Draft version of Newton's memorandum on John Pollexfen's A Discourse of Trade, Coyn and Paper Credit (1697 & 1700)

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Observations on Mr P's Reply.

1. On the Argument against Paper Credit taken from ye course of the Coynage.

To shew that the Coynage has decreased since the rise and growth of paper credit Mr P. (sect. 2, 3, 4, 56, 7) justifies his assertions that there were coyned in silver communibus annis about 400000li ꝑ an from 1640 to 1660, 200000li from 1660 to 1680 & less then 80000li ꝑ an from 1680 to 1695. These assertions I disputed not except that I affirmed the 400000li ꝑ an to be not in silver alone but in gold & silver together. But I represented that from this decrease of the silver coynage nothing could be argued against Paper credit, & that for these two reasons.

First because Mr. P. considers not the whole coynage of both gold & silver together which make our wealth, but that of silver alone. For the coynage of silver from 1640 to 1660 was greater then that of gold & now it is much l{illeg}ess & this alteration of the proportion arises not from paper credit but from the growing exportation of silver to the Indies while our gold stays at home, our Merchants finding that silver is a better commodity in the Indies then gold.

Secondly because the decrea{illeg}se of the coynage from 1640 to 1695 was not uniform, as it should seem by Mr P's representation but had several periods of increasing & decreasing according to the vicissitudes of pea{illeg}ce & war abroad, all which ought to be distinguished & considered severally before any thing can be concluded from the course of the coynage. For if the coynage in the reign of K. Cha. & K. Iames II increased with paper credit when according to his recconing it should have d{illeg}ecreased, if at other times the decrease of the coynage arose from other causes then paper credit, then we must ascribe the increase to paper credit & the decrease not to paper credit but to those <614v> other causes, & so the argument from the course of the coynage against paper credit will vanish. Now the course of the coynage answered to the vicissitudes of peace & warr abroad after this manner.

The silver coynage in the latter half of Q. Elizabeth's reign (after she had recoyned the base money of her Predecessors) & in the fiverst five years of K. Iames I was one year with another about 70 or 80 thousand pounds ꝑ an. Then upon a cessation of arms between the Spaniards & Dutch it fell suddenly to less then 40 thousand pounds ꝑ an. Afterwards upon renewing the warr & making a peace between England & Spain it grew greater then ever & continued {illeg}so till {illeg}the end of the warr 1648 the silver coynage being about 440000li ꝑ an & that of both gold & silver 600000li ꝑ an or above. Then upon the conclusion of peace between Spain & Holland it fell again & became but the 8th or 10th part of what it was before and continued so for the next 18 years the coynage of both gold & silver together besides the money for Dunkirk being less then 60000li ꝑ an till the enacting of the Coynage Duty by which & the flourishing trade in the peacefully reigns of Cha II & Iames II & the quick dispatch of business by paper credit notwithstanding or disadvantageous trade with France it encreased till it became about 680000li ꝑ an. And then by the late warr with France & {illeg}ye consequent decay of paper credit & trade it decreased again exceedingly. This agreement between the encrease & decrease of ye coynage and the state of the nation in respect of peace and warr ab{illeg}road shews that the coynage has principally depended on that state. And if paper credit hath had any effect upon the coynage it hath promoted it because both increased together till 1690 and afterwards both decreased together by the late French war.

And therefore Mr P. in his first paper set the argument in a wrong light when he represented that the coynage had decreased ever since the rise & growth of paper credit. For he there considers the coynage of gold & silver together before ye year 1660 & the coynage of silver alone afterwards, & lessens the latter in the reign of K. Cha. II & K. Iam. II by taking a medium between that wch preceeded the late French warr & that wch was in the warr, whereas if he had considered ye whole coynage of both gold & silver till the present time & distinguished between times of peace & warr he would have found the argument from the coynage <615r> to because the life of their trade

But Mr P. makes an Objection which lies against all the circulating credit in England, {illeg}vizt that it inclines to luxury & luxury occasions the exportation of or money. For this Objection lies not only against credit upon Parliamentary Funds but against credit upon land or any thing else but money in a Bank, be the deposit never so safe & the security never so good. But if this be a good Objection we must reject wine because it occasions drunkenness & all the best things because by corruption they become the worst. Rather let us suppress drunkenness & keep {illeg}or wine.

If all or paper credit considered as a sort of riches was turned into gold, the gold would incline to luxury as the credit did before, and the luxury would export or silver. Must we therefore throw away the gold for fear we should want market money:? Why should we not rather endeavour to grow richer by keeping or gold & only suppressing luxury?

But tho paper credit be a sort of riches we must not use it immoderately. Like vertue it has its extre{illeg}mes. Too much may hurt us as well as too little. So much is best for us as suffices to lower interest, make dispatch in business, set the people on work & inspire life & vigour into all the busy part of the nation, & more then this may be of ill consequence by inclining the nation too strongly to luxury. For it enriches us only amongst or selves & not in respect of forreign nations, & on that account is less valuable then money. But what proportion in respect of gold & silver is best for us is a determination wch may vary with circumstances of time & must be left to the w experience & the wisdome of the legislative power.