3. The war that began in 1739.

4. The war that began in 1756.

5. The American war, that began in 1775.

6. The present war, that began in 1793.

The national debt, at the conclusion of the war which ended in 1697, was twenty-one millions and an half. (See Smith's Wealth of Nations, chapter on Public Debts.) We now see it approaching fast to four hundred millions. If between these two extremes of twenty-one millions and four hundred millions, embracing the several expenses of all the including wars, there exist some common ratio that will ascertain arithmetically the amount of the debts at the end of each war, as certainly as the fact is known to be, that ratio will in like manner determine what the amount of the debt will be in all future wars, and will ascertain the period within which the funding system will expire in a bankruptcy of the government; for the ratio I allude to, is the ratio which the nature of the thing has established for itself.

Hitherto no idea has been entertained that any such ratio existed, or could exist, that would determine a problem of this kind; that is, that would ascertain, without having any knowledge of the fact, what the expense of any former war had been, or what the expense of any future war would be; but it is nevertheless true that such a ratio does exist, as I shall show, and also the mode of applying it.

The ratio I allude to is not in arithmetical progression like the numbers 2, 3, 4, 5, 6, 7, 8, 9; nor yet in geometrical progression, like the numbers 2, 4, 8, 16, 32, 64, 128, 256; but it is in the series of one half upon each preceding number; like the numbers 8, 12, 18, 27, 40, 60, 90, 135.

Any person can perceive that the second number, 12, is produced by the preceding number, 8, and half 8; and that the third number, 18, is in like manner produced by the preceding number, 12, and half 12; and so on for the rest. They can also see how rapidly the sums increase as the ratio proceeds. The difference between the two first numbers is but four; but the difference between the two last is forty-five; and from thence they may see with what immense rapidity the national debt has increased, and will continue to increase, till it exceeds the ordinary powers of calculation, and loses itself in ciphers.

I come now to apply the ratio as a rule to determine in all cases.

I began with the war that ended in 1697, which was the war in which the funding system began. The expense of that war was twenty-one millions and an half. In order to ascertain the expense of the next war, I add to twenty-one millions and an half, the half thereof (ten millions and three quarters) which makes thirty-two millions and a quarter for the expense of that war. This thirty-two millions and a quarter, added to the former debt of twenty-one millions and an half, carries the national debt to fifty-three millions and three quarters. Smith, in his chapter on Public Debts, says, that the national debt was at this time fifty-three millions.

I proceed to ascertain the expense of the next war, that of 1739, by adding, as in the former case, one half to the expense of the preceding war. The expense of the preceding war was thirty-two millions and a quarter; for the sake of even numbers, say, thirty-two millions; the half of which (16) makes forty-eight millions for the expense of that war.

I proceed to ascertain the expense of the war of 1756, by adding, according to the ratio, one half to the expense of the preceding war.

The expense of the preceding was taken at 48 millions, the half of which (24) makes 72 millions for the expense of that war. Smith, (chapter on Public Debts,) says, the expense of the war of 1756, was 72 millions and a quarter.

I proceed to ascertain the expense of the American war, of 1775, by adding, as in the former cases, one half to the expense of the preceding war. The expense of the preceding war was 72 millions, the half of which (36) makes 108 millions for the expense of that war. In the last edition of Smith, (chapter on Public Debts,) he says, the expense of the American war was _more than an hundred millions_.

I come now to ascertain the expense of the present war, supposing it to continue as long as former wars have done, and the funding system not to break up before that period. The expense of the preceding war was 108 millions, the half of which (54) makes 162 millions for the expense of the present war. It gives symptoms of going beyond this sum, supposing the funding system not to break up; for the loans of the last year and of the present year are twenty-two millions each, which exceeds the ratio compared with the loans of the preceding war. It will not be from the inability of procuring loans that the system will break up. On the contrary, it is the facility with which loans can be procured that hastens that event. The loans are altogether paper transactions; and it is the excess of them that brings on, with accelerating speed, that progressive depreciation of funded paper money that will dissolve the funding system.

I proceed to ascertain the expense of future wars, and I do this merely to show the impossibility of the continuance of the funding system, and the certainty of its dissolution.

The expense of the next war after the present war, according to the ratio that has ascertained the preceding cases, will be 243 millions.

Expense of the second war 364

---------------- third war 546

---------------- fourth war 819

-------- fifth war 1228

3200 millions;

which, at only four per cent. will require taxes to the nominal amount of one hundred and twenty-eight millions to pay the annual interest, besides the interest of the present debt, and the expenses of government, which are not included in this account. Is there a man so mad, so stupid, as to sup-pose this system can continue?

