coin to the next purchaser at the advanced price; whether coined gold or silver, being the legal tender coin to any amount, will purchase an additional quantity of gold or silver bullion beyond its weight, equal to the seignorage, that is the test of the theory. It will be found, I apprehend, that the person who has the bullion coined into the legal tender coin loses the amount of the seignorage, and that little or no gold or silver would be brought to the Mint to be coined into the legal tender coin.

With respect to the argument* (p. 378.), "because the government having everywhere the exclusive privilege of coining, no coin can come to market cheaper than they think proper to afford it." A seignorage may be charged by a deduction from the quantity of gold or silver contained in those coins which the government can protect from competition, and to which it can secure the best market. This is the case with ancillary coins. When silver coins are coined exclusively by the government, and regulated to exchange, as in this country, with the gold coin, the legal tender coin, the money of the realm, at 6, 7, or 10 per cent. above their intrinsic value as silver bullion, the government secures to these coins the best market, and, having the monopoly of the coinage, protects them from all competition; but this additional value extends no further than the government monopoly and the home market. It extends only to the subordinate coins, which find their best market in exchange with the legal tender coin, within the narrow sphere of the national circulation. The legal tender coin, whether gold or silver, which exchanges with commodities, is beyond the control of government and the protection of monopoly in determining its value. As commodities have the general market of the world, so has the legal tender coin. All control and monopoly equally cease; whether that coin, which is money, is received by weight or by tale is

immaterial; whether at home or abroad, it will be valued by its weight of pure silver or pure gold-by its intrinsic value.

Adam Smith (b. iv. c. 3. v. ii. p. 273.):

"The French coin was, before the late reformation of the English gold coin, much less worn than the English, and was, perhaps, two or three per cent. nearer its standard. If the computed exchange with France, therefore, was not more than two or three per cent. against England, the real exchange might have been in its favour. Since the reformation of the gold coin, the exchange has been constantly in favour of England, and against France.

In some countries the expense of coinage is defrayed by the government; in others, it is defrayed by the private people, who carry their bullion to the Mint, and the government even derives some revenue from the coinage. In England, it is defrayed by the government, and if you carry a pound weight of standard silver to the Mint, you get back sixty-two shillings, containing a pound weight of the like standard silver. In France, a duty of eight per cent. is deducted for the coinage, which not only defrays the expense of it, but affords a small revenue to the Government. In England, as the coinage costs nothing, the current coin can never be much more valuable than the quantity of bullion which it actually contains. In France, the workmanship, as you pay for it, adds to the value in the same manner as to that of wrought plate. A sum of French money, therefore, containing a certain weight of pure silver, is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the standards of their respective Mints, a sum of English money could not well purchase a sum of French money containing an equal number of ounces of pure silver, nor consequently a bill upon France for such a sum. If for such a bill no more additional money was paid than what was sufficient to compensate the expense of the French coinage, the real exchange might be at par between the two countries; their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France. If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France."

There can be no doubt that the loss in weight by the wearing of the coin would render the exchange with foreign countries unfavourable to the extent of that loss of weight; but does not this militate against the supposition that the exchanges would not be

equally unfavourable, if that loss of weight arose from a charge on account of seignorage? Would the value of the "fashion compensate the diminution of the weight?" To the English merchant who received the bill which would be paid in England in English money, it would be indifferent how the diminished quantity of pure gold or silver arose, whether from the wearing of the coin, or from the seignorage; he would receive so much less gold or silver on payment of the bill in London, where the seignorage would be worth nothing, upon Adam Smith's own reasoning. "Abroad, it (the coin) would only sell for its weight in bullion." The bill would be purchased with silver crowns or livres in France, and paid in gold in London. Adam Smith should have shown that the bill would purchase in France so much additional silver bullion as was equal to the amount of the seignorage, and that the exchanges were influenced in the manner that he describes. Adam Smith adduces the following statement in proof of his theory, for which I shall submit an explanation.

