date

Polit. Economy Paper Mischief
Polit. Economy

Paper Mischief

Rise of Prices

Column 2

Events which used to be regarded as disastrous, and which prove not to be so now—but rather the contrary.

1. Exportation of money (metallic) out of the country.

2. Emigration of labouring hands without capital.

3. Emigration of persons living on income and continuing after their emigration to draw income from the country.

4. Emigration of capitalists withy their capital

Column 3

Effect of the hoarding plan pursued by Frederick the great—Hoarding cash?

Which was the greatest? Loss by interest that might have been made of the money? or

Saving by avoidance of the loss from degradation of money and rise of prices?

Would the hoarded money, if introduced into the circulation, have made a clear and permanent addition pro tanto to the mass of money in circulation?

Answer

Being the produce of taxes—it was taken from consumption expenditure and added to capital

Column 4

Items in the Account as between money and vendibles?

Quere what are elements to be taken in the account as between money and wealth not pecuniary, in regard to the fixation of prices.

1. Land is not to this purpose to be ranked among vendible commodities—because its price being in No of years purchase will depend not upon the absolute quantum of money but upon the proportion between stock or capital and income.

2. So any other source of perennial income. as Annuities secured on Canal Navigation and Road[?] Undertakings &c.

3. Are Bills of Exchange to be considered as adding to the quantity of money, so far as they are employd in paying for wholesale purchases?

Column 5

Why the encrease of productive capital outstrips the encrease of income—whence the fall in the profit of Stock and the rate of interest?—

An addition to productive capital is an addition in the shape of principal.

An addition to income comes in only in the shape and in the proportion of interest on that principal though at the high rate of interest in which profit on stock is included.

{Encrease}

Of all the fallacies that have or have not been brought under review by Aristotle, the fallacy a non causâ ut causâ is among those that have seen most service. In this field it is that the imagination seconded by the affections ranges[?] with peculiar/[...?] complacency and ease.

Whatever prosperities[?] are remarked are fastened/[...?] as trophies without ceremony[?] as so many trophies on the favourite measures: Or[?] all [...?] are With as little ceremony are fastened on the obnoxious one

No wonder that this should be the case in the present instance in which the deception is favourd by such multitude of appearances.

Column 6

Dilemma

Either the influx of paper money is evil, or not. If not no objection to Annuity Notes. If yes, a reason for extirpating other paper, and giving Annuity Notes as a substitute.

__________________

difficulty of making an estimate of the permanent probable proportion of paper money to cash.

There may be a maximum beyond which all the confidence in the world would not be able to carry it. But by any deficiency of confidence it might be reduced with that maximum down to 0.

Column 7

Quere the effect of a tax upon the import of Bullion, if it could be enforced?

It would keep down the rise of prices. Plate would be so much the dearer—and there would be so much the less of it in proportion to wealth in other shapes.

But there would not be the less of wealth in other shapes—but so much the more: for the application of the existing stock of labour.

The [...?] encouragement for coining[?], and the prohibition of export of Bullion from Coin[?] or English made Plate put together are a trap for and a prison for bullion in the shape of Coin: letting it in at all times, and letting it out at no time.

It is only in the shape of Plate that Gold and Silver are of any actual use—that any encrease in the quantity is attended with any advantage. In the shape of Coin, they are no otherwise of use than in as far as they are capable of upon occasion, of being converted into Plate: and while they are in the shape of coin, every encrease in the quantity not attended with a correspondent encrease in the power of purchasing, is attended with disadvantage—viz: in respect of luggage[?].

Column 8

{Adam Smith with every body else exhibits the encrease in quantity of gold as the cause {result} of the rise of prices. But he mentions not that rise as an evil: only the acquisition of the plate as a matter of indifference. So the quantity of wealth in the country be the same, it never occurs to him to enquire into the state of feelings.}

Quere both or if not which of the two masses of money produce the rise of prices? The Bills of Exchange &c. paid by Dealers?—or the small masses paid by consumers?

__________

Adam Smith mentions Paper Money as driving out Cash: But the prohibition of melting Cash or Plate was intended to prevent this effect altogether, and it can not be supposed to be altogether ineffectual. See Col. X.

[Column 9]

Paper Mischief

May not the Country Banks be mischievous in this way—Lending their Notes to Farmers and Dealers in Corn &c., whereby they are enabled to keep up the Corn &c. without selling it, does not this afford an encreased vent for their paper? especially as there is so much more money to pay for corn &c. in the year—How can the prices of all things rise on a sudden to all people for the whole year unless either quantities of things decrease in proportion, or quantity of money encreases?

