Answ. IX. I own the scheme proposed is pretty much the same with that proposed by Mr. Lowndes; and I must here give a satisfactory answer how a project so solidly refuted in 1695, can possibly be eligible in 1760.

First then, I say, that the question was not then understood. Mr. Lowndes put it upon a wrong issue, and supported his argument upon wrong principles. He insisted, that his scheme implied no debasement of the former standard. He ascribed the rise of the price of bullion to the rise of the intrinsic value of silver, and not to the lightness of the coin with which it was bought. He always supposed, that the stamp, and not the substance, made the currency. A light shilling and a heavy one were both shillings, according to him. He proposed reducing the weight of the silver coin 20 per cent. below the standard of Elizabeth, because he was ashamed to propose more; but a reduction of 33 per cent. or rather 50, would hardly have brought the pound sterling to the mean value of the silver currency at that time.

Mr. Locke, on the other hand, supposed the whole dispute to rest upon one point, to wit, Whether or not Mr. Lowndes’s scheme implied a debasement of the standard? He reasoned upon sound principles, and with good sense; but he did not turn his attention to the only object which fixes ours at present, to wit, the interests of those who are engaged in permanent contracts.

Mr. Lowndes’s great argument for reducing the standard was, that silver bullion was risen to 6 s. 5 d. per ounce, (that is, that it might have been bought with 77 pence of shillings of ¹⁄₇₇ part of a pound troy) and therefore he was of opinion, that the pound troy should be coined into 77 shillings; which was diminishing the value of the pound sterling about 20 per cent. or ¹⁄₅. Mr. Locke answered him very well, that the 77 pence were paid in clipped money, and that those 77 pence were not in weight above 62 pence standard coin. This answer is quite satisfactory. But I ask, whether Mr. Locke would have been of opinion that any man who had borrowed 1000 l. sterling in this clipped money, ought to have been obliged, upon a reformation of the standard, to pay back 1000 l. sterling in standard weight? These gentlemen, Mr. Lowndes and Mr. Locke, examined very slightly the influence which altering the standard might have upon the interest of debtors and creditors; which is the only consideration that makes the reformation difficult to adjust at present. So great an influence in every political matter has the change of circumstances! Credit then was little known; consequently the mass of debts in England was small: now it is universally established, and the mass of debts active and passive is very great, and forms a very considerable interest in Great Britain.

In those days the landed interest, and the interest of the crown, were only attended to. Trade at that time was almost at a stop, and had been ruined by a piratical war. The evil was past a remedy, consistent with justice. Credit was very low, and daily declining, and demanded an instant reformation of the coin. Restoring the standard was the most favourable, both for the landed interest and the exchequer; and so it was gone into. The nation, and every debtor, was robbed by their creditors; but they did not perceive it; and what we do not see, seems to do us no harm. The question, therefore, is very different: circumstances must constantly be examined, and according to these every political question must be decided.

I have already observed, how the introduction of milled coin had the effect of introducing the clipping of that part which had been coined with the hammer. Guineas, at the revolution, (if I am well informed) passed for 21 shillings and sixpence. Gold was then to silver, over all Europe, rather above the proportion of 1 to 15, as appears by the famous regulation in 1690, called the convention of Leipzick, when the German coinage was settled; and it appears also by the proportion observed in France; and in Spain it was still higher, being as 1 to 16. At this rate we may be certain, that at the revolution the English silver was standard weight; because the guinea being left to seek its own price above 20 shillings, the statute value, did not rise above 21 shillings 6 pence, which marks the proportion to have been as 15.6 is to 1. The guinea, therefore, would not have failed to have risen higher, had the silver coin been light.

From 1692 to 1695, that is, in three years time, (Locke’s Farther Consid. p. 74.) the progress of clipping went on with such rapidity, that guineas rose from 21 shillings 6 pence, to 30 shillings; and according to a very sensible letter which lies before me, signed G. D. and printed in 1695, intituled, A Letter from an English merchant at Amsterdam, to his friend in London, I find there was at that time no determinate value at all for the pound sterling: so great was the difference of the currencies! As a proof, he says, that 100 pounds sterling in silver, which ought to weigh 32 pounds troy, weighed then commonly between 14 and 18. At which rate guineas were very cheap at 30 shillings: they were worth above 40 shillings: and Davenant says, that five millions then borrowed by the state did not produce the value of two millions and a half.

It would be foreign to the present purpose to enter into a particular disquisition, in order to shew the difference between the political state of England then, and at present: let it suffice to remark in general,

I. That there was then no possibility of determining what the current value of a pound sterling was. It varied every month, and was daily declining. At present it is nearly of the same standard as it has been for many years.

