JB_001_612v.xml

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.

JB_003_121.xml

Title: [1 Nov r 1800 Paper Mischief]

Description: 1 Nov r 1800

Paper Mischief

Ch. I.V. Mischief proved

11

First then an encrease in the quantity of wealth to any amount may be made at any time without any encrease in /addition to/ the quantity of money.

Quere?

This, when applied to the whole commercial world taken together will be understood or at least assented to more readily than if confined in its application to any one country in particular.

In the case of each individual article Wealth is produced by Labour - labour by money. But the quantity of wealth produced - the quantity of labour bestowed has no assured[?] nor necessary nor fixed dependence on the quantity of money given for it. Now in 1800 a day’s labour is hardly likely to be had for as much silver as is contained in 1 s-6 d /1-6/: 650 years ago it was to be had for 2 d. + Upon quantity of provisions and other necessaries it does depend in this sort, viz. that without provisions &c sufficient to keep a man for a whole year /throughout the year/, the labour of a man for a year is not /never/ to be obtained. But the same quantity of provisions for which a given sum of money has been to be paid at one /a later/ time /period/, has been to be had for less than a tenth part of the money at another /an earlier/.

A given quantity of labour and thence of wealth is produced at all times by any quantity of money, however great or small for which the quantity of recompense in provisions which the labouring hand finds himself enabled to require happens at that time to be exchanged.

+ See Table of prices by Sir George Shuckburgh Evelyn - reprinted in Nicholson’s Journal for Sept 1798 from Philosoph. Transactions for 1798. p.176.

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.