[Column 10]

X.

Times Oct. 30 1800

Bullion from Plate or Coin export prohibited. [Balance of para not JB hand] Several Merchants and Refiners, Proprietors of Foreign Gold Bars, weighing 2543 Ounces, attended the Court at Guildhall on Tuesday with their Witnesses, and made affidavits that no part of the above gold was the Coin of this Realm, or the clippings thereof or plate wrought within this Kingdom. The Court afterwards ordered them the usual Certificates for the exportation thereof.

Times 30 Oct. 1800

The differences in the course of exchange at Hamburgh is upwards of 15 per Cent: and at home the price is encreased from £3. 17: 6 (the Standard price) to £4. 5s per ounce. This accounts for the large importations of bullion abroad.
Similar Items
  • Title: [22 Novr.1800 Paper Mischief]
    Description: 22 Novr.1800

    Paper Mischief

    Brouillon II

    [Column 1]

    Expulsion of Cash. It is not of itself a mischief, but a good. The real evil of it is the danger of destroying the credit and value of the future[?]

    [Column 2]

    {Though the influx of money is itself employd in adding to the mass of productive capital, yet no real addition to such capital is thus made, since if the labour employd in making the goods by the exportation of which the money is obtained had been employd in the making goods for home consumption to the same value, a/the same quantity of money would by that means have been employd in making an addition to capital to equal amount, without adding to the national mass of money.

    In Spain and Portugal, or at least in Spanish and Portuguese America, gold and silver coming in to the hands non-commercial men, in the shape of rent, and not in the hands of commercial men in the shape of capital, add nothing to capital.

    [Column 3]

    Wealth can not be encreased but by capital.

    Productive Capital is either physically productive capital or money.

    Of physically productive capital the value is not decreased by quantity—

    Of money, it is.

    Be the case as it may, with regard to gradual additions to money keeping par with additions to wealth i:e: with the possible addition to labour—in regard to such sudden ones as outstrip that possible addition the can be doubt of the propriety of creating[?] them.

    If instead of encreasing in a greater ratio money has encreased in a less than wealth, rents must have fallen instead of rising as they have done.

    But as provisions would have fallen first, and the fall could only be gradual and in proportion to the encrease of wealth, the inconveniences produced could never have been equal to those produced by the sudden additions/-crease of/in to money by paper

    [Column 4]

    {Enrichedness[?] of the nation—that a certain quantity of wealth requires a certain quantity of money to circulate it. as per Thornton Times 28 Novr 1800}

    The quantity of money that comes into the mint[?] is the quantity of bullion that in addition to the quantity of other imported goods is equal to the quantity of home made wealth capable of being exported for the purchase of such foreign goods.

    The prevailing/reigning taste determines the proportions as between home produced/made goods—foreign produced goods other than bullion—and bullion i:e: plate.

    Whatever quantity of bullion has not a demand for it in the shape of plate the proportion of plate to the aggregate mass of fortunes of individuals being filled up, will come into the Mint, because in the shape of money it can force an exchange for all such articles as a man wants.

    [Column 5]

    Difference as between metallic money and paper.

    The matter of Metallic coming in in exchange—the quantity of it is limited by the quantity of surplus produce exportable—and therefore can not make any addition to wealth more than would otherwise be made by savings.

    Paper is not subject to such limitation—it may be introduced in large quantities at once and whenever it is introduced, it is introduced by capitalists—and expended in the production of capital—chiefly productive capital

    But still it can produce no effect if all the capacity for labour would otherwise be employd—and if it employs it not in any more advantageous or lucrative manner than it would otherwise have been employd in.

    Is it likely to be more advantageous? The onus probandi lies on the advocates for paper, considering the mischiefs proved upon it.

    [Column 6]

    Government, when it forbid the /re/conversion of money into bullion, undermined the value of it. The foundation of the value put upon it as money was the intrinsic value possessed by it as plate.

    Absurdity of Government in sinking the value of money, by encouraging the coinage of it—i:e: giving a bounty on the conversion of it/bullion into coin.

    Encrease of money is not the cause but the effect of encrease of wealth. Gold &c. is not imported in the state of money—None that is imported is converted into money till the country is stocked with plate. A stock of plate will be added to the mass of other useful wealth proportioned to the addition already made to this stock of other wealth, before any addition is made to the stock of money. But this already existing stock of money would have served as well to constitute the savings as any added portion.‡

    [Column 9]

    ‡ The time when encrease of money encreases wealth is the time when goods are more home-made than bought. i:e: made under the superintendence of dependent stewards instead of independent and accumulating manufacturers.—But this time is long past.

