ThenecessitywhichtheBankfeltitselfundertoguardthesafetyofitsestablishment，therefore，alwaysprevented，beforetherestrictionfrompayinginspecie，atoolavishissueofpapermoney。
Thuswefindthat，foraperiodoftwenty-threeyearspreviouslytothesuspensionofcashpaymentsin1797，theaveragepriceofgoldbullionwas3l。17s。73/4d。peroz。about23/4d。underthemintprice；andforsixteenyearspreviouslyto1774，itneverwasmuchabove4l。peroz。Itshouldberememberedthatduringthesesixteenyearsourgoldcoinwasdebasedbywearing，anditisthereforeprobablethat4l。ofsuchdebasedmoneydidnotweighasmuchastheounceofgoldforwhichitwasexchanged。
DrA。Smithconsiderseverypermanentexcessofthemarketabovethemintpriceofgold，asreferribletothestateofthecoins。Whilethecoinwasofitsstandardweightandpurity，themarketpriceofgoldbullion，hethought，couldnotgreatlyexceedthemintprice。
MrThorntoncontendsthatthiscannotbetheonlycause。\"Wehave，\"hesays，\"latelyexperiencedfluctuationsinourexchanges，andcorrespondentvariationsinthemarket，comparedwiththemintpriceofgold，amountingtonolessthaneightortenpercent；thestateofourcoinagecontinuinginallrespectsthesame。\"MrThorntonshouldhavereflectedthatatthetimehewrote，speciecouldnotbedemandedattheBankinexchangefornotes；thatthiswasacauseforthedepreciationofthecurrencywhichDrSmithcouldneverhaveanticipated。IfMrThorntonhadprovedthattherehadbeenafluctuationoftenpercent。inthepriceofgold，whiletheBankpaidtheirnotesinspecie，andthecoinwasundebased，hewouldthenhaveconvictedDrSmithof\"
havingtreatedthisimportantsubjectinadefectiveandunsatisfactorymanner。\"（6*）
Butasallchecksagainsttheover-issuesoftheBankarenowremovedbytheactofparliament，whichrestrictsthemfrompayingtheirnotesinspecie，theyarenolongerboundby\"fearsforthesafetyoftheirestablishment，\"tolimitthequantityoftheirnotestothatsumwhichshallkeepthemofthesamevalueasthecoinwhichtheyrepresent。Accordinglywefindthatgoldbullionhasrisenfrom3l。17s。73/4d。theaveragepricepreviously1to1797，to4l。10s。andhasbeenlatelyashighas4l。13s。peroz。
Wemaythereforefairlyconcludethatthisdifferenceintherelativevalue，or，inotherwords，thatthisdepreciationintheactualvalueofbank-noteshasbeencausedbythetooabundantquantitywhichtheBankhassentintocirculation。Thesamecausewhichhasproducedadifferenceoffromfifteentotwentypercent。inbank-noteswhencomparedwithgoldbullion，mayincreaseittofiftypercent。Therecanbenolimittothedepreciationwhichmayarisefromaconstantlyincreasingquantityofpaper。
Thestimuluswhicharedundantcurrencygivestotheexportationofthecoinhasacquirednewforce，butcannot，asformerly，relieveitself。Wehavepapermoneyonlyincirculation，whichisnecessarilyconfinedtoourselves。Everyincreaseinitsquantitydegradesitbelowthevalueofgoldandsilverbullion，belowthevalueofthecurrenciesofothercounties。
Theeffectisthesameasthatwhichwouldhavebeenproducedfromclippingourcoins。
Ifone-fifthweretakenofffromeveryguinea，themarketpriceofgoldbullionwouldriseone-fifthabovethemintprice。
Forty-fourguineasandahalf（thenumberofguineasweighingapound，andthereforecalledthemintprice），wouldnolongerweighapound，thereforeafifthmorethanthatquantity，orabout56l。wouldbethepriceofapoundofgold，andthedifferencebetweenthemarketandthemintprice，between56l。
and46l。14s。6d。wouldmeasurethedepreciation。
