THE DECLINE AND FALL, &c. &c. NOTHING, they say, is more certain than death, and nothing more uncertain than the time of dying; yet we can always fix a period beyond which man cannot live, and within some moment of which he will die. We are enabled to do this, not by any spirit of prophecy, or foresight into the event, but by observation of what has happened in all cases of human or animal existence. If, then, any other subject, such, for instance, as a System of Finance, exhibits in its progress, a series of symptoms indicating decay, its final dissolution is certain, and the period of it can be calculated from the symptoms it exhibits. Those who have hitherto written on the English System of Finance (the Funding System) have been uniformly impressed with the idea of its downfall happening some time or other. They took, however, no data for that opinion, but expressed it predictively, or merely as opinion, from a conviction that the perpetual duration of such a system was a natural impossibility. It is in this manner that Doctor Price has spoken of it; and Smith, in his Wealth of Nations, has spoken in the same manner; that is, merely as opinion without data. "The progress (says Smith) of the enormous debts, which at present oppress, and will, in the long run, most probably ruin all the great Nations in Europe, (he should have said Governments) has been pretty uniform." But this general manner of speaking, though it might make some impression, carried with it no conviction. It is not my intention to predict any thing; but I will shew from data already known, from symptoms and facts which the English funding system has already exhibited publicly, that it will not continue to the end of Mr. Pitt's life, supposing him to live the usual age of a man. much sooner it may fall, I leave to others to predict. How Let financiers diversify systems of credit as they will, it is nevertheless true, that every system of credit is a system of paper money. Two experiments have already been had upon paper money; the one in America, the other in France. In both those cases the whole capital was emitted, and that whole capital, which, in America, was called continental money, and in France assignats, appeared in circulation; the consequence of which was, that the quantity became so enormous, and so disproportioned to the quantity of population, and to the quantity of objects upon which it could be employed, that the market, if I may so express it, was glutted with it, and the value of it fell. Between five and six years determined the fate of those experiments. The same fate would have happened to gold and silver, could gold and silver have been issued in the same abundant manner as paper had been, and confined within the country as paper money always is, by having no circulation out of it; or, to speak on a larger scale, the same thing would happen in the world, could the world be glutted with gold and silver, as America and France have been with paper. The English system differs from that of America and France in this one particular, that its capital is kept out of sight; that is, it does not appear in circulation. Were the whole capital of the National debt, which at the time I write this is almost four hundred million pounds sterling, to be emitted in assignats or bills, and that whole quantity put into circulation, as was done in America and in France, those English assignats, or bills, would sink in value as those of America and France have done; and that in a greater degree, because the quantity of them would be more disproportioned to the quantity of population in England, than was the case in either of the other two countries. A nominal pound sterling in such bills would not be worth. one penny. But though the English system, by thus keeping the capital out of sight, is preserved from hasty destruction, as in the case of America and France, it nevertheless approaches the same fate, and will arrive at it with the same certainty, though by a slower progress. The difference is altogether in the degree of speed by which the two systems approach their fate, which, to speak in round numbers, is as twenty is to one; that is, the English system, that of funding the capital instead of issuing it, contained within itself a capacity of enduring twenty times longer than the system adopted by America and France; and at the end of that time it would arrive at the same common grave, the Potter's field, of paper money. The datum, I take for this proportion of twenty to one, is the difference between a capital and the interest at five per cent. Twenty times the interest is equal to the capital. The accumulation of paper money in England is in proportion to the accumulation of the interest upon every new loan; and therefore the progress to dissolution is twenty times slower than if the capital were to be emitted and put into circulation immediately. Every twenty years in the English system is equal to one year in the French and American systems. Having thus stated the duration of the two systems, that of funding upon interest and that of emitting the whole capital without funding, to be as twenty to one, I come to examine the symptoms of decay approaching to dissolution that the English system has already exhibited, and to compare them with similar symptoms in the French and American systems. The English funding system began one hundred years ago; in which time there have been six wars, including the war that ended in 1697. 1. The war that ended, as I have just said, in 1697. 3. The war that began in 1739. 4. The war that began in 1756. 5. The American war that began in 1775. 6. The present war that began in 1793. The National debt at the conclusion of the war, which ended in 1697, was twenty-one millions and a half. (See Smith's Wealth of Nations, chapter on Public Debts.) We now see it approaching fast to four hundred millions. If between these two extremes of twenty-one millions and four hundred millions, embracing the several expenses of all the including wars, there exists some common ratio that will ascertain arithmetically the amount of the debt at the end of each war, as certainly as the fact is now known to be, that ratio will in like manner determine what the amount of the debt will be in all future wars, and will ascertain the period within which the funding system will expire in a bankruptcy of the Government; for the ratio I allude to is the ratio which the nature of the thing has established for itself. Hitherto no idea has been entertained that any such ratio existed, or could exist, that could determine a problem of this kind, that is, that could ascertain, without having any knowledge of the fact, what the expense of any former war had been, or what the expense of any future war would be; but it is nevertheless true that such a ratio does exist, as I shall shew, and also the mode of applying it. The ratio I allude to is not in arithmetical progression, like the numbers 2, 3, 4, 5, 6, 7, 8, 9; nor yet in geometrical progression, like the numbers 2, 4, 8, 16, 32, 64, 128, 256; but is in the series of one half upon each preceding number; like the numbers 8, 12, 18, 27, 40, 60, 90, 135. Any person can perceive that the second number, 12, is produced by the preceding number, 8, and half 8; and that the third number, 18, is in like manner produced by the preceding number, 12, and half 12; and so on for the rest. They can also see how rapidly the sums increase as the ratio proceeds. The difference between the two first numbers is but four; but the difference between the two last is forty-five; and from thence they may see with what immense rapidity the National debt has increased, and will continue to increase, till it exceeds the ordinary power of calculation, and loses itself in cyphers. 1 come now to apply the ratio as a rule to determine, all the cases. I began with the war that ended in 1697, which was the war in which the funding system began. The expense of that war was twenty-one millions and a half. In order to ascertain the expense of the next war, I add to 21 millions and a half the half thereof, 10 millions and three quarters, which make thirty-two millions and a quarter for the expense of that war. This thirty-two millions and a quarter, added to the former debt of twenty-one millions and a half, carries the National debt to fifty-three millions and three quarters. Smith, in his chapter on Public Debts, says, the National debt was at this time fifty-three millions. I proceed to ascertain the expense of the next war, that of 1739, by adding, as in the former case, one half to the expense of the preceding war. The expense of the preceding war was thirty-two millions and a quarter; for the sake of even numbers, say thirty-two millions; the half of which 16, makes forty-eight millions for the expense of that war. I proceed to ascertain the expense of the war of 1756, by adding, according to the ratio, one half to the expense of the preceding war. The expense of the preceding war was taken at forty-eight millions, the half of which, 24, makes seventy-two millions for the expense of that war. Smith (chapter on Public Debts) says, the expense of the war of 1756, was twenty-two millions and a quarter. |