III.

Note.—Speaking in the House of Commons on Agricultural Distress, on May 7, 1822, Ricardo gives an illustration which bears on some points in the foregoing and following letters: 'Suppose my own case. I am possessed of a considerable quantity of land, the whole unburthened with a single debt. Now according to the honourable member (Mr. Attwood) I and the tenants on that land would have only been injured to the amount of the increase which the change in the value of money has made in the burthen of taxation; but we are in point of fact injured much more.' 'The superabundant supply' has caused a sinking in the value of corn greater than in proportion to the additional quantity itself. To understand why, take the case of a commodity introduced for the first time, say a particular kind of superfine cloth: 'If 10,000 yards of this clothwere imported, under such circumstances, many persons would be desirous of purchasing it, and the price consequently would be enormously high. Suppose this quantity of cloth to be doubled; the aggregate value of the 20,000 yards would be much more considerable than the aggregate value of the 10,000 yards, for the article would still be scarce and therefore in great demand. If the quantity of cloth were to be again doubled, the effect would still be the same, for, although each particular yard of the 40,000 would fall in price, the value of the whole would be greater than that of the 20,000. But, if they went on in this way increasing the quantity of the cloth until it came within the reach of the purchase [sic] of every class in the country, from that time any addition to its quantity would diminish the aggregate value. This argument would apply to corn. Corn is an article which is necessarily limited in its consumption, and, if you went on increasing it in quantity, its aggregate value would be diminished beyond that of a smaller quantity. I make an exception in favour of money. If there were only £100,000 in this country, it would answer all the purposes of a more extended circulation; but, if the quantity were increased, the value of commodities would alter only in proportion to the increase, because there is no necessary limitation of the quantity of money [wanted].' (Cf. Letter III, p. 3.) So on June 12th he says: 'Quantity regulates the value of everything,' though it is also true (he says in a speech of May 9, 1822) 'that the price of every commodity is constituted by the wages of labour and the produce [sic] of stock.'

Stock Exchange,24 March, 1810.

My dear Sir,

I have left you quite free for Friday, but I regret that your engagements will not conveniently allow you to come to us on that day. We shall expect you on Saturday morning. I hope Mrs. Malthus' visit will not be deferred longer than the next meeting of the King of Clubs[33].

It appears to me that you ascribe the difference in thevariations of price which would probably be the effect of doubling the quantity of coffee, sugar, or indigo, on [the] one hand, or of doubling the quantity of the precious metals on the other, to a wrong cause. Coffee, sugar, and indigo are commodities for which, although there would be an increased use if they were to sink much in value, still, as they are not applicable to a great variety of new purposes, the demand would necessarily be limited; not so with gold and silver. These metals exist in a degree of scarcity, and are applicable to a great variety ofnewuses; the fall of their price, in consequence of augmented quantity, would always be checked, not only by an increased demand for those purposes to which they had before been applied, but to the want of them for entirely new employments. If they were in sufficient abundance, we might even make our tea-kettles and saucepans of them. It is to this essential difference between these commodities, and not to the circumstance of one of them being employed as a circulating medium, that I should attribute the different effects which would follow from the augmentation of their quantity. In any point of view however I do not see how it bears materially on the question between us, namely whether the precious metals are frequently resorted to for the payment of debts between countries when no disturbance has taken place in the amount or proportion of the currency.

I wonder as you do that the stocks have not felt the effects of Mr. Vansittart's vigorous system. The delay which has taken place in creating new stock, the good news from abroad, and, above all, the want of reflection in the mass of stockholders may be considered as the cause.

Ever truly yours,David Ricardo.