When I first conceived the idea of seeking for some common ratio that should apply as a rule of measurement to all the cases of the funding system, so far as to ascertain the several stages of its approach to dissolution, I had no expectation that any ratio could be found that would apply with so much exactness as this does. I was led to the idea merely by observing that the funding system was a thing in continual progression, and that whatever was in a state of progression might be supposed to admit of, at least, some general ratio of measurement, that would apply without any very great variation. But who could have supposed that falling systems, or falling opinions, admitted of a ratio apparently as true as the descent of falling bodies? I have not made the ratio any more than Newton made the ratio of gravitation. I have only discovered it, and explained the mode of applying it.

To shew at one view the rapid progression of the funding system to destruction, and to expose the folly of those who blindly believe in its continuance, and who artfully endeavour to impose that belief upon others, I exhibit in the annexed table, the expense of each of the six wars since the funding system began, as ascertained by ratio, and the expense of the six wars yet to come, ascertained by the same ratio.

[Ill.u.s.tration: Table318]

* The actual expense of the war of 1739 did not come up to the sum ascertained by the ratio. But as that which is the natural disposition of a thing, as it is the natural disposition of a stream of water to descend, will, if impeded in its course, overcome by a new effort what it had lost by that impediment, so it was with respect to this war and the next (1756) taken collectively; for the expense of the war of 1756 restored the equilibrium of the ratio, as fully as if it had not been impeded. A circ.u.mstance that serves to prove the truth of the ratio more folly than if the interruption had not taken place. The war of 1739 ***

languid; the efforts were below the value of money et that time; for the ratio is the measure of the depreciation of money in consequence of the funding system; or what comes to the same end, it is the measure of the increase of paper.

Every additional quant.i.ty of it, whether in bank notes or otherwise, diminishes the real, though not the nominal value of the former quant.i.ty.--_Author_

Those who are acquainted with the power with which even a small ratio, acting in progression, multiplies in a long series, will see nothing to wonder at in this table. Those who are not acquainted with that subject, and not knowing what else to say, may be inclined to deny it. But it is not their opinion one way, nor mine the other, that can influence the event. The table exhibits the natural march of the funding system to its irredeemable dissolution. Supposing the present government of England to continue, and to go on as it has gone on since the funding system began, I would not give twenty shillings for one hundred pounds in the funds to be paid twenty years hence. I do not speak this predictively; I produce the data upon which that belief is founded; and which data it is every body's interest to know, who have any thing to do with the funds, or who are going to bequeath property to their descendants to be paid at a future day.

Perhaps it may be asked, that as governments or ministers proceeded by no ratio in making loans or incurring debts, and n.o.body intended any ratio, or thought of any, how does it happen that there is one? I answer, that the ratio is founded in necessity; and I now go to explain what that necessity is.

It will always happen, that the price of labour, or of the produce of labour, be that produce what it may, will be in proportion to the quant.i.ty of money in a country, admitting things to take their natural course. Before the invention of the funding system, there was no other money than gold and silver; and as nature gives out those metals with a sparing hand, and in regular annual quant.i.ties from the mines, the several prices of things were proportioned to the quant.i.ty of money at that time, and so nearly stationary as to vary but little in any fifty or sixty years of that period.

When the funding system began, a subst.i.tute for gold and silver began also. That subst.i.tute was paper; and the quant.i.ty increased as the quant.i.ty of interest increased upon acc.u.mulated loans. This appearance of a new and additional species of money in the nation soon began to break the relative value which money and the things it will purchase bore to each other before. Every thing rose in price; but the rise at first was little and slow, like the difference in units between two first numbers, 8 and 12, compared with the two last numbers 90 and 135, in the table. It was however sufficient to make itself considerably felt in a large transaction. When therefore government, by engaging in a new war, required a new loan, it was obliged to make a higher loan than the former loan, to balance the increased price to which things had risen; and as that new loan increased the quant.i.ty of paper in proportion to the new quant.i.ty of interest, it carried the price of things still higher than before. The next loan was again higher, to balance that further increased price; and all this in the same manner, though not in the same degree, that every new emission of continental money in America, or of a.s.signats in France, was greater than the preceding emission, to make head against the advance of prices, till the combat could be maintained no longer. Herein is founded the necessity of which I have just spoken. That necessity proceeds with accelerating velocity, and the ratio I have laid down is the measure of that acceleration; or, to speak the technical language of the subject, it is the measure of the increasing depreciation of funded paper money, which it is impossible to prevent while the quant.i.ty of that money and of bank notes continues to multiply. What else but this can account for the difference between one war costing 21 millions, and another war costing 160 millions?

