An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗

are in the market

considered as worth a shilling, and a shilling can at any time be had for them. Even before the

late reformation of the gold coin of Great Britain, the gold, that part of it at least which

circulated in London and its neighbourhood, was in general less degraded below its standard

weight than the greater part of the silver. One-and-twenty worn and defaced shillings,

however, were considered as equivalent to a guinea, which, perhaps, indeed, was worn and

defaced too, but seldom so much so. The late regulations have brought the gold coin as near,

perhaps, to its standard weight as it is possible to bring the current coin of any nation; and the

order to receive no gold at the public offices but by weight, is likely to preserve it so, as long

as that order is enforced. The silver coin still continues in the same worn and degraded state as

before the reformation of the cold coin. In the market, however, one-and-twenty shillings of

this degraded silver coin are still considered as worth a guinea of this excellent gold coin.

 

The reformation of the gold coin has evidently raised the value of the silver coin which can be

exchanged for it.

 

In the English mint, a pound weight of gold is coined into fortyfour guineas and a half, which

at one-and-twenty shillings the guinea, is equal to forty-six pounds fourteen shillings and

sixpence. An ounce of such gold coin, therefore, is worth � 3:17:10� in silver. In England, no

duty or seignorage is paid upon the coinage, and he who carries a pound weight or an ounce

weight of standard gold bullion to the mint, gets back a pound weight or an ounce weight of

gold in coin, without any deduction. Three pounds seventeen shillings and tenpence halfpenny

an ounce, therefore, is said to be the mint price of gold in England, or the quantity of gold

coin which the mint gives in return for standard gold bullion.

 

Before the reformation of the gold coin, the price of standard gold bullion in the market had,

for many years, been upwards of �3:18s. sometimes � 3:19s. and very frequently �4 an ounce;

that sum, it is probable, in the worn and degraded gold coin, seldom containing more than an

ounce of standard gold. Since the reformation of the gold coin, the market price of standard

gold bullion seldom exceeds � 3:17:7 an ounce. Before the reformation of the gold coin, the

market price was always more or less above the mint price. Since that reformation, the market

price has been constantly below the mint price. But that market price is the same whether it is

paid in gold or in silver coin. The late reformation of the gold coin, therefore, has raised not

only the value of the gold coin, but likewise that of the silver coin in proportion to gold

bullion, and probably, too, in proportion to all other commodities ; though the price of the

greater part of other commodities being influenced by so many other causes, the rise in the

value of either gold or silver coin in proportion to them may not be so distinct and sensible.

 

In the English mint, a pound weight of standard silver bullion is coined into sixty-two

shillings, containing, in the same manner, a pound weight of standard silver. Five shillings

and twopence an ounce, therefore, is said to be the mint price of silver in England, or the

quantity of silver coin which the mint gives in return for standard silver bullion. Before the

reformation of the gold coin, the market price of standard silver bullion was, upon different

occasions, five shillings and fourpence, five shillings and fivepence, five shillings and

sixpence, five shillings and sevenpence, and very often five shillings and eightpence an ounce.

Five shillings and sevenpence, however, seems to have been the most common price. Since

the reformation of the gold coin, the market price of standard silver bullion has fallen

occasionally to five shillings and threepence, five shillings and fourpence, and five shillings

and fivepence an ounce, which last price it has scarce ever exceeded. Though the market price

of silver bullion has fallen considerably since the reformation of the gold coin, it has not fallen

so low as the mint price.

 

In the proportion between the different metals in the English coin, as copper is rated very

much above its real value, so silver is rated somewhat below it. In the market of Europe, in the

French coin and in the Dutch coin, an ounce of fine gold exchanges for about fourteen ounces

of fine silver. In the English coin, it exchanges for about fifteen ounces, that is, for more silver

than it is worth, according to the common estimation of Europe. But as the price of copper in

bars is not, even in England, raised by the high price of copper in English coin, so the price of

silver in bullion is not sunk by the low rate of silver in English coin. Silver in bullion still

preserves its proper proportion to gold, for the same reason that copper in bars preserves its

proper proportion to silver.

