1810
TheHighPriceofBullion，aProofoftheDepreciationofBankNotes。
byDavidRicardoLondon:PrintedforJohnMurray，32，Fleet-Street；AndSoldbyEveryOtherBooksellerinTownandCountry1810
IntroductionThewriterofthefollowingpageshasalreadysubmittedsomereflectionstotheattentionofthepublic，onthesubjectofpaper-currency，throughthemediumoftheMorningChronicle。Hehasthoughtpropertorepublishhissentimentsonthisquestioninaformmorecalculatedtobringittofairdiscussion；andhisreasonsforsodoing，are，thathehasseen，withthegreatestalarm，theprogressivedepreciationofthepaper-currency。Hisfearshavebeenaugmentedbyobserving，thatbyagreatpartofthepublicthisdepreciationisaltogetherdenied，andthatbyothers，whoadmitthefact，itisimputedtoanycausebutthatwhichtohimappearstherealone。Beforeanyremedycanbesuccessfullyappliedtoanevilofsuchmagnitude，itisessentialthatthereshouldbenodoubtastoitscause。Thewriterproposes，fromtheadmittedprinciplesofpoliticaleconomy，toadvancereasons，which，inhisopinion，prove，thatthepaper-currencyofthiscountyhaslongbeen，andnowis，ataconsiderablediscount，proceedingfromasuperabundanceinitsquantity，andnotfromanywantofconfidenceintheBankofEngland，orfromanydoubtsoftheirabilitytofulfiltheirengagements。Hedoesthiswithoutreluctance，beingfullypersuadedthatthecountryisyetinpossessionofthemeansofrestoringthepaper-currencytoitsprofessedvalue，viz。thevalueofthecoins，forthepaymentofwhichitpurportstobeapledge。
HeisawarethathecanaddbutlittletotheargumentswhichhavebeensoablyurgedbyLordKing，andwhichoughtlongbeforethistohavecarriedconvictiontoeverymind；buthetrusts，thatastheevilhasbecomemoreglaring，thepublicwil1notcontinuetoview，withoutinterest，asubjectwhichyieldstonootherinimportance，andinwhichthegeneralwelfareissomateriallyconcerned。
Dec。1，1809。
HighPriceofBullion，aProofoftheDepreciationofBankNotesThepreciousmetalsemployedforcirculatingthecommoditiesoftheworld，previouslytotheestablishmentofbanks，havebeensupposedbythemostapprovedwritersonpoliticaleconomytohavebeendividedintocertainproportionsamongthedifferentcivilizednationsoftheearth，accordingtothestateoftheircommerceandwealth，andthereforeaccordingtothenumberandfrequencyofthepaymentswhichtheyhadtoperform。Whilesodividedtheypreservedeverywherethesamevalue，andaseachcountryhadanequalnecessityforthequantityactuallyinuse，therecouldbenotemptationofferedtoeitherfortheirimportationorexportation。
Goldandsilver，likeothercommodities，haveanintrinsicvalue，whichisnotarbitrary，butisdependentontheirscarcity，thequantityoflabourbestowedinprocuringthem，andthevalueofthecapitalemployedinthemineswhichproducethem。
\"Thequalityofutility，beauty，andscarcity，\"saysDrSmith，\"aretheoriginalfoundationofthehighpriceofthosemetals，orofthegreatquantityofothergoodsforwhichtheycaneverywherebeexchanged。Thisvaluewasantecedentto，andindependentoftheirbeingemployedascoin，andwasthequalitywhichfittedthemforthatemployment。\"
Ifthequantityofgoldandsilverintheworldemployedasmoneywereexceedinglysmall，orabundantlygreat，itwouldnotintheleastaffecttheproportionsinwhichtheywouldbedividedamongthedifferentnations-thevariationintheirquantitywouldhaveproducednoothereffectthantomakethecommoditiesforwhichtheywereexchangedcomparativelydearorcheap。Thesmallerquantityofmoneywouldperformthefunctionsofacirculatingmedium，aswellasthelarger。Tenmillionswouldbeaseffectualforthatpurposeasonehundredmillions。
DrSmithobserves，\"thatthemostabundantminesofthepreciousmetalswouldaddlittletothewealthoftheworld。Aproduceofwhichthevalueisprincipallyderivedfromitsscarcityisnecessarilydegradedbyitsabundance。\"
