An inquiry into the nature and causes of the wealth of

42

The Wealth of Nations

sion of exporting silver bullion, and to the prohibition of export-

ing silver coin. This permission of exporting, he said, rendered the

demand for silver bullion greater than the demand for silver coin.

But the number of people who want silver coin for the common

uses of buying and selling at home, is surely much greater than

that of those who want silver bullion either for the use of exporta-

tion or for any other use. There subsists at present a like permis-

sion of exporting gold bullion, and a like prohibition of exporting

gold coin; and yet the price of gold bullion has fallen below the

mint price. But in the English coin, silver was then, in the same

manner as now, under-rated in proportion to gold; and the gold

coin (which at that time, too, was not supposed to require any

reformation) regulated then, as well as now, the real value of the

whole coin. As the reformation of the silver coin did not then

reduce the price of silver bullion to the mint price, it is not very

probable that a like reformation will do so now.

Were the silver coin brought back as near to its standard weight

as the gold, a guinea, it is probable, would, according to the present

proportion, exchange for more silver in coin than it would pur-

chase in bullion. The silver coin containing its full standard weight,

there would in this case, be a profit in melting it down, in order,

first to sell the bullion for gold coin, and afterwards to exchange

this gold coin for silver coin, to be melted down in the same man-

ner. Some alteration in the present proportion seems to be the

only method of preventing this inconveniency.

The inconveniency, perhaps, would be less, if silver was rated in

the coin as much above its proper proportion to gold as it is at

present rated below it, provided it was at the same time enacted,

that silver should not be a legal tender for more than the change of

a guinea, in the same manner as copper is not a legal tender for

more than the change of a shilling. No creditor could, in this case,

be cheated in consequence of the high valuation of silver in coin;

as no creditor can at present be cheated in consequence of the

high valuation of copper. The bankers only would suffer by this

regulation. When a run comes upon them, they sometimes en-

deavour to gain time, by paying in sixpences, and they would be

precluded by this regulation from this discreditable method of

evading immediate payment. They would be obliged, in conse-

quence, to keep at all times in their coffers a greater quantity of

cash than at present; and though this might, no doubt, be a con-

siderable inconveniency to them, it would, at the same time, be a

considerable security to their creditors.

Three pounds seventeen shillings and tenpence halfpenny (the

mint price of gold) certainly does not contain, even in our present

excellent gold coin, more than an ounce of standard gold, and it

may be thought, therefore, should not purchase more standard

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43

Adam Smith

bullion. But gold in coin is more convenient than gold in bullion;

and though, in England, the coinage is free, yet the gold which is

carried in bullion to the mint, can seldom be returned in coin to

the owner till after a delay of several weeks. In the present hurry of

the mint, it could not be returned till after a delay of several months.

This delay is equivalent to a small duty, and renders gold in coin

somewhat more valuable than an equal quantity of gold in bul-

lion. If, in the English coin, silver was rated according to its proper

proportion to gold, the price of silver bullion would probably fall

below the mint price, even without any reformation of the silver

coin; the value even of the present worn and defaced silver coin

being regulated by the value of the excellent gold coin for which it

can be changed.

A small seignorage or duty upon the coinage of both gold and

silver, would probably increase still more the superiority of those

metals in coin above an equal quantity of either of them in bul-

lion. The coinage would, in this case, increase the value of the

metal coined in proportion to the extent of this small duty, for the

same reason that the fashion increases the value of plate in pro-

portion to the price of that fashion. The superiority of coin above

bullion would prevent the melting down of the coin, and would

discourage its exportation. If, upon any public exigency, it should

become necessary to export the coin, the greater part of it would

soon return again, of its own accord. Abroad, it could sell only for

its weight in bullion. At home, it would buy more than that weight.

There would be a profit, therefore, in bringing it home again. In

France, a seignorage of about eight per cent. is imposed upon the

coinage, and the French coin, when exported, is said to return

home again, of its own accord.

The occasional fluctuations in the market price of gold and sil-

ver bullion arise from the same causes as the like fluctuations in

that of all other commodities. The frequent loss of those metals

from various accidents by sea and by land, the continual waste of

them in gilding and plating, in lace and embroidery, in the wear

and tear of coin, and in that of plate, require, in all countries

which possess no mines of their own, a continual importation, in

order to repair this loss and this waste. The merchant importers,

like all other merchants, we may believe, endeavour, as well as

they can, to suit their occasional importations to what they judge

is likely to be the immediate demand. With all their attention,

however, they sometimes overdo the business, and sometimes

underdo it. When they import more bullion than is wanted, rather

than incur the risk and trouble of exporting it again, they are some-

times willing to sell a part of it for something less than the ordi-

nary or average price. When, on the other hand, they import less

than is wanted, they get something more than this price. But when,

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