Ifsuchdebasedcoinweretocontinuetobecalledbythenameofguineas，andifthevalueofgoldbullionandallothercommoditieswereratedinthedebasedcoin，aguineafreshfromthemintwouldbesaidtobeworth1l。5s。andthatsumwouldbegivenforitbytheillicittrader；butitwouldnotbethevalueofthenewguineawhichhadincreased，butthatofthedebasedguineaswhichhadfallen。Thiswouldimmediatelybeevident，ifaproclamationwereissued，prohibitingthedebasedguineasfrombeingcurrentbutbyweightatthemintpriceof3l。17s。10
1/2d。；thiswouldbeconstitutingthenewandheavyguineas，thestandardmeasureofvalue，inlieuoftheclippedanddebasedguineas。Thelatterwouldthenpassattheirtruevalue，andbecalled17or18shilling-pieces。Soifaproclamationtothesameeffectwerenowenforced，banknoteswouldnotbelesscurrent，butwouldpassonlyforthevalueofthegoldbullionwhichtheywouldpurchase。Aguineawouldthennolongerbesaidtobeworth1l。4s。butapoundnotewouldbecurrentonlyfor16or17
shillings。Atpresentgoldcoinisonlyacommodity，andbank-notesarethestandardmeasureofvalue，butinthatcasegoldcoinwouldbethatmeasure，andbank-noteswouldbethemarketablecommodity。
\"Itis，\"saysMrThornton，\"themaintenanceofourgeneralexchanges，or，inotherwords，itistheagreementofthemintpricewiththebullionpriceofgold，whichseemstobethetrueproofthatthecirculatingpaperisnotdepreciated。\"Whenthemotiveforexportinggoldoccurs，whiletheBankdonotpayinspecie，andgoldcannotthereforebeobtainedatitsmintprice，thesmallquantitythatcanbeprocuredwillbecollectedforexportation，andbank-noteswillbesoldatadiscountforgoldinproportiontotheirexcess。Insayinghoweverthatgoldisatahighprice，wearemistaken；itisnotgold，itispaperwhichhaschangeditsvalue。Compareanounceofgold，or3l。17s。10
1/2d。tocommodities，itbearsthesameproportiontothemwhichithasbeforedone；andifitdonot，itisreferribletoincreasedtaxation，ortosomeofthosecauseswhicharesoconstantlyoperatingonitsvalue。Butifwecomparethesubstituteofanounceofgold，3l。17s。101/2d。inbanknotes，withcommodities，weshallthendiscoverthedepreciationofthebank-notes。IneverymarketoftheworldIamobligedtopartwith4l。10s。inbank-notestopurchasethesamequantityofcommoditieswhichIcanobtainforthegoldthatisin3l。17s。
101/2d。ofcoin。
Itisoftenasserted，thataguineaisworthatHamburgh26
or28shillings；butweshouldbeverymuchdeceivedifweshouldthereforeconcludethataguineacouldbesoldatHamburghforasmuchsilverasiscontainedin26or28shillings。Beforethealterationintherelativevalueofgoldandsilver，aguineawouldnotsellatHamburghforasmuchsilvercoinasiscontainedin21standardshillings；itwillatthepresentmarketpricesellforasumofsilvercurrency，which，ifimportedandcarriedtoourminttobecoined，willproduceinourstandardsilvercoin21s。5d。（7*）
Itisneverthelesstrue，thatthesamequantityofsilverwill，atHamburgh，purchaseabillpayableinLondon，inbanknotes，for26or28shillings。Cantherebeamoresatisfactoryproofofthedepreciationofourcirculatingmedium？
Itissaid，that，iftheRestriction-billwerenotinforce，everyguineawouldleavethecountry。（8*）
Thisis，nodoubt，true；butiftheBankweretodiminishthequantityoftheirnotesuntiltheyhadincreasedtheirvaluefifteenpercent。，therestrictionmightbesafelyremoved，astherewouldthenbenotemptationtoexportspecie。Howeverlongitmaybedeferred，howevergreatmaybethediscountontheirnotes，theBankcanneverresumetheirpaymentsinspecie，untiltheyfirstreducetheamountoftheirnotesincirculationtotheselimits。
