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nical terms of the merchant are explained, means neither more nor less, than that gold and silver pass from the country where they are cheap to the country where they are dear. The whole of the long chapter, therefore, in which so wuch abstruse learning is expended on this subject, seems to us very nearly useless, or worse than useless, if falling into two or three important errors lay any foundation for that sentence. He tells us, for example, that no connection exists. between the course of exchange and the balance of trade; that the Auctuations in the exchange are not occasioned by: the excess or scarcity of bills. Because these are not the only causes of the effect which he examines, he supposes that they are no cause at all...
The chapter which follows is, “On the fluctuation of the market-price of money above and below its mint price;" a subject which in general is very little understood, and on which the labours of Mr. Wheatley, we are sorry to say, have very little tendency to throw light. The first sentence of the chapter runs thus : “ As I attempted in the preceding chapter to explain the effect, which the uniform gravitation of money to its level produced on the course of exchange, I shall now endeavour to shew the effect which it produces on the price of bullion.” We have already seen that the term “ gravitation of money to its, level,” can only mean, the tendency of gold and silver to an uniform value all over the world. Money is a term for gold and silver in one shape,! bullion is a term for gold and silver in another shape, and the value of any portion of either entirely depends upon the quantity of the precious metal which it happens to con. tain. When Mr. Wheatley therefore says that he is going to explain the tendency which the gravitation of money to its level produces upon the price of bullion, it is the same thing as if he proposed to explain the effect which the tendency of gold and silver to an uniformity of price, produced upon the price of gold and silver. The answer is very plain; an approximation, greater or less, to that uniformity. As Mr. Wheatley finds out, however, that it produces very different results, we may rest assured that he has.greatly mistaken the matter.
This abstruse subject, which is so much darkened by the imperfection of the language employed about it, we should attempt in vain to elucidate in the compass of a critique.. All that we can do is, to shèw (which will not require many words) that Mr. Wheatley's principle of “the level,” wliich in his hands works so many miracles, is not adequate to account for the fluctuation of the price of bullion above and below the mint price. To simplify the question, let us sup
pose that we have no money in this country but gold money) and to avoid the inconvenience of fractions, let us suppose that an ounce of gold is coined into four pieces called guineas, or any thing else. The mint price of an ounce of gold is therefore four guineas. If the government should coin more of these guineas than are wanted, are they not still bullion, "and caħ they not either be exported or wrought at home, with hardly any interruption from any restrictions that government can impose? How then can they ever sink be. low the price of bullion? It is not so easy to determine the limit of their enhancement above the market price of bullion. If the quantity coined is less than what is necessary for the full supply of the community, the accommodation which they afford will dispose every individual to give somewhat more for them, than he would for an equal weight of bullion. Mr. Wheatley's level then will account for a certain depression of bullion below the mint price, but will by no means account for any elevation above it. The fluctuations therefore, as well above as below that price, which are experienced in the course of trade, must be dependent upon causes of which Mr. Wheatley has not been aware.
The chapters on Lord Liverpool's letter to the King, and on the amount of our specie we must entirely omit. In the chapter “on the theory of the balance of trade," there are some very useful statements, and some very sensible remarks. It is the author's object to shew, that by the official accounts of the balance of trade in our favour 300,000,0001. of gold and silver have during the last century been imported into this island; that of this immense quantity a small portion only remains; that the greater portion of it must have de. parted in the ordinary way of commerce; that the notion therefore of getting rich even in bullion by the balance of trade, is as false in fact, as it is unfounded in theory.
One apparent objection to this conclusion arises from our foreign expenditure in time of war. Mr. Wheatley examines this subject at great length, with a view to prove that this foreign expenditure is defrayed by the exportation of goods, not of money. He introduces some inconclusive reasoning, founded on his own theory; but there are many good remarks, which are drawn from a better source. To rectify all his mistakes, and to explain clearly the effects of a foc reign expenditure upon the balance of trade, upon the course of exchange, and upon the national stock of gold and silver would require a very wide space. It is undoubtedly true, that had this country sustained no foreign experiditure during the whole century, it would have had just as little of the 300,000,0001. as it now has. But we
doubt whether we should have been of this way of thinking, had nothing operated to convince us, beside what Mr. Wheatley has advanced.
The concluding inquiry of Mr. Wheatley respects the de preciation of money, and he advances a variety of observations both on its causes and effects. We have occupied so much space with the preceding parts of the inquiry, that we cannot enter into a full analysis of his opinions on this subject. The collection of facts is useful, but the speculation is de fective.
From the conquest to the present time, money, he thinks, has progressively depreciated. In considering the subject, he divides this period into three parts; the first extending from William I. to Elizabeth ; the second, from Elizabeth to the Revolution; the third, from the Revolution to the present times. During the period from the conquest to the reign of Elizabeth, the depreciation of the currency he represents as occasioned solely by the debasement of the coin ; that is to say, the successive operations of government, by which coin of the same denomination was made to contain less and less of the precious metal. The depreciation of money during the second period, he says, was accelerated by the influx of money from America. This expression implies that something else cooperated. But this he neglects to explain. During the third period, from the commencement to the conclusion of the 18th century, money, he tells us, has depreciated 111 per cent. Of this depreciation, the annual supply of gold and silver from the mines in South America will, according to his estimate, account for 40 per cent. ; the remaining 71 per cent.
money in Europe. .
