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lative deposit. All issuers of notes must, however, to a certain extent provide themselves with resources against rapid demands, or what are termed runs. The amount of currency thus kept in reserve, must always diminish, pro tanto, the profits of their trade: banks have therefore at all times endeavoured to keep down this deposit in their own coffers to the least possible amount. Before the restriction it was known to have borne no inconsiderable proportion to the whole issues; but since that enactment, the disinclination of individuals to demand payment, unless in cases of distrust; the ease of acquiring credit; the mutual disposition to accommodate, founded on principles of a common interest; the facility of investing capital in certain government securities, steady in their price, and of daily sale; the rapidity of transmission; and various other causes, have enabled persons, with otherwise inadequate means, to support issues of notes to a great amount, to guard sufficiently against ordinary runs, and to make nearly five per cent. of the whole sum, thus virtually lent to them without interest. Such persons can have no motive for keeping the circulation within bounds; their only wish must be to extend so lucrative a trade; regardless, perhaps wholly ignorant, of consequences.

Thus the paper system, established at the Bank of England without check, but administered there in a manner much more moderate than could have been expected or foreseen, has ramified into every town and village; adding to the stock of currency, assisting therefore in depreciating its value, and encouraging the wildest speculations, with the most unbounded extravagance.

These sources cannot, however, discharge an indefinite stream: notes may be generated much beyond the local wants of those who hold them; payment will then be demanded for the purpose of remittance; suspicions may arise, and the whole mass issued by certain individuals suspected, will be returned: but no correction is applicable at the fountain head; no generation of notes beyond the wants of those who hold them, can there be restrained: the whole nation lies completely at discretion, as to all the relations of property dependent on compact, before the feet of a mercantile company-governed, no doubt, by men of honor and integrity, but whose interests, as members of that body, goad them to pursue the measures which have created, and must continue to augment the evil universally felt, though it is partially denied.

SECTION VIII.

I may now reasonably be asked, what are the remedies? To

this I answer-In principle there exists but one-reducing the paper currency to such an amount, that, circulating with gold, both shall no more than equal the quantity that would have been required, had gold circulated alone, or with convertible notes. And there appears to be one only method of carrying this principle into exe

cution.

To regulate artificially the issue of a non-convertible currency, population, industry, seasons, crops, enterprise, new inventions, domestic intercourse, foreign trade, must be accurately and incessantly measured; not merely at home, but in foreign countries: and admitting these to be ascertained, I know not who would undertake to deduce the practical inference. Restore the system, never departed from by our ancestors, which constantly florished, till unwary speculatists established the novel and pernicious theory of 1797; and all the parts will regulate themselves. The standard of value will vibrate on either side of a common level, as it ought to do when exportation or importation has tended to excess, metallic currency will exert rather a potential, than an actual energy, to restore the balance; and being liable only to those variations which adhere to the nature of things, it will afford all the stability to be hoped for or expected; where nothing is exempted from con tinual change. Nor will convertible notes in the least degree influence the effect; since they naturally decrease or increase in nominal amount, as gold becomes of greater or of less value: non convertible notes follow a course precisely opposite.

If the discussions in these pages approximate towards the truth, it must of necessity follow, that no quantity of gold, however large could enable the bank to resume payments in specie; and at the same time to maintain a circulation, altogether equal in nominal amount to what at present exists. The depreciation would in that case continue, attaching to the whole in its artificial state, but leaving the intrinsic part when it became merchandise; and this conversion would go on ad infinitum. But if the whole mass were first reduced to the limits above defined, in a gradual manner, detrimental to the public and to the bank itself in the least possible degree, by temperately withholding some advances from the government, and some discounts from individuals; and as country bankers, on account of the greater difficulty of procuring that, in which then notes must be paid on demand, would find themselves obliged to adopt caution in their future issues; there seems no reason for apprehending that the object, of such vital importance, could not be obtained. Gold might then be purchased without loss; no profit could be made by exporting it; no inducement would then be found for converting coin into an article of traffic; the only drain likely to ensue, would limit itself to satisfying the curiVOL. XIV. Pam. NO. XXVII, C

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osity or the caprice of some few individuals, eager to possess that from which they had long been debarred, or preferring an intrinsic currency, when all grounds for preference were removed.

It must, however, be confessed, that, in retracing our steps, the path is uniformly an ascent. The career of depreciation has been easy and pleasant: debtors, speculators, persons improvident or profuse, have found many obstacles removed from out of their way; whilst those suffered almost without complaint, who had accumulated the produce of industry and care. But the same causes continuing to act, the velocity of descent will increase; no human power can arrest it at the actual point, except by an expedient disgraceful in itself, and inefficient, unless coupled with the means all-powerful without it. We have therefore to choose the alternative, of temporary difficulty or destruction. I need scarcely observe, that the expedient alluded to is a reduction of the coin, In this way any depreciation of ideal currency may undoubtedly be out-run; but then from time to time the chase must be renewed: paper will go on starting anew from precisely the same causes as at first; whilst at each bound in the pursuit, temporary injustice is rendered perpetual; creditors are pro tanto defrauded, insult is added to injustice; and every principle is violated that can bind man to man, or individuals to society.

