than coinage sinks the price of commodities,

How to avoid such ambiguities of speech, —

A case which cannot be resolved by this theory, —

In speaking we do not distinguish between pure metal, and 48 that which is mixed with alloy,

Of the abuse of terms relative to denominations of coins, 49

This illustrated by an example, —

Farther obscurities from the abuse of language, —

How to avoid such abuse, 50

QUEST. 2. What is the difference between raising the value — of coin, by imposing coinage, and raising the denomination of it?

ANSW. The first is real, and affects foreign nations; the — other does not,

Proved by an example, 51

How the arbitrary method of raising the denominations of — coin affects prices at home,

QUEST. 3. How will the imposition of coinage affect the 53 creditors of Great Britain?

ANSW. If they continue to be paid by denominations, they — will gain; if by weight of metal, they will not gain, nor will they lose,

Proved by an example, —

How the imposition of coinage advances the credit of 54 France,

QUEST. 4. Is the plan we have proposed effectual towards — preserving the pound sterling invariable?

ANSW. No: but seems to be the best relative to material — money,

A scale of value realized in metal never can be exact; — because the metal itself varies in its value,

1. From the manufacturing of it. 2. From the interest of 55 money. 3. From the manners of a people,

The only exact scale of value is that which can measure the — metals like every other commodity,

Explanation of this proposition, by an example, —

And by an application, to the bank of Amsterdam, 56

How the locking up the coin in that bank renders the value — of it more stable,

QUEST. 5. Will not the imposition of coinage in England 57 frequently stop the mint?

ANSW. Certainly: when the balance of trade is unfavourable, —

But this is an advantage to England which France now 58 enjoys,

The coin of France passes in other nations above its value — as a metal, and returns to France unmelted,

QUEST. 6. Is not this return a loss to France? —

Intricacy of this question, 59

Resolution of it, —

It is no loss to France, 60

Another view of this question, —

QUEST. 7. If by overrating gold the English lose their 61 silver, why should not France by overrating silver lose her gold?

ANSW. Because the English rate their gold above the value — of it in their own market. The French do not so with their silver,

How the proportion of the metals is kept nearly the same in 62 all European markets?

Because when home demand disturbs the proportion, foreign — trade brings it even again,

Coins of gold and silver should be proportioned at the rate 63 of the market at home,

And nations cannot fix that proportion by any convention — among themselves,

Why is the proportion of the metals so different in Europe — and in Asia?

Answer to this, —

QUEST. 8. Is it the interest of Princes to debase the 64 standard of their coin?

ANSW. It is their immediate interest when they are debtors, — and it is their interest to raise it when creditors; but always unjust,

Who are debtors and who creditors; and how Princes who 65 incline to rob their subjects may avoid robbing themselves at the same time,

Example of a Prince who is now employing this engine — against his enemies, not his subjects,

Writers against this practice have used wrong arguments to 66 dissuade Princes from it,

The proper arguments against it are three, 67

1. It disturbs the ideas of people with regard to value, —

2. It either robs the class of debtors, or creditors, —

3. It ruins credit, —

This last circumstance will probably put an end to the — practice,

QUEST. 9. What is the best form to be given to coin? —

Difference between medals and coins, —

Of indenting the impression, —

The less the surface, the wearing is the less, 68

The advantage of having heavy pieces for the greatest part — of the coin: yet small denominations are useful in some cases, for preventing the rise of prices,

Mixed metal better than copper for small denominations, as — appears from the practice in Germany,

Mixed metal never to be bagged up with fine, 69

CHAP. VII. Of the regulations observed in France, with regard 70 to coin, bullion, and plate,

The marc is the unit of French weight at the mint, —

The remedy of weight upon silver, what? —

The standard of fineness is 11 fine to 1 of alloy, —

Remedy of alloy, what? —

Quantity of fine silver in a marc, as it is delivered at 71 the mint,

Into what coined, —

Mint price of a marc of fine silver, —

The price of coinage 8⅕ per cent. upon silver, —

Remedy of weight upon gold, —

The fineness of standard gold, 72

The remedy of alloy upon gold, —

The marc into what coined, —

Mint price of a marc of fine gold, —

The price of coinage 8⅕ per cent. upon gold, —

Which no way stops the mint, —

Of the proportion of the metals, 73

How to discover it, —

The proportion is as 1 to 14.47, —

Gold contained in a louis d’or, and silver in a crown of 6 — livres,

Proportion of a French grain to a troy grain, —

Proportion between the louis and the guinea, 74

Of the fineness of French wrought plate, —

Goldsmiths profit by the imposition of coinage, 75

And never find the mint in competition with them for the — metals,

Advantages of the French regulations, —

High price of bullion in the Paris market during the year 76 1760,

Present state of the wearing of the French silver coin, 77

CHAP. VIII. Of the regulations observed in Holland, with regard 78 to coin and bullion,

Present state of the Dutch currency, —

Regulations in the Dutch mint, 79

Their unit of weight is the marc Hollands troes, —

The remedy of weight on silver, —

The fineness of silver is different in different coins, —

Florins are 11⁄12 fine with one grain of remedy, —

How they reckon their silver standard, —

Exact quantity of fine silver in a marc weight of Dutch 80 florins as they come from the mint,

