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

In 1749, a new regulation was made with the public creditors, when the interest of the whole redeemable national debt was reduced to 3 per cent. This circumstance infinitely facilitates the matter, with respect to this class, since, by this innovation of all former contracts, the whole national debt may be considered as contracted at, or posterior to the 25th of December 1749.

Were the state by any arbitrary operation upon money (which every reformation must be) to diminish the value of the pound sterling, in which the parliament at that time, bound the nation to acquit those capitals and the interest upon them, would not all Europe say, that the British parliament had defrauded their creditors. If therefore the operation proposed to be performed should have a contrary tendency, to wit, to augment the value of the pound sterling, with which the parliament at that time bound the nation to acquit those capitals and interests, must not all Europe also agree, that the British parliament had defrauded the nation?

This convention with the antient creditors of the state, who, in consequence of the debasement of the standard, might have justly claimed an indemnification for the loss upon their capitals, lent at a time when the pound sterling was at the value of the heavy silver, removes all cause of complaint from that quarter. There was in the year 1749, an innovation in all their contracts, and they are now to be considered as creditors only from the 25th of December of that year.

I shall now give a sketch of a regulation which may be made, not only for the national creditors at present, but in all times to come, which, by setting money upon a solid footing, may be an advantage both to the nation, to the creditors, and to credit in general.

Let the value of the pound sterling be inquired into during one year preceding and one posterior to the transaction of the month of December 1749. The great sums borrowed and paid back by the nation, during that period, will furnish data sufficient for that calculation. Let this value of the pound be specified in troy grains of fine silver and fine gold bullion, without mentioning any denomination of money according to the exact proportion of the metals at that time. And let this pound be called the pound of national credit.

This first operation being determined, let it be enacted, that the pound sterling, by which the state is to borrow for the future, and that in which the creditors are to be paid, shall be the exact mean proportion between the quantities of gold and silver above specified, according to the actual proportion of the metals at the time such payments shall be made; or that the sums shall be borrowed or acquitted, one half in gold and one half in silver, at the respective requisitions of the creditors or of the state, when borrowing. All debts contracted posterior to 1749, may be made liable to conversions.

The consequence of this regulation will be the insensible establishment of a bank-money, the usefulness of which has been explained. Nothing would be more difficult to establish by a positive institution[institution] than such an invariable measure, and nothing will be found so easy as to let it establish itself by its own advantages. This bank-money will be liable to much fewer inconveniences than that of Amsterdam. There the persons transacting must be upon the spot, here, the sterling currency may, every quarter of a year, be adjusted by the exchequer to this invariable standard, for the benefit of all debtors and creditors, who incline to profit of the stability of this measure of value.

This scheme is liable to no inconvenience from the variation of the metals, let them be ever so frequent, or hard to be determined; because upon every occasion where there is the smallest doubt as to the actual proportion, the option competent to creditors to be paid half in silver and half in gold, will remove.

Such a regulation will also have this good effect, that it will give the nation more just ideas of the nature of money, and consequently of the influence it ought to have upon prices.

If the value of the pound sterling shall be found to have been by accident less in December 1749, than it is at present; or if at present (upon the account of the war, and the exportation of the more weighty coin) the currency be found below what has commonly been since 1749, in justice to the creditors, and to prevent all complaints, the nation may grant them the mean proportion of the value of the pound sterling from 1749 to 1760; or any other which may to parliament appear reasonable.