OF THE

RESUMPTION

OF

CASH PAYMENTS,

&c. &c.

WHEN paper and money circulated together in this country, without affecting the relative value of each other, the proportion of the latter to the former was about equal, or one-half of the whole circulating medium, which was then rather more than forty millions; about twenty-two millions of which was in specie, and never less than twenty. Since that time, as the issue of paper has increased in its proportion, the specie has gradually disappeared; and this the Bullion Report assigns as the natural consequence of a disproportion between these two ingredients in a mixed currency: nor have I any intention of denying it, but merely, on this very ground, to prove the impossibility of the resumption of Cash Payments in the present moment.

Admitting these facts, and the full force of the deduction, it follows, that the least proportion of specie that can circulate in conjunction with paper, is about one-half; and such, indeed, are not only the proportions which would be assigned by the principles of a physical equilibrium, but must be those also given by the calculation of the relative values of paper and money in a mixed currency, where the quantity of the representative values is equal to that of the intrinsic values; for, as in such a circulation there would always be found a pound sterling of gold or silver for every pound sterling of paper, so it must follow, that, under such circumstances, the value of the one must always be precisely equal to that of the other: while, as this state of uniform value in a mixed circulation depends upon this principle of equilibrium, it is equally evident that equality of values, so compared, must cease when the representative value exceeds the intrinsic.

Let us enquire, therefore, how these principles bear in the present state of increased wealth in the country. The income of the country may be stated at upwards of two hundred millions per annum. Now as this is an accumulating amount, the effect of its gradual or increasing diffusion throughout the country will be the same as that of the constant action of its mean, or of one-half of the whole amount; the amount, therefore, of the circulating medium, or of the representative instrument constantly required for the diffusion of this income, must be calculated with reference to the mean of the income and not the whole of it; that is, with reference to this latter sum of one hundred millions. But as it may be supposed that not more than two-thirds of the income of the country are expended in the year, so this sum of one hundred millions must be further reduced to somewhat about seventy millions, as the amount of the circulating medium required for the diffusion or expenditure of its income. I speak here not of the mercantile operations of men, but of what may be called their ready-money transactions-the receipt and payment of salaries, of rents, interests, wages of labor, the butchers' and bakers' bills, &c. which absolutely require the instrumentality of money; and conceive, on the general principles above stated, that the necessary amount of the circulating medium, properly so called, that is to say, of specie, Bank of England notes, and private bank notes, for the performance of these operations, with an annual income of above two hundred millions, cannot be assigned at much less than seventy millions. The mercantile operations of the country have a representative medium of their own, in bills of exchange, promissory notes, &c. the amount of which is supposed to be not less than three hundred millions. But even these transactions cannot be entirely settled without the aid of the circulating medium; as, with the utmost contrivance, the fractional parts or balances must necessarily be paid in what is called money. This, therefore, is an additional reason to suppose that the amount above stated cannot exceed the real demand.

It may be, and indeed is contended, that this great amount and increase of income in the country is more fictitious than real; that it is now only the shadow, of which the substance has been consumed. Yet where but in the country itself has this substance been expended? a very small proportion only excepted. Loans could not have been raised without the existence of real property; and that property, thus paid into the hands of the Government, has returned again amongst the people, and excited fresh energies and

1

It is not here affected to fix these amounts with absolute precision; but to assign them in round numbers on general principles.

.

industry: by which the productive capital of, the country has thus been increased within the last twenty or thirty years. If any one doubt this, let him reflect, that, with a population of only ten millions, energies have been exerted by which we have created, by machinery, the labor of an hundred millions of population. Can this have been so many years in operation without an immense increase of productive capital? Can new lands have been cultivated to the extent they have been in this period; new mines worked, new canals dug, new manufactories created, without that enormous increase of productive capital sufficient to account for, and warrant, the increased demand of circulating medium? And is it not evident, therefore, that the necessity of increasing our currency has been the natural consequence of an increased productive capital, -and not, as contended by some, that the growth of capital and income is a fiction arising out of the increased quantity of papermoney, and that the same effects might be produced by a reduced circulation? Denying this, however, and assuming, on the grounds above stated, that the required circulating medium, in the existing state of the wealth of this country, is about seventy millions, and referring it to the foregoing data, it follows, in absolute strictness, that to produce, in the present times, a mixed circulation of gold and paper, where the two parts would be in perfect equilibrium, about thirty-five millions of specie would be required to be brought at once into circulation.