Mint price of fine silver, —

Price of coinage in Holland is 1½ per cent. upon silver, —

Of the Dutch gold coins, 80

The ducat has no legal denomination, —

The fineness of it 23 carats 8 grains, 81

How the fineness is reckoned, —

Fineness of the ducats of the empire, —

Exact quantity of fine gold in a marc weight of Dutch — ducats as they come from the mint,

Mint price of fine gold, —

Price of coinage upon ducats about 1 per cent. 82

The price of coinage upon both species should be the same, —

The rider —

Has a legal denomination, and is a lawful tender in — payments to ⅓ of the sum,

As it is always coined by the state, and for the state — there can be no mint price,

Regulation as to the fineness, denomination, and weight of 83 the rider,

Quantity of fine gold in a florin of riders, —

To put the ducat upon a par with riders, it should — circulate for 5 florins 4⅛ stivers,

Utility of not fixing the denomination of ducats, —

How to find the proportion of the metals in the coin of 84 Holland, and a wonderful phænomenon in the value of ducats,

Were all the coin of full weight the proportion would be as — 1 to 14.62,

Quantity of fine silver in a florin piece, 85

Quantity of fine gold in a florin of riders, —

Investigation of this proportion as to the ducats, —

By which it appears that the war has raised the value of 86 gold, and set the market proportion of the metals in Holland at 1 to 14.785,

Which is a rise in the value of gold of 1.12 per cent. —

The intention of this minute detail is to calculate the 87 real par of the coins of Europe,

Proportion between the mint weights of Holland, England, — France, and Germany,

Par of a pound sterling (in weighty silver) with Dutch 88 florins in riders, is 11 florins 12 stivers,

Par of a pound sterling in gold with ditto, is 11 florins — 3⅕ stivers,

Par of a French louis with ditto, 11 florins, 3¾ stivers, —

Par of 24 livres French in silver with ditto, 11 florins 1½ — stivers,

Great balance of trade against France in September 1761, —

Low value of the pound sterling in Holland in 1761, —

Owing to the lightness of the English gold at that time, 89

And not to the wrong balance of their trade, as was 91 alleged,

Defects of the silver currency of Holland, —

Account of this currency, 92

Regulation for the payment of foreign bills in coin, —

Ditto for current bills—ditto for merchandize, —

The denominations of the several silver currencies not — proportioned to their intrinsic value,

Cause of this.—-Regulations concerning the weighing of 93 silver species in banks current,

All allowances for light weight are an abuse, 94

Frauds of money-jobbers in Holland, —

The best silver coin in Holland is upon an average 1 per — cent. too light,

From which it follows that the actual proportion of the 95 metals is as 1 to 14.479,

Another abuse in the silver coin of Holland, —

Reason of the great apparent scarcity of the silver coin in 96 Holland,

A paradox to be resolved, —

Resolution of it, 97

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Part I

Of the Interest of money.

INTRODUCTION, Page 101

CHAP. I. What Credit is, and on what founded, 105

CHAP. II. Of the nature of obligations to be performed, in 108 consequence of credit given,

CHAP. III. Of the interest of money, 112

CHAP. IV. Of the principles which regulate the rate of 115 interest,

CHAP. V. Of the regulation of interest by statute, 121

CHAP. VI. What would be the consequences of reducing, by a 125 British statute, the legal interest of money below the present level of the stocks?

CHAP. VII. Methods of bringing down the rate of interest, 129 in consequence of the principles of demand and competition,

CHAP. VIII. Is the rate of interest the sure barometer of 135 the state of commerce?

CHAP. IX. Does not interest fall in proportion as wealth 139 increases?

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II. Of Banks

CHAP. I. Of the various kinds of credit, 141

CHAP. II. Of private credit, 144

CHAP. III. Of banks, 146

CHAP. IV. Of banks of circulation upon mortgage or private 150 credit,

CHAP. V. Such banks ought to issue their notes on private, 153 not mercantile credit,

CHAP. VI. Use of subaltern bankers and exchangers, 154

CHAP. VII. Concerning the obligation to pay in coin, and 157 the consequences thereof,

CHAP. VIII. How a wrong balance of trade affects banks of 161 circulation,

CHAP. IX. How a grand balance may be paid by banks, without 162 the assistance of coin,

CHAP. X. Insufficiency of temporary credits for the payment 164 of a wrong balance,

CHAP. XI. Of the hurt resulting to banks, when they leave 165 the payment of a wrong balance to exchangers,

CHAP. XII. How the payment of a wrong balance affects 169 circulation,

CHAP. XIII. Continuation of the same subject; and of the 178 principles upon which banks ought to borrow abroad, and give credit at home,

CHAP. XIV. Of optional clauses contained in bank notes, 195

CHAP. XV. Of subaltern banks of circulation, and of their 202 competition with one another,

CHAP. XVI. Of some regulations proper to be made with 205 regard to national banks,

CHAP. XVII. When, and in what case, banks should be obliged 208 to keep open books,

CHAP. XVIII. Is it the interest of banks to grant credits 210 and cash accompts to exchangers and others, who make a trade of sending coin out of the country?