Note.—'The King of Clubs' is described in the Life of Sir James Mackintosh, (by his son,—2nd ed. 1836), vol. i. p. 137(under date 1800): 'As an agreeable rallying point in addition to the ordinary meetings of a social circle, a dinner-club (christened "The King of Clubs" by Mr. Robert Smith [Bobus, brother of Sydney Smith]), was founded by a party at his [Mackintosh's] house, consisting of himself [Mackintosh] and the five following gentlemen, all of whom still survive:—Mr. Rogers, Mr. Sharp, Mr. Robert Smith, Mr. Scarlett, and Mr. John Allen. To these original members were afterwards added the names of many of the most distinguished men of the time; and it was with parental pride and satisfaction that he received intelligence some time after of their "being compelled to exclude strangers and to limit their numbers, so that in what way 'The King of Clubs' eats, by what secret rites and institutions it is conducted, must be matter of conjecture to the ingenious antiquary, but can never be regularly transmitted to posterity by the faithful historian."'—The biographer adds in a note that the Club was suddenly dissolved in the year 1824. Some of the most distinguished members are enumerated, among them Ricardo (l. c. p. 138n.). To judge by a letter of Mackintosh to Sharp on 29th June, 1804, the Club at that date included (besides the writer and his correspondent) only Sydney Smith, Scarlett, Boddington, the poet Rogers, Whishaw, and Horner (Mack. Life, vol. i. 209). The time of meeting seems to have been the first Saturday of every month. See below Letter XLIV, but cf. XLIII. Add Memoirs of Horner, i. 193, under date April 1802, and Holland's Memoir of Sydney Smith i. 91, &c.

London,10 Aug., 1810.

My dear Sir,

On my return to London, after a short excursion to Tunbridge Wells, I found your obliging letter.... On further reflection I am confirmed in the opinion which I gave with regard to the effect of opening new markets or extending the old. I most readily allow that since the war not only the nominal but the real value of our exports and imports has increased; but I do not see howthis admission will favour the view which you take of the subject.

England may have extended its carrying trade with the capital of other countries. Instead of exporting sugar and coffee direct from Guadaloupe and Martinique to the continent of Europe, the planters in those colonies may first export them to England, and from England to the continent. In this case the list of our exports and imports will be swelled without any increase of British capital. The taste for some foreign commodity may have increased in England at the expense of the consumption of some home commodity. This would again swell the value of our exports and imports, but does not prove a general increase of profits nor any material growth of prosperity.

I am of opinion that the increased value of commodities is always the effect of an increase either in the quantity of the circulating medium or in its power, by the improvements in economy [in] its use [sic][34],—and is never the cause[35]. It is the diminished value, I mean nominal value, of commodities, which is the great cause of the increased production of the mines; but the increased nominal value of commodities can never call money into circulation. It is certainly an effect and not a cause. I am writing in a noisy place; you must therefore excuse all blunders. I must offer the same apology for my two half sheets[36]. I did not like to copy the first half over again.

With best compliments to Mrs. Malthus, I remain,

Yours very sincerely,David Ricardo.

Stock Exchange,17 Aug., 1810.

My dear Sir,

... I cannot deny myself the pleasure of accepting your kind invitation for Saturday next. I will be with you at the usual hour.

That we have experienced a great increase of wealth and prosperity since the commencement of the war, I am amongst the foremost to believe; but it is not certain that such increase must have been attended by increased profits, or rather an increased rate of profits, for that is the question between us. I have little doubt however that for a long period, during the interval you mention[37], there has been an increased rate of profits, but it has been accompanied with such decided improvements of agriculture both here and abroad, for the French Revolution was exceedingly favourable to the increased production of food, that it is perfectly reconcileable to my theory. My conclusion is that there has been a rapid increase of capital, which has been prevented from showing itself in a low rate of interest by new facilities in the production of food. I quite agree that an increased value of particular commodities occasioned by demand has a tendency to occasion an increased circulation, but always in consequence of the cheapness of some other commodities. It is therefore their cheapness which is the immediate cause of the introduction of additional money.

I have not been home since I received your letter. I will look at the passage you refer me to in Adam Smith[38], and will consider of the other matters in your letter, so as to be prepared to give you my theory when we meet.

The facts you have extracted from Wetenhall's tables are curious[39], and are hardly reconcileable to any theory. I attribute many of them to the state of confusion into which Europe has been plunged by the extent and nature of the war; and it would be quite impossible to reason correctly from them without calculating what the state was of the real as well as the computed exchange during the periods referred to. Pray make my best respects to Mrs. Malthus, and believe me,

Truly yours,David Ricardo.

