From Richard Jackson
als and ad:
American Philosophical Society
Inner Temple 17 Mar 1754
Sir
I would fain merit a Correspondence, I have so
much Pleasure in, and have therefore ventured to digest and commit
to paper the Thoughts I have before mentioned to you, on the
Subject of a Medium of Commerce, including a Plan of a Provincial
Bank, which if any way Eligible, you will be able to adapt to the
Circumstances of the Province of Pennsylvania.
However imperfectly I may have executed my
design, I am convinced my Principles are true: I think if they be
not precisely so, it is the fault of my expression. Yet I am well
aware that it is much more frequent, for us to Err in applying our
Principles, than in deducing them. For tho’ it is a false
Proposition that what is true in Theory, may be otherwise in
Practice yet every days experience teaches us, that Sanguine Men
will perpetually be building a Practice on a Theory that cannot
support it. This I think proper to say to clear myself from the
Imputation of deeming myself equal to a Task, that so many abler
men have wisely declined.
Should a Bank of any kind be capable of
receiving a firm Establishment in your Province I make no doubt,
but it would provide an Ample Fund not only for the Publick
Services, to which the Interest of your subsisting Loans are
appropriated, but for the carrying into full execution all those
Beneficent views, at this time entertained among you, and that too
liable to abundantly fewer Casualties, both in its Birth, and
Continuance: if I am not mistaken in this fact I need say nothing
more to reccommend my Notion, especially at this juncture.
As I dare not consider my Papers as any thing
more than meer speculation, I have now purposely turned to the 14 G
2.a Statute made to prevent the Erection of Banks in America, but
from the Reccolection I have of that Statute It will not extend to
a Bank on the Foot I recommend one, and Incorporated by the
Assembly, or even by Mr. Penn.
As I think it incumbent, on me to suggest all
the difficulties, I can conceive may occurr in the Prosecution of
the Affair, I will add that I cannot foresee to what amount, the
Credit of a Set of Gentlemen, Empowered to Lend Money in
Pennsylvania, however judiciously named, might reach in England,
tho’ supported by Mortgage of the Provincial Revenue, but I
Question not it would reach far enough.
I have long had it in my mind, to return an
Answer to your favour of the 5th May, and am ashamed to own, that
after having had 6 Mo. to do it in, I am prevented by Mr. Smiths
return from Cambridge on his return to Philadelphia only a
fortnight before I expected him. I will Endeavour to trouble you
with a Sheet or two on this Head by the next Ship.
I ought to beg your Pardon for the little
Ceremony I observe, in sending the Papers inclosed herewith. They
are my first Draught from undigested Materials. My Servant has had
time to make but one Copy and that an Incorrect one. Mr. Smith did
me the favour to peruse that I now send, and judged it preferable.
I am a Careless Writer, but you will excuse me.
I am greatly pleased with that Gentleman’s
Company. He is a very Ingenious Modest Man, and my friends at the
University, whose Conversation with him, I suppose has been more in
the Literary Way, give him a great Character. I wish his stay there
could have been somewhat longer, he would have made it
profitable.
I have deferred writing my Letter until this
Night, that I might at Court today have picked up some News worth
your Attention, relating to the new Model of the Administration
become necessary by the Death of Mr. Pelham. The General Confidence
reposed in the Integrity of that Gentleman was a Cement as well as
a support, to those with whom he shared the Power intrusted to them
by the Crown. I fear they want both at present. The Lord
Chancellor, The Duke of Newcastle, and most of the Old Friends of
Sir Robert Walpole, and many of those who came in at his
Resignation hold together, but they find it a difficult matter to
satisfy Mr. Fox the Secretary at War. He is so considerable both by
his Abilities and his Connections, (which last it is said extend
even among the Royal Family) that he has been looked on as
dangerous either satisfyed or disatisfyed. It was once agreed, that
he should accept the Office of Secretary of State, and the D. of
Newcastle for the present at least, be first Commissioner of the
Treasury; but Mr. Fox afterwards discovering, he was not to Injoy
as much Power in the H. of Commons as he thought himself intitled
to, rejected this Offer, and today there are two Reports, One that
he is to continue Secy. at War (I fear if he does, as no friend)
the other that he is to quit Every thing. We that have no immediate
concern wish only for Concord, as the Publick Service cannot but
suffer by Dissension. I am Dear Sir with great Esteem your most
Obedient much Obliged Servant
I write you no Secrets but I had [rather] they should not be known
to come from me.
