Jeremy Bentham's Economic Writings

Volume Two

Werner Stark

• Publisher: Taylor & Francis
• Year: 2014
• eBook ISBN: 9781317657361
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

This volume contains all the writings that are grouped around Bentham's boldest idea - the proposal of a 'circulating currency': a government sponsored currency which would be both a kind of savings certificate and a kind of paper money. The roots of this proposal are illustrated in two pamphlets from 1794-96, along with subsequent pamphlets and discussions which show Bentham's unsuccessful negotiations with the trasury on this matter.

ABSTRACT OR COMPRESSED VIEW OF A TRACT INTITULED CIRCULATING ANNUITIES

ABSTRACT OR COMPRESSED VIEW OF A TRACT INTITULED CIRCULATING ANNUITIES

EXHIBITING A PLAN FOR THE CREATION, CIRCULATION, AND PAYMENT OF A PROPOSED NEW SPECIES OF GOVERNMENT PAPER CURRENCY UNDER THE NAME OF ANNUITY NOTES

OF WHICH THE OBJECT IS TO AFFORD FACILITIES WHICH ARE NOT AFFORDED BY STOCK ANNUITIES OR ANY OTHER EXISTING GOVERNMENT SECURITIES FOR THE INVESTMENT OF SMALL, TEMPORARY, OR FLUCTUATING SUMS: WHEREBY MONEY MAY BE OBTAINED BY GOVERNMENT AT A REDUCED RATE OF INTEREST:

THE PRICE OF STOCKS RAISED AND UNIFORMLY SUPPORTED: THE REDUCTION OF THE RATE OF INTEREST ON THE NATIONAL DEBT ACCELERATED AT THE SAME TIME WITH THE REDEMPTION OF THE PRINCIPAL:

A NEAT ADDITION MADE TO THE MASS OF NATIONAL CAPITAL, THE EVER-ENCREASING SOURCE OF NATIONAL INCOME:

FRUGALITY PROMOTED AMONG INDIVIDUALS OF ALL RANKS AND DENOMINATIONS:

THE MEANS OF PROVIDING FOR FUTURITY UPON THE SECUREST TERMS PLACED FOR THE FIRST TIME WITHIN THE REACH OF THE INFERIOR ORDERS: AND THEIR ATTACHMENT TO THE ESTABLISHED GOVERNMENT (THE BASIS OF NATIONAL SECURITY AND TRANQUILLITY) STRENGTHENED BY NEW TIES 1800

[TABLE OF CONTENTS]

Introduction.

Chapter I. Plan for the Creation, Emission, Payment, and Eventual Extension, of a proposed new species of Government Paper, under the name of Annuity Notes.

Chapter II. Form of an Annuity Note.

Chapter III. Comparison of the proposed, with the existing Government Securities.

Chapter IV. Grounds of Expectation with regard to the proposed Measure.

Chapter [V.] Financial Advantages.

Chapter VI. [Financial Advantages continued.]

Chapter VII. [Financial Advantages continued.]

Chapter VIII. [Financial Advantages continued.]

Chapter IX. [Financial Advantages continued.]

Chapter X. War Loans.

Chapter XI. Advantage by addition to National Capital.

Chapter XII. Advantage by addition to Commercial Security.

Chapter XIII. Particular Interests concerned.

Chapter XIV. Rise of Prices—how to obviate.

Chapter XV. Reduction of Interest—Proposed Mode compared with Mr. Pelham’s.

Chapter XVI. Moral Advantages.

Chapter XVII. Constitutional Advantages.

Recapitulation and Conclusion.

CIRCULATING ANNUITIES, & c.*

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INTRODUCTION

THE main principle of the proposed measure consists in the opening the market for government annuities on terms of profit to government—viz. at a reduced rate of interest—to a mass of money, which, by existing circumstances, is either excluded from the faculty of yielding interest to the owners altogether, or, in the hands of bankers or otherwise, they are obliged to accept, on inferior security, a rate of interest inferior, all things considered, to that which, with a very considerable degree of profit, might be allowed by government. The annuities, thus created, to be charged upon the existing fund; and the money thus raised to be employed, as it comes in, in the redemption of debt, and thence in exoneration of that fund. The result and benefit of the measure, taking it on the smallest scale, will, besides the above profit to government, consist in the affording to the least opulent and most numerous class of individuals (Friendly Societies included)—in a word, to the great bulk of the community—the means of placing out small hoards, however minute, with a degree of advantage unattainable by any other means, † and this, too, even at compound interest—a mode of accumulation which, familiar as it is in name, is not in effect capable of being realized by any other means in favour of individuals, though so happily brought to bear in favour of the public in the instance of the Sinking Funds;—not to speak of the collateral advantage obtained, by creating on the part of the lower orders, in respect of the proposed new species of property, a fresh and more palpable interest in the support of that government, on the tranquillity of which the existence of such their property will depend.‡