Ifintheprogresstowardswealth，onenationadvancedmorerapidlythantheothers，thatnationwouldrequireandobtainagreaterproportionofthemoneyoftheworld。Itscommerce，itscommodities，anditspayments，wouldincrease，andthegeneralcurrencyoftheworldwouldbedividedaccordingtothenewproportions。Allcountriesthereforewouldcontributetheirsharetothiseffectualdemand。
Inthesamemannerifanynationwastedpartofitswealth，orlostpartofitstrade，itcouldnotretainthesamequantityofcirculatingmediumwhichitbeforepossessed。Apartwouldbeexported，anddividedamongtheothernationstilltheusualproportionswerere-established。
Whiletherelativesituationofcountiescontinuedunaltered，theymighthaveabundantcommercewitheachother，buttheirexportsandimportswouldonthewholebeequal。Englandmightpossiblyimportmoregoodsfrom，thanshewouldexportto，France，butshewouldinconsequenceexportmoretosomeothercountry，andFrancewouldimportmorefromthatcountry；sothattheexportsandimportsofallcountrieswouldbalanceeachother；billsofexchangewouldmakethenecessarypayments，butnomoneywouldpass，becauseitwouldhavethesamevalueinallcountries。
Ifamineofgoldwerediscoveredineitherofthesecountries，thecurrencyofthatcountrywouldbeloweredinvalueinconsequenceoftheincreasedquantityofthepreciousmetalsbroughtintocirculation，andwouldthereforenolongerbeofthesamevalueasthatofothercountries。Goldandsilver，whetherincoinorinbullion，obeyingthelawwhichregulatesallothercommodities，wouldimmediatelybecomearticlesofexportation；
theywouldleavethecountywheretheywerecheap，forthosecountrieswheretheyweredear，andwouldcontinuetodoso，aslongasthemineshouldproveproductive，andtilltheproportionexistingbetweencapitalandmoneyineachcountrybeforethediscoveryofthemine，wereagainestablished，andgoldandsilverrestoredeverywheretoonevalue。Inreturnforthegoldexported，commoditieswouldbeimported；andthoughwhatisusuallytermedthebalanceoftradewouldbeagainstthecountryexportingmoneyorbullion，itwouldbeevidentthatshewascarryingonamostadvantageoustrade，exportingthatwhichwasnowayusefultoher，forcommoditieswhichmightbeemployedintheextensionofhermanufactures，andtheincreaseofherwealth。
Ifinsteadofaminebeingdiscoveredinanycountry，abankwereestablished，suchastheBankofEngland，withthepowerofissuingitsnotesforacirculatingmedium；afteralargeamounthadbeenissuedeitherbywayofloantomerchants，orbyadvancestogovernment，therebyaddingconsiderablytothesumofthecurrency，thesameeffectwouldfollowasinthecaseofthemine。Thecirculatingmediumwouldbeloweredinvalue，andgoodswouldexperienceaproportionaterise。Theequilibriumbetweenthatandothernationswouldonlyberestoredbytheexportationofpartofthecoin。
Theestablishmentofthebankandtheconsequentissueofitsnotestherefore，aswellasthediscoveryofthemine，operateasaninducementtotheexportationeitherofbullionorofcoin，andarebeneficialonlyinasfarasthatobjectmaybeaccomplished。Thebanksubstitutesacurrencyofnovalueforonemostcostly，andenablesustoturnthepreciousmetals（which，thoughaverynecessarypartofourcapital，yieldnorevenue，）
intoacapitalwhichwillyieldone。DrA。Smithcomparestheadvantagesattendingtheestablishmentofabanktothosewhichwouldbeobtainedbyconvertingourhighwaysintopasturesandcorn-fields，andprocuringaroadthroughtheair。Thehighways，likethecoin，arehighlyuseful，butneitheryieldanyrevenue。