[Enclosure]
1. Whatever reason there may be to doubt, whether Political Welfare
Necessarily conduces to the Happiness of Individuals; it is
generally admitted to do so; at least, Plenty of the Necessaries
and Conveniencies of Life, Publick and Private Splendor, and
Security from External and Internal Violence, to one of which Heads
I believe every Article of Political Welfare may be reduced, are at
this day the Ends of all Government usually esteemed good ones. 2.
These Ends are attained by the Accumulated Labour of the Collective
Body of Individuals, who form the State, and that, exactly in a
degree, proportionable to the Amount of all their Labour, under
which Term I Include, as well the Operations of the Understanding,
as those of the Hands and Arms. 3. The Means of adding to the
Publick Stock, and of supporting the Private owner of them, Sir
William Petty calls Efficiencies, in opposition to the National
Wealth already acquired by past Labour; which last consists in the
Means of Security, the Various species of Lasting Splendor, but
principally in the Improvements made by its Inhabitants on the
Natural Face of a Country, which may be partly referred to the last
head, and partly to that of Plenty, as it renders the Earth capable
of greater Annual Productions. 4. A Part of the Wealth or Stock of
every Civilized People consists in Gold and Silver Coined or
Uncoined Substances that would never have obtained a great Value,
meerly as Commodities, but have acquired one greater than almost
any other in the World, from their aptness, for what they are now
universally become, a Medium of Commerce. 5. Should it be admitted
that Commerce is not essentially necessary to Political Welfare, It
is in Antient History, and not in the present State of the Globe
that we are to search for the Latter without the former, for
Neither the Stock of a State, nor its Efficiencies can be
augmented, but by increasing the Labour of its Subjects or
Multiplying its Effects, (which is a work of the Understanding) and
the Manners of the Present Age furnish us with no sufficient
stimulus but Commerce. 6. That Constitution of Government and that
set of Manners which most effectually promote universal Labour and
Application are, Politically speaking, the best Government and the
best Manners, and that which is necessary for Carrying on Commerce
is Politically necessary to the Well being of a State. 7. Gold and
Silver by the Common Consent of Mankind represent, and are in their
respective different degrees capable of being converted into most
of the things that are to be ranked under any of the 3 Heads of
Political Ends, that is, into every thing that is an object of
Commerce, or in other words they are as I said before a Universal
Medium of Commerce. 8. The Use of a Medium of C[ommerce] is to
assure to the Seller an Equal Value quam proximo of the same
or one or more other objects of Commerce, in return for that he
then parts with and for this it is a Pledge. 9. A Commerce carried
on by a Medium, will always be preferable to one carried on by
Barter, or otherwise, because it will be more extensive; and it
will be more extensive, because by a Medium Labour will often
receive its reward, and consequently its Incouragement, by the
Effects of distant Labour that could never otherwise have reached
it. 10. This is the more Evident when one Considers that, to carry
on a Trade by Barter, 2 Commodities must actually be at the same
time in Commercio, but Money supplys the place of that which
is absent[,]is afterward convertible, into another Commodity, that
nothing but money could have purchased, and thus Introduces Trade
where it could not have come without a Medium. 11. Labour is not
only encouraged but forced by a Medium for where there is no
Medium, there can be little or no Trade, and the Necessaries of
Life will be to be had with little or no Labour. Besides a Medium
of Commerce is the Foundation of Accumulation, the Nature of which
is to force Labour, on some side for present subsistence as it
Locks up, or carries out of the Way, the Effects of Past Labour.
And thus a Medium of Commerce propagates Labour and thereby
increases the Efficiencies of a State. 12. It is Evident therefore
that any Medium is better than none, provided it answers the
purpose of a Pledge in any tolerable degree, if it does not, it is
a snare and Engine of Fraud. Tobacco Sugar and Rice have been long
used as Mediums of Trade with success, and Paper Money in Countries
where the Legislature has been wise and honest as in Pennsylvania
has been found liable to fewer Objections than any of them. 13. But
the University of a Value set on Gold and Silver will not only upon
Emergencies enable that Country which is possessed of either or of
Credit convertible into either, to avail itself of the Labour of
other Countries, but what is of much greater moment gives that
Value a Steadiness. 14. This Steadiness tho by no means perfect, is
greatly superior to that of any other Medium that ever was, or
probably ever will be devised: because its Universality will in a
great measure prevent the Effects of any Accession to its Quantity,
even tho’ this Accession fall out in a Particular spot from whence
it cannot be immediatly dispersed, for like Water spread over a
great Tract of Land the Increase will quickly become imperceptible
by being diffused, the Expectation of which will prevent all
considerable Effects from its Increase before it be actually
dispersed. 15. A Paper Currency not convertible at pleasure into
Money can never become the Medium of a Commerce intended much
beyond the Power of the Legislature that creates it. 16. Every
Accession therefore to its Quantity must be immediatly felt, and
cannot be made without Injustice to those, who are possessed of
part of that already subsisting and to Creditors unless it be
exactly in the same proportion as the Objects of Commerce actually
in Commercio increase with it, and if it be not increased so
fast, there is a kind of Injustice done to Sellers and Debtors. 17.