Dear Sir,

I lose no time in answering your obliging letter and endeavouring as far as lies in my power to remove the very few objections which prevent us from being precisely of the same opinion on the subject of money and the laws which regulate its value in the countries which have constant commercial intercourse with each other. I have no view in this discussion but that which you have avowed, the circulation of truth; if therefore I should fail to convince you, and you should express your opinions in print, it is immaterial to me whether you mention my name or not. I trust you will do that which shall most fully tend to establish the just principles of the science.

There does not appear to me to be any substantial difference between bullion and any other commodity as far as regards the regulation of its value and the laws which determine its exportation or importation. It is true that bullion, besides being a commodity useful in the arts, has been adopted universally as a measure of value and a medium of exchange; but it has not on that account been taken out of the list of commodities. A new use has been found for aparticular article; consequently there has been an increased demand for it and an augmented supply. This new use has made every man a dealer in bullion; he buys it to sell it again, and the general competition of all these dealers will as surely, and as strictly, regulate its value in every country, as the competition of the same or other dealers will regulate the value of all other commodities. I have your sanction for calling every purchaser of commodities a dealer in bullion; and, though in the language of commercial men the sellers of money are in all cases called purchasers, it is not on that account less true that they are sellers of one commodity and purchasers of another. The nature of corn was not changed by the discovery that a new use might be made of it by fermentation and distillation; and, if we should hereafter discover that it might be used for a hundred other purposes, contributing to the comforts and enjoyments of mankind, the demand for it would increase, and its price would in the first instance be considerably augmented; but this would be the only change it would undergo; it would continue to be imported and exported by the same rules as every other commodity. I have no doubt that on this point we should not differ; it remains therefore for you to show why the new uses, to which gold has been applied in consequence of its being adopted as the money of the world, should exempt it from the general law of competition, and why it should not certainly and invariably (invariably only as that term is applied to other commodities) seek the most advantageous market.

It is probable that the word 'redundancy' has not been happily chosen by me to express the impression made on my mind of the cause of an unfavourable balance of trade; but on looking over the article in the Review[40]I find that you use it precisely in the sense in which I wish to convey my meaning, for you admit that a relatively redundantcurrency may be, and frequently is, a cause of an unfavourable balance of trade; but you contend that it is not the only cause. Now I, so understanding the word, contend that it is the invariable cause. This relative redundancy may be produced as well by diminution of goods as by an actual increase of money (or which is the same thing by an increased economy in the use of it) in one country; or by an increased quantity of goods or by a diminished amount of money in another. In either of these cases a redundancy of money is produced as effectually as if the mines had become more productive. I do not deny that temporary fluctuations do occur in the value of the precious metals; on the contrary I maintain that those fluctuations never cease; but I attribute them all to one cause, namely a redundancy of the currency produced in one of the ways above mentioned, and not to the demand for particular commodities. These demands are in my opinion regulated by the relative state of the currency; they are not causes but effects. You appear to me not sufficiently to consider the circumstances [which] induce one country to contract a debt to another. [In] all the cases you bring forward you always suppose the [deb]t already contracted, forgetting that I uniformly contend that it is the relative state of the currency which is the motive to the contract itself. The corn, I say, will not be bought unless money be relatively redundant; you answer me by supposing it already bought and the question to be only concerning the payment. A merchant will not contract a debt for corn to a foreign country unless he is fully convinced that he shall obtain for that corn more money than he contracts to pay for it, and, if the commerce of the two countries were limited to these transactions, it would as satisfactorily prove to me that money was redundant in one country as that corn was redundant in the other. It would prove too that nothing but money was redundant. If indeed sugar were exportedby some other merchant, the debt for corn would be paid without the exportation of money, and I should say that sugar was the redundant commodity; and the exportation of sugar, the more redundant commodity, by diminishing the aggregate amount of commodities, would raise the value of money, so that in a short time money would, if corn continued to be imported and sugar exported, no longer be redundant even as compared with corn. Your observation is just, concerning the extra expenses attending the exportation of bulky commodities; but in all these discussions we must suppose these expenses to make part of the price of the commodity; our comparison is made on the prices at which the importer could afford to sell them, and those prices necessarily include expenses of every sort. I do not think that the knowledge of the computed exchange of Jamaica would throw any light on the subject in dispute[41]. I will, however, endeavour to learn every particular concerning it, and hope to be able on Saturday next to pay you a visit in Hertfordshire, when we will further discuss these seeming difficulties.

