1810
　　TheHighPriceofBullion，aProofoftheDepreciationofBankNotes。
　　byDavidRicardoLondon:PrintedforJohnMurray，32，Fleet-Street；AndSoldbyEveryOtherBooksellerinTownandCountry1810
　　IntroductionThewriterofthefollowingpageshasalreadysubmittedsomereflectionstotheattentionofthepublic，onthesubjectofpaper-currency，throughthemediumoftheMorningChronicle。Hehasthoughtpropertorepublishhissentimentsonthisquestioninaformmorecalculatedtobringittofairdiscussion；andhisreasonsforsodoing，are，thathehasseen，withthegreatestalarm，theprogressivedepreciationofthepaper-currency。Hisfearshavebeenaugmentedbyobserving，thatbyagreatpartofthepublicthisdepreciationisaltogetherdenied，andthatbyothers，whoadmitthefact，itisimputedtoanycausebutthatwhichtohimappearstherealone。Beforeanyremedycanbesuccessfullyappliedtoanevilofsuchmagnitude，itisessentialthatthereshouldbenodoubtastoitscause。Thewriterproposes，fromtheadmittedprinciplesofpoliticaleconomy，toadvancereasons，which，inhisopinion，prove，thatthepaper-currencyofthiscountyhaslongbeen，andnowis，ataconsiderablediscount，proceedingfromasuperabundanceinitsquantity，andnotfromanywantofconfidenceintheBankofEngland，orfromanydoubtsoftheirabilitytofulfiltheirengagements。Hedoesthiswithoutreluctance，beingfullypersuadedthatthecountryisyetinpossessionofthemeansofrestoringthepaper-currencytoitsprofessedvalue，viz。thevalueofthecoins，forthepaymentofwhichitpurportstobeapledge。
　　HeisawarethathecanaddbutlittletotheargumentswhichhavebeensoablyurgedbyLordKing，andwhichoughtlongbeforethistohavecarriedconvictiontoeverymind；buthetrusts，thatastheevilhasbecomemoreglaring，thepublicwil1notcontinuetoview，withoutinterest，asubjectwhichyieldstonootherinimportance，andinwhichthegeneralwelfareissomateriallyconcerned。
　　Dec。1，1809。
　　HighPriceofBullion，aProofoftheDepreciationofBankNotesThepreciousmetalsemployedforcirculatingthecommoditiesoftheworld，previouslytotheestablishmentofbanks，havebeensupposedbythemostapprovedwritersonpoliticaleconomytohavebeendividedintocertainproportionsamongthedifferentcivilizednationsoftheearth，accordingtothestateoftheircommerceandwealth，andthereforeaccordingtothenumberandfrequencyofthepaymentswhichtheyhadtoperform。Whilesodividedtheypreservedeverywherethesamevalue，andaseachcountryhadanequalnecessityforthequantityactuallyinuse，therecouldbenotemptationofferedtoeitherfortheirimportationorexportation。
　　Goldandsilver，likeothercommodities，haveanintrinsicvalue，whichisnotarbitrary，butisdependentontheirscarcity，thequantityoflabourbestowedinprocuringthem，andthevalueofthecapitalemployedinthemineswhichproducethem。
　　"Thequalityofutility，beauty，andscarcity，"saysDrSmith，"aretheoriginalfoundationofthehighpriceofthosemetals，orofthegreatquantityofothergoodsforwhichtheycaneverywherebeexchanged。Thisvaluewasantecedentto，andindependentoftheirbeingemployedascoin，andwasthequalitywhichfittedthemforthatemployment。"
　　Ifthequantityofgoldandsilverintheworldemployedasmoneywereexceedinglysmall，orabundantlygreat，itwouldnotintheleastaffecttheproportionsinwhichtheywouldbedividedamongthedifferentnations-thevariationintheirquantitywouldhaveproducednoothereffectthantomakethecommoditiesforwhichtheywereexchangedcomparativelydearorcheap。Thesmallerquantityofmoneywouldperformthefunctionsofacirculatingmedium，aswellasthelarger。Tenmillionswouldbeaseffectualforthatpurposeasonehundredmillions。
　　DrSmithobserves，"thatthemostabundantminesofthepreciousmetalswouldaddlittletothewealthoftheworld。Aproduceofwhichthevalueisprincipallyderivedfromitsscarcityisnecessarilydegradedbyitsabundance。"