But even supposing that a considerably less amount would suffice, whence is such an immediate supply of the precious metals to come from, with the present diminished production of them? The probability is, that there does not at this moment exist in the country, of unappropriated gold and silver, one quarter of that amount; and that it will not answer to bring the amount gradually into circulation, has been proved by experiment. If it is to come, it must come at once; if gradually brought forward, it will disappear as fast as it comes.

How, therefore, is it possible, under these circumstances, to resume a metallic circulation without some most essential change in the circumstances themselves, or in the system of the circulation, to adapt it to new circumstances? As to the former of these positions, that is to say, as to the change of the circumstances themselves, either the quantity of specie in Europe must greatly increase, and its value fall, or the amount of the capital in this country must be reduced; that is to say, not by paying off the debt, for that would not

Such an event might ultimately happen from a change of government in South America.

be a reduction of the property, in point of fact, but merely giving it another form.

The only reduction of capital, therefore, that would avail towards the possibility of a resumption of Cash Payments, in the present state of the precious metals, would be that sort of annihilation of capital to bring property back to its former limits, which it is to be presumed that few people in this country would be bold enough to propose as a measure preferable to continuing the circulation by means of a paper or other representative currency. thing less than the expeditious operations of an inundation, or an earthquake, to destroy our mines, and overwhelm our manufactories, would reduce the existing demand for a circulating medium of seventy millions.

No

As, therefore, with respect to these changes of circumstances, one of them is not very probable, and the other not very desirable, the next point for consideration is, How will it be practicable to accommodate the existing means to the change of circumstances? We must, I think, consider the price of gold as permanently risen by the increase of what it has to represent: unless, therefore, either the quantity of the one be increased, or the other diminished, any alteration of the value of the coin, either by deterioration, or by raising the nominal value with a view to bring its value as coin to a level with its value as bullion, both of which have been proposed, would, I conceive, be found to be only a temporary expedient; as, even with such alterations of value, though it might for a time prevent the exportation of gold, the quantity of the precious metals would still be found insufficient to reach that proportion of the whole currency, which we have above stated to be necessary to prevent the enhanced value of gold with reference to paper; and, consequently, from time to time, a further deterioration would become requisite. The only use, therefore, of such a change would be, that it might keep the coin in the country for a time, and thus give the opportunity of bringing into circulation a sufficient quantity of specie: but unless a certainty of procuring this, within the time required, could be previously ascertained, the expedient would be a fallacious, if not a dangerous one.

If, therefore, we cannot find sufficient gold and silver to represent nearly one-half the circulating medium of the country; if, also, any change of the value of the coin appears to be at best but a temporary expedient-to what plan shall we next look? It might indeed be possible to obtain a mixed circulation of specie and paper, where the specie should bear to the paper a less than equal proportion, by suffering a constant regulation from day to day to take place in the interior, similar to the rate of foreign exchange,

between the nominal and market-prices of the specie; instead of its circulating as at present under a fixed and invariable denomination.

Certainly such a regulation would keep the specie in circulation, with paper, though in a less proportion than that of equality of amount, and would prevent the present exportation of gold and silver: but then the vast inconvenience of thus mixing these varying values in all the domestic occurrences of the nation, and the introduction of all the arts of money-brokers in every market-town, would destroy all the advantages that could otherwise arise; and indeed the miseries of this system are sufficiently experienced in several parts of Europe where it prevails.

Nor can I conceive there is any thing so alarming in the idea that we can never return to the old system of a money-currency. I view in it only the proof of the extraordinary wealth of the country in proportion to the limited existence of gold and silver, which seems to render a new system for the representation of property permanently necessary.

Under all these difficulties, therefore, and considering in the present state of the wealth and commerce of this country, that no less an amount of specie than thirty-five millions of the precious metals is necessary for a due proportion of such a mixed currency as can exist without evils even more serious than the absence of specie altogether; and reflecting, moreover, that there is no reason for supposing that the amount of the wealth and capital of this country has reached its limit, but that on the contrary it may be increasing every year-I must confess I am induced to believe that the period is arrived, or is very nearly at hand, when there is not to be found a sufficient quantity of gold and silver to answer the purpose of a circulating medium in this country, under anything like the same principles as it was originally destined to operate, or under any immediate modification of them.

It appears to me, however, that notwithstanding this revolution, some system may be devised by which the circulating medium, as well as public credit, in the country, may be put upon a more permanent basis; one in which no future change in the state of property, and the quantity of gold and silver, can produce any disturbing effect.

It is, I conceive, to be effected by the establishment of a representative currency, to which the properties of positive inimitability and of durability may be given; the amount of the issues of which, through the channels of the Government, shall be duly regulated by Parliament, and a provision under the same authority duly guaranteed for the conversion of that currency on demand into gold at the market-price,-not as coin or money, but as mer