CHAP. XIX. Application of the principles above deduced, 212 towards forming the policy of circulation,

CHAP. XX. Objections to this doctrine, 215

CHAP. XXI. How, by a return of a favourable balance, the 218 bank may be enabled to pay off the debts due to foreigners, and thus deliver the nation from that burden,

CHAP. XXII. Of banks of circulation, established on 220 mercantile credit,

CHAP. XXIII. Of the first establishment of Mr. Law’s bank 235 of circulation, in the year 1716,

CHAP. XXIV. Account of the variations of the French coin 236 some time before and after the death of Louis XIV.

CHAP. XXV. Continuation of the account of Law’s bank, 239

CHAP. XXVI. Account of the royal Mississippi bank of 243 France, established on public credit,

CHAP. XXVII. A short account of the French company of the 247 Indies,

CHAP. XXVIII. Chronological anecdotes, 250

CHAP. XXIX. Continuation of the royal bank of France, until 252 the time the company cf the Indies promised a dividend of 200 livres per action,

CHAP. XXX. Inquiry into the motives of the Duke of Orleans 256 in concerting the plan of the Mississippi,

CHAP. XXXI. Continuation of the account of the royal bank 265 of France, until the total bankruptcy the 21st of May 1720,

CHAP. XXXII. Conclusion of the Mississippi scheme, 270

CHAP. XXXIII. Why credit fell, and how it might have been 276 supported,

CHAP. XXXIV. How the diminishing the denomination of the 284 paper in circulation, by the arret of the 21st of May 1720, destroyed the credit of France, when the same arbitrary measures taken with regard to the coin had produced no such effect,

CHAP. XXXV. How a bank may be safely established in France, 289 as matters stand at present,

CHAP. XXXVI. Of banks of deposit and transfer, 291

CHAP. XXXVII. Of the bank of Amsterdam, 292

CHAP. XXXVIII. Of the agio of the bank of Amsterdam, 294

CHAP. XXXIX. Continuation of the same subject; and 298 concerning the circulation of coin through the bank of Amsterdam,

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III. Of Exchange

CHAP. I. OF the first principles of exchange, 310

CHAP. II. How to determine exactly the true and intrinsic 316 value of the metals, coin, or money, in which a balance to foreign nations is to be paid,

CHAP. III. How to remove the inconveniences which occur in 325 paying balances with the metals or coin of a nation,

CHAP. IV. How the price of exchange, _in a prosperous 333 trading nation_, may be prevented from operating upon the whole mass of reciprocal payments, instead of affecting the balance only,

CHAP. V. How, when other expedients prove ineffectual for 344 discharging of balances, the same may be paid by the means of credit, without the intervention of coin or bullion; and who are they who ought to conduct that operation,

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Part IV

Of public Credit.

CHAP. I. Of the various consequences of public debts, 348

CHAP. II. Of the rise and progress of public credit, 351

CHAP. III. Of anticipations, or borrowing money upon 354 assignments to taxes, for the discharge of principal and interest,

CHAP. IV. Of the state of public credit in France before 367 the reign of Louis XIV. and of the sentiments of the great Richlieu upon that subject,

CHAP. V. Of the present state of public credit in Great 380 Britain,

CHAP. VI. State of the public credit of France; their 402 debts, funds, and appropriations, at the peace 1763,

CHAP. VII. Comparative view of the revenue, debts, and 438 credit of Great Britain and France,

CHAP. VIII. Contingent consequences of the extension of 441 credit, and increase of debts,

CHAP. IX. Of bankruptcies, 456

CHAP. X. Methods of contracting and paying off public 465 debts,

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Book V

Of Taxes, and of the proper application of their amount.

INTRODUCTION, 482

CHAP. I. Of the different kinds of taxes, 484

CHAP. II. Of proportional taxes, and their proper object, 486

CHAP. III. How proportional taxes are drawn back by the 490 industrious; and how that drawing back is the only reason why taxes raise the prices of commodities,

CHAP. IV. Of cumulative taxes, 495

CHAP. V. Of the inconveniences which proceed from 500 proportional taxes, and of the methods of removing them,

CHAP. VI. Cumulative and proportional taxes compared with 517 one another, and farther examined,

CHAP. VII. Consequences of taxes, when the amount of them 523 is properly applied,

CHAP. VIII. Of the extent of taxation, 527

CHAP. IX. The consequences of an abolition of taxes, 542

CHAP. X. Are taxes a spur to industry, as some pretend? 556

CHAP. XI. Considerations upon land taxes, with some 561 observations upon those of England and France,

CHAP. XII. Miscellaneous questions upon taxes, 577

CHAP. XIII. Recapitulation of the fourth book, 593

CHAP. XIV. Recapitulation of the fifth book, 637

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AN

INQUIRY

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PRINCIPLES OF POLITICAL OECONOMY.

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