    [Column 7]

    The quantity of money depends upon the relative quantity of bullion in proportion to the demand—viz: in proportion to the quantity of other wealth—When the plenty of bullion is such that a man can not sell it above the mint—rather than it should be idle he sells it for the mint price.

    Although the influx of money should have produced a clear addition to wealth formerly, by adding to the quantity or effect of labour, yet if the addition to wealth in these respects is already brought to its maximum, the utility of additions to money has ceased.

    Addition can not be made to wealth by money beyond the capacity for labour &c. unemployd—

    Objection—Yes, by trade—importing the product of foreign labour—Answer—but that is purchased the produce of home labour

    [Column 8]

    Modes of augmentg effect of Labour

    1. Division of Labour/8. Capital

    2. Saving of force/labour by machinery/7. Skill

    3. Operating on a large scale/9. Capital

    4. Discovery of new and less expensive agents i:e: agents the obtainment of which costs less labour./2. Skill

    [...?] from [...?]

    5. Discovery of less expensive modes of acting—Bleaching by oxygen./4. Skill

    6. Discovery of new funds of crude materials. mines, shoals of fish &c./1. Chance.

    7. Applications of less expensive materials to the purposes of more expensive. Paper from Straw./3. Skill

    8. Means of preservation—Curing Herrings &c. Forsyth’s growing[?] Timber. [...?] discoveries./6.Skill

    9. Means of encrease of vegetables. Forsyth’s methods of pruning. 5. Skill

    10. Profit by/-able exchange. Exchange of a mass of goods which cost a given quantity of labour for a mass which either cost a greater quantity, or rather would exchange again for a mass that cost a greater quantity.

    [Column 9]

    Rise of prices proves the existence of a mass of money beyond what has made any addition to wealth, but it does not disprove the existence of a mass that that has made an addition to wealth.

    Mischief small if only metal money—because the addition—great or small would be 1. [...?] [...?]/

    2. Not subject to will—therefore not susceptible of abuse

    3. Therefore capable[?] of being predictd[?]/precalculated and provided for—

    It would not exist, but in proportion as it outstripped the encrease of wealth—and would therefore have though not for its cause yet for its inseparable concomitant, that acceptable result.

    [Column 10]

    In the diffusion and accumulation of wealth, multiplication of manufacturers and merchants are necessary.

    It is necessary that these should be numerous—and have large stocks—because these are the class of men by whom ‘money is habitually saved’. But it is not necessary that their stocks should have a large quantity of money to represent them.

    What makes merchants rich and numerous is the variety of merchandise, which tempts the great land proprietors to spend a larger and larger portion of their incomes this way—instead of spending the whole in the maintenance of idle retainers. No savings are made upon the portion of income spent on servants and retainers. Savings will necessarily be made upon the portions spent on the purchase of manufactures and imported goods.
  • Title: [30 Oct. 1800 Ordo & Brouillon]
    Description: 30 Oct. 1800

    Ordo & Brouillon

    Paper Mischief

    [Column 1]

    Ordo

    I. Introductory Matter+

    II. Mischiefs of Paper Money Announced.

    III. Advantages, real or supposed announced

    IV. Mischiefs proved

    V. Advantages disproved or admitted

    VII. Case as between Bank and Banker’s paper.

    VI. Adam Smith considered.

    Conduct. Post-off the long[?] description to an Appendix?

    Title

    Thoughts on Paper Money. Shewing the mischiefs produced by/flowing from it—including its share in the present pressure[?]—together with an indication of the remedy.

    [Column 2]

    +Remedies that can not be [...?] at the [...?] draw attention[?] from the [...?].

    Facts indisputable or acknowledged

    1. That the prices of commodities must be regulated by the proportion between commodities and money.

    2. That within these 50 years prices in general have undergone a great encrease.

    3. That within do money has received a great encrease.

    4. Deductions &c.

    4. The rise of prices (taken all together) is an exact measure of the encrease of the quantity of money above that of vendible commodities.

    5. Mischief of a rise of prices, the defalcation from the income of fixed-incomists.

    6. This overlooked by A. Smith, who has attended more to wealth than feeling.

    [Column 3]

    Instead of Real Price—say Cost or Charge of production.

    As the rise of prices equal to one third of the whole sum of prices gives one third part of the value false, This of itself serves as a proof that the addition to the quantity of money has been productive of no addition to the quantity of wealth.