　　Ifintheprogresstowardswealth，onenationadvancedmorerapidlythantheothers，thatnationwouldrequireandobtainagreaterproportionofthemoneyoftheworld。Itscommerce，itscommodities，anditspayments，wouldincrease，andthegeneralcurrencyoftheworldwouldbedividedaccordingtothenewproportions。Allcountriesthereforewouldcontributetheirsharetothiseffectualdemand。
　　Inthesamemannerifanynationwastedpartofitswealth，orlostpartofitstrade，itcouldnotretainthesamequantityofcirculatingmediumwhichitbeforepossessed。Apartwouldbeexported，anddividedamongtheothernationstilltheusualproportionswerere-established。
　　Whiletherelativesituationofcountiescontinuedunaltered，theymighthaveabundantcommercewitheachother，buttheirexportsandimportswouldonthewholebeequal。Englandmightpossiblyimportmoregoodsfrom，thanshewouldexportto，France，butshewouldinconsequenceexportmoretosomeothercountry，andFrancewouldimportmorefromthatcountry；sothattheexportsandimportsofallcountrieswouldbalanceeachother；billsofexchangewouldmakethenecessarypayments，butnomoneywouldpass，becauseitwouldhavethesamevalueinallcountries。
　　Ifamineofgoldwerediscoveredineitherofthesecountries，thecurrencyofthatcountrywouldbeloweredinvalueinconsequenceoftheincreasedquantityofthepreciousmetalsbroughtintocirculation，andwouldthereforenolongerbeofthesamevalueasthatofothercountries。Goldandsilver，whetherincoinorinbullion，obeyingthelawwhichregulatesallothercommodities，wouldimmediatelybecomearticlesofexportation；
　　theywouldleavethecountywheretheywerecheap，forthosecountrieswheretheyweredear，andwouldcontinuetodoso，aslongasthemineshouldproveproductive，andtilltheproportionexistingbetweencapitalandmoneyineachcountrybeforethediscoveryofthemine，wereagainestablished，andgoldandsilverrestoredeverywheretoonevalue。Inreturnforthegoldexported，commoditieswouldbeimported；andthoughwhatisusuallytermedthebalanceoftradewouldbeagainstthecountryexportingmoneyorbullion，itwouldbeevidentthatshewascarryingonamostadvantageoustrade，exportingthatwhichwasnowayusefultoher，forcommoditieswhichmightbeemployedintheextensionofhermanufactures，andtheincreaseofherwealth。
　　Ifinsteadofaminebeingdiscoveredinanycountry，abankwereestablished，suchastheBankofEngland，withthepowerofissuingitsnotesforacirculatingmedium；afteralargeamounthadbeenissuedeitherbywayofloantomerchants，orbyadvancestogovernment，therebyaddingconsiderablytothesumofthecurrency，thesameeffectwouldfollowasinthecaseofthemine。Thecirculatingmediumwouldbeloweredinvalue，andgoodswouldexperienceaproportionaterise。Theequilibriumbetweenthatandothernationswouldonlyberestoredbytheexportationofpartofthecoin。
　　Theestablishmentofthebankandtheconsequentissueofitsnotestherefore，aswellasthediscoveryofthemine，operateasaninducementtotheexportationeitherofbullionorofcoin，andarebeneficialonlyinasfarasthatobjectmaybeaccomplished。Thebanksubstitutesacurrencyofnovalueforonemostcostly，andenablesustoturnthepreciousmetals（which，thoughaverynecessarypartofourcapital，yieldnorevenue，）
　　intoacapitalwhichwillyieldone。DrA。Smithcomparestheadvantagesattendingtheestablishmentofabanktothosewhichwouldbeobtainedbyconvertingourhighwaysintopasturesandcorn-fields，andprocuringaroadthroughtheair。Thehighways，likethecoin，arehighlyuseful，butneitheryieldanyrevenue。
