Part 4
[At the end is written in pencil in Malthus's handwriting, 'Was any bullion imported from Hamburg in March?']
XII.
LONDON, _17 Dec., 1812_.
MY DEAR SIR,
I have written to Mr. Thornton[52] to request him to meet you at dinner, at my house, on any day most convenient to him, after Sat.u.r.day and before Thursday, but I have not had his answer in time for this day's post. I will send you a line at the King of Clubs. I shall only ask Mr.
Sharp to meet us. Will you not stay with us whilst you are in town? I a.s.sure you it would be quite convenient, and it would afford me great pleasure. If Mrs. Malthus accompany you it will be still more agreeable, and I am desired by Mrs. Ricardo to add her solicitations to my own.
On many points connected with our old question we are I believe agreed,--though there is yet some difference between us. I have not lately given it so much consideration as you have,--and I always regret that I do not put down in writing, for I have a very treacherous memory, the chief points of difference that occur in our discussions. I cannot help thinking that there is no unfavourable exchange which may not be corrected by a diminution in the amount of the currency, and I consider this to afford a proof that the currency must be redundant for a time at least. Whilst the exchange is unfavourable it is always accompanied, though not always caused, by an excess of currency. With best respects to Mrs. Malthus,
I am, my dear Sir, Yours most truly, DAVID RICARDO.
... As I was about leaving the city I received Mr. Thornton's answer. He is engaged on Wednesday and Thursday, and has fixed on Monday for our meeting, but he wishes us to meet at his house as there is to be a debate in the House of Lords on the Bullion question, and he is not sure that his presence may not be necessary in the Commons. I will settle this point with him, and if you do not hear from me I shall expect you at my house on Monday, if you do not agree to come on Sat.u.r.day evening.
NOTE.--Thomas Tooke, in his 'History of Prices and of the State of the Circulation from 1839 to 1847' (publ. 1848)[53], refers to this dispute between Ricardo and Malthus, on the relation of the currency to the balance of trade, and quotes long extracts from the article of Malthus in the Edinburgh Review, where (as in this correspondence[54]) Malthus maintains that the precious metals are continually used in payments made by one country to another even if, till that moment, the currencies of both have been at their usual level. The view of Ricardo is that nothing but the state of the currency can influence the foreign exchanges. As late as 1840 statesmen clung to the idea that the Directors of the Bank of England could only operate on the exchanges by increasing or diminishing the circulation[55]. Tooke (followed later by Newmarch, hardly a less authority) sides with Malthus, and thinks that Ricardo's reply to him, in the Appendix to the Tract on Bullion, is 'little more than a repet.i.tion in varied forms of expression, according to the phraseology peculiar to the theory in question, of the axiom that gold will not be exported unless it is cheaper than another commodity, a.s.suming consequently the fact to have been that all commodities were at that time dearer in this country than they were abroad, and relatively to gold;'--whereas it appears[56] that between 1809 and 1811 the bulk of commodities were at a far higher price (measured in gold) on the Continent than in England; the 'continental system' had forced vast stores of goods to lie unsaleable in England for want of physical ability, on the part of the merchants of them, to land them on the Continent, though they did their best to smuggle them by way of Heligoland or Turkey into Germany and the door of Portugal was ajar. Coffee was unsaleable in England at 6_d._ the pound, and at the same time it was fetching 4_s._ or 5_s._ on the Continent. Napoleon used to look at the English price current, and, if he found gold dear and coffee cheap in England, he was satisfied that his Berlin and Milan decrees were well carried out, while the English saw only another proof that the Bank was extending its issues overmuch. Tooke and Malthus agreed that the difference between the market price and the mint price of gold bullion was the full measure of the depreciation of the currency; but the 'ultra-bullionists' would not stop there. Tooke, like Ricardo on another occasion (see Letter XLII), had to 'write a book to convince' them, namely his 'Thoughts and Details on the High and Low Prices of the last Thirty years,' (1823).
XIII.
LONDON, _30th Dec., 1813_.
MY DEAR SIR,
I have been amusing myself for one or two evenings in calculating the exchanges, price of gold, etc., at Amsterdam, and I enclose the result of my labour. I have every reason to believe that my calculations are correct,--though I am somewhat puzzled at the profit which there appears to be on the importation of gold from Amsterdam, if the prices there be quoted correct [_sic_]. If the difference were the other way, we might ascribe it to the money of Holland not being so good as it ought to be by the mint regulations; but in the present instance for guilders, as good as they are coined, gold can be bought 9-1/2 per cent.
cheaper than in London. I am told that gold which cannot be exported has sunk considerably in price although gold that may be exported keeps its price. I fully expect that foreign gold will be lower.
