Letters of David Ricardo to Thomas Robert Malthus, 1810-1823 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 diminis.h.i.+ng 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 s.h.i.+llings banco, when the agio was 3 per cent., which reduced into English money at 31 [Flemish] s.h.i.+llings 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 s.h.i.+llings.

6: Value of an oz. of standard gold in Flemish Banco s.h.i.+llings.

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 s.h.i.+llings per sterling in gold.

8: Real par of exchange in Flemish Banco s.h.i.+llings 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 s.h.i.+llings banco.

C: Par of exchange with London in Flemish s.h.i.+llings 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 s.h.i.+llings 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.