I am, dear Sir, with great respect,Your obedient Servant,David Ricardo.

Throgmorton Street,18th June, 1811.

Dear Sir,

I have been so much engaged since I had the pleasure of receiving your letter that I have not had an opportunity of answering it till this evening.

The information which you are desirous of obtaining respecting the premium on bills in Jamaica from the year1808 to the present period, I will endeavour to procure, but, as these transactions all take place in Jamaica, and as the merchants here are frequently not acquainted with the prices at which the bills remitted to them are negociated, I am not sure that I shall be successful.

I very much regret that there is so little probability of our finally agreeing on the subject which has lately engaged our attention. The definition which you give of the word 'redundant,' as applied to the currency, is not satisfactory to me. Though it should be allowed that the rise in the price of one commodity, in the case of a scarcity of corn, should be accompanied with a fall in the prices of all others, why should a redundancy of currency be impossible under such circumstances? The currency must, I apprehend, be considered as a whole, and as such must be compared with the whole of the commodities which it circulates. If then it be in a greater proportion to commodities after than before the scarce harvest, whilst no such alteration has taken place in the proportions between money and commodities abroad, it appears to me that no expression can more correctly describe such a state of things than a 'relative redundancy of currency.' Under these circumstances not only money but every other commodity would become comparatively cheap as compared with corn, and would therefore be exported in return for the corn which would be in demand in this country. By relative redundance then I mean, relative cheapness, and the exportation of the commodity I deem, in all ordinary cases, the proof of such cheapness. Indeed, from one who allows that the amount of money employed in any country is regulated by its value, and might therefore be comparatively redundant though it consisted only of a million, or deficient though it amounted to a hundred millions, I should not have expected any difference of opinion on the comparative cheapness of money being the only satisfactoryproof of its redundance. If however I thought that the difference between us was as to the correct use of a word, I should immediately yield the point in dispute, but I am persuaded that we do not agree in the principle. You are of opinion that a bad harvest will raise the price of corn, but will lower in some degree the prices of other commodities. Whether it would or would not do so is not material; but, if your opinion is correct, then I say there would be no exportation of money, because money would not be the cheapest exportable commodity. If, before the deficient harvest, money was at the same value in any two countries, that is to say all their exportable commodities without exception were at the same prices in both, then, according to your view of the question, after the scarcity the prices of all commodities would fall in the country where such scarcity occurred. Whilst then the prices were unequal in the two countries, commodities only would be exported in exchange for corn, and there would be no question between us, because we differ as to the cause of the exportation of money. You have indeed said that there may be a glut of commodities in the foreign market. What! a glut of commodities with a dearer price! impossible,—these two circumstances are incompatible. If the price of any commodity had been £20 in both countries and in consequence of the bad harvest it had been lowered to £15 in one of them, there could not be a glut of that commodity in the other country till it had there also fallen to £15. Not only must the price of one commodity fall in the foreign market, but the prices of all (because you suppose them all to have fallen in England) before money could be exported in exchange for corn, and then I would allow that money would be exported, but even then it would be so only because it was more cheap on the whole, as compared with commodities in the exporting country, and this I contend isthe proof of its relative redundance. You maintain that money is rendered cheap by a bad harvest as compared with corn only, but with all other commodities it is dearer than before,—and then, what appears to me very inconsistent, you insist that this commodity thus rendered scarce and dear will be exported, though, before it had increased in value, it had no tendency to leave us, whilst too there are commodities which have undergone an opposite change, which from being dearer have become cheaper, and which will nevertheless be obstinately retained by us. This is a mode of reasoning which I cannot reconcile.