We have had a continuance of foggy weather ever since Monday. We are obliged to burn candles during the day, and at night it is with the greatest difficulty we can find our way to our homes. I hope you are more fortunate and breathe a clearer atmosphere. We shall expect you in Brook Street on your next visit to London. Have the goodness to write the day before you come. With best wishes to Mrs. Malthus,
I am, dear Sir, Yours very truly, DAVID RICARDO.
[TABLES ENCLOSED IN LETTER XII.]
Columns 11 and 12 will show on inspection whether silver be pa.s.sing from London to Amsterdam or from Amsterdam to London. Suppose the price of silver in London to be 6_s._ 7_d._ and the exchange with Amsterdam 28_s._ Against 6_s._ 7_d._ in column 11 the par of exchange is 2941 in column 12; consequently being at 28 it is unfavourable to Amsterdam, and silver can be exported from Amsterdam to London with a profit of 5 per cent. If under the same circ.u.mstances the exchange had been 31, silver could have been exported to Amsterdam with a profit of 5 per cent.
Columns 8, 9 and 10 will show from which country gold may be profitably exported. Suppose the price of gold in Amsterdam to be 16 per cent.
premium, the agio 3 per cent., the exchange with London 31, and the price of gold in London 5 10_s._, from which country would gold be exported and with what profit?
Against 16 per cent. in column 1 the par of exchange in column 8 is 3964, and against 5 10_s._ the price of gold in London in column 9 the multiplier 708 stands in column 10. 3964 multiplied by 708 gives 2806 as the par for bank notes; therefore, when the exchange is at 31, it is unfavourable to Holland, and gold may be exported from thence with a profit of 10-1/2 per cent. nearly. Or thus: an oz. of standard gold, when the marc could be bought at 16 per cent. premium at Amsterdam, would cost 1543 Flemish shillings banco, when the agio was 3 per cent., which reduced into English money at 31 [Flemish] shillings per sterling will give 4 19_s._ 6-3/4_d._ But it will sell in London for 5 10_s._ which is a profit of 10-1/2 per cent. nearly.
Table Key
1: Price of gold at Amsterdam. Premium on _f._ 355 per marc.
2: Value of a marc in current guilders.
3: Corresponding price of an oz. of standard gold in London.
4: Corresponding price of an oz. of standard silver in London.
5: Value of an oz. of standard gold in Flemish current shillings.
6: Value of an oz. of standard gold in Flemish Banco shillings.
Agio 3 p.c.
+--------------+----------+-------------+---------+----------+-------+
1
2
3[57]
4
5
6[58]
+--------------+----------+-------------+---------+----------+-------+
_s._ _d._
Par _f._ 355
_f_ 355
6800
137
133
pence
1 p.c. prem.
35855
6732
1384
1343
2 "
36210
6667
1398
1357
3 "
36565
6602
1413
1372
4 "
36920
6538
1425
1386
5 "
37275
6476
1439
1398
6 "
37630
6415
1453
1411
7 "
37985
6355
1466
1425
8 "
38340
6296
148
1439
9 "
38695
6239
1493
1453
38937
3 17 10-1/2
62
1503
1460
10 "
39050
3 18 1
1507
1463
11 "
39405
3 18 10
1521
1476
12 "
39760
3 19 6-1/2
1535
1490
13 "
40115
4 0 3
1548
1503
14 "
40470
4 0 11-1/2
1562
1517
15 "
40825
4 1 8
1575
1529
16 "
41180
4 2 4-1/2
1589
1543
17 "
41535
4 3 0-1/2
1603
1556
18 "
41890
4 3 9
1617
1570
19 "
42245
4 4 5-1/2
1631
1583
20 "
426
4 5 2
1645
1596
21 "
42955
4 5 10-1/2
1658
1610
+--------------+----------+-------------+---------+----------+-------+
Table Key
7: Real par of exchange in Flemish current shillings per sterling in gold.
8: Real par of exchange in Flemish Banco shillings per sterling in gold. Agio 3 p.c.
9: When the price of gold in London in bank notes is 10: The bullion par must be multiplied by 11: Price of standard silver in London in bank notes per oz.
12: Par of exchange with Amsterdam in Banco. Agio 3 p.c.