Thelawisallowedbyallwritersonpoliticaleconomytobeauselessbarrieragainsttheexportationofguineas:itissoeasilyevaded，thatitisdoubtedwhetherithashadtheeffectofkeepingasingleguineamoreinEnglandthantherewouldhavebeenwithoutsuchlaw。MrLocke，SirJ。Stuart，DrA。Smith，LordLiverpool，andMrThornton，allagreeonthissubject。Thelattergentlemanobserves，\"ThatthestateoftheBritishlawunquestionablyservestodiscourageandlimit，thoughnoteffectuallytohinder，thatexportationofguineaswhichisencouragedbyanunfavourablebalanceoftrade，andperhapsscarcelylessensitwhentheprofitonexportationbecomesverygreat。\"Yetaftereveryguineathatcaninthepresentstateofthingsbeprocuredbytheillicittraderhasbeenmeltedandexported，hewillhesitatebeforeheopenlybuysguineaswithbank-notesatapremium，because，thoughconsiderableprofitmayattendsuchspeculation，hewilltherebyrenderhimselfanobjectofsuspicion。Hemaybewatched，andpreventedfromeffectinghisobject。Asthepenaltiesofthelawaresevere，andthetemptationtoinformersgreat，secrecyisessentialtohisoperations。Whenguineascanbeprocuredbymerelysendingabank-noteforthemtotheBank，thelawwillbeeasilyevaded；
butwhenitisnecessarytocollectthemopenlyandfromawidelydiffusedcirculation，consistingalmostwhollyofpaper，theadvantageattendingitmustbeveryconsiderablebeforeanyonewillencountertheriskofbeingdetected。
WhenwereflectthatabovesixtymillionssterlinghavebeencoinedintoguineasduringhispresentMajesty\'sreign，wemayformsomeideaoftheextenttowhichtheexportationofgoldmusthavebeencarried-Butrepealthelawagainsttheexportationofguineas，permitthemtobeopenlysentoutofthecounty，andwhatcanpreventanounceofstandardgoldinguineasfromsellingatasgoodapriceforbank-notes，asanounceofPortuguezegoldcoin，orstandardgoldinbars，whenitisknowntobeequaltotheminfineness？Andifanounceofstandardgoldinguineaswouldsellinthemarket，asstandardbarsdonow，at4l。10s。peroz。，orastheyhavelatelydoneat4l。13s。peroz。，whatshopkeeperwouldsellhisgoodsatthesamepriceeitherforgoldorbank-notesindifferently？Ifthepriceofacoatwere3l。17s。101/2d。oranounceofgold，andifatthesametimeanounceofgoldwouldsellfor4l。13s。，isitconceivablethatitwouldbeamatterofindifferencetothetailorwhetherhewerepaidingoldorinbank-notes？
Itisonlybecauseaguineawillnotpurchasemorethanapound-noteandashilling，thatmanyhesitatetoallowthatbank-notesareatadiscount。TheEdinburghReviewsupportsthesameopinion；butifmyreasoningbecorrect，Ihaveshewnsuchobjectionstobegroundless。
MrThorntonhastoldusthatanunfavourabletradewillaccountforanunfavourableexchange；butwehavealreadyseenthatanunfavourabletrade，ifsuchbeanaccurateterm，islimitedinitseffectsontheexchange。Thatlimitisprobablyfourorfivepercent。Thiswillnotaccountforadepreciationoffifteenortwentypercent。MoreoverMrThorntonhastoldus，andIentirelyagreewithhim，\"Thatitmaybelaiddownasageneraltruth，thatthecommercialexportsandimportsofastatenaturallyproportionthemselvesinsomedegreetoeachother，andthatthebalanceoftradethereforecannotcontinueforaverylongtimetobeeitherhighlyfavourableorhighlyunfavourabletoacounty。\"Nowthelowexchange，sofarfrombeingtemporary，existedbeforeMrThorntonwrotein1802，andhassincebeenprogressivelyincreasing，andisnowfromfifteentotwentypercent。againstus。MrThorntonmusttherefore，accordingtohisownprinciples，attributeittosomemorepermanentcausethananunfavourablebalanceoftrade，andwill，Idoubtnot，whateverhisopinionmayformerlyhavebeen，nowagreethatitistobeaccountedforonlybythedepreciationofthecirculatingmedium。