II. The money-unit then had nothing to preserve it at any determinate value. The silver, to which it was affixed, was clipped three times in a year, while the gold sought its value as a commodity. At present the gold cannot vary: the guinea is fixed, and must pass for 21 shillings, let the silver be ever so light; and this gives a determinate value to the pound sterling.

III. In 1695, the whole disorder had been coming on with rapidity; at present it has advanced with imperceptible steps: consequently,

IV. At that time the number of permanent contracts which stretched beyond the æra of the debasement of the standard, were many; at present they are few.

V. In 1695, a money’d interest was hardly known. The rich had their money in their chests; now they have it in their pocket-book.

VI. The different between the currency and the legal standard in 1695, was one half: at present it is one twentieth.

VII. The debts of the nation did not then exceed 12 millions: now they exceed 140^[V].

VIII. Many sums then had been borrowed on assignments of certain branches of the excise, the amount of which was uncertain, and deficiencies (which in such cases are unavoidable) were not made good to the creditors. At present all is paid in determinate sums of pounds sterling.

IX. And lastly, the question was not understood. Locke and Lowndes felt, but did not see distinctly, wherein the difference of their sentiments consisted: and those who only feel never describe with perspicuity.

It was then generally imagined that a pound could never be more than a pound; but at present people know how to reckon coin by grains, and see clearly that 1718 is more than 1638.

For these reasons I apprehend, that a scheme, similar to that proposed by Mr. Lowndes, may now be mentioned without offence; that the people of Great Britain are just now as good judges of what is for their interest, as they were in 1695. And if the decision of a former parliament is alledged in favour of the old standard, I answer, that such arguments are only good, when people are disposed to pay a greater deference to the sentiments of their fathers than their own; which I am apt to believe is not the case at present.

If these answers are found satisfactory, we may conclude, that in whatever way the disorder of the British coin is removed, the change ought to be made in such a manner as neither to benefit or to prejudice any, but such as have lost or gained by the debasement of the standard. Lest, however, that these answers should be perplexing only, without drawing conviction along with them, (which in matters of dispute is frequently the case) I shall say something farther upon this subject, with a view to reconcile two opinions, which are perhaps more opposite in appearance than in reality.

I have already apprized the reader, that I pretend to reason only upon principles, not upon exact information of facts. Circumstances which are hid from me, will nevertheless work their full effect, and may render the best deduced principles delusive, when, without attending to them, we pretend to draw conclusions.

Now, such circumstances in the present case there must certainly be; otherwise every body in England would agree, that the standard is at present actually debased, and that the restitution of it would effectually be raising it from what it has been for these many years. Upon this supposition, the consequences we have drawn must be allowed by every body to be just and natural.

Nothing, I think, is more certain, than that all men would be of the same opinion upon every proposition, were such propositions well understood, and did all parties make the application of them to the same object, and in the same sense.

If this be true, let me try to give a reason how it happens that there are different sentiments in England upon the method of restoring the standard.

I. First then, the question is not understood; and the principal thing which obscures people’s ideas concerning it, is their constantly attending to the denominations of the money of accompt, instead of attending to the denominations of the coin. These two things are universally confounded. A pound sterling is always a pound sterling, no doubt; but the grains of silver which compose one pound sterling are not the same in number with those which compose every pound sterling. Now, the moment money is realized in the metals, and that the standard measure of value is affixed to them, let them be worn or not, it is very evident that nothing but the grains of the metal in the several pieces can represent the scale by which the coin becomes a measure of value. Whenever, therefore, people lose sight of this undoubted truth, and begin to measure by the denominations of the ideal money of accompt, without examining whether that value be exactly realized or not, it is just the same thing as if they were to measure a length upon a plan without adjusting their compasses to the scale, and upon a bare supposition that the opening they had, by accident might answer to the length they were to measure.

II. The state, in every country almost, is negligent in instructing the people of the consequences of every variation in the coin; and likewise negligent in providing against the inconveniences which result from all changes in those matters. It is not to be supposed that the common people can exactly comprehend the consequences of making a pound sometimes consist of more silver and sometimes of less. When the pieces are heavy however, they weigh them in their hand, and say this is good money; but when they find that they must give as much in tale of this good money to pay their debts, as if it had been light, they feel a regret, but they do not see the injustice of such a regulation.