With respect to the other point, namely, that the exchange accurately measures the depreciation of the currency[43], I cannot but humbly retain that opinion notwithstanding the high authorities against me. I do not mean to contend that a convulsed state of the exchange, such as would be caused by a subsidy granted to a foreign power, would accurately measure the value of the currency, because a demand for bills arising from such a cause would not be in consequence of the natural commerce of the country. Such a demand would therefore have the effect of forcing the exports of commodities by means of the bounty which the exchange would afford. After the subsidy was paid the exchange would again accurately express the value of the currency. The same effects would follow, as in the case of a subsidy, from the foreign expenditure of Government. These have a natural tendency to create an unfavourable exchange, yet if the demand for bills is regular it is surprising how this bounty on exportation will be reduced by the competition amongst the exporters of commodities. I am of opinion that in the ordinary course of affairs, if, from any of the circumstances so often mentioned, there should be a slight alteration in the value of the currencies of any two countries, itwill speedily be communicated to the exchange; and, if such a state of things should permanently continue, the exchange has no tendency to correct itself. The fact however appears to be that there is no degree of permanence in the proportions between the currencies and the commodities of nations,—they are subject to constant fluctuations always approaching an absolute level but never really finding it. I hope I have not wearied you with the defence which I have endeavoured to make for the opinions which I have imbibed. I assure you that I am not obstinately attached to any system, but am ready to relinquish any views I may have taken as soon as I am satisfied that they are incorrect. I shall not fail attentively to consider the chapters in Sir J. Steuart's work which you have mentioned[44]. I hope before the summer is over to pay you a visit at Hertford.

I am, dear Sir,Yours very sincerely,David Ricardo.

New Grove, Mile End,17 July, 1811.

Dear Sir,

I hoped long ere this to have had the pleasure of seeing you in London. I am anxious for an opportunity of introducing Mrs. Malthus and Mrs. Ricardo to each other, and I shall certainly claim the half promise which Mrs. Malthus made me on that subject when I experienced your hospitality at Hertford. We have few engagements, and have a bed always at your disposal, so that I shall hope on your very first visit to London you will favour me by occupying it.

A friend of mine has been writing on the subject of bullion. I take the liberty of sending you the MS[45]. If you could look over it and give me your opinion of it you will much oblige me. He would be induced to prepare it for the press if he thought that the mode in which the argument is put is more likely to silence our adversaries and convince those who are not our adversaries than the mode in which it has been put by any other person. Should you be so engaged that you cannot devote your attention to it at the present time, use no ceremony with me, but return the MS. by the coach, directed to me at No. 16 Throgmorton Street. With best respects to Mrs. Malthus,

I am, dear Sir,Yours very truly,David Ricardo.

Stock Exchange,17th Oct., 1811.

Throgmorton Street,22nd Oct., 1811.

Dear Sir,

I am exceedingly obliged to you for the trouble which you have taken in looking over the papers which I sent you, and for the remarks which you have made upon them. Notwithstanding your flattering encouragement I think I shall not have sufficient confidence again to address the public;—the object which I had in view is completely attained,—the public attention has been awakened, and the discussion is now in the most able hands. I regret, however, that you cannot bring yourself to subscribe to my doctrine respecting the exchange being influenced by no other causes but by the relation which the amount of currency bears to the uses for which it is required in thedifferent nations of the earth. This may proceed from your interpreting my proposition somewhat too rigidly. I wish to prove that if nations truly understood their own interest they would never export money from one country to another but on account of comparative redundancy. I assume indeed that nations in their commercial transactions are so alive to their advantage and profit, particularly in the present improved state of the division of employments and abundance of capital, that in point of fact money never does move but when it is advantageous both to the country which sends and the country that receives that it should do so. The first point to be considered is, what is the interest of countries in the case supposed? The second what is their practice? Now it is obvious that I need not be greatly solicitous about this latter point; it is sufficient for my purpose if I can clearly demonstrate that the interest of the public is as I have stated it[46]. It would be no answer to me to say that men were ignorant of the best and cheapest mode of conducting their business and paying their debts, because that is a question of fact not of science, and might be urged against almost every proposition in Political Economy. It rests with you therefore to prove that a case can exist where it may become theinterestof a nation to pay a debt by the transmission of money rather than in any other mode, when money is not the cheapest exportable commodity,—when money (taking into account all expenses which may attend the exportation of different commodities as well as money) will not purchase more goods abroad than it will at home. You appear to me to have repeatedly admitted that it is the relative prices of commodities which regulates their exportation. Is it notthen as certain that money will go to that country where the major part of goods are cheap, as that goods will go to any other country where the major part are dear? I say the major part, because if the cheapness of one half of the exportable commodities be balanced by the dearness of the other half, in both countries, it is obvious that the commerce of such countries will be confined to the exchange of goods only. When you say that money will go abroad to pay a debt or a subsidy, or to buy corn, although it be not superabundant, but at the same time admit that [it] will speedily return and be exchanged for goods, you ap[pear to me] to concede all for which I contend, namely, that [it will] be theinterestof both countries, when money is not superabundant in the one owing the debt, that the expense of exporting the money should be spared, because it will be followed by another useless expense,—sending it back again.