 

Upon the reformation of the silver coin, in the reign of William III., the price of silver bullion

still continued to be somewhat above the mint price. Mr Locke imputed this high price to the

permission of exporting silver bullion, and to the prohibition of exporting silver coin. This

permission of exporting, he said, rendered the demand for silver bullion greater than the

demand for silver coin. But the number of people who want silver coin for the common

uses of buying and selling at home, is surely much greater than that of those who want silver

bullion either for the use of exportation or for any other use. There subsists at present a like

permission of exporting gold bullion, and a like prohibition of exporting gold coin; and yet the

price of gold bullion has fallen below the mint price. But in the English coin, silver was then,

in the same manner as now, under-rated in proportion to gold; and the gold coin (which at that

time, too, was not supposed to require any reformation) regulated then, as well as now, the

real value of the whole coin. As the reformation of the silver coin did not then reduce the price

of silver bullion to the mint price, it is not very probable that a like reformation will do so

now.

 

Were the silver coin brought back as near to its standard weight as the gold, a guinea, it is

probable, would, according to the present proportion, exchange for more silver in coin than it

would purchase in bullion. The silver coin containing its full standard weight, there would in

this case, be a profit in melting it down, in order, first to sell the bullion for gold coin, and

afterwards to exchange this gold coin for silver coin, to be melted down in the same manner.

Some alteration in the present proportion seems to be the only method of preventing this

inconveniency.

 

The inconveniency, perhaps, would be less, if silver was rated in the coin as much above its

proper proportion to gold as it is at present rated below it, provided it was at the same time

enacted, that silver should not be a legal tender for more than the change of a guinea, in the

same manner as copper is not a legal tender for more than the change of a shilling. No creditor

could, in this case, be cheated in consequence of the high valuation of silver in coin ; as no

creditor can at present be cheated in consequence of the high valuation of copper. The bankers

only would suffer by this regulation. When a run comes upon them, they sometimes

endeavour to gain time, by paying in sixpences, and they would be precluded by this

regulation from this discreditable method of evading immediate payment.They would be

obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at

present ; and though this might, no doubt, be a considerable inconveniency to them, it would,

at the same time, be a considerable security to their creditors.

 

Three pounds seventeen shillings and tenpence halfpenny (the mint price of gold) certainly

does not contain, even in our present excellent gold coin, more than an ounce of standard

gold, and it may be thought, therefore, should not purchase more standard bullion. But gold in

coin is more convenient than gold in bullion ; and though, in England, the coinage is free, yet

the gold which is carried in bullion to the mint, can seldom be returned in coin to the owner

till after a delay of several weeks. In the present hurry of the mint, it could not be returned till

after a delay of several months. This delay is equivalent to a small duty, and renders gold in

coin somewhat more valuable than an equal quantity of gold in bullion. If, in the English coin,

silver was rated according to its proper proportion to gold, the price of silver bullion would

probably fall below the mint price, even without any reformation of the silver coin ; the value

even of the present worn and defaced silver coin being regulated by the value of the excellent

gold coin for which it can be changed.

 

A small seignorage or duty upon the coinage of both gold and silver, would probably increase

still more the superiority of those metals in coin above an equal quantity of either of them in

bullion. The coinage would, in this case, increase the value of the metal coined in

proportion to the extent of this small duty, for the same reason that the fashion increases the

value of plate in proportion to the price of that fashion. The superiority of coin above bullion

would prevent the melting down of the coin, and would discourage its exportation. If, upon

any public exigency, it should become necessary to export the coin, the greater part of it

would soon return again, of its own accord. Abroad, it could sell only for its weight in bullion.

At home, it would buy more than that weight. There would be a profit, therefore, in bringing it

home again. In France, a seignorage of about eight per cent. is imposed upon the coinage, and

the French coin, when exported, is said to return home again, of its own accord.

 

The occasional fluctuations in the market price of gold and silver bullion arise from the same

causes as the like fluctuations in that of all other commodities. The frequent loss of those

metals from various accidents by sea and by land, the continual waste of them in gilding and

plating, in lace and embroidery, in the wear and tear of coin, and in that of plate, require, in all

countries which possess no mines of their own, a continual importation, in order to repair this

loss and this waste. The merchant importers, like all other merchants, we may believe,

endeavour, as well as they can, to suit their occasional importations to what they judge is

likely to be the immediate demand. With all their attention, however, they sometimes overdo

the business, and sometimes underdo it. When they import more bullion than is wanted, rather

than incur the risk and trouble of exporting it again, they are sometimes willing to sell a part

of it for something less than the ordinary or average price. When, on the other hand, they

import less than is wanted, they get something more than this price. But when, under all those

occasional fluctuations, the market price either of gold or silver bullion continues for several

years together steadily and constantly, either more or less above, or more or less below the