Polit. Economy

Paper Mischief

Rise of Prices

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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

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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

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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?

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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.

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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.

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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.

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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[?].

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{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?

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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.

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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?

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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.