　　Somepeoplemightbealarmedatthespecieleavingthecountry，andmightconsiderthatasadisadvantageoustradewhichrequiredustopartwithit；indeedthelawsoconsidersitbyitsenactmentsagainsttheexportationofspecie；butaverylittlereflectionwillconvinceusthatitisourchoice，andnotournecessity，thatsendsitabroad；andthatitishighlybeneficialtoustoexchangethatcommoditywhichissuperfluous，forotherswhichmaybemadeproductive。
　　Theexportationofthespeciemayatalltimesbesafelylefttothediscretionofindividuals；itwillnotbeexportedmorethananyothercommodity，unlessitsexportationshouldbeadvantageoustothecounty。Ifitbeadvantageoustoexportit，nolawscaneffectuallypreventitsexportation。Happilyinthiscase，aswellasinmostothersincommercewherethereisfreecompetition，theinterestsoftheindividualandthatofthecommunityareneveratvariance。
　　Wereitpossibletocarrythelawagainstmeltingorexportingofcoinintostrictexecution，atthesametimethattheexportationofgoldbullionwasfreelyallowed，noadvantagecouldaccruefromit，butgreatinjurymustarisetothosewhomighthavetopay，possibly，twoouncesormoreofcoinedgoldforoneofuncoinedgold。Thiswouldbearealdepreciationofourcurrency，raisingthepricesofallothercommoditiesinthesameproportionasitincreasedthatofgoldbullion。Theownerofmoneywouldinthiscasesufferaninjuryequaltowhataproprietorofcornwouldsuffer，werealawtobepassedprohibitinghimfromsellinghiscornformorethanhalfitsmarketvalue。Thelawagainsttheexportationofthecoinhasthistendency，butissoeasilyevaded，thatgoldinbullionhasalwaysbeennearlyofthesamevalueasgoldincoin。
　　Thusthenitappearsthatthecurrencyofonecountrycanneverforanylengthoftimebemuchmorevaluable，asfarasequalquantitiesofthepreciousmetalsareconcerned，thanthatofanother；thatexcessofcurrencyisbutarelativeterm；thatifthecirculationofEnglandweretenmillions，thatofFrancefivemillions，thatofHollandfourmillions，etc。etc。whilsttheykepttheirproportions，thoughthecurrencyofeachcountryweredoubledortrebled，neithercountrywouldbeconsciousofanexcessofcurrency。Thepricesofcommoditieswouldeverywhererise，onaccountoftheincreaseofcurrency，buttherewouldbenoexportationofmoneyfromeither。ButiftheseproportionsbedestroyedbyEnglandalonedoublinghercurrency，whilethatofFrance，Holland，etc。etc。continuedasbefore，weshouldthenbeconsciousofanexcessinourcurrency，andforthesamereasontheothercountrieswouldfeeladeficiencyintheirs，andpartofourexcesswouldbeexportedtilltheproportionsoften，five，four，etc。wereagainestablished。
　　IfinFranceanounceofgoldweremorevaluablethaninEngland，andwouldthereforeinFrancepurchasemoreofanycommoditycommontobothcountries，goldwouldimmediatelyquitEnglandforsuchpurpose，andweshouldsendgoldinpreferencetoanythingelse，becauseitwouldbethecheapestexchangeablecommodityintheEnglishmarket；forifgoldbedearerinFrancethaninEngland，goodsmustbecheaper；weshouldnotthereforesendthemfromthedeartothecheapmarket，but，onthecontrary，theywouldcomefromthecheaptothedearmarket，andwouldbeexchangedforourgold。
　　TheBankmightcontinuetoissuetheirnotes，andthespeciebeexportedwithadvantagetothecountry，whiletheirnoteswerepayableinspecieondemand，becausetheycouldneverissuemorenotesthanthevalueofthecoinwhichwouldhavecirculatedhadtherebeennobank。（1*）
