Part 2 (1/2)

I am, my dear Sir, Yours very truly, DAVID RICARDO.

II.

STOCK EXCHANGE, _22 March, 1810_.

MY DEAR SIR,

Mrs. Ricardo is expecting Mrs. Malthus to accompany her on Friday next to Knyvett's concert, and will, I am sure, be very much disappointed at the information which I am to give her that she will not be able to accompany you to town. I will not however quite give up all hopes of seeing her.

You must positively not think of leaving us before Tuesday. I have engaged several of your friends to meet you at dinner on Monday, and I not only advance my own claims but those of Mr. Wishaw[29], Mr.

Sharp[30], Mr. Tennant[31], and Mr. Dumont[32].

I have been making enquiries concerning a bullion merchant. I find that the trade is mostly carried on by a cla.s.s of people not particularly scrupulous in their modes of getting money, and I am told that they would not be very communicative, particularly on the subject of their _exports_. There are however some well-informed merchants who know a great deal of the trade without themselves being actively engaged in it, to whom I hope I shall be able to introduce you.

I do not admit that if you were to double the medium of exchange it would fall to half its former value, not even if you were also to double the quant.i.ty of metal which was the standard of such medium. The consumption would increase in consequence of its diminished value, and the fall of its value would be regulated precisely by the same law as the fall in the value of indigo, sugar, or coffee.

Mr. Mushet will dine with us on Sunday. What do you think of Mr.

Vansittart's financial talents?

Yours very truly, DAVID RICARDO.

NOTE.--Speaking in the House of Commons on Agricultural Distress, on May 7, 1822, Ricardo gives an ill.u.s.tration which bears on some points in the foregoing and following letters: 'Suppose my own case.

I am possessed of a considerable quant.i.ty 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 quant.i.ty 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 cloth were imported, under such circ.u.mstances, many persons would be desirous of purchasing it, and the price consequently would be enormously high.

Suppose this quant.i.ty 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 quant.i.ty 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 quant.i.ty of the cloth until it came within the reach of the purchase [_sic_] of every cla.s.s in the country, from that time any addition to its quant.i.ty 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 quant.i.ty, its aggregate value would be diminished beyond that of a smaller quant.i.ty. 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 quant.i.ty were increased, the value of commodities would alter only in proportion to the increase, because there is no necessary limitation of the quant.i.ty of money [wanted].' (Cf. Letter III, p.

3.) So on June 12th he says: 'Quant.i.ty 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 const.i.tuted by the wages of labour and the produce [_sic_] of stock.'

III.

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 Sat.u.r.day 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 the variations of price which would probably be the effect of doubling the quant.i.ty of coffee, sugar, or indigo, on [the] one hand, or of doubling the quant.i.ty 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 of _new_ uses; the fall of their price, in consequence of augmented quant.i.ty, 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 circ.u.mstance 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 quant.i.ty. 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 ma.s.s of stockholders may be considered as the cause.