Somepeoplemightbealarmedatthespecieleavingthecountry，andmightconsiderthatasadisadvantageoustradewhichrequiredustopartwithit；indeedthelawsoconsidersitbyitsenactmentsagainsttheexportationofspecie；butaverylittlereflectionwillconvinceusthatitisourchoice，andnotournecessity，thatsendsitabroad；andthatitishighlybeneficialtoustoexchangethatcommoditywhichissuperfluous，forotherswhichmaybemadeproductive。
Theexportationofthespeciemayatalltimesbesafelylefttothediscretionofindividuals；itwillnotbeexportedmorethananyothercommodity，unlessitsexportationshouldbeadvantageoustothecounty。Ifitbeadvantageoustoexportit，nolawscaneffectuallypreventitsexportation。Happilyinthiscase，aswellasinmostothersincommercewherethereisfreecompetition，theinterestsoftheindividualandthatofthecommunityareneveratvariance。
Wereitpossibletocarrythelawagainstmeltingorexportingofcoinintostrictexecution，atthesametimethattheexportationofgoldbullionwasfreelyallowed，noadvantagecouldaccruefromit，butgreatinjurymustarisetothosewhomighthavetopay，possibly，twoouncesormoreofcoinedgoldforoneofuncoinedgold。Thiswouldbearealdepreciationofourcurrency，raisingthepricesofallothercommoditiesinthesameproportionasitincreasedthatofgoldbullion。Theownerofmoneywouldinthiscasesufferaninjuryequaltowhataproprietorofcornwouldsuffer，werealawtobepassedprohibitinghimfromsellinghiscornformorethanhalfitsmarketvalue。Thelawagainsttheexportationofthecoinhasthistendency，butissoeasilyevaded，thatgoldinbullionhasalwaysbeennearlyofthesamevalueasgoldincoin。
Thusthenitappearsthatthecurrencyofonecountrycanneverforanylengthoftimebemuchmorevaluable，asfarasequalquantitiesofthepreciousmetalsareconcerned，thanthatofanother；thatexcessofcurrencyisbutarelativeterm；thatifthecirculationofEnglandweretenmillions，thatofFrancefivemillions，thatofHollandfourmillions，etc。etc。whilsttheykepttheirproportions，thoughthecurrencyofeachcountryweredoubledortrebled，neithercountrywouldbeconsciousofanexcessofcurrency。Thepricesofcommoditieswouldeverywhererise，onaccountoftheincreaseofcurrency，buttherewouldbenoexportationofmoneyfromeither。ButiftheseproportionsbedestroyedbyEnglandalonedoublinghercurrency，whilethatofFrance，Holland，etc。etc。continuedasbefore，weshouldthenbeconsciousofanexcessinourcurrency，andforthesamereasontheothercountrieswouldfeeladeficiencyintheirs，andpartofourexcesswouldbeexportedtilltheproportionsoften，five，four，etc。wereagainestablished。
IfinFranceanounceofgoldweremorevaluablethaninEngland，andwouldthereforeinFrancepurchasemoreofanycommoditycommontobothcountries，goldwouldimmediatelyquitEnglandforsuchpurpose，andweshouldsendgoldinpreferencetoanythingelse，becauseitwouldbethecheapestexchangeablecommodityintheEnglishmarket；forifgoldbedearerinFrancethaninEngland，goodsmustbecheaper；weshouldnotthereforesendthemfromthedeartothecheapmarket，but，onthecontrary，theywouldcomefromthecheaptothedearmarket，andwouldbeexchangedforourgold。
TheBankmightcontinuetoissuetheirnotes，andthespeciebeexportedwithadvantagetothecountry，whiletheirnoteswerepayableinspecieondemand，becausetheycouldneverissuemorenotesthanthevalueofthecoinwhichwouldhavecirculatedhadtherebeennobank。（1*）