If in any country there exists a dearness of importable commodities and no corresponding cheapness of exportable commodities, money in such country is above its natural level and must infallibly be exported in payment of the dear commodities,—but what does this state of things indicate but an excess of currency, and it may surely be correctly said that money is exported to restore the level not to destroy it. I ought to apologise for again troubling you with my opinions, but you have drawn me into it. I shall be happy to renew our conversation on these disputed points as soon as you can make it convenient to visit us in London, and I trust it will not be long before Mrs. Malthus and you will favour us with your company. On some future day I shall have great pleasure in again visiting you at Hertford.

I am, dear Sir,Yours very truly,David Ricardo.

New Grove, Mile End,22nd Dec., 1811.

My dear Sir,

I write to you, in the first place, to remind you that Mrs. Ricardo and I fully depend on having the pleasure of Mrs. Malthus' and your company at Mile-end in the next month, when we hope that our endeavours to make your visit comfortable will induce you to make a long stay with us. In the second place, I am desirous of correcting some of the errors in the papers which I left with you and which I have been enabled to discover, as I have many others, by the ingenious arguments with which you have opposed my conclusions. In my endeavours to trace the effects of a subsidy[47]in forcing the exportation of commodities, I stated, if I recollect rightly, that it would occasion, first, a demand for bills; secondly, an exportation of all those commodities the prices of which already differed so much, in the two countries, as to require only the trifling stimulus which the first fall in the exchange would afford; thirdly, a real alteration in the relative state of prices, viz. a rise in the exporting and a fall in the importing country,—in a degree too to counterbalance the advantage from the unfavourable exchange; and lastly, a further fall of the exchange and a consequent exportation of an additional quantity of goods and then of money till the subsidy were paid. It appears, then, that if the subsidy were small it would be wholly paid by the exportation of commodities, as the fall in the exchange would be sufficient to encouragetheirexportation, but not sufficient to encourage the exportation of money. If the exportation of money were in the same proportion as the exportation of commodities, that is to say, supposing the commodities of a country to be equal to 100, and its money equal to two, then if not less than one fiftieth of theexports in payment of the subsidy consisted of money, prices would after such payment be the same as before in both countries, and, although the exchange must have fallen to that limit at which the exportation of money became profitable, it would immediately have a tendency to recover, and would shortly rise to par; but it is precisely because less than this proportion of money will be exported that the exchange will continue permanently unfavourable and will have no tendency to rise, more than it will have to fall.

