Consequence of the price of coinage imposed with consent.
The method here is to leave every one free to do with their coin, or with their bullion, what they please. Do they incline to melt down or export the coin, they may have entire liberty to do it: no penalty ought to be imposed, other than that which will necessarily follow, viz. the expence of procuring new coin.
In order to make our reasoning here more distinct, let us form a supposition with regard to a new regulation of the British coin.
The present confusion has convinced every man, that a reformation of the coin is necessary; and the opinions of those who have writ best upon that subject seem to be divided upon one main article. The metals are disproportioned in the coin, the gold being there to the silver, as 1 to 15.21, instead of being as 1 to 14.5. By law, 113 grains of gold are made equal to 1718.7 grains of silver. One party would have the silver adjusted to the gold; the other would have the gold adjusted to the silver. This is the question, in a few words. Now, suppose a middle course were taken, and that the standard were to be fixed at the mean proportion of these two values; that is, at the value of the half of 1718.7 grains fine silver, added to the half of 113 grains fine gold; which, in the first part of this book, we have shewn, by many arguments, to be the only method of preserving an equality in the money-unit; this will make the new pound consist of 1678.6 grains of fine silver, and 115.77 grains fine gold: and this is also a sort of medium between the two opinions.
At that rate, the pound troy standard silver must be coined into 63 shillings and 6 pence, and the pound troy standard gold into 46 guineas, or pound-pieces, each worth 20 shillings.
Now, if upon both species 8 per cent. coinage were imposed, (for as all this is a pure supposition, it is no matter at what rate the coinage be stated) then the mint price of the pound troy fine silver must be fixed at 63s. 1¾d. and the mint price of a pound troy of fine gold at 45l. 5s. ¾d. sterling.
That bullion is brought to the mint when trade is favourable.
Suppose then (as an example) that the mint price of fine bullion should be fixed at 8 per cent. below the coin in England; What principle could oblige people to carry bullion to be coined?
I answer, When the balance of trade is favourable for England, that balance must sooner or later be paid in bullion. If trade still continues favourable, after the first balance is paid, what use can those who have the bullion make of it, if there be no demand for it to work it into plate? To export it, by employing it in trade, does not remove the difficulty; because, while the balance stands favourable, export as much as you will, more bullion must enter than it is possible to export, in the way of trade; for we do not suppose that in exporting it, it is to be given away gratis. The bullion, therefore, not being demanded for exportation; not being permitted to pass current for money; and not being demanded for making into plate; must be employed so as to be profitable to the owner one way or other. For this purpose it must be lent, or employed within the country for purchasing some sort of effects which produce an income. For this purpose the bullion must be coined, in order to render it capable of circulation, and of becoming price.
At all times, therefore, when in a country there is bullion, not demanded as such, the proprietor carries it to the mint, he sells it at the mint price; and as this mint price is stated at 8 per cent. below the price of coin, he gives it for the price he can get for it: this he does without regret, because, if next day he should want to change his coin into bullion again, he will find it in the market at the same value.