Elementary arithmetic, with brief notices of its history... by Robert Potts.

46

MONEY.

of which is the law which fixes bullion when coined to a certain value,
but which has no power over uncoined bullion, and, therefore, leaves.
it, like other commodities, to find its price according to the supply
and demand.
As gold coins are fixed at ~3. 17s. 10-l. the ounce, it is singular
that the Committee should be surprised that the ounce in coin was not
equal in value to the ounce in bullion, which latter was worth ~4 -and upwards; and that they should conceive such inequality in value.
to have been occasioned by a superabundance of paper money, when
they might have seen that, if the coins were free from restriction,
they would become of the same value as standard bullion.
The Committee assumed that the gold coin is the measure of value,
and on this assumption founded the most essential points of their
Report. But a measure implies something fixed and unchangeable,
which the material of coins cannot be, so long as it is a subject of
traffic. The truth is, the pound sterling is our actual measure in this
kingdom, and the coin is only the instrument by which that measure
is applied. So long as it remains, or is supposed to remain, precisely
equal to its prototype, so long only is it an accurate substitute for it.
Whenever it exceeds, or falls below the value of the pound sterling,
it equally becomes an incorrect resemblance of it.'
The debate in the House turned on the question, whether the
bank notes were depreciated or the guineas enhanced in value. If
the dividends payable for the interest of the National Debt were made
the test, the bank note was not depreciated, but the guinea was.
raised. If coin or any other mercantile commodity be the test, it will
appear that the guinea was not enhanced, but that the bank note was
depreciated. This dilemma was not considered, but after a debate
which lasted seven nights, the majority of the House voted that the
bank note was not depreciated,2 but that it was highly important.
that the restrictions on cash payments at the Bank of England should
be removed whenever it was compatible with the public interest.
It is curious to remark, that the Bank of England issued a notice
on 18 MAarch, 1811, that the price of silver had risen so much since6
1 From 1797, the circulating medium has been chiefly carried on by a credit
currency of exchequer bills, bank notes, and promissory notes. The manufacturer
having employed his capital in the production of goods, sold them to the merchant, and received a promissory note payable at a fixed date. The country
banker discounted this note with his own local notes payable on demand. With
these notes the manufacturer could pay his workmen and produce other goods,
and his workmen could with them procure necessaries. When the promissory
note became due, it was discharged by the produce of the sale of the goods. This
method of local currency dispensing with the precious metals, and depending on.
credit, became the means of very largely increasing the industry' of the people.
The system, however, is subject to serious drawbacks and dangers, which have
not failed to cause both embarassment and even ruin, both to manufacturers,
merchants, and bankers, and great distress to the workmen.
a Lord King, in a letter to his tenants, declared that " In consequence of the
late great depreciation of paper money, I can no longer consent to receive any
bank notes at their nominal value in payment or satisfaction of an old contract.'"
lie required payments in guineas, or Portugal gold equal in weight to the number
of guineas due, or in bank notes with an addition of ~14. 12s. 6d. per cent., such
being the difference in the market price of gold, when the agreements were made
in 1807 and the market price in 1811. The government was reduced to the
dilemma, either to strike at once sufficient gold coins, or to protect from arrest
those who were unable to procure guineas to meet the demands on them. The
latter was determined on, and an opportunity was lost of establishing a gold.
coinage of such a weight as would have secured it from disappearing.