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_139.xml

Title: [19 Dec r 1800 Paper Mischief]

Description: 19 Dec r 1800

Paper Mischief

Ch. < > Government Hoard

2

Defalcation like addition - defalcation from the source in question as from any other, defalcation as well as addition - may be considered as before with reference to addition to wealth - addition to prices - and influence in commercial credit. Let us begin with wealth.

1. That a defalcation produced /made/ in this or any other way from the mass of money in circulation should in any case be productive of any addition to the mass of wealth is seen to be impossible at the first word.

2. If, at the commencement /outset/ of the hoarding plan, the capacity for /national stock of/ labour happens to be fully employed, and employed to the best advantage, or if in respect of the encrease of wealth though not employd to the best advantage things are so circumstanced that no addition to the mass of money, or no addition employd in the shape of productive capital could have the effect of causing the stock of capacity for labour to be employd to any greater advantage, and if at this time the ratio of money to wealth and consequently the amount of prices is on the encrease, a defalcation to any amount short of /not exceeding/ that of the supposed encrease of the stock of money can not be productive of any defalcation from the growing mass of wealth.

3. In any other than this last-supposed case, the defalcation thus made from the mass of money will be productive of a defalcation to certain degree from the mass of wealth. Of the amount of this latter defalcation Let us endeavour to form an estimate according to /under/ the different modifications of which the case is susceptible.

JB_003_142.xml

Title: [nd [wm 1798] Paper Mischief]

Description: nd [wm 1798]

Paper Mischief

Ch. < > Government Hoard

5

On the face of this account + the result of a the hoarding every year a quantity of money to a given amount is a loss to conductive[?] capital to the amount of about 1/ 6

th part of the money hoarded: to which may be added loss of the addition that would have been in the way of interest, in each succeeding year.

The effects of hoarding metallic have very little resemblance to the effects of those dissimilar to which the stock of paper money is subject, though defalcation be the result in both cases. In the case of hoarding the defalcation &c is gradual and comparatively inconsiderable: too much so to have any perceptible effect it may well be supposed in respect of the lowering of prices. The effects of a shock to paper credit, though the defalcation may be very copious and sudden may also be incapable of producing any sensible effect in the way of lowering prices. But in this case it is from a very different cause. The same state of things which raised the stock of paper money to the height from which it was broken down by the force of the supposed shock would in no great length of time be sufficient to raise it up again to that same level: and as this restitution would naturally take place before the time when prices might have adjusted themselves to the stock /level of the reduced mass/ of money remaining any determinant fall of prices does not appear to be among the consequences naturally to be expected from shocks to which paper money in a country circumstanced like Britain is exposed.

{+ By preventing wealth the hoarding prevents encrease of prices that would have been effected by the addition to the mass of vendible commodities.}

See the nex[?] page