I believe you admit, that in the case of an augmentation of 2 per cent. to our currency, although it were wholly metallic, the prices of commodities would rise in this country 2 per cent. above their former level, and that such rise being confined to this country alone it would check exportation and encourage importation; the consequence of which would be a demand for bills and a fall in the exchange. This rise of prices and fall of the exchange, proceeding from what you do not object to call a redundant currency, would not be temporary but permanent, unless it were corrected by a reduction of the amount of the currency here, or by some change in the relative amount of the currencies of other countries. That these would be the effects of a direct augmentation of currency, I believe, you, with very few qualifications, admit. Now, as a bad harvest or the vote of a subsidy tend [sic] to produce the very same effects, namely, a relative state of high prices at home, accompanied by an unfavourable exchange, they admit only of the same cure,—and, as in the case of an augmentation of currency the exchange would have no tendency to rise, neither would it in the case of a subsidy, the unfavourable exchange being in both instances produced by a redundant currency, or in more popular language by a relative state of prices which renders the exportation of money most profitable[48]. I haveuniformly maintained that the money of the world is distributed amongst the different countries according to their commerce and payments, and that, if in any country it should from any cause happen to exceed that proportion, the excess would infallibly be exported to be divided amongst the other countries. I have, however, always supposed that my readers would understand me to mean that this would be strictly the fact only if money could be exported free from all expense. If the expenses of exporting money to France be 3 per cent., to Vienna 5 per cent., to Russia 6 per cent., and to the East Indies 8 per cent., the currency of England may exceed its natural level as compared with those countries by 3, 5, 6, and 8 per cent. respectively, and consequently the exchange may permanently continue depressed in th[ose pr]oportions. If an excess of currency once occurs, [the unfa]vourable exchange must continue till some alterati[on in] the relative amount of currency. The circumstances which [may] occasion such an alteration are numerous, and are fully detailed in the papers which I left with you. To the precise agreement between the effects of an augmented currency and the effects of a subsidy I most particularly request your attention, as on such agreement depends the whole success of the argument which I am advancing in favour of my opinion that an unfavourable exchange has no tendency to correct itself. It may be urged that the relative state of high prices at home occasioned by an augmentation of currency is the natural effect of such a cause, but that this is not the case in a subsidy; that the exportation of commodities in payment of a subsidy is forced, and that it will produce a glut in the foreign market, but that after the subsidy is paid and the necessity for exportation shall cease prices will rise in the foreign market to their former rate. This however will not be true. Commodities may rise in a trifling degree abroad, but cannot regain theirformer rate unless the exchange should also rise to par, but this it can never do whilst the demand for bills do[es] not exceed the supply. Now, as the prices of foreign commodities in the home market, which could not have been supplied in the usual abundance during the operation of the subsidy when we had a large balance to pay, would fall, and would be in greater demand from the moment that our commodities would be received in exchange, the exportation of our goods would be balanced by the importation of foreign goods, and the sellers of bills would neither exceed nor fall short of the purchasers. These are the substance of the amendments which I wish to make to my paper, which is now so faulty that I shall be glad to have it returned to me. Have the goodness to bring it with you when you come to town.

I am, my dear Sir,Yours with great esteem,David Ricardo.

London,29th, August, 1812.

My dear Sir,

I intend leaving town this evening for Ramsgate, where I think I shall stay about a fortnight, so that I cannot accept your kind invitation for Saturday next; but I hope it will not be long before I bend my steps towards your hospitable roof. If on Saturday the 19th of September you should be quite disengaged and it should be every way convenient to you and Mrs. Malthus, I shall be glad to take tea with you on the evening of that day. I shall be obliged to quit you on the Monday morning. I hope I need not say that I shall be exceedingly sorry if I put you to the least inconvenience and that it willbe equally agreeable to me to visit you on any Saturday after the 19th if I am not engaged to go to Ramsgate.

Perhaps you will be so good as to write a few lines directed to the Stock Exchange a few days previously to the 19th as I shall certainly be in town at that time. I am obliged to you for the interest you take in the price of Omnium. It appears to be in a very thriving condition. Mr. Goldsmid[50]informs me that at the period of the improvement in the exchange about Christmas last there were no importations, as far as he knows, of gold from France. A small quantity was imported from Lisbon. I have consulted Wetenhall's list[51], and the following appear to be the variations in the exchange and the price of gold about Christmas last.

ExchangewithHamburg.Doubloons,per oz.Portuguesegold,[per. oz.]1811.£s.d.£s.d.Nov. 29244 15 0Dec. 324·64 18 6" 624·64 14 64 18 6" 13254 15 6" 20254 19 0" 3127·61812.Jan. 327·64 14 04 18 6" 3127·64 18 6Feb. 21284 17 0Mar. 20294 15 6" 3129·44 14 64 13 6April 2129·44 17 64 17 6June 528·64 18 6July 3128·94 19 05 0 0Aug. 2828·95 0 0

The price of dollars yesterday was 6/3½ per oz., higherby one penny than any price ever yet quoted. I should think that a very trifling rise more will send the tokens out of circulation. We will speak on our old subject when we meet. I am now in great haste and must therefore conclude. Pray make my kind compliments to Mrs. Malthus,

And believe me, my dear Sir,Yours very truly,David Ricardo.

[At the end is written in pencil in Malthus's handwriting, 'Was any bullion imported from Hamburg in March?']

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 Saturday 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 assure 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 Saturday evening.

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