　　Iftheyattemptedtoexceedthisamount，theexcesswouldbeimmediatelyreturnedtothemforspecie；becauseourcurrency，beingtherebydiminishedinvalue，couldbeadvantageouslyexported，andcouldnotberetainedinourcirculation。Thesearethemeans，asIhavealreadyexplained，bywhichourcurrencyendeavourstoequalizeitselfwiththecurrenciesofothercounties。Assoonasthisequalitywasattained，alladvantagearisingfromexportationwouldcease；butiftheBankassuming，thatbecauseagivenquantityofcirculatingmediumhadbeennecessarylastyear，thereforethesamequantitymustbenecessarythis，orforanyotherreason，continuedtore-issuethereturnednotes，thestimuluswhicharedundantcurrencyfirstgavetotheexportationofthecoinwouldbeagainrenewedwithsimilareffects；goldwouldbeagaindemanded，theexchangewouldbecomeunfavourable，andgoldbullionwouldrise，inasmalldegree，aboveitsmintprice，becauseitislegaltoexportbullion，butillegaltoexportthecoin，andthedifferencewouldbeaboutequaltothefaircompensationfortherisk。
　　InthismanneriftheBankpersistedinreturningtheirnotesintocirculation，everyguineamightbedrawnoutoftheircoffers。
　　Iftosupplythedeficiencyoftheirstockofgoldtheyweretopurchasegoldbullionattheadvancedprice，andhaveitcoinedintoguineas，thiswouldnotremedytheevil，guineaswouldbestilldemanded，butinsteadofbeingexportedwouldbemeltedandsoldtotheBankasbullionattheadvancedprice。
　　"TheoperationsoftheBank，"observedDrSmith，alludingtoananalogouscase，"wereuponthisaccountsomewhatlikethewebofPenelope，theworkthatwasdoneinthedaywasundoneinthenight。"ThesamesentimentisexpressedbyMrThornton:-
　　"Findingtheguineasintheircofferstolesseneveryday，theymustnaturallybesupposedtobedesirousofreplacingthembyalleffectualandnotextravagantlyexpensivemeans。Theywillbedisposed，toacertaindegree，tobuygold，thoughatalosingprice，andtocoinitintonewguineas；buttheywillhavetodothisattheverymomentwhenmanyareprivatelymeltingwhatiscoined。Theonepartywillbemeltingandsellingwhiletheotherisbuyingandcoining。Andeachofthesetwocontendingbusinesseswillnowbecarriedon，notonaccountofanactualexportationofeachmeltedguineatoHamburgh，buttheoperationoratleastagreatpartofitwillbeconfinedtoLondon；thecoinersandthemelterslivingonthesamespot，andgivingconstantemploymenttoeachother。
　　"TheBank，"continuesMrThornton，"ifwesupposeit，aswenowdo，tocarryonthissortofcontestwiththemelters，isobviouslywagingaveryunequalwar；andeventhoughitshouldnotbetiredearly，itwillbelikelytobetiredsoonerthanitsadversaries。"
　　TheBankwouldbeobligedthereforeultimatelytoadopttheonlyremedyintheirpowertoputastoptothedemandforguineas。Theywouldwithdrawpartoftheirnotesfromcirculation，tilltheyshouldhaveincreasedthevalueoftheremaindertothatofgoldbullion，andconsequentlytothevalueofthecurrenciesofothercountries。Alladvantagefromtheexportationofgoldbullionwouldthencease，andtherewouldbenotemptationtoexchangebank-notesforguineas。
　　Inthisviewofthesubject，then，itappears，thatthetemptationtoexportmoneyinexchangeforgoods，orwhatistermedanunfavourablebalanceoftrade，neverarisesbutfromaredundantcurrency。ButMrThornton，whohasconsideredthissubjectverymuchatlarge，supposesthataveryunfavourablebalanceoftrademaybeoccasionedtothiscountrybyabadharvest，andtheconsequentimportationofcorn；andthattheremaybeatthesametimeanunwillingnessinthecountry，towhichweareindebted，toreceiveourgoodsinpayment；thebalanceduetotheforeigncountrymustthereforebepaidoutofthatpartofourcurrency，consistingofcoin，andthathencearisesthedemandforgoldbullionanditsincreasedprice。HeconsiderstheBankasaffordingconsiderableaccommodationtothemerchants，bysupplyingwiththeirnotesthevoidoccasionedbytheexportationofthespecie。
　　AsitisacknowledgedbyMrThornton，inmanypartsofhiswork，thatthepriceofgoldbullionisratedingoldcoin；andasitisalsoacknowledgedbyhim，thatthelawagainstmeltinggoldcoinintobullionandexportingitiseasilyevaded，itfollows，thatnodemandforgoldbullion，arisingfromthisoranyothercause，canraisethemoneypriceofthatcommodity。Theerrorofthisreasoningproceedsfromnotdistinguishingbetweenanincreaseinthevalueofgold，andanincreaseinitsmoneyprice。
