Author Topic: Ricardoes  (Read 632 times)

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Offline EWC

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Ricardoes
« on: July 30, 2017, 11:37:20 AM »
Not sure if this is the right place for this.  And hope the two links below work

Just noticed Ricardo called for the production of official 60 oz gold ingots (perhaps giant gold coins?)  in his plan to return to convertability around 1820.

2028 were apparently struck, but Sraffa claimed in 1952 that only 13 were ever bought and those for collector purposes.  The rest were melted.  The Royal mint claims to still have the dies.

A couple of questions

1) have all those 13 also since been melted?

2) anyone figured out why converting paper into gold was so umpopular.  Did the new soverigns just offer a better deal?

http://www.royalmintmuseum.org.uk/collection/collection-highlights/master-tools-dies/ricardo-ingot-dies/index.html

https://books.google.co.uk/books?id=2pifDgAAQBAJ&lpg=PT61&ots=zTuBL-64H6&dq=Ricardoes%20gold&pg=PT60#v=onepage&q=Ricardoes%20gold&f=false

Rob

« Last Edit: July 30, 2017, 05:21:52 PM by EWC »

Online Figleaf

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Re: Ricardoes
« Reply #1 on: July 30, 2017, 03:27:53 PM »
Although you date the discussion to 1820, it actually started in 1810. In that year, the "Bullion Committee" submitted its Report from the Select Committee of the House of Commons on the High Price of Bullion to parliament. For a full text, see E. Cannan, Th paper pound, London 1919. The report created two camps.

Bullionists were led by contemporary economists with high name recognition, including Malthus and Ricardo. They deplored the inconvertibility of the pound (paper money). This was a consequence of the "Bank Restriction Act"of 1797, which forbade the Bank of England to issue any cash (paper money). The consequence of the Bank Restriction Act was the rise of the "country banker", small banking houses issuing their own paper money. This money was unacceptable outside a small circle around the issuing bank, making it inconvertible in fact. The Bank of England could and did discount commercial paper, thereby financing foreign trade and creating negotiable paper denominated in pounds that could be negotiated. The money creation of the BoE and the country bankers meant that paper pounds circulated at a discount.

The anti-bullionists were led by the BoE and included parties, such as country bankers, foreign traders and the government. The BoE liked its discounting business as "risk free" as long as the underlying parties were financially solid and disliked the risk of issuing notes that could be redeemed (Cannan p. 34). The country bankers had found a way to get rich quickly (or fail quickly) and didn't want it to be taken away. Foreign traders found that the pound rate on foreign exchanges was more favourable than gold (this was largely due to the BoE's fee policy). The motivation of the government does not become clear. My guess is that the government liked the possibility to extend the paper money supply quickly in times of war. Country bankers that went broke would have functioned as a counterweight, with the holders of defunct paper money paying the equivalent of a tax (an ex-propriation, if you will) to keep the money supply in check. Keep in mind that France had a larger population, a larger territory and popular support from those oppressed by royalists (until the French army started misbehaving even worse). Britain's key advantage was that it had paper pounds and France was restricted by the metallic Franc de Germinal.

I hadn't heard of the Ricardo bullion (had no time to follow your links yet.) In light of the above, it seems likely that the bullionists got it approved through parliament, since the BoE and the government would not have condoned it. Though the BoE, bound by law, had the bullion bars created, it would have done whatever it could not to issue them. That was probably not difficult, with gold being more expensive than paper pounds. They would have claimed that the Ricardo experiment had failed for "lack of demand" and would have stored the bars in their vaults, to be forgotten. When they were in fact forgotten, the form of the bars would no longer have mattered, so the BoE could leave them as they were or re-melt them.

The discussion was decided by parliament in favour of the bullionists in 1819 by the Act for the resumption of cash payments and the BoE's factual resumption of cash payments in 1821. Here Ricardo also played a role, proposing an "ingot exchange system" as an intermediate stage between inconvertibility and full convertibility. If the bars were meant for this stage, the answer to your question is that the intermediate stage never came into effect, because the balance sheet of the BoE improved quickly after Napoleon had been defeated. The cost of this improved position was high unemployment among de-mobilised and handicapped former soldiers, a high crime rate and a decades long spate of executions, revolting the population.

Peter
« Last Edit: July 30, 2017, 03:43:11 PM by Figleaf »
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: Ricardoes
« Reply #2 on: July 30, 2017, 05:36:26 PM »
This was a consequence of the "Bank Restriction Act" of 1797, which forbade the Bank of England to issue any cash (paper money).

I thought the Bank Restriction Act of 1797 stopped them uttering gold coin? 

Gold would come to be needed to pay continental provisioners for Wellington's troops.  I recall that is how Rothchild's Bank got started.  Seems R was a coin dealer who was looking after the gold of a client (coin collector) who had fled the fighting.  R "borrowed" the gold, smuggled it through the French lines (!), and sold it to Wellington at a big profit.  Anyhow - thatís the story I recall from the Ferguson book.

But the whole thing seems fiendishly complicated.  Ricardo seems to me to be less of a bullionist than Parliament, as he wanted to greatly restrict convertibility to just the mega wealthy (60 oz ingots!). 

Also, Cobbett reports he was getting support from Country Bankers, yet Cobbett was certainly a bullionist seeking full convertibility. 

Add to that, Cobbett endlessly scoffed at Ricardo and loathed Malthus

Gives me a headache trying to figure it out   :)

Do check the links....................

Online Figleaf

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Re: Ricardoes
« Reply #3 on: July 30, 2017, 06:20:29 PM »
I thought the Bank Restriction Act of 1797 stopped them uttering gold coin?

Yes, that should have been the "Bank Restriction Act" of 1797, which forbade the Bank of England to issue any cash (gold coin). Sorry.

Wellington financed the Peninsular campaign to a large extent with liberated Spanish silver and gold. He also used the copper tokens with his face and list of victories usually catalogued as "Yorkshire". However, those sources were not available in the first phase of the campaign.

I guess Ricardo saw the bullion not as a private means of payment, but as a means of debt settlement between bankers (you will remember the high denomination USD banknotes used the same way.) If you know you can get a gold bar for enough paper money, you will accept the paper money, which is the essence of convertibility.

Don't know about Cobbett. If it's just a claim from himself, I'd be wary.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: Ricardoes
« Reply #4 on: April 21, 2018, 08:27:52 AM »
Don't know about Cobbett. If it's just a claim from himself, I'd be wary.

Hmmm.  As I recall Wellington, with the backing of William IV, took Cobbett to trial on charges of sedition in 1830, and lost.

Wellington's administration fell straight afterwards, ushering in the Anti-Truck Act of 1831, and the Great Reform Bill of 1832.

Thus one can make a case that Cobbett played a crucial role in the birth of modern democracy itself.

I recommend reading his book "A History of the Protestant Revolution", which attacks the foundation of the Bank of England as a swindle perpetrated on the public.

But I recall it covers similar ground to that I covered myself - (peer reviewed for publication by Joe Cribb and Nick Mayhew).  And I recall you dismissed that paper as "wrong and confused", without giving any reason why.  An attempt to manage perception, with no regard to objective fact.

Wellington made the mistake of not being wary of Cobbett.  I think you should be wary of not knowing about him.

Rob