JB_001_610v.xml

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.

JB_003_111.xml

Title: [1 Nov r 1800 Superseded? Paper]

Description: 1 Nov r 1800

Superseded?

Paper Mischief

Ch. IV Mischief

1. Rise of Prices

1

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

JB_001_611v.xml

Title: [4 Novr.1800 Brouillon Paper]

Description: 4 Novr.1800

Brouillon

Paper Mischief

1*/5

* [Column 1]

Sinking Fund if a self-supporting Fund = Redemption of debt.

Provision is made by Government for the removal of the load of debt at the end

of a period of 40 or 50 years: Why not against[?] a cause of impoverishment of

([...?] partial as to classes affected) so much more powerful than national

debt?

Vendible

1. Individual

2. Aggregate

Aggregate

1. Physical—Land & Building

2. Ideal. Annuities &c.

Prefat. 1. Introd. Co-effects become[?] indexes—

When political economy is thoroughly understood and the relations between the

several phænomena/the matters of fact which constitute the subject matter of it

is clearly made out, and effects branching out from one & the same cause,

are traced to this their source each one of every such system of connectd

effects, will serve as a diagnostic and index to the rest.

By this means by means of a few [...?]/matters of fact [...?] public[?] in their

nature to be concealed, the eye of the politician may be able to penetrate into

the unknown[?] [...?] of affairs in a hostile state.

[Column 2]

Coining-Quasi

It is time to reclaim this stray prerogative which has thus long and thus

incautiously been suffered/to be [...?]/left in the hands of individuals.

The robbery committed by Bankers is peculation pro ratâ

A distinction that whether observed or no ought never to be unobserved by

criminalists, is that between peculation in toto and peculation pro ratâ. The

crime of Bankers, if it were one belongs to the latter head.

Revolution

A revolution in property—of the quiet kind—and yet setting aside the mischief of

disturbance &c little less extensive than the most turbulent ones known.

Fixed reduction of General rate of Interest.

Produces the mischief of encrease of money without the benefit.

[Column 3]

Price—measure of

The price of a particular article may rise to any degree without any addition to

the quantity of money in the country: do of all articles, not: but only in

proportion to the money.

No addition to the quantity of money would raise prices, supposing the addition

to wealth proportionable: therefore from the absolute addition to money must be

deducted the quantity equivalent to wealth, in estimating the cause and measure

of the rise.

Money Increase Ê Interest Decrease

An excess in the quantity of money serves to counter balance and check the

mischief resulting from the reduction of the rate of interest, which arises out

of the augmentation in the quantity of stock.

French Assignats

Produced the effect of money according to the price they were taken at

[Column 4]

Prices—how obtained

The quantity of money in circulation i:e: actually employd in buying can never

be worth more or less than quantity of commodities bought with/by it

The price of any sort of goods in two different years is the same thing with the

quantities of money given in the two respective years for the same quantity of

goods.

Therefore if in the second year the price of goods is double what it was in the

first) it follows and shews that the same quantity of money was in the second

year worth in goods but half of what it was in the first: if the whole of one[?]

quantity of money was worth the whole quantity of goods, the half of the money

is/was worth but the half of the goods of the same year and a given sum in the

second year was worth but half what

[Column 5]

what the same sum was worth in the first year.

A. Smith

Admitted that paper may have a tendency in a certain degree to expell cash but

not to its own amount: and so much as it fails of expelling to its own amount by

so much it must rise prices

It tends to expell cash—because as money grows cheap in the country and other

vendible commodities grow dear in proportion to what they are in other

countries, it becomes advantageous to send the money out to other countries in

exchange for goods. This is particularly the case of provisions of which the

real cost of production can not be so much diminished by machines as that of

Cloaths and furniture.

But in England this tendency is counteracted at both ends—

1. by the laws against exporting cash.

2. —against importing provisions.

[Column 6]

{A. Smith’s position is disproved to intuitive certainty by the simple fact of

the rise of prices}

What are the prices meant?

The prices given by consumers, the ultimate prices—or those given by Dealers the

intermediate or preliminary prices. or both together?

Semble the ultimate: these are what bear ration to income—so that the sum of

them is equal to the sum of income minus money saved and unemployd[?]

These ultimate prices, are the only prices felt.

The intermediate if they did not fall upon the ultimate would do no harm:—but

that is impossible.

No addition to wealth can be effected by any addition to money any otherwise

than by encreasing the proportion of enriching to impoverishing expenditure.

But in as much as fresh-inflowing paper money is added

[Column 7]

added in the first instance to capital i:e: employd in enriching expenditure,

does it not appear from hence that paper money adds something to wealth upon the

whole.

Error Sources.

{1. Case of individuals.

2. Sophistry of the language detracting from the value of paper money

3. —and of metallic money.

4. Accidental connection between encrease of money metal and paper and encrease

of wealth.}

5. Money raisable by paper which could not have been raisable without. ex. gr.

Bank of England. It is a mode of taxing without possibility of opposition to the

tax.

Coin

Forbidding export or melting of coin was in fact an act of Bankruptcy—stripping

the metal of its value—and reducing it to the condition of bad paper.

[Column 8]

A case might be put in which an addition to the quantity of money shall be not

merely accompanied by, but productive of an addition to wealth: and this without

any addition to prices or at least without a proportionable addition to

prices.

But the case thus put would not quadrate with the real state of things in

England.

Suppose money imported into the Scotch[?] Isles and employd[?] in fisheries.

Cases as between money and wealth.

1. Wealth encreasing money encreasing in the same proportion—No rise.

2. Wealth encreasing money encreasing in greater proportion—Rise.

3. Wealth encreasing. money encreasing but in less proportion—No rise but

fall.

4. Wealth encreasing—money decreasing—Greater fall.

[Column 9]

Cases continued

1. Wealth decreasing money decreasing in the same proportion—No fall

2. Wealth decreasing—Money decreasing in greater proportion—Rise.

3. Wealth decreasing—money decreasing but in a less proportion—No fall—but Rise.

Return of a state of things in which money should be stationary or

decreasing—

If the decrease were gradual no inconvenience would ensue—The[?] Rents would be

lowered—but prices of provisions would have been lowered first {Goods being

sold} The money as well as real price of exportable goods being lowered goods

would be exported to a larger amount or a revenue might be drawn from foreign

nations by taxes on Exports

[...?] bread basket stops.

[Column 10]

Data as between 2 points of Time 1750 & 1800

1. Quantity of wealth.

2. Quantity of money less—equal—or greater

3. Prices—higher—equal—or lower.

Known antecedently

1. Wealth/Income of 1750

2. Wealth/Income of 1800

3. Prices of 1750

4. Prices of 1800

5. Money of 1750

Known by inference

6. Money of 1800

Cases continued

1. Wealth stationary money stationary. No rise nor fall.

2. Wealth stationary—money encreasing. Rise

3. Wealth stationary money decreasing—Fall.