+-----------+-------------+-------------+------+----------+----------+
7
8
9
10
11
12
+-----------+-------------+-------------+------+----------+----------+
_s._ _d._
_s._ _d._
3520
3417
(1.) 3555
3451
4 0 0
973
5 2
3748
(2.) 3590
3485
4 1 0
961
5 3
3688
(3.) 3625
3519
4 2 0
949
5 4
3660
(4.) 3661
3554
4 3 0
938
5 5
3575
(5.) 3695
3587
4 4 0
927
5 6
3521
(6.) 3731
3622
4 5 0
916
5 7
3468
(7.) 3766
3656
4 6 0
905
5 8
3417
(8.) 3801
3690
4 7 0
895
5 9
3367
(9.) 3836
3724
4 8 0
885
5 10
3319
3861
3748
(10.) 3871
3758
4 9 0
875
5 11
3272
(11.) 3906
3792
4 10 0
865
6 0
3227
(12.) 3962
3327
4 11 0
856
6 1
3184
(13.) 3977
3862
4 13 0
838
6 2
3142
(14.) 4012
3896
4 15 0
820
6 3
3098
(15.) 4048
3930
4 17 0
803
6 4
3058
(16.) 4083
3964
4 19 0
786
6 5
3017
(17.) 4118
3998
5 0 0
779
6 6
2979
(18.) 4154
4032
5 2 0
764
6 7
2941
(19.) 4189
4067
5 4 0
749
6 8
2904
(20.) 4224
4102
5 6 0
735
6 9
2869
(21.) 4259
4136
5 8 0
721
6 10
2833
5 10 0
708
6 11
2799
7 0
2766
7 1
2732
7 2
2702
7 3
2671
7 4
2640
7 5
2611
7 6
2582
+-----------+-------------+-------------+------+----------+----------+
XIV.
LONDON, _1 Jan., 1814_.
MY DEAR SIR,
Having finished a table for the Hamburgh exchanges, similar to that which I have already sent you for Holland, I thought you might like to have a copy of it[59]. In this as well as in the other the result is not quite satisfactory; for example, at the present time I believe the exchange with Hamburgh is quoted 28_s._ and the price of dollars 6_s._ 11-1/2_d._ By the table it appears that with [such] a price of dollars the exchange at par would be 25_s._; consequently it is now unfavourable to Hamburgh 12 per cent., which appears to me to be excessively high. In fact, under the present circ.u.mstances, there can be no intercourse with Hamburgh, and the quotation must be only nominal. Mrs. Ricardo and I leave London to-morrow early for Bradford; from thence we intend going to Gatcomb[60], and expect to be in town again on Thursday. I hope we shall soon see you. With best wishes to Mrs. Malthus,
I am, dear Sir, Yours very truly, DAVID RICARDO.
Table Key
A: Price of a ducat or 53 grains of fine gold in marks banco.
B: Price of an oz. of standard gold in Flemish shillings banco.
C: Par of exchange with London in Flemish shillings banco per sterling of gold.
D: Corresponding price of an oz. of standard silver in London in pence.
E: Corresponding price of an oz. of standard gold in London in , etc.
F: When the price of gold in London in bank-notes is per oz.
G: The bullion par of exchange must be multiplied by H: When the price of dollars in London is per oz.
I: The par of exchange in silver is
+----+-------+------+------+------+------------+----+---------+------+
A
B
C
D
E
F
G
H
I
+----+-------+------+------+------+------------+----+---------+------+
_s._ _d._
_s._ _d._
539
11933
3060
7097
4 0 0
973
4 11-1/2
3508
545
12066
3094
7019
4 1 0
961
5 1
3422
551
12199
3128
6943
4 2 0
949
5 2-1/2
3339
557
12332
3163
6868
4 3 0
938
5 4
3261
563
12465
3197
6795
4 4 0
927
5 5-1/2
3187
569
12598
3233
6723
4 5 0
916
5 7
3115
575
12731
3268
6653
4 6 0
905
5 8-1/2
3047
581
12864
3303
6584
4 7 0
895
5 10
2982
587
12996
3337
6517
4 8 0
885
5 11-1/2
2919
593
13129
3372
6451
4 9 0
875
6 1
2859
599
13262
3407
6386
4 10 0
865
6 2-1/2
2802
605
13395
3442
6323
4 11 0
856
6 4
2746
611
13528
3476
6261
4 13 0
838
6 5-1/2
2693
617
13661
3508
62
3893
4 15 0
820
6 7
2642
623
13792
3542
3931
4 17 0
803
6 8-1/2
2593
629
13925
3576
3968
4 19 0
796
6 10
2546
635
14057
3611
4005
5 0 0
779
6 11-1/2
25
641
14189
3645
4043
5 2 0
764
7 1
2455
647
14321
3679
4081
5 4 0
749
7 2
2413
653
14454
3714
4119
5 6 0
735
659
14586
3748
4157
5 8 0
721
665
14719
3783
4195
5 10 0
708
671
14851
3818
4233
677
14984
3852
4270
683
15117
3887
4308
689
15250
3922
4346
+----+-------+------+------+------+------------+----+---------+------+
N.B.--3 marks are equal to 8 Flemish shillings banco. When dollars are 4_s._ 11-1/2_d._, standard is 2-1/2_d._ more. When 6_s._ 1_d._, 3_d._ more. When 7_s._, 3-1/2_d._ more.
XV.