    When once an error has got into the universal[?] language, it is next to impossible to get it out again. Propositions and those false, are imperceptibly involved in terms[?]. The true opinion is dug out and brought to view, with great labour by a few thinking men: while the false opinion is declared every moment by all the world.

    [Column 4]

    7. Adam Smith specter[?] of the rise of prices not resulting purely from encrease of metal money.

    8. Accordingly he considers any addition to money by paper money as impossible—as he considers the expulsion of an equal quantity of metal money as a necessary effect.

    9. Were this the case paper money would not be chargeable with the mischief in question—but would be purely beneficial.

    10. It appears not to have been productive of any such effect—[...?] by testimony of Mr Rose.

    11. 2. by the testimony of the known matter of fact viz: the rise of prices.

    There can be no rise but as the ratio of money to commodities encreases.

    11. (1) Scarce any cash remained he says, along with the American currencies—True: because the demand for foreign commodities encreasing faster than the stock of their own commodities they had to give in exchange, the deficiency was necessarily filled up by cash—

    Apply this to the expulsion of cash from the Country.

    [Column 5]

    12. This shews that money has no such tendency to drive out money as he supposes.

    13. He sometimes seems to suppose the quantity of money to be limited by the quantity of commodities.

    14. If it were—metallic money would drive out metallic money—which he does not seem to suppose—and which is disproved by the rise of prices.

    15. Rise of prices ought naturally to affect all commodities alike, and would were it not for particular causes—viz:

    1. Unequal rise or fall of real price.

    2. Unequal rise or fall of demand.

    3. Taxation.

    4. In case of imported articles like causes acting in the producing country.

    [Column 6]

    16. Of Cloathing &c. the prices have risen less than provisions—because the real prices have been reduced by manufacturing improvements.

    17. Of Corn the price has been kept down by the improvements in Husbandry.

    18. Of {provisions}cattle the price has risen above corn by the encreased demand produced by Horses which are the effects as well as causes of wealth and the instruments of security as depending on national defence.

    19. Of Mutton, A. Smith has shewn how the price has been kept up by the prohibition of the export of Wooll.

    20. The keeping up the price of Mutton must have contributed to keep up the price of other Butcher’s meat?

    [Column 7]

    21. Besides cash Paper must not Bills of Exchange, as far as they go have contributed as well as the encreased fertility of the mines, and consequent encrease of metal money to the rise of prices?

    22. They must have done so, as much as Cash paper of equal magnitude. Is it the money paid by Dealers or that by Consumers, that produces the rise?

    23. As the number of hands through which a piece of money passes in a year is inversely as its magnitude does not small money contribute more than large to the rise of prices?

    24. Unfortunately the reduction of real price has fallen more on luxuries than necessaries. Fine Cloathing Liquors &c.

    [Column 8]

    25. But in regard to Liquors has been very happily counteracted by Taxes.

    25. In so far as Paper money has contributed to the encrease of vendible commodities

    Sources of illusion

    26. Neither encrease of paper nor of metal money has contributed any thing to the encrease of vendible commodities. But as both have encreased at the same time the encrease of money has been deemed the cause of the encrease of vendible commodities. Gradual encrease of money produces not rise of prices; sudden, does.—Why does gradual not?—not because the fresh money has time to produce the fresh stock of vendible commodities, but because the savings have time to produce the encrease./the addition to intrinsically productive capital with the existing stock of money have had time to produce this encrease

    Had it not been for the encrease of money money prices would have grown lower and lower while wealth was encreasing.

    [Column 9]

    Mischiefs and Advantages of Banking.

    I. Mischiefs

    1. Rise of prices thence taxation of the distressed classes. A. Smith censured for his indifference.

    2. Commercial insecurity by excess.

    3. by occasional defects/

    4. Support to monopoly by enabling Growers witholding from sale.

    5. by enabling dealers to buy up.

    6. By speculating themselves by engrossing articles of inferior importance and quantity.

    * 7. Diminution quantity of exports and thence of profit by exports and imports. True the fact—But quære as to the evil? So much less capital employd in foreign trade—so much the more in home[?] production and improvement.

    8. No good—no real addition to wealth.

    *The whole community is thus taxed by the issuing of the paper for the purpose of taxing them another way by the application made of it.

    [Column 10]

    9. Stoppage would produce no evil as the fall of prices would be gradual—Picture &c.

    10. Error Sources

    11. Rise—amount of

    12. Adam Smith.

    II. Advantages

    1. Encrease of the general mass of wealth—by the advantage attending to management on a large scale.

    The advantage is real—but quere as to the share of Bankers in producing it—

    Their trade is ill-suited to the slowness of production

    Better suited to the quickness of exchange.