Iftheyattemptedtoexceedthisamount，theexcesswouldbeimmediatelyreturnedtothemforspecie；becauseourcurrency，beingtherebydiminishedinvalue，couldbeadvantageouslyexported，andcouldnotberetainedinourcirculation。Thesearethemeans，asIhavealreadyexplained，bywhichourcurrencyendeavourstoequalizeitselfwiththecurrenciesofothercounties。Assoonasthisequalitywasattained，alladvantagearisingfromexportationwouldcease；butiftheBankassuming，thatbecauseagivenquantityofcirculatingmediumhadbeennecessarylastyear，thereforethesamequantitymustbenecessarythis，orforanyotherreason，continuedtore-issuethereturnednotes，thestimuluswhicharedundantcurrencyfirstgavetotheexportationofthecoinwouldbeagainrenewedwithsimilareffects；goldwouldbeagaindemanded，theexchangewouldbecomeunfavourable，andgoldbullionwouldrise，inasmalldegree，aboveitsmintprice，becauseitislegaltoexportbullion，butillegaltoexportthecoin，andthedifferencewouldbeaboutequaltothefaircompensationfortherisk。
InthismanneriftheBankpersistedinreturningtheirnotesintocirculation，everyguineamightbedrawnoutoftheircoffers。
Iftosupplythedeficiencyoftheirstockofgoldtheyweretopurchasegoldbullionattheadvancedprice，andhaveitcoinedintoguineas，thiswouldnotremedytheevil，guineaswouldbestilldemanded，butinsteadofbeingexportedwouldbemeltedandsoldtotheBankasbullionattheadvancedprice。
\"TheoperationsoftheBank，\"observedDrSmith，alludingtoananalogouscase，\"wereuponthisaccountsomewhatlikethewebofPenelope，theworkthatwasdoneinthedaywasundoneinthenight。\"ThesamesentimentisexpressedbyMrThornton:-
\"Findingtheguineasintheircofferstolesseneveryday，theymustnaturallybesupposedtobedesirousofreplacingthembyalleffectualandnotextravagantlyexpensivemeans。Theywillbedisposed，toacertaindegree，tobuygold，thoughatalosingprice，andtocoinitintonewguineas；buttheywillhavetodothisattheverymomentwhenmanyareprivatelymeltingwhatiscoined。Theonepartywillbemeltingandsellingwhiletheotherisbuyingandcoining。Andeachofthesetwocontendingbusinesseswillnowbecarriedon，notonaccountofanactualexportationofeachmeltedguineatoHamburgh，buttheoperationoratleastagreatpartofitwillbeconfinedtoLondon；thecoinersandthemelterslivingonthesamespot，andgivingconstantemploymenttoeachother。
\"TheBank，\"continuesMrThornton，\"ifwesupposeit，aswenowdo，tocarryonthissortofcontestwiththemelters，isobviouslywagingaveryunequalwar；andeventhoughitshouldnotbetiredearly，itwillbelikelytobetiredsoonerthanitsadversaries。\"
TheBankwouldbeobligedthereforeultimatelytoadopttheonlyremedyintheirpowertoputastoptothedemandforguineas。Theywouldwithdrawpartoftheirnotesfromcirculation，tilltheyshouldhaveincreasedthevalueoftheremaindertothatofgoldbullion，andconsequentlytothevalueofthecurrenciesofothercountries。Alladvantagefromtheexportationofgoldbullionwouldthencease，andtherewouldbenotemptationtoexchangebank-notesforguineas。
Inthisviewofthesubject，then，itappears，thatthetemptationtoexportmoneyinexchangeforgoods，orwhatistermedanunfavourablebalanceoftrade，neverarisesbutfromaredundantcurrency。ButMrThornton，whohasconsideredthissubjectverymuchatlarge，supposesthataveryunfavourablebalanceoftrademaybeoccasionedtothiscountrybyabadharvest，andtheconsequentimportationofcorn；andthattheremaybeatthesametimeanunwillingnessinthecountry，towhichweareindebted，toreceiveourgoodsinpayment；thebalanceduetotheforeigncountrymustthereforebepaidoutofthatpartofourcurrency，consistingofcoin，andthathencearisesthedemandforgoldbullionanditsincreasedprice。HeconsiderstheBankasaffordingconsiderableaccommodationtothemerchants，bysupplyingwiththeirnotesthevoidoccasionedbytheexportationofthespecie。
AsitisacknowledgedbyMrThornton，inmanypartsofhiswork，thatthepriceofgoldbullionisratedingoldcoin；andasitisalsoacknowledgedbyhim，thatthelawagainstmeltinggoldcoinintobullionandexportingitiseasilyevaded，itfollows，thatnodemandforgoldbullion，arisingfromthisoranyothercause，canraisethemoneypriceofthatcommodity。Theerrorofthisreasoningproceedsfromnotdistinguishingbetweenanincreaseinthevalueofgold，andanincreaseinitsmoneyprice。