This last opinion naturally suggests a variety of reflections; and so many erroneous opinions prevail on the subject of paper money, that it might not be proper, inadequate as our limits are, altogether to pass it.
There is one mode in which we can perceive that the use of paper money in Europe has contributed to depreciate the general currency. It is a principle abundantly fixed, and indeed admitted by Mr. Wheatley, that the value of gold and silver in coin, is entirely determined by their value in bullion. Now, as bullion, gold and silver are universally allowed to be justly regarded as mere commodities, whose value is determined entirely by the demand which there is for them in proportion to the supply. Thus, while the supply remains the same, if any occurrence should happen to increase ihe derand for gold and silver, if they should be applied to any new purpose, for which a quantity that was not wanted before becomes necessary,
then the value of those métals would rise, and inoney would be enhanced, not depreciated. Thus, too, should any occurrence happen which lessened the demand for gold and silver, should they be dispensed with in any employment for which they were formerly wanted, their value would sink, and money would be depreciated. But this is really the effect which has been produced by adopting the use of paper money. 'The use of gold and silver has become to a great degree extinct in currency; the demand has thus been considerably lessened, while the supply remained the same, or nearly the same; the price, accordingly, has fallen in a correspondent proportion.
This principle, however, seems inadequate to account for so extraordinary an pirert as a depreciation of 71 per cent. This is nearly two thirds of the whole; which would imply that the use of gold and silver in coin, were currency confined to the precijus metals, would occasion a consumption of those metals, nearly double all other kinds of consumption taken together. But this is absurd. Mr. Wheatley accordingly endeavours to account for a great part of the effect, by another operation which he ascribes to paper
money. Paper money, having a tendency to be issued in excess, enhances, he says, the price of conmodities. The reason he states as follows: “If it be true, that all prices are in proportion to the quantity of currency, and that the quantity of currency is augmented by the publication of paper, it necessarily follows, that paper must occision an advance of prices correspondent with the augmentation, and proportionally depress the value of money." This, as far as we can perceive, is the sun and substance of his reasoning on this subject. But the first of these premises, viz.' that all prices are in proportion to the quantity of currency, we have already seen, is aliogether unfounded. The argument therefore falls to the ground. But this is not all; for in the secopil of these premises, viz. that the quantity of currency is augmented by the publication of paper money, two things that are of a nature very widely different, seem to be strangely confounded. There are two species of paper money, the laws of which are remarkably discordant. There are; ist. The notes, payable on demand, of responsible bankers; there is, 2dly. Paper issued as money, on the authority of government. Of the latter sort, any quanuity may be issued ; and it may sink to any depreciation, as las been witnessed in the cases of the French assignats, and of the paper issued by the government of the United States in the war of the revolution. The former (the notes of the bankers) so long as they are really payable on demand, can never be either in excessive quantity, or cause a depreciation beyond that which we have already explained. But without entering into the demon
istration of this important truth, which would carry us far beyond our limits, we shall content ourselves with showing, that the inferences which Mr. Wheatley would here draw, are really inconsistent with his own principles.
When notes continue payable on demand, and are not subject to discount, all the depreciation which they sustain, is necessarily comingnicated to the coin of the country. Thus, when a one pound note can purchase as much of any sort of commodity, as twenty shillings, to whatever degree the note declines in its power of purchasing, to the same degree are the twenty shillings reduced in their power of purchasing. But no proposition connected with this subject is better established than this ; that the gold and silver in coin, bear ihe same value as gold and silver in bullion. Particular accidents may for a little time raise their value in coin above, or depress it below, their value in bullion ; but equality is the natural state to which it constantly approximates. Whatever effect, therefore, the issue of paper money, (that which is most commonly, and should be exclusively known by that title, the noes of barkers, payable on demand) has to depreciate the currency, the same effect it has to reduce the price of bullion. Now Mr. Wheauley tells us, (p. 285) “ that the paper of any given country, instead of being limited to the amount of the gold and silver, which would circulate if tiere were no paper, may be augmented, without reduction to a discount, to an indefinite extent, provided that the paper of other countries shall be augmented in a similar ratio." It follows, by Mr.. Wheatles's conclusions, that currency may be lepreciated to an indefinite extent; but if so, the value of gold and silver may be reduced to an indefinite extent; and if nations were to go on in the ardour of issuing paper, they might, by that single circumstance, reduce gold and silver below the value of of lead and copper, without the smallest increase in the supply, and with a very insignificant decrease in the demand. It is difficult to imagine any réductio ad absurdum more complete than this. The truth is, that Mr. Wheatley is by no means a master of his subject. He has very unwisely taken upon himself the function of teacher, when he would have been much better employe: in exerising that of learner. There seems to be no sobject on which mankind are nere apt to deceive themselves in this way, than the subject of political economy. 'This author goes forward, explaining and reasoning about his erroneous positions, positions of which the folly seems so easy to be detected, with as much self-complacency, and as much confidence, as if he were descending to the bottom of the most important truths. Dr. Smith, he treats, with a most decided air of superiority; as