Farther, when people find that upon a reformation of the coin they are still obliged to acquit their obligations with the same denominations as before, is it not very natural for sellers to insist upon having the former prices for all sorts of commodities. This is the reason why the universal experience of France (which nation has been more accustomed to variations in their coin, than England) proves that merchandize does not immediately rise and fall according to the variations of the coin. But the operations of foreign trade, which are immediately felt and profited of by the trading part of the nation, insensibly affect the dealings of the body of the people, and produce, after a certain time, those effects, which ought to have followed immediately upon the innovation.

Now it is very certain that the principles we have been laying down will not, in practice, answer, unless the state should lend a hand, both by instructing their subjects in the nature of the change intended, and by interposing their authority to see justice done among them.

Those who oppose the doctrine we have been laying down, go upon the supposition that the law ought to order all obligations to be acquitted according to their denomination after the reformation of the standard. I go upon the supposition that it is just they should be acquitted according to the intrinsic value. Where then lies the difference between our sentiments? We are of the same opinion, as to the main question: for were it true that prices were not to sink 5 per cent. after the reformation, I should be the last man to propose, that debtors ought to be allowed conversions in paying with the new standard; and I suppose that those who support the contrary sentiment would be just as little inclined to oppose a conversion, upon the supposition that ninety five pounds, after the supposed reformation, were to be equivalent, to all intents and purposes, to a hundred at present.

III. The clearest and the best reasoners I have met with upon this subject, are apt upon some occasions to confound the two species of circulation which we have endeavoured carefully to distinguish; to wit, the involuntary which takes place in acquitting contracts already made, with the voluntary which takes place in common sales. As an example of this, and as a means of reconciling opinions, and not with any intention of entring upon refutations, I shall here extract a passage from Mr. Harris upon coins, Part II. p. 96. and insert in Italics what I think will explain the difference between our sentiments.

“You affirm (says he) that if the rate of a guinea be reduced one shilling, there would be a loss of the one and twentieth part upon all the guineas in the nation;” (yes, as often as debtors might be obliged to give them to their creditors for pounds sterling) “but that there would be no loss at all upon guineas, if they were ordered to pass for twenty one shillings, having in them no more silver than there is at present in twenty standard shillings.” (no, certainly; because the debtor would pay his debt with the same number of guineas which he had borrowed.) "Strange, very strange indeed, that there should be such magic in the word shilling, and the number twenty one, as to make the same thing, only calling it by different names, have such different effects! It is scarce necessary to take any farther notice of such a mere jingle of words; but out of tenderness to these young logicians, but more out of regard to those who may be deceived by them, if any such there can be, I shall endeavour to shew, that our scheme is more favourable to them than their own.

“It is self-evident that the nation would not lose one farthing upon all the gold it exported, by a reduction of the mint price of gold: for this reduction would not in the least debase the intrinsic quality of the gold, and every guinea that went into foreign parts, would fetch there as much afterwards, as it doth at present.”

What I have put in Italics clears up the opinion which the author endeavours to refute. He seems much surprized to find magic concealed under the word shilling, and twenty one, whereas there are no words more magical in all the jargon of astrology than in these, and in every term relating to the denominations of money of accompt. Is it not very magical, that the same quantity of silver at present found in twenty one light shillings, being coined into twenty standard shillings, should only acquit a pound sterling of debt, and that were it coined again into twenty one shillings, it would acquit one pound one shilling of debt? Nay more, were it coined into a hundred shillings, it would acquit a debt of five pounds.

The doctrine, therefore, which the author endeavours to combat in this place, is not so ridiculous as it appeared to him; but he has not, in this place, attended to the difference between paying what one owes, and buying merchandize in the course of foreign trade. Let me illustrate this by an example.

I come to my creditor with a guinea, and I say, I owe you twenty one shillings; there you have them. No, says my creditor, that piece is but twenty, by the new regulation; I must have one shilling more. There is no reasoning here, the denomination of the coin must decide between us, not the weight, not the intrinsic value of what I had borrowed. But I go to a shop to buy a hat, the hatter asks twenty shillings; I offer him a guinea and demand a shilling to be returned; says the hatter, That guinea is worth but twenty shillings: Very well, say I, if my piece of gold is worth no more than 20 shillings, your hat was, yesterday, worth a shilling less than it, and, consequently, to day is worth no more than 19 shillings.

In the last example, magic has no effect, and to such cases Mr. Harris has only attended in the passage cited; but in the first, the magical word of a statute, is capable to undo one half of the nation; although their ruin does not imply the exportation of a shilling out of the kingdom, or any benefit to foreigners, unless they be creditors to Great Britain.