　　Iftherewereagreatdemandforcornitsmoneypricewouldadvance；because，incomparingcornwithmoney，weinfactcompareitwithanothercommodity；andforthesamereason，whenthereisagreatdemandforgolditscornpricewillincrease；
　　butinneithercasewillabushelofcornbeworthmorethanabushelofcorn，oranounceofgoldmorethananounceofgold。
　　Anounceofgoldbullioncouldnot，whateverthedemandmightbe，whilstitspricewasratedingoldcoin，beofmorevaluethananounceofcoinedgold，or3l。17s。101/2d。
　　Ifthisargumentshouldnotbeconsideredasconclusive，I
　　shouldurge，thatavoidinthecurrency，asheresupposed，canonlybeoccasionedbytheannihilationorlimitationofpapercurrency，andthenitwouldspeedilybefilledbyimportationsofbullion，whichitsincreasedvalue，inconsequenceofthediminutionofcirculatingmedium，wouldinfalliblyattracttotheadvantageousmarket。Howevergreatthescarcityofcornmightbe，theexportationofmoneywouldbelimitedbyitsincreasingscarcity。Moneyisinsuchgeneraldemand，andinthepresentstateofcivilizationissoessentialtocommercialtransactions，thatitcanneverbeexportedtoexcess；eveninawarsuchasthepresent，whenourenemyendeavourstointerdictallcommercewithus，thevaluewhichthecurrencywouldbear，fromitsincreasingscarcity，wouldpreventtheexportationofitfrombeingcarriedsofarastooccasionavoidinthecirculation。
　　MrThorntonhasnotexplainedtous，whyanyunwillingnessshouldexistintheforeigncountrytoreceiveourgoodsinexchangefortheircorn；anditwouldbenecessaryforhimtoshow，thatifsuchanunwillingnessweretoexist，weshouldagreetoindulgeitsofarastoconsenttopartwithourcoin。
　　Ifweconsenttogivecoininexchangeforgoods，itmustbefromchoice，notnecessity。Weshouldnotimportmoregoodsthanweexport，unlesswehadaredundancyofcurrency，whichitthereforesuitsustomakeapartofourexports。Theexportationofthecoiniscausedbyitscheapness，andisnottheeffect，butthecauseofanunfavourablebalance；weshouldnotexportit，ifwedidnotsendittoabettermarket，orifwehadanycommoditywhichwecouldexportmoreprofitably。Itisasalutaryremedyforaredundantcurrency；andasIhavealreadyendeavouredtoprove，thatredundancyorexcessisonlyarelativeterm，itfollows，thatthedemandforitabroadarisesonlyfromthecomparativedeficiencyofthecurrencyoftheimportingcountry，whichtherecausesitssuperiorvalue。
　　Itresolvesitselfentirelyintoaquestionofinterest。IfthesellersofthecorntoEngland，totheamountIwillsupposeofamillion，couldimportgoodswhichcostamillioninEngland，butwouldproduce，whensoldabroad，morethanifthemillionhadbeensentinmoney，goodswouldbepreferred；ifotherwise，moneywouldbedemanded。
　　Itisonlyafteracomparisonofthevalueintheirmarketsandinourown，ofgoldandothercommodities，andbecausegoldischeaperintheLondonmarketthanintheirs，thatforeignersprefergoldinexchangefortheircorn。Ifwediminishthequantityofcurrency，wegiveanadditionalvaluetoit:thiswillinducethemtoaltertheirelection，andpreferthecommodities。IfIowedadebtinHamburghof100l。Ishouldendeavourtofindoutthecheapestmodeofpayingit。IfIsendmoney，theexpenceattendingitstransportationbeingIwillsuppose5l。todischargemydebtwillcostme105l。IfI
　　purchaseclothhere，which，withtheexpencesattendingitsexportation，willcostme106l。andwhichwill，inHamburgh，sellfor100l。itisevidentlymoretomyadvantagetosendthemoney。Ifthepurchaseandexpencesofsendinghardwaretopaymydebt，willtake107l。Ishouldprefersendingclothtohardware，butIwouldsendneitherinpreferencetomoney，becausemoneywouldbethecheapestexportablecommodityintheLondonmarket。