The difference cannot be accounted for on the score of extraordinary efforts or extraordinary achievements. The war that cost twenty-one millions was the war of the con-federates, historically called the grand alliance, consisting of England, Austria, and Holland in the time of William III. against Louis XIV. and in which the confederates were victorious. The present is a war of a much greater confederacy--a confederacy of England, Austria, Prussia, the German Empire, Spain, Holland, Naples, and Sardinia, eight powers, against the French Republic singly, and the Republic has beaten the whole confederacy.--But to return to my subject.

It is said in England, that the value of paper keeps equal with the value of gold and silver. But the case is not rightly stated; for the fact is, that the paper has _pulled down_ the value of gold and silver to a level with itself. Gold and silver will not purchase so much of any purchasable article at this day as if no paper had appeared, nor so much as it will in any country in Europe where there is no paper. How long this hanging together of money and paper will continue, makes a new case; because it daily exposes the system to sudden death, independent of the natural death it would otherwise suffer.

I consider the funding system as being now advanced into the last twenty years of its existence. The single circ.u.mstance, were there no other, that a war should now cost nominally one hundred and sixty millions, which when the system began cost but twenty-one millions, or that the loan for one year only (including the loan to the Emperor) should now be nominally greater than the whole expense of that war, shows the state of depreciation to which the funding system has arrived. Its depreciation is in the proportion of eight for one, compared with the value of its money when the system began; which is the state the French a.s.signats stood a year ago (March 1795) compared with gold and silver. It is therefore that I say, that the English funding system has entered on the last twenty years of its existence, comparing each twenty years of the English system with every single year of the American and French systems, as before stated.

Again, supposing the present war to close as former wars have done, and without producing either revolution or reform in England, another war at least must be looked for in the s.p.a.ce of the twenty years I allude to; for it has never yet happened that twenty years have pa.s.sed off without a war, and that more especially since the English government has dabbled in German politics, and shown a disposition to insult the world, and the world of commerce, with her navy. The next war will carry the national debt to very nearly seven hundred millions, the interest of which, at four per cent, will be twenty-eight millions besides the taxes for the (then) expenses of government, which will increase in the same proportion, and which will carry the taxes to at least forty millions; and if another war only begins, it will quickly carry them to above fifty; for it is in the last twenty years of the funding system, as in the last year of the American and French systems without funding, that all the great shocks begin to operate.

I have just mentioned that, paper in England has _pulled down_ the value of gold and silver to a level with itself; and that _this pulling dawn_ of gold and silver money has created the appearance of paper money keeping up. The same thing, and the same mistake, took place in America and in France, and continued for a considerable time after the commencement of their system of paper; and the actual depreciation of money was hidden under that mistake.

It was said in America, at that time, that everything was becoming _dear_; but gold and silver could then buy those dear articles no cheaper than paper could; and therefore it was not called depreciation.

The idea of _dearness_ established itself for the idea of depreciation.

The same was the case in France. Though every thing rose in price soon after a.s.signats appeared, yet those dear articles could be purchased no cheaper with gold and silver, than with paper, and it was only said that things were _dear_. The same is still the language in England. They call it _deariness_. But they will soon find that it is an actual depreciation, and that this depreciation is the effect of the funding system; which, by crowding such a continually increasing ma.s.s of paper into circulation, carries down the value of gold and silver with it. But gold and silver, will, in the long run, revolt against depreciation, and separate from the value of paper; for the progress of all such systems appears to be, that the paper will take the command in the beginning, and gold and silver in the end.

But this succession in the command of gold and silver over paper, makes a crisis far more eventful to the funding system than to any other system upon which paper can be issued; for, strictly speaking, it is not a crisis of danger but a symptom of death. It is a death-stroke to the funding system. It is a revolution in the whole of its affairs.

If paper be issued without being funded upon interest, emissions of it can be continued after the value of it separates from gold and silver, as we have seen in the two cases of America and France. But the funding system rests altogether upon the value of paper being equal to gold and silver; which will be as long as the paper can continue carrying down the value of gold and silver to the same level to which itself descends, and no longer. But even in this state, that of descending equally together, the minister, whoever he may be, will find himself beset with acc.u.mulating difficulties; because the loans and taxes voted for the service of each ensuing year will wither in his hands before the year expires, or before they can be applied. This will force him to have recourse to emissions of what are called exchequer and navy bills, which, by still increasing the ma.s.s of paper in circulation, will drive on the depreciation still more rapidly.

It ought to be known that taxes in England are not paid in gold and silver, but in paper (bank notes). Every person who pays any considerable quant.i.ty of taxes, such as maltsters, brewers, distillers, (I appeal for the truth of it, to any of the collectors of excise in England, or to Mr. White-bread,)(1) knows this to be the case. There is not gold and silver enough in the nation to pay the taxes in coin, as I shall show; and consequently there is not money enough in the bank to pay the notes. The interest of the national funded debt is paid at the bank in the same kind of paper in which the taxes are collected. When people find, as they will find, a reservedness among each other in giving gold and silver for bank notes, or the least preference for the former over the latter, they will go for payment to the bank, where they have a right to go. They will do this as a measure of prudence, each one for himself, and the truth or delusion of the funding system will then be proved.