    The additions made by paper money to real wealth are seen[?]

    The defalcations (by defalcations from income & thence from savings) though not less real, are indiscernible.
  • Title: [27 Oct. 1800 Polit. Economy]
    Description: 27 Oct. 1800

    Polit. Economy

    Paper Mischief

    Rise of Prices

    [Column 2]

    The defalcation from income produced by the degradation is compensated in point

    of quantity of wealth by the accession proceeding from the same source for

    though the quantity of vendible commodities is not the greater for the addition

    to the mass of money neither is it the less.

    In this field Through the trite and the paradoxical lies the road to new and

    useful truth.

    [Column 3]

    Anny Notes {Abstract} Rise of Prices Ch. XIV.

    Benefit to the community by guaranteeing it against the mischief from rise of

    prices by substituting to a paper money over which it has no command a paper

    money over which it has a perfect command.

    Whatever accession to the mass of money the community has borne by accession to

    the mass of Bankers paper, it can bear by the accession to the mass of Annuity

    Note paper without greater mischief in this case than in that.

    [Column 4]

    [...?] Bills of Exchange (for terms longer than the distance) should also be

    prohibited, after giving proper notice. For these, add not only to commercial

    security but to rise of prices.

    It is true, they are extinguished as the term arrives—but then they are

    received[?] to the same amount which is always to the amount of the supposed

    solvency.

    {A man with a Bill for £20 in his hand is as much a lendder[?] as a man with £20

    in money or cash notes in his hand.}

    Bills of Exchange at distant dates are money imported from future time—from

    futurity.

    Prohibition of Bills of Exchange would be prohibiting the whole mercantile body

    from overtrading themselves and taxing the distressed classes: Bills of Exchange

    for short dates save carriage, but so would Annuity Notes.

    [Column 5]

    The addition to money by metal money can not be prevented, and makes some

    compensation by the proportionable addition to the stock of plate.

    Addition by paper may be prevented, and makes no such compensation.

    Ii is again the mercantile interest As the children of this world been[?] to the

    children of light so has always been the mercantile interest to the landed. The

    former always arises in their generation than the latter.

    Bills of Exchange

    Do they not rather diminish than raise prices?—since, being confined in a manner

    to the Dealer they encrease the competition between the dealers, and diminish

    profit in par stock. Per contra, they pro tanto save dealers from using cash,

    and thereby leave so much [...?] to circulate among the consumers.

    [Column 6]

    {The charge against Paper money has no appearance of fallaciousness “[...?]”

    &c.

    It occurs immediately, or ought to occur that a House/the building paid for in

    paper is not less a House nor less durable, than if paid for in gold. It is not

    as paper money but as money that paper money does the mischief.}

    [Column 7]

    No Good

    Argument Contra

    Want of Employment—See Poor Plan

    Another argument e contrà may be taken from the unemployd state of a considerable

    part of the capacity for labour. So many possessors[?] of various descriptions

    unemployd! Whence comes this?—whence but for the want of money to employ

    them—there paper would supply this want. Most true it is Much capacity for

    labour has always been and continues to be lost. But it is all in fragments. To

    “gather together the fragments of labour that nothing be lost” is an object/a

    miracle that can not be accomplished. I had almost said a miracle that can not

    be wrought, without an appropriate institution, adapted to the purpose. Of such

    an institution, an Outline been sketched/offered[?].

    The pipe[?] has been sounded—but whatever was the cause[?]—by lips not

    sufficiently hallowed so it is—[...?] have not yet been found.

    Men men that I know of have stood up to dance[?] highest from [...?]

    [...?]—bootless admiration/bootless lifeless admiration from the few—such is the

    lot of him who casts forth truths/ideas however useful into an age not ripe for

    them.

    [Column 8]

    Money/coined metal is a sort of pledge—a pledge of the best kind—for so much

    plate as might be made out of it.

    No Good

    {The encrease or decrease of wealth depends on the proportion between labour

    employd in the production of productive articles and articles of slow[?]

    consumption on the one hand, and labour employd in non-production or in the

    production of articles of quick consumption on the other.

    The quantity of money paid for labour has no tendency to make any change in

    these proportions}

    [Column 9]

    Prefat

    There is scarce room for novelty in measures—but abundant for trains of close

    and just reasoning by which the effects and comparative utility of measures may

    be ascertained.

    In this field—through the paradoxical lies the road to useful truth.

    The language of large minds is unintelligible to ordinary/little ones