Itcan，Ithink，nolongerbedisputedthatbank-notesareatadiscount。Whilethepriceofgoldbullionis4l。10s。peroz。，orinotherwords，whileanymanwillconsenttogivethatwhichprofessestobeanobligationtopaynearlyanounce，andasixthofanounceofgold，foranounce，itcannotbecontendedthat4
l。10s。innotesand4l。10s。ingoldcoinareofthesamevalue。
Anounceofgoldiscoinedinto3l。17s。101/2d。；bypossessingthatsumthereforeIhaveanounceofgold，andwouldnotgive4l。10s。ingoldcoin，ornoteswhichIcouldimmediatelyexchangefor4l。10s。，foranounceofgold。
Itiscontrarytocommonsensetosupposethatsuchcouldbethemarketvalue，unlessthepricewereestimatedinadepreciatedmedium。
Ifthepriceofgoldwereestimatedinsilverindeed，thepricemightriseto4l。，5l。，or10l。anounce，anditwould，ofitself，benoproofofthedepreciationofpapercurrency，butofanalterationintherelativevalueofgoldandsilver。I
have，however，Ithinkproved，thatsilverisnotthestandardmeasureofvalue，andthereforenotthemediuminwhichthevalueofgoldisestimated。Butifitwere；asanounceofgoldisonlyworthinthemarket151/2oz。ofsilver，andas151/2ouncesofsilverispreciselyequalinweight，andisthereforecoinedinto80shillings，anounceofgoldoughtnottosellformorethan4
l。
Thosethenwhomaintainthatsilveristhemeasureofvaluecannotprovethatanydemandforgoldwhichmayhavetakenplace，fromwhatevercauseitmayhaveproceeded，canhaveraiseditspriceabove4l。peroz。Allabovethatpricemust，ontheirownprinciples，becalledadepreciationinthevalueofbank-notes。
Itthereforefollows，thatifbank-notesbetherepresentativeofsilvercoin，thenanounceofgold，sellingasitnowdoesfor4
l。10s。sellsforanamountofnoteswhichrepresent171/2
ouncesofsilver，whereasinthebullionmarketitcanonlybeexchangedfor151/2ounces。FifteenouncesandahalfofsilverbullionarethereforeofequalvaluewithanengagementoftheBanktopaytobearerseventeenouncesandahalf。
Themarketpriceofsilverisatthepresenttime5s。91/2d。
peroz。estimatedinbank-notes，themintpricebeingonly5s。
2d。，consequentlythestandardsilverin100l。isworthmorethan112l。inbank-notes。
Butbank-notes，itmaybesaid，aretherepresentativesofourdebasedsilvercoin，andnotofourstandardsilver。Thisisnottrue，becausethelawwhichIhavealreadyquoteddeclaressilvertobealegaltenderforsumsonlynotexceeding25l。
exceptbyweight。IftheBankinsistedonpayingtheholderofabank-noteof1000l。insilvercoin，theywouldbeboundeithertogivehimstandardsilveroffullweight，ordebasedsilverofanequalvalue，withtheexceptionof25l。whichtheymightpayhimindebasedcoin。Butthe1000l。soconsistingof975l。puremoney，and25l。debased，isworthmorethan1112l。atthepresentmarketvalueofsilverbullion。
Itissaidthattheamountofbank-noteshasnotincreasedinagreaterproportionthantheaugmentationofourtraderequired，andthereforecannotbeexcessive。Thisassertionwouldbedifficulttoprove，andiftrue，noargumentbutwhatisdelusivecouldbefoundedonit。Inthefirstplace，thedailyimprovementswhichwearemakingintheartofeconomizingtheuseofcirculatingmedium，byimprovedmethodsofbanking，wouldrenderthesameamountofnotesexcessivenow，whichwerenecessaryforthesamestateofcommerceataformerperiod。
Secondly，thereisaconstantcompetitionbetweentheBankofEnglandandthecountry-bankstoestablishtheirnotes，totheexclusionofthoseoftheirrivals，ineverydistrictwherethecountrybanksareestablished。