But it is Inseperable from the Nature of a Medium of Commerce to be
of as steady a Value as possible, because it is not like other
Pledges of a Value superior to the thing for which it is Pledged;
at most it is only inconsiderably so, unless it be used in a
Concern that requires much Skill, and then that superiority is
considered as the Price of that Skill. 18. A Currency liable to
sudden Changes of Value must necessarily subject Buyers and
Sellers, Creditors and Debtors to Risques which if they be
unnecessary ought to be removed, because caeteris
paribus Commerce will always thrive most where subject to
fewest Risques. 19. If a Gold and Silver Currency can be introduced
into Pennsylvania, these Risques are there unnecessary; and if
there be a Balance of Trade in its favour it cannot want Gold and
Silver for that purpose unless we suppose, there are reasons that
induce those Persons who receive the Balance to invest it in
Securities elsewhere. If this be the Fact, the Proposal I am going
to make must be feasible. 20. But it is said, Gold and Silver will
not stay in the Country, for that the Balance is apt to and this
Case is by no means inconsistent with the Condition of a thriving
Infant State, for Every State is thrifty that Superlucrates but if
the Increase of Stock, the Improvement of Lands and Efficiencies
produces a much greater Income than the Rate of Interest the Whole
Superlucration may be expended this way together with a Debt, that
may augment every year and yet the Country more able to support it;
indeed where there is both Industry and Credit it must be so. Now
Nobody denys that the Value of the Stock in Pennsylvania, and
Annual Value of its Land increase at a prodigious Rate as well as
its Efficiencies. 21. If the Individuals in such a Country want
Credit it can only be for want of their Credit being manifested in
a Country where Money is accumulated: which in proportion as it is
the Case of any Country, Interest will be Low, so that Lowness of
Interest is by no means the Test of Political Welfare, tho it is a
Proof of an Accumulated Medium extra Commercium. 22. But in
the Case of the Province of Pennsylvania admitting a yearly Balance
at present to be against them the Consequence of which is, the
[Interests?] must contract [illegible] debts, and yet
supposing, there is a Considerable Superlucation but converted into
Stock and Improvements all that is wanting to introduce an
unvariable Medium of Commerce with as Low a Rate of Interest to be
paid for it by Individuals, in that Province as possible, is that
the Province stand Middle Man, and as such, acquire to themselves
the Difference of Int[erest] paid and received, in consideration of
the Risque they would be liable to, and in lieu of the Profit they
now make of the Publick Loans, the former of which would be no
greater, and the Latter, tho’ perhaps less at first, probably in
time abundantly more and very soon surpass it. My
Proposal is to erect a Provincial Bank, by Act of Assembly, the
Plan of which I am sure many gentlemen in that Assembly are far
more capable of contriving than I am. I shall however offer a
Sketch, that will serve at least for an Illustration of what I have
been saying, and ’tho’ laible to objections from People better
acquainted with the State of the Province, may admit of
Improvements that will remove them. Let this Bank be intrusted to
the Management of the Gentlemen now Trustees of the Loan Office.