Iftherewereagreatdemandforcornitsmoneypricewouldadvance；because，incomparingcornwithmoney，weinfactcompareitwithanothercommodity；andforthesamereason，whenthereisagreatdemandforgolditscornpricewillincrease；
butinneithercasewillabushelofcornbeworthmorethanabushelofcorn，oranounceofgoldmorethananounceofgold。
Anounceofgoldbullioncouldnot，whateverthedemandmightbe，whilstitspricewasratedingoldcoin，beofmorevaluethananounceofcoinedgold，or3l。17s。101/2d。
Ifthisargumentshouldnotbeconsideredasconclusive，I
shouldurge，thatavoidinthecurrency，asheresupposed，canonlybeoccasionedbytheannihilationorlimitationofpapercurrency，andthenitwouldspeedilybefilledbyimportationsofbullion，whichitsincreasedvalue，inconsequenceofthediminutionofcirculatingmedium，wouldinfalliblyattracttotheadvantageousmarket。Howevergreatthescarcityofcornmightbe，theexportationofmoneywouldbelimitedbyitsincreasingscarcity。Moneyisinsuchgeneraldemand，andinthepresentstateofcivilizationissoessentialtocommercialtransactions，thatitcanneverbeexportedtoexcess；eveninawarsuchasthepresent，whenourenemyendeavourstointerdictallcommercewithus，thevaluewhichthecurrencywouldbear，fromitsincreasingscarcity，wouldpreventtheexportationofitfrombeingcarriedsofarastooccasionavoidinthecirculation。
MrThorntonhasnotexplainedtous，whyanyunwillingnessshouldexistintheforeigncountrytoreceiveourgoodsinexchangefortheircorn；anditwouldbenecessaryforhimtoshow，thatifsuchanunwillingnessweretoexist，weshouldagreetoindulgeitsofarastoconsenttopartwithourcoin。
Ifweconsenttogivecoininexchangeforgoods，itmustbefromchoice，notnecessity。Weshouldnotimportmoregoodsthanweexport，unlesswehadaredundancyofcurrency，whichitthereforesuitsustomakeapartofourexports。Theexportationofthecoiniscausedbyitscheapness，andisnottheeffect，butthecauseofanunfavourablebalance；weshouldnotexportit，ifwedidnotsendittoabettermarket，orifwehadanycommoditywhichwecouldexportmoreprofitably。Itisasalutaryremedyforaredundantcurrency；andasIhavealreadyendeavouredtoprove，thatredundancyorexcessisonlyarelativeterm，itfollows，thatthedemandforitabroadarisesonlyfromthecomparativedeficiencyofthecurrencyoftheimportingcountry，whichtherecausesitssuperiorvalue。
Itresolvesitselfentirelyintoaquestionofinterest。IfthesellersofthecorntoEngland，totheamountIwillsupposeofamillion，couldimportgoodswhichcostamillioninEngland，butwouldproduce，whensoldabroad，morethanifthemillionhadbeensentinmoney，goodswouldbepreferred；ifotherwise，moneywouldbedemanded。
Itisonlyafteracomparisonofthevalueintheirmarketsandinourown，ofgoldandothercommodities，andbecausegoldischeaperintheLondonmarketthanintheirs，thatforeignersprefergoldinexchangefortheircorn。Ifwediminishthequantityofcurrency，wegiveanadditionalvaluetoit:thiswillinducethemtoaltertheirelection，andpreferthecommodities。IfIowedadebtinHamburghof100l。Ishouldendeavourtofindoutthecheapestmodeofpayingit。IfIsendmoney，theexpenceattendingitstransportationbeingIwillsuppose5l。todischargemydebtwillcostme105l。IfI
purchaseclothhere，which，withtheexpencesattendingitsexportation，willcostme106l。andwhichwill，inHamburgh，sellfor100l。itisevidentlymoretomyadvantagetosendthemoney。Ifthepurchaseandexpencesofsendinghardwaretopaymydebt，willtake107l。Ishouldprefersendingclothtohardware，butIwouldsendneitherinpreferencetomoney，becausemoneywouldbethecheapestexportablecommodityintheLondonmarket。