Asthelatterhavemorethandoubledinnumberwithinveryfewyears，isitnotprobablethattheiractivitymayhavebeencrownedwithsuccess，indisplacingwiththeirownnotesmanyofthoseoftheBankofEngland？
Ifthishavehappened，thesameamountofBankofEnglandnoteswouldnowbeexcessive；which，withalessextendedcommerce，wasbeforebarelysufficienttokeepourcurrencyonalevelwiththatofothercounties。Nojustconclusioncanthereforebedrawnfromtheactualamountofbank-notesincirculation，thoughthefact，ifexamined，would，Ihavenodoubt，befoundtobe，thattheincreaseintheamountofbanknotes，andthehighpriceofgold，haveusuallyaccompaniedeachother。
Itisdoubted，whethertwoorthreemillionsofBank-notes（thesumwhichtheBankissupposedtohaveaddedtothecirculation，overandabovetheamountwhichitwilleasilybear，）couldhavehadsucheffectsasareascribedtothem；butitshouldberecollected，thattheBankregulatetheamountofthecirculationofallthecountrybanks，anditisprobable，thatiftheBankincreasetheirissuesthreemillions，theyenablethecountrybankstoaddmorethanthreemillionstothegeneralcirculationofEngland。
Themoneyofaparticularcountyisdividedamongstitsdifferentprovincesbythesamerulesasthemoneyoftheworldisdividedamongstthedifferentnationsofwhichitiscomposed。
Eachdistrictwillretaininitscirculationsuchaproportionateshareofthecurrencyofthecountry，asitstrade，andconsequentlyitspayments，mayrequire，comparedtothetradeofthewhole；andnoincreasecantakeplaceinthecirculatingmediumofonedistrict，withoutbeinggenerallydiffused，orcallingforthaproportionablequantityineveryotherdistrict。
ItisthiswhichkeepsacountrybanknotealwaysofthesamevalueasaBankofEnglandnote。IfinLondon，whereBankofEnglandnotesonlyarecurrent，onemillionbeaddedtotheamountincirculation，thecurrencywillbecomecheapertherethanelsewhere，orgoodswillbecomedearer。Goodswill，therefore，besentfromthecountrytotheLondonmarket，tobesoldatthehighprices，orwhichismuchmoreprobable，thecountrybankswilltakeadvantageoftherelativedeficiencyinthecountrycurrency，andincreasetheamountoftheirnotesinthesameproportionastheBankofEnglandhaddone；priceswouldthenbegenerally，andnotpartiallyaffected。
Inthesamemanner，ifBankofEnglandnotesbediminishedonemillion，thecomparativevalueofthecurrencyofLondonwillbeincreased，andthepricesofgoodsdiminished。ABankofEnglandnotewillthenbemorevaluablethanacountrybanknote，becauseitwillbewantedtopurchasegoodsinthecheapmarket；
andasthecountrybanksareobligedtogiveBankofEnglandnotesfortheirownwhendemanded，theywouldbecalleduponforthemtillthequantityofcountrypapershouldbereducedtothesameproportionwhichitbeforeboretotheLondonpaper，producingacorrespondingfallinthepricesofallgoodsforwhichitwasexchangeable。
Thecountrybankscouldneverincreasetheamountoftheirnotes，unlesstofilluparelativedeficiencyinthecountrycurrency，causedbytheincreasedissuesoftheBankofEngland。（9*）Iftheyattemptedit，thesamecheckwhichcompelledtheBankofEnglandtowithdrawpartoftheirnotesfromcirculationwhentheyusedtopaythemondemandinspecie，wouldobligethecountrybankstoadoptthesamecourse。Theirnoteswould，onaccountoftheincreasedquantity，berenderedoflessvaluethantheBankofEnglandnotes，inthesamemannerasBankofEnglandnoteswererenderedoflessvaluethantheguineaswhichtheyrepresented。TheywouldthereforebeexchangedforBankofEnglandnotesuntiltheywereofthesamevalue。