Let them be impowered to Issue Notes payable as our Bank Notes at
sight, and vest in them the other Powers given by Parliament to the
Corporation of the Bank of England. if it be not too great an
Undertaking at once (I mean if it be judged that the New Bank be
able to support it) Let all the Subsisting Emissions of Paper Money
be called in, and exchanged at a price fixed, for these Notes: And
Let the Trustees at their discretion (under proper regulations)
lend to every body as great a sum more of these Notes as they are
able to secure the Repayment of, with reasonable Interest. If it be
true that a Balance of Trade remains with England against
Pennsylvania, more than the latter receives from the rest of the
World, which is one Reason why the Province Bills have been many
years below Par, its Notes will be often brought for Payment by
those who want Credit in England, and tho’ the Want of a Medium for
Circulation, (more likely to increase than diminish) must speedily
carry these out again upon Loan, yet the Bank will find itself
necessitated at first to contract, and afterwards from time to time
to augment a debt in England, until either this Balance ceases, or
which is not to be expected, the Bank becomes capable to Circulate
without assistance all its Note Credit. Here the New Bank will find
itself in the situation of Middle man, and the Danger
inherent to this situation I had in view, when I left room for the
Objection that it would be too great an undertaking to change all
the Paper Money for Notes at once. Whether this be ventured on or
not; it will be necessary, to borrow a sum of Money in England
greater or less in proportion to the Extent of the Design, on the
Public Security of the Province; a Part of which I believe it would
be proper to lay out in India Bonds or somewhat of like Nature,
which tho’ it make less Interest than the Bank itself pays will be
a Security, (not quite dead) to be deposited with the Bank of
England, or some Considerable Bankers in London, for the Money,
they may pay on the Draughts of the Provincial Bank, Another Part
of this Money must be shipped for Pennsylvania to be there applyed
for Payment of all Notes brought for that Purpose. And tho’ I have
above said that this Debt in England will Augment, I think it is
not impossible but that, the Profits made by the Bank above so much
as shall be appropriated to Publick Services together with a Part
of the Money first borrowed if the Increase of the Credit of the
Bank shall render the residue sufficient to Circulate its Notes,
may pay the Balance, that must certainly run the Province in Debt
and consequently the Bank if it be not thus paid: but I rather
think they will not for many years at least be sufficient. Besides
this original and probably increasing Loan, I suppose it would be
proper, to fortify the Credit of the Bank by taking in a
Subscription like that called here the Bank Circulation, that is a
Subscription of Substantial Persons who undertake on a Call to
advance their respective proportions of the whole sum subscribed,
and make a Deposit of £10 per Cent as a security for their
performance, in consideration of which they receive an
Extraordinary Int[erest] on this 10 per Cent. It has often been
said that sending Money to Pennsylvania, to serve as a Medium of
Trade is but hedging in a Cuckoo, for that it will immediatly, and
must necessarily come to England again, to pay this Balance I spoke
of before. This Objection I conceive I have already answered in
substance, For I do not propose the Money to be sent as a Medium,
but to support a Note Credit that will be so, and therefore it is
probable whatever Balance be paid to England the Cash in the Bank
in Philadelphia need be very small, and may be easily preserved
from removal thus. If the Bank can borrow money in England to pay
this Balance as I suppose it may, and will give Bills ¼ per Cent
below the Market Price no body can draw but themselves. These
Draughts will be paid by their Bankers in London or the B. of
England and the Money replaced by fresh Loans, while the Bond I
mentioned before, stand as a security to the Bankers, or Bank of
England. Should this Debt thus Augmenting become very large, it
will always be greatly inferior, and must naturally every day
become more and more inferior to the Value of the Notes Circulated
in America, and as the Excess of Int[erest] paid by the Borrowers
in Pennsylvania, above what the Bank pay in England will probably
defray all charges of Management, the Interest of the Difference,
between the Amount of the Debt and that of the Circulated Notes,
will be clear Gains to the Province, in lieu of that now made on
their Loans. In short the Benefits of this Plan will be 1. Trade
will feel no Shock, nor Obstruction by the calling in the Paper
Money, the Place of which will be immediately supplied by a better
Currency. 2. Neither Buyers nor Sellers, Creditors nor Debtors can
suffer any Loss, or run any risk by the Variation in value of this
Currency for there never can be more or less of it in Circulation
than is truely necessary for the Purposes of Domestic Commerce and
had it no other advantage over Paper Money this is a very visible
one, that it will spontaneously flow and Ebb in Quantity as it is
wanted. 3. This Increase being spontaneous will remove all
mischiefs that may now arise for want of a sufficient Medium, and
effectually obviate Evils that may as things stand at present be
irreperable before an Additional Medium is created, and this
without those Struggles in the Legislature, that frequently may
otherwise leave Animosities that cannot but have Pernicious
Consequences. 4. A Bank of this Kind cannot fail in a very short
time of becoming the Mint of all N. America and it will be
impossible to prevent their Notes from pervading wherever Commerce
finds its way in that Country, except by erecting Banks of equal
Credit, a hard matter to effect when this has so much the Start of
them; thus the Bank of Philadelphia may hereafter even in a few
years, Circulate £1000000 of Notes, which puts me in mind that I
could wish them payable in Sterling Money. At present the Loans of
£80000 are thought not near sufficient for the use of the Province.
40000 [written above: £20000] more are deemed not enough. It
cannot therefore be supposed that less than £200000 would be
immediatly Circulated in a Country where Trade is increasing every
day. These Notes might be Circulated on a Bottom of £40000 borrowed
for that Purpose, of which £10000 might be the 10 per Cent on
100000 Circulation subscription. Perhaps the whole of this £40000
would be best left in England, at most a Small sum would be enough
for the Reasons above to send into Pennsylvania.
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