An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) / Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

by Sir James Steuart

The great scarcity of silver coin in England, being evidently occasioned by the disproportion between the metals in the coin, it has been proposed to remedy that disorder all at once, by crying down the value of guineas to 20 shillings, without making a new coinage, or taking any measures for preventing the horrid consequences which would follow upon such a step, as matters stand at present. Whoever inclines to read all that may be said in favour of this operation, may consult Mr. Harris’s Essay upon Money and Coins, Part II. p. 84. et seq.

My intention is not to refute the sentiments of particular people, but to trace out the principles I have laid down, and to apply them to the removing such objections as I think either plausible in themselves, or which may appear plausible to people who do not thoroughly understand those matters.

I shall then, in the first place, examine what consequence this bringing down the legal currency of guineas to 20 shillings would have upon common voluntary circulation; that is to say, buying and selling, abstracting from unvoluntary circulation which takes place when people are about to pay, or acquit obligations; two things totally different in themselves, and which ought carefully to be set asunder.

will make coin disappear altogether.

The consequences of reducing guineas to 20 shillings, without a re-coinage of the silver, will be, 1. To fix the standard of the pound sterling to the mean proportion of the worn out silver money in present currency. 2. To make the light guineas, which are below the value of 20 old shillings, to pass by tale for pounds sterling; though intrinsically not worth the new guineas. 3. To occasion the melting down of all the new guineas. And 4. When once the coin is brought to consist of nothing but old unequal pieces, to occasion the heaviest of these to be melted down in their turn, until at last coin must disappear altogether.

If to supply specie, government shall send silver or gold to be coined at the mint at the legal standard, the moment it appears, the old shillings and the light gold will buy it up, and it will be thrown into the melting pot. This will stop even the melting down of the more weighty pieces of the old specie; because (by this trade) they will become more valuable; since in currency they will be an equivalent for the new specie of full standard weight. No private person surely will carry either of the metals to the mint, because there they would receive but 62 shillings or 44½ guineas for their troy pound of the respective metals, whereas in the market they will get a greater number of old shillings and guineas to buy, weight for weight, which will serve the same purpose in circulation.

How light shillings are bought by weight.

Let not my reader laugh at the scheme of buying old shillings at the market by weight. The thing is done every day. For whether I sell my silver bullion for 65 shillings per pound (paid in shillings, guineas, or bank-notes) or buy old shillings weight for weight, it is quite the same thing. The reason why people do not sell the old shillings by the pound, is only because they are not all of the same weight, although they be all of the same value in circulation; but they sell their bullion, as it were, against old worn shillings reduced to a mean proportion of value; which sale of bullion is virtually buying old shillings at market by weight. A man, therefore, who can with a pound of silver bullion buy the value of 65 old shillings, will certainly never employ it to buy 62 heavy ones from the mint, which are no where worth more, except in the melting pot. The same is true of the gold.

Consequences as to circulation with merchants and bankers.

I have endeavoured to shew by the plainest arguments, that no silver coin, the value of which is above the value of any other currency within the kingdom, can remain in circulation, or can escape the money-jobber and the melting pot. I think this is a point pretty well agreed on all hands; because it is the argument made use of against those who propose to introduce shillings of base metal into circulation, as an expedient for procuring change for the gold: a scheme so entirely repugnant to all the principles of money, that I have taken no notice of it.