On the larger scale upon which it may be expected to expand itself, the measure, after accelerating the otherwise rapid ascent of government annuities to the par price,* and clearing away the 4 and 5 per Cents,† would afford the means of bringing the further reduction of the rate of interest on those annuities to its maximum in point of effect, rate of reduction and rapidity taken together;‡ reduction of interest accelerating, too, in this way, redemption of principal, instead of taking place of it and retarding it, as on the plan pursued in Mr. Pelham’s days.§

Other paper currencies have been either (like the French Assignats and Mandats, &c.) engagements for money in unlimited quantity, and without funds for performance; or promises of minute portions of a species of property (for example lands and houses) incapable of being reduced into such portions; or, like some of the American currencies, promises of metallic money, payable at a period altogether indefinite, dating, for instance, from a fixed day posterior to the conclusion of a war.

By the proposed currency, nothing is engaged for but to pay such moneys as there are already funds for paying, and at such times at which there are funds for paying them; and this in a quantity which, by the terms of the engagement, has its ne plus ultra, and can in no case add to the existing amount of the engagements it finds charged upon those funds; reimbursing immediately, and with profit, the fund on which it draws, it stands distinguished by this prominent feature from all currencies as yet exemplified.||

The losses, experienced or apprehended, from rash or penniless issuers of promissory notes, gave birth to the restrictions imposed on issues of sums below a certain magnitude. But this reason has no application to notes expressive of engagements, of the sort proposed, on the part of government. Issuing from such a source, the sums of the notes cannot be too minute: incapable of encreasing, certain even of diminishing, the amount of the engagements they find existing, the influx of them cannot be too great. The smallness of the notes adds to the multitude of the customers; the multitude of the notes divides the mass of the engagements, and does not add to it. Confined within those bounds, the magnitude of the emission adds not only to the profit of the measure, but to the security of the fund.

A species of notes was not long ago proposed, whereby government annuities were to stand mortgaged, and yet (it was supposed) without diminution of their value: —and which were expected to pass, and be paid for, as if they had engaged for the payment of so much money, though without binding any assignable individual to the payment of it. But the now proposed plan engages for no payment for which adequate funds are not already in existence; nor without imposing on a determinate individual the obligation of making the payment out of those funds; not yet burthens those funds, without immediately disburthening them to a superior amount.

By taking from the load of government annuities which is found pressing on the market, the sale of the Land Tax for stock has bettered the terms of all succeeding loans. On the measure now proposed hangs a profit the same in kind, superior in degree.*

Reducing the mass of the national debt, the operation on the Land Tax takes nothing from the mass of national capital;—the proposed measure adds to it. The former borrows from capital, but refunds immediately, with 10 per Cent to boot; the latter adds still more to capital, and that as speedily, without having borrowed anything.†

Every penny of the national debt redeemed, if redeemed with money not borrowed from capital, is so much added (it will be shown) to that part of the national capital which does not consist of money. The addition made by the Sinking Fund to the mass of national capital is little inferior to the defalcation it makes from the mass of national debt. So many years as, by the aid of the proposed measure, may come to be struck off from the period which would otherwise have been occupied in the redemption of the debt, so many years’ interest, upon the sum equal to the greatest amount of that debt, will therefore have been added, and that at compound interest, to the amount of national capital, by the operation of the proposed measure.

A sort of discovery in political economy has been made of late (for such it seems to be,) that commercial security is not less liable to suffer by deficiency than by excess, in respect of the customary quantity of paper in circulation. Among the advantages attendant on the proposed paper will be found that of affording a remedy, and that of the preventive kind, against the shocks which commercial security might otherwise have to sustain from such deficiency or excess.*

Shocks of that kind are not, however, the only mischief to which the community stands exposed, not only by the abuse, but even by the use, of every species of circulating paper as yet known. Rise of prices is another mischief, less heeded, but not less real. By gold and silver money to the same amount, the same mischief would (it is true) be produced, and in the same degree; but the magnitude of the mischief is in proportion to the suddenness of the addition, not to the absolute quantum of it; and, in the shape of cash, the influx is not susceptible of any such suddenness as in the shape of paper. To be capable of opposing an effectual barrier to a torrent of this sort, will be found to be among the properties of the proposed paper. To point out measures adequate to that end, is among the tasks undertaken in the plan of the p...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Table of Contents
• Introduction
• A Plan for Augmentation of the Revenue
• Proposal for the Circulation of a [New] Species of Paper Currency
• Abstract or Compressed View of a Tract Intituled Circulating Annuities
• Paper Mischief [Exposed]