Adam Smith (b. iv. c. 6. v. ii. p. 379.):—

"The seignorage in France raises the value of the coin higher than in proportion to the quantity of pure gold which it contains. Thus, by the edict of January, 1726*, the Mint price of fine gold of twenty-four carats was fixed at seven hundred and forty livres nine sous, and one denier, one-eleventh, the mark of eight Paris ounces. The gold coin of France, making an allowance for the remedy of the Mint, contains twenty-one carats and three-fourths of fine gold, and two carats one-fourth of alloy. The mark of standard gold, therefore, is worth no more than about six hundred and seventy-one livres, ten deniers. But in France this mark of standard gold is coined into thirty louis-d'ors of twenty-four livres each, or into seven hundred and twenty livres. The coinage, therefore, increases the value of a mark of standard gold bullion, by the difference between six hundred and seventy-one livres ten deniers, and seven hundred and twenty livres ; or by forty-eight livres nineteen sous and two deniers."

* "Dictionnaire de Bazinghen," tom. ii. p. 589., article "Seigneurage."

See the Analysis in Appendix.

E

Adam Smith (b. i. c. 5. v. i. p. 54.) had before stated, "In reality, during the continuance of any one regulated proportion between the respective values of the different metals in coin, the value of the most precious metal regulates the value of the whole coin." According to this theory, the gold louis-d'or, being of the most precious metal, must have regulated the value of the whole coin. May not this have led to an erroneous conclusion? Whether the metal be the most precious or not is immaterial. That coin, whether gold or silver, which is made a legal tender in the payment of debt to any amount, the other coins being exchangeable with this coin at a rate beyond what those coins would sell for as bullion, becomes, from that circumstance, the measure or standard of value, and "regulates the value of the whole coin." It appears from the statement* (p. 379.) that the gold coins exchanged with the livres, at the rate of 48 livres 19 sous and 2 deniers more in coin than the bullion would sell for, of which these gold coins were composed that this difference existed between the mark of coined and uncoined gold. The seignorage and all the reasoning of Adam Smith is applied by him to the louis-d'or, as if it was the standard coin, the measure of value; but the louisd'or was not the measure of value, nor the money of account; nor was gold the standard. The money of account was the livre, sol, and denier, and the regulation that the louis-d'or should exchange for 24 livres-being about eight per cent. beyond its value as gold bullion-secured the louis-d'or in the circulation, not because it was more precious than the silver, nor because the seignorage increased its value as coin, but because it found in its exchange with the livres its best market; it became a token or merchandise, silver in value, although gold in metal — as our shillings become gold in value, although silver in metal. The louis-d'ors were as effectually silver in value, as if each louis-d'or had been transmuted into a 24

* P. 49.

livre piece of silver. The standard was silver. The louis-d'ors were ancillary coins; their value was determined by the silver coin. The gold coin in France stood in the same relation to the silver coin, as the silver coin in England now stands to the gold coin. It would be as reasonable to say that the seignorage of 10 per cent. on our silver coin added ten per cent. to the value of our current coin, as to say that the seignorage of eight per cent. on the gold coin in France added eight per cent. to the value of the current coin; and that ten per cent. more must be paid in France for a bill payable in England, on account of the seignorage on the silver coin, as to say that eight per cent. more must be paid in England for a bill payable in France, on account of the eight per cent. seignorage on the gold coin there. The bill drawn on France was not paid there in gold money, valued as gold money, any more than a bill drawn on England in silver money is valued as silver

money.

It is to be observed, that Adam Smith's illustration is borrowed from the gold coin, the louis-d'or: if the louis-d'or was an ancillary coin, and exchanged with the silver livres at seven or eight per cent. beyond its intrinsic value, it would be worth so much more, not on account of the workmanship, but on account of its being raised to the value of the silver livre, for which it was made exchangeable: the coined gold would be as valuable as the coined silver. If, as I submit, the gold coin was an ancillary coin, the seignorage would add to the gold coin the whole amount of the duty, as supposed by Adam Smith, and the consequences would follow which he enumerates :-If exported, it would soon return; it would be a tax which no one would pay; if a bill were purchased with gold coin, so much more beyond the intrinsic value of the coin would be paid for it as the seignorage amounted to; and it would neither be melted nor exported, but, I conceive, none of these consequences would result from a seignorage being imposed upon the legal tender coin;