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debased by wearing； and it is therefore probable that 4 l。 of
such debased money did not weigh as much as the ounce of gold for
which it was exchanged。
Dr A。 Smith considers every permanent excess of the market
above the mint price of gold； as referrible to the state of the
coins。 While the coin was of its standard weight and purity； the
market price of gold bullion； he thought； could not greatly
exceed the mint price。
Mr Thornton contends that this cannot be the only cause。 〃We
have；〃 he says； 〃lately experienced fluctuations in our
exchanges； and correspondent variations in the market； compared
with the mint price of gold； amounting to no less than eight or
ten per cent； the state of our coinage continuing in all respects
the same。〃 Mr Thornton should have reflected that at the time he
wrote； specie could not be demanded at the Bank in exchange for
notes； that this was a cause for the depreciation of the currency
which Dr Smith could never have anticipated。 If Mr Thornton had
proved that there had been a fluctuation of ten per cent。 in the
price of gold； while the Bank paid their notes in specie； and the
coin was undebased； he would then have convicted Dr Smith of 〃
having treated this important subject in a defective and
unsatisfactory manner。〃 （6*）
But as all checks against the over…issues of the Bank are now
removed by the act of parliament； which restricts them from
paying their notes in specie； they are no longer bound by 〃fears
for the safety of their establishment；〃 to limit the quantity of
their notes to that sum which shall keep them of the same value
as the coin which they represent。 Accordingly we find that gold
bullion has risen from 3 l。 17s。 7 3/4d。 the average price
previously 1 to 1797； to 4 l。 10s。 and has been lately as high as
4 l。 13s。 per oz。
We may therefore fairly conclude that this difference in the
relative value； or； in other words； that this depreciation in the
actual value of bank…notes has been caused by the too abundant
quantity which the Bank has sent into circulation。 The same cause
which has produced a difference of from fifteen to twenty per
cent。 in bank…notes when compared with gold bullion； may increase
it to fifty per cent。 There can be no limit to the depreciation
which may arise from a constantly increasing quantity of paper。
The stimulus which a redundant currency gives to the exportation
of the coin has acquired new force； but cannot； as formerly；
relieve itself。 We have paper money only in circulation； which is
necessarily confined to ourselves。 Every increase in its quantity
degrades it below the value of gold and silver bullion； below the
value of the currencies of other counties。
The effect is the same as that which would have been produced
from clipping our coins。
If one…fifth were taken off from every guinea； the market
price of gold bullion would rise one…fifth above the mint price。
Forty…four guineas and a half （the number of guineas weighing a
pound； and therefore called the mint price）； would no longer
weigh a pound； therefore a fifth more than that quantity； or
about 56 l。 would be the price of a pound of gold； and the
difference between the market and the mint price； between 56 l。
and 46 l。 14s。 6d。 would measure the depreciation。
If such debased coin were to continue to be called by the
name of guineas； and if the value of gold bullion and all other
commodities were rated in the debased coin； a guinea fresh from
the mint would be said to be worth 1 l。 5s。 and that sum would be
given for it by the illicit trader； but it would not be the value
of the new guinea which had increased； but that of the debased
guineas which had fallen。 This would immediately be evident； if a
proclamation were issued； prohibiting the debased guineas from
being current but by weight at the mint price of 3 l。 17s。 10
1/2d。； this would be constituting the new and heavy guineas； the
standard measure of value； in lieu of the clipped and debased
guineas。 The latter would then pass at their true value； and be
called 17 or 18 shilling…pieces。 So if a proclamation to the same
effect were now enforced； banknotes would not be less current；
but would pass only for the value of the gold bullion which they
would purchase。 A guinea would then no longer be said to be worth
1 l。 4s。 but a pound note would be current only for 16 or 17
shillings。 At present gold coin is only a commodity； and
bank…notes are the standard measure of value； but in that case
gold coin would be that measure； and bank…notes would be the
marketable commodity。
〃 It is；〃 says Mr Thornton； 〃 the maintenance of our general
exchanges； or； in other words； it is the agreement of the mint
price with the bullion price of gold； which seems to be the true
proof that the circulating paper is not depreciated。〃 When the
motive for exporting gold occurs； while the Bank do not pay in
specie； and gold cannot therefore be obtained at its mint price；
the small quantity that can be procured will be collected for
exportation； and bank…notes will be sold at a discount for gold
in proportion to their excess。 In saying however that gold is at
a high price； we are mistaken； it is not gold； it is paper which
has changed its value。 Compare an ounce of gold； or 3 l。 17s。 10
1/2d。 to commodities； it bears the same proportion to them which
it has before done； and if it do not； it is referrible to
increased taxation； or to some of those causes which are so
constantly operating on its value。 But if we compare the
substitute of an ounce of gold； 3 l。 17s。 10 1/2d。 in banknotes；
with commodities； we shall then discover the depreciation of the
bank…notes。 In every market of the world I am obliged to part
with 4 l。 10s。 in bank…notes to purchase the same quantity of
commodities which I can obtain for the gold that is in 3 l。 17s。
10 1/2d。 of coin。
It is often asserted； that a guinea is worth at Hamburgh 26
or 28 shillings； but we should be very much deceived if we should
therefore conclude that a guinea could be sold at Hamburgh for as
much silver as is contained in 26 or 28 shillings。 Before the
alteration in the relative value of gold and silver； a guinea
would not sell at Hamburgh for as much silver coin as is
contained in 21 standard shillings； it will at the present market
price sell for a sum of silver currency； which； if imported and
carried to our mint to be coined； will produce in our standard
silver coin 21s。 5d。 （7*）
It is nevertheless true； that the same quantity of silver
will； at Hamburgh； purchase a bill payable in London； in
banknotes； for 26 or 28 shillings。 Can there be a more
satisfactory proof of the depreciation of our circulating medium？
It is said； that； if the Restriction…bill were not in force；
every guinea would leave the country。（8*）
This is； no doubt； true； but if the Bank were to diminish the
quantity of their notes until they had increased their value
fifteen per cent。； the restriction might be safely removed； as
there would then be no temptation to export specie。 However long
it may be deferred； however great may be the discount on their
notes； the Bank can never resume their payments in specie； until
they first reduce the amount of their notes in circulation to
these limits。
The law is allowed by all writers on political economy to be
a useless barrier against the exportation of guineas： it is so
easily evaded； that it is doubted whether it has had the effect
of keeping a single guinea more in England than there would have
been without such law。 Mr Locke； Sir J。 Stuart； Dr A。 Smith； Lord
Liverpool； and Mr Thornton； all agree on this subject。 The latter
gentleman observes； 〃That the state of the British law
unquestionably serves to discourage and limit； though not
effectually to hinder； that exportation of guineas which is
encouraged by an unfavourable balance of trade； and perhaps
scarcely lessens it when the profit on exportation becomes very
great。〃 Yet after every guinea that can in the present state of
things be procured by the illicit trader has been melted and
exported； he will hesitate before he openly buys guineas with
bank…notes at a premium； because； though considerable profit may
attend such speculation； he will thereby render himself an object
of suspicion。 He may be watched； and prevented from effecting his
object。 As the penalties of th