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1 Nov r 1800
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Paper Mischief
Ch. IV Mischief
1. Rise of Prices
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1. First as to the rise of prices. In an aggregate view the alledged evil may appear an imaginary one. + But an aggregate view is an indeterminate view /one/: and an indeterminate view is liable to be a false one. It would be found particularly so here in the present instance.
Vendible commodities since the rise requires now an additional quantity of money to pay for them: true - this would indeed be a misfortune /an evil/, if the additional quantity of money did not exist. But it does exist it existed even /already/ before the rise: for it are the sole cause of the rise: then where is the mischief? The remedy instead of treading tardily as usual upon the steps of the disease, precedes it: or rather precedes the result which otherwise would be a disease, and prevents it from becoming so.
First then comes the encrease of wealth – for is not money wealth? It is not indeed the only species of wealth: a man can neither be fed, cloathed, lodged, convey’d nor warmed by it. But it is not the less a species of wealth: were it not, it would not be received, as it is, in exchange for every other. An encrease of wealth is upon the whole therefore not only a necessary concomitant but the very cause of the supposed alleged evil. Admitt it to be attended with diminution of wealth in the instance of individuals, still, being attended with encrease of wealth upon the whole,
the loss is more than covered by the profit, and any conclusion that should be formed, by dwelling upon particular instances of loss would be no otherwise than erroneous /a wrong one/.
+ N.B. This, being a false view, should not precede the true one
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Title: [19 Dec r 1800 Paper Mischief]Description: 19 Dec r 1800 Paper Mischief Ch. < > Government Hoard g II. Prices 7 II. Secondly in regard to prices - Like the effects of addition, the three effects of defalcation may in this view be prejudicial /beneficial/, beneficial /prejudicial/ or indifferent according to circumstances. If the ratio of money to wealth be on the encrease and to such a degree upon the encrease as to produce a rise of prices, the operation of the defalcation in question will be in that respect beneficial so far as the effect of it is to check the rise or stop it altogether without producing any such fall as shall be productive as such of a small inconvenience. If the ratio of money to wealth be not on the encrease, still more if it be on the decrease, the effect of the defalcation in question will be to produce a fall of prices more or less sensible according to the proportion of the money defalcated to the mass from which it was defalcated. In respect of commercial credit it can have no effect analogous to that with which paper money is apt to be attended by reason of the sudden though temporary defalcations to which the mass of it is exposed. In the case of thesaurization, the defalcation always nor from the mass in circulation is always gradual, nor can ever be otherwise It
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Title: [1 Nov r 1800 Paper Mischief]Description: 1 Nov r 1800 Paper Mischief Ch. V Mischief proved 2 To this I answer 1. Although it were an inseparable result of an encrease of wealth {of the aggregate mass of wealth} it would not follow that it might not be an evil. Wealth is but a means: comfort is the end: shew but a loss in comfort, the /all/ encrease in wealth, be it what it may, loses all its value. Follow it up, apply it to the several classes of parties interested, in point of comfort we shall find it productive of an indisputable loss. {Three such classes may be distinguished. 1. The first is composed of those whose incomes are commonly called fixed - more aptly unencreasable /unaugmentable/. 2. The second is composed of those whose incomes are not in their nature unencreasable, but in point of fact do not receive an encrease in quantity of money proportionable or more than proportionable to the decrease in the marketable value of it. 3. The third is composed of those who whether as proprietors of the supposed extra influx of money or on any other account do receive by means of it an encrease in money more than proportionable to the rise of prices - to the decrease in the marketable value of it as above.}
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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.
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