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Having thus tired your patience with a letter much longer than I at all contemplated when it was begun, I shall add little more than a few deductions necessarily flowing, as it seems to me, from principles universally admitted; which yet differ materially from opinions generally entertained. If the value of all commodities depend on the supply and the demand-it follows of course, that in the actual state of society, the circulating media of any nation, or of the world, must be equal to a given quantity. Double the gold coin of some one country, and prevent its egress or conver sion; double the mass of gold in the whole world, supposed the only medium of circulation; each piece will then become of half the value in exchange for other articles, and the value of the whole must remain unchanged. Nominally increasing or diminishing the amount of circulating media, cannot then vary the wealth, or affect the industry of a country.

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By a strange inadvertence, most recent writers have confounded in this instance, the real with the nominal value of circulating media: the real value is always constant under given circumstances; the nominal value augments indefinitely with depreciation.

The nation first adopting a convertible paper currency, gains capital to the amount of coin' thus rendered superfluous, and

exchanged as merchandise. But had all nations, at the same time, adopted the same system, relatively to an equal extent, no gain could have accrued to any; and the only effects would have been an immense reduction in the value of gold and silver, coined or uncoined, and of the paper representing them, in exchange for other commodities; nominally stated as a commensurate rise in the price of every thing else and a complete stoppage of the mines-till, after the lapse, possibly of some hundred years, the stock of gold would have so much diminished, and its value consequently so much increased, as to again advance the produce of those mines to a level with the materials, labor, &c. expended in working them.

The great reduction in value of gold and silver, from their diminished use, appears to have more than counteracted all improvements of machinery, and skill, in working the American mines.

An increase of commerce, industry, population, &c. throughout the world, would not require any numerical augmentation of gold, or other circulating media: the demand carrying on the value in an equal degree, a subdivision of pieces would entirely satisfy every purpose of convenience. But in any particular district thus progressive, as the general value will be but little extended by so partial a cause, the numerical quantity must be increased, either by the purchase of a metallic currency, or by what is much better, and a saving of capital to the whole amount, the issue of convertible notes.

Nations using metallic currency possess a resource available at any time, by substituting other media.

A circulation even wholly metallic, constitutes a very small portion of the real wealth in any country, and has almost nothing to do with the rate at which capital is borrowed and lent, improperly called the interest of money. But altering the denomination of such a medium, or creating a depreciation of artificial currency, is precisely similar to varying the linear, or any other measure.

Taxation not applied either to the necessaries of life, or to a particular article, cannot have any tendency to augment its price as rent is well known not to add any thing to what is either demanded or paid for the produce of land, dependent, in common with every thing else, on the supply and the demand.

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A metallic circulation, at least for the ordinary transactions of common life, can alone maintain itself in times of hostile invasion, or of domestic tumult.

Finally, the paper currency seems to have remained thus long, without a greater reduction of value; in consequence of habit, prejudice, established opinions, ordinary rates, &c. acting as

moral inertia; these may occasion a less rapid descent, but have no power to arrest the course.

I shall hope for the communication of any observation or objections that may occur.

I am, &c.

D. G.

POSTSCRIPT.

JUST as the preceding sheets were sent to the press, a propo sal has been made for advancing Six Millions, in the form of Exchequer Bills, to such Merchants and Manufacturers as may require the aid, under certain regulations; especially on their giving sufficient security for repayment after particular intervals.

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The measure is grounded on the notoriety of immense accumulations of manufactured goods, and of foreign produce being retained at home, for want of sale and on the slow or uncertain returns, for articles already exported to distant countries.

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The sum is an actual Loan from the Nation at large to these individuals, whose capitals will receive a temporary augmentation to the whole amount; consequently they will be enabled to continue their usual concerns; and by so doing, to provide employ ment for large bodies of people, likely otherwise to suffer from want of work.

But the articles thus manufactured or imported, must be considered as forced additions to a stock already in excess; and the eventual benefit or disadvantage can only depend on the state of Europe and of the world, at a future period. If foreign markets become open to our trade, before this capital, artificially supplied, is exhausted, and certainly before the time arrives for its being replaced, the whole operation will be productive of good: but under different circumstances the evil day will merely be postponed, to arrive at last with a deepened gloom. Merchants and manufacturers might indeed, gradually let down their concerns to the level of actual circumstances, and by so doing avoid all sudden shocks; experience however seems scarcely to warrant our anticipating such conduct: an advance of capital appears much more likely to encourage further speculatious, with the hope of repairing

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