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607 1,200 686
825 1,235 945
The foregoing account, No. 1, containing only those parishes
RT. HON. W. W. POLE,
RESPECTING THE DISAPPEARANCE
THE GOLD COIN,
RESUMPTION OF CASH PAYMENTS.
THE RIGHT HONORABLE
W, W, POLE, M, P,
MASTER OF HIS MAJESTY'S MINT,
Ge. &c. &c.
THE continued disappearance of the gold coin immediately on issuing from the bank, has been assigned to various causes, and has occasioned the suggestion of different plans to prevent it. Amongst these plans a seignorage has not unfrequently been mentioned. But the insufficiency of a seignorage for the purpose proposed, is perhaps capable of being proved by decisive arguments. As you have, Sir, in the late gold and silver coinage, displayed eminent judgment and ability, I am anxious to submit to your consideration the opinion I have formed on this very interesting and important subject,
The reason why a seignorage has been mentioned on the present occasion, is of course because it is conceived that by means of a seignorage the precious metals in coin may be rendered more valuable than the same metals in bullion. But it will appear in the course of my letter, that with the standard coin this cannot be effected. With. out however immediately adverting to that circumstance, let it be supposed, that the attempt is made in the first place, by diminishing, by way of seignorage, the present standard coin. This would be no remedy for the evil in question; because the present disappearance of the standard coin can of course be occasioned only by such a difference in the value of bank notes, and the gold, contained in standard coins, that a profit may be derived from purchasing the latter with the former, in order to melt them down, or export them. Now the value of a bank note depends on the value of the standard coin into which it is convertible :' and the value of the present standard coin is directly as the quantity of gold it contains. If then the value of that standard coin be diminished, by decreasing the quantity of gold contained in it, or indeed by any other means, the value of the bank note which is referred to, and
regu. lated by the value of such standard coin, will be diminished exactly in the same proportion; consequently, if the sovereign or standard coin were diminished to any extent whatever, there would still exist the same proportionate difference in value between a bank note and a sovereign, from whatever cause it might arise, as there does at present; and therefore there would still be the same inducement as at present, to purchase the latter with the former, in order to melt it down or export it. Consequently a seignorage of this kind would be no remedy for the evil complained of, whilst a direct injustice would be committed towards all those who are either public creditors, or creditors of individuals, all whose incomes proceed from annuities or fixed salaries; and in short, all whose property consists of money. For by diminishing the value or the quantity of the commodity by which their property is regulated or estimated, or in fact of which it consists, we diminish the property itself. This would be evinced in the smaller quantity of commodities such property would then be capable of commanding, since the price of all articles would be increased exactly in proportion as value of the standard coin might be diminished. At the same time, every dealer in bullion would increase his price : every person who might (for instance) bring an ounce of bullion to the bank for sale, would demand for it a greater number of the then diminished sovereigns than he does of the present sovereigns, or a greater number of bank notes, which would then possess a value only corre, spondent to the value of such diminished sovereigns. The price, then, or nominal value of bullion, is inversely as the value of the standard coin, and consequently will increase as the standard coin is deteriorated; but its real value, compared with the real value of the standard coin, will remain the same. To diminish therefore the standard coin by way of seignorage, will not cause any change in the relative values of gold in coin and gold in bullion.
The fact is indisputable, that, as bullion, the gold contained in a sovereign is worth more than a one pound bank note, and that the profit to be derived from purchasing the sovereign with the one pound note, in order to employ it as bullion, is the immediate cause of the disappearance of the gold coin : that circumstance has therefore been first assumed to exemplify the insufficiency of a seignorage for the purpose proposed. A more general position might
* See the Appendix.
however have been taken, and still the same conclusion would have followed. This will be evident in a very few words. The present disappearance of the standard coin might have been stated to arise from such a difference between the market price of gold in bullion and the mint price, that a profit may be derived from melting down or exporting the standard coin. Now the market price of bullion, as well as of every other commodity, is inversely as the value of the currency; and the value of the currency is directly as the value of the standard coin : the value also of the standard coin is directly as the quantity of the precious metal it contains. Diminish then the value of the present British stándard coin, by decreasing the quantity of gold contained in it, and the value of the currency will be diminished in the sanie proportion. Consequently, since the price of bullion is inversély as the value of the currency, the price of bullion will be increased as the value of the currency is diminished. Increase then the mint price of gold by coining an ounce of gold into a greater number of sovereigns than at present, and the market price of gold will be increased exactly in the same proportion: there would therefore still exist a difference between the market and the mint price of gold in the same proportion as at present. Consequently to diminish by way of seignorage, the present standard coin, would not be a remedy for its disappearance.
A seignorage of this kind may have the effect proposed, when applied to the silver or copper coin, which, not being standard coin, may be considered as mere tokens, and to possess a value, like bank notes, correspondent to the value of the standard coin, into which they may be exchanged. But then there is, or should be, no cumpulsion to take them, except in such small sums as could not be paid in the standard coin. Silver is indeed made a legal tender to the amount of two pounds. It would perhaps have been better if it had been made so for sums only under 20s. : however, as it is not a legal tender for more than 21., the smallness of the sum may possibly render it a matter of little consequence. With respect then to coins of the description of silver, which are not the standard coin, but may be considered as tokens, or in the same light in many repects, as bank notes, a seignorage may be useful, because not being standard coin, yet possessing intrinsic value, it might happen by a change in the relative values of gold and silver, that the value of silver, compared with that of gold, might become in such proportion as to make it profitable to melt down the silver coinage, and dispose of in that shape. But now that it is made to pass current, at a price considerably beyond the proportion it usually bears to gold, there is no great chance that such an increase in its proportionate value will take place. In thus diminishing, however, the quantity of silver in the silver coin, it is requisite that it should be effected in the true