1 An eminent Member of Parliament.--_Editor._.

I have said in the foregoing paragraph that there is not gold and silver enough in the nation to pay the taxes in coin, and consequently that there cannot be enough in the bank to pay the notes. As I do not choose to rest anything upon a.s.sertion, I appeal for the truth of this to the publications of Mr. Eden (now called Lord Auckland) and George Chalmers, Secretary to the Board of Trade and Plantation, of which Jenkinson (now Lord Hawkesbury) is president.(1) (These sort of folks change their names so often that it is as difficult to know them as it is to know a thief.) Chalmers gives the quant.i.ty of gold and silver coin from the returns of coinage at the Mint; and after deducting for the light gold recoined, says that the amount of gold and silver coined is about twenty millions. He had better not have proved this, especially if he had reflected that _public credit is suspicion asleep_. The quant.i.ty is much too little.

1 Concerning Chalmers and Hawkesbury see vol. ii., p. 533.

Also, preface to my "Life of Paine", xvi., and other pa.s.sages.---_Editor._.

Of this twenty millions (which is not a fourth part of the quant.i.ty of gold and silver there is in France, as is shown in Mr. Neckar's Treatise on the Administration of the Finances) three millions at least must be supposed to be in Ireland, some in Scotland, and in the West Indies, Newfoundland, &c. The quant.i.ty therefore in England cannot be more than sixteen millions, which is four millions less than the amount of the taxes. But admitting that there are sixteen millions, not more than a fourth part thereof (four millions) can be in London, when it is considered that every city, town, village, and farm-house in the nation must have a part of it, and that all the great manufactories, which most require cash, are out of London. Of this four millions in London, every banker, merchant, tradesman, in short every individual, must have some.

He must be a poor shopkeeper indeed, who has not a few guineas in his till. The quant.i.ty of cash therefore in the bank can never, on the evidence of circ.u.mstances, be so much as two millions; most probably not more than one million; and on this slender twig, always liable to be broken, hangs the whole funding system of four hundred millions, besides many millions in bank notes. The sum in the bank is not sufficient to pay one-fourth of only one year's interest of the national debt, were the creditors to demand payment in cash, or demand cash for the bank notes in which the interest is paid, a circ.u.mstance always liable to happen.

One of the amus.e.m.e.nts that has kept up the farce of the funding system is, that the interest is regularly paid. But as the interest is always paid in bank notes, and as bank notes can always be coined for the purpose, this mode of payment proves nothing. The point of proof is, can the bank give cash for the bank notes with which the interest is paid?

If it cannot, and it is evident it cannot, some millions of bank notes must go without payment, and those holders of bank notes who apply last will be worst off. When the present quant.i.ty of cash in the bank is paid away, it is next to impossible to see how any new quant.i.ty is to arrive.

None will arrive from taxes, for the taxes will all be paid in bank notes; and should the government refuse bank notes in payment of taxes, the credit of bank notes will be gone at once. No cash will arise from the business of discounting merchants' bills; for every merchant will pay off those bills in bank notes, and not in cash. There is therefore no means left for the bank to obtain a new supply of cash, after the present quant.i.ty is paid away. But besides the impossibility of paying the interest of the funded debt in cash, there are many thousand persons, in London and in the country, who are holders of bank notes that came into their hands in the fair way of trade, and who are not stockholders in the funds; and as such persons have had no hand in increasing the demand upon the bank, as those have had who for their own private interest, like Boyd and others, are contracting or pretending to contract for new loans, they will conceive they have a just right that their bank notes should be paid first. Boyd has been very sly in France, in changing his paper into cash. He will be just as sly in doing the same thing in London, for he has learned to calculate; and then it is probable he will set off for America.

A stoppage of payment at the bank is not a new thing. Smith in his Wealth of Nations, book ii. chap. 2, says, that in the year 1696, exchequer bills fell forty, fifty, and sixty per cent; bank notes twenty per cent; and the bank stopped payment. That which happened in 1696 may happen again in 1796. The period in which it happened was the last year of the war of King William. It necessarily put a stop to the further emissions of exchequer and navy bills, and to the raising of new loans; and the peace which took place the next year was probably hurried on by this circ.u.mstance, and saved the bank from bankruptcy. Smith in speaking from the circ.u.mstances of the bank, upon another occasion, says (book ii. chap. 2.) "This great company had been reduced to the necessity of paying in sixpences." When a bank adopts the expedient of paying in sixpences, it is a confession of insolvency.