An Inquiry into the Principles of Political Oeconomy (Vol. 2 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

So soon as there shall be a few millions of silver coined free, let the mint price both of gold and silver be diminished, suppose 4 per cent. This, I imagine, will in a short time give an advanced price to coin, and sink the price of bullion; which will have the effect of recalling all the guineas of the late King from Holland and Flanders; because coin being then dearer than bullion in England, people will choose to send over current guineas to pay their English debts, rather than to remit bills of exchange. This circumstance will naturally stop the coining of gold for some time; but if the balance of trade shall continue favourable, the mint must, in time, be set a-going.

During this experiment, a close attention must be had to the rate of prices.

During this period, a strict attention must be had to the state of prices. It is plain, that stopping the coining of gold ought not to make them sink; since the daily augmentation upon the quantity of the gold coin from abroad (which will not cost any coinage) will, I imagine, be sufficient to compensate it. If, therefore, prices shall be found to sink notwithstanding, this effect must proceed from a combination among the merchants. An intelligent statesman will quickly discover the true state of the case.

And if they vary, how to discover the true cause of it.

If the sinking of the price is a necessary consequence of the imposition of coinage, it will perhaps manifest itself by the following symptoms: 1mo, The profit of the English merchants upon goods exported will be the same as before. 2do, The price of the goods exported will be the same as before in foreign markets. And 3tio, Exchange will mark as many per cent. favourable for England as goods will have fallen in their price at home.

If the fall of the prices be forced, by a combination among the merchants, their profits will be greater; and very probably no variation will appear upon the exchange in favour of England.

Let, therefore, the course of exchange be attended to, and by this the minister will be able to judge, when silver and gold are to be brought to the mint. The moment exchange, and the price of bullion in the London market, shall shew that coin is near the full price of coinage above the price of bullion, then the time approaches when the mint is to be set a-going.

Farther consequences of this experiment.

It is to no purpose to pretend to prognosticate the effect of this change in the policy of the English mint. Effects it will certainly produce, which every one will interpret according as their interest may dictate to them. But the principles of trade are now too well known. English ministers are too well instructed in the theory of it, and too sharp-sighted to be deceived by appearances. A trial of a few years will render the consequences of this innovation perfectly clear; and before the great reform takes place, the principles will be so well confirmed, as not to leave a shadow of doubt concerning the course which is best to be followed.

The silver coined in the interval, at 65 shillings in the pound troy, may then be rated at its just value, in proportion to the new pound sterling, and may form a denomination by itself, easily to be distinguished by the stamp. If it should happen to fall into inconvenient fractions, let it be called in, and received at the mint above the rate of other bullion: the loss will not be considerable; and it cannot be expected that any plan can be proposed which is liable to none.