IV. The sentiments which the people of England generally form upon this subject, are directed by those of the higher classes. These are all of the class of creditors, and very naturally retain sentiments analogous to their own interest. I am far from insinuating any thing here to the prejudice of this class; all I mean is, that upon an obscure point, people lean naturally to that side which favours themselves, especially when the nation’s interest, and the interest of justice, do not evidently declare against it.

I call the higher classes of a people creditors; because they live upon a fortune already made, and draw their income from permanent contracts: and those are the debtors, who are bound on the opposite side of such contracts. Besides these two interests, there is another which can never be at the mercy of any arbitrary regulation as to money: those, to wit, who live upon their industry, and who enter into no contract but that of sale: they regulate their prices according to the intrinsic value of the coin at the time; whereas the others who are engaged in permanent contracts, must regulate theirs according to the words of their contract, and the interpretation which the law puts upon those words. Every man therefore, whose fortune is already made, either in land, money, or salary, has an interest in seeing the standard raised, and those who are bound in permanent contracts with them, are those only who can be hurt by it.

Farther, the higher classes in Great Britain have always the penning of the law. Is it then surprising, to find the interest of creditors constantly attended to, in new regulations of the standard? When Princes arbitrarily debase the standard, they debase it because at such a time they are virtually in the class of debtors: their expence then exceeds their income. On the contrary, when wars come to cease, and when their expences are reduced within the compass of their revenue, they raise the standard: because they become then of the class of creditors.

This principle is a key to all the mystery of the raising and sinking of the numerary value of the French coin in former times, before public credit was established among them.

Now let us apply this reasoning to the present case.

Since in all changes upon the coin we find (of late) the interest of creditors constantly attended to in Great Britain, is it not very natural for people to reason upon the supposition that there is no injustice in raising the standard; and is it not natural to suppose that government will act upon the same principles in their future regulations of the standard, as upon the last occasion in 1695? Every one, therefore, whose fortune is made, finds it his interest to have the standard brought back to what it was formerly; and he does not perceive the injury such a regulation would do to his debtors. On the other hand, the merchants see plainly that if this standard should be restored upon an imaginary principle of justice, the prices of commodities will not fall as they ought to do, and as foreign trade requires they should; they are therefore against raising the standard, because it will be a prejudice to trade, a clog upon exportation, and therefore a loss to themselves.

This, I think, very naturally accounts for the difference of opinion among the people of England, upon a matter of very general concern, and nothing is so easy as to reconcile all those interests by doing justice to every one, and injustice to none.

As an illustration of this subject, I shall cite a recent example of a change made in the circulation of Dutch ducats, executed by that wise nation, seemingly in direct opposition to the principles here laid down, and exactly consistent with those we are endeavouring to explode.

The States General lately called down all the light ducats, and ordered them to go by weight, as bullion, without making any allowance to such as might suffer by it.

This regulation, and a new coinage of ducats, had the immediate effect of raising the value of that species of current money; consequently, it may be said, that debtors by that regulation have been proportionally hurt, by an act of one of the wisest governments in Europe, if our principles are admitted to be just. But before this conclusion can be drawn, circumstances must be examined.

Ducats in Holland are the price, not the measure of value, having no fixed legal denomination. The current silver coin is what the state, and all the mercantile interest attend to: and in proportion as this current silver coin or bank species is become light, the agio upon that currency has risen. The agio then, in combination with every currency, furnishes an invariable measure for value, as well as the bank money of Amsterdam; and to that every one attends who regards his interest.

The state, therefore, by this arbitrary measure, or sudden revolution on the ducats, did not hurt any debtor; because debtors never were obliged to give ducats in payment.

Will any one say that the Dutch silver currency, now that the agio is high, is of equal value in inland dealings as formerly when it was low: and must not the same argument hold with respect to the currency of Great Britain, although no such thing as agio be there known? Or will it be said, that because the Dutch, who have an invariable measure of value independent of their coin, make an arbitrary operation upon their currency, which is only price; that therefore the English, who have no invariable measure of value independent of their coin, may make a similar operation upon theirs?

Thus it is that circumstances influence our decisions upon all political matters; and principles well deduced do not cease to be true, although they appear contradictory to experience, in cases where every circumstance is not exactly known. For this reason, I shall be very far from deciding as to the part proper to be taken by the British government; I go no farther than to point out plain principles; it is the business of statesmen to apply them according to circumstances.

CHAP. XIII.
In what Sense the Standard may be said to have been debased by Law, and in what Sense it may be said to have suffered a gradual Debasement by the Operation of political Causes.