Chap. V: Of the Present State of Public Credit in Great Britain

We have, in a preceeding chapter,given a general view of the state of public credit in England, at the end of the last century. In this, I shall briefly run through the most remarkable revolutions, both in sentiments and events, which have succeeded since that time.

At the revolution the revenue of England was about two million sterling, affected by two debts. The first was called the bankers debt, contracted by Charles II and, by letters patent, charged upon his hereditary excise, to the amount of upwards of 1,300,000 l. This debt was arbitrarily reduced to one half, in the last years of King William, and put at 6 per cent perpetual annuity, to commence no sooner than 1706. The other was a debt of 60,000 l. due to that Prince's servants, neglected to be paid by his successor, and discharged after the revolution.

At the peace of Ryswick, the national debt amounted to about 20 millions. The branches of taxes subsisting at the revolution, and continued till then, produced no more than about 800,000 l.; but by additional taxes laid on in the reign of King William, the whole revenue extended to 3,355,499 l. of which above one million was to cease before 1700, as has been said. This reduced the revenue, at the beginning of Queen Anne's reign, to nearly what it had been at the revolution: out of which if we deduct the interest of the national debt then subsisting, and the expence of the civil list, we shall discover the extent of the funds prepared for engaging in the war with France; and then by comparing the state of the nation at her accession, with what it was at her death, we shall form a general notion of the progress of credit at that period.

What the exact amount of the revenue of England was at the death of the Queen, I cannot justly say. But as it may be comprehended under the three general branches of customs, excises, and other inland duties, we may form a guess at it, though imperfectly, I allow, from the number of articles in each.

At her accession, the customs comprehended fifteen articles; at her death, they amounted to thirty-seven: at her accession, the excises comprehended ten articles; at her death, they amounted to twenty-seven: at her accession, the other inland duties comprehended eight articles; at her death, they amounted to sixteen, including the land tax, then become in a manner perpetual, although laid on from year to year.

At her accession, the public debts amounted (as above) to near seven millions, at her death they exceeded fifty millions.

In fourteen years, from the revolution to her accession, the money granted by parliament, partly raised on the subject, and partly borrowed, or taken credit for, according to the custom of the times, amounted to above fifty-five millions. During the 13 years of Queen Anne, the money granted by parliament raised on the subject, or borrowed as above, amounted to upwards of 80 millions.

By this general sketch I do not mean to enter into exact details: facts must be sought for in books which treat of facts: our chief object is to examine the principles upon which the public credit was supported, let the exact sum of money raised be what it will.

The expences of the French war first engaged the nation to revive those taxes which had been suppressed; and to impose many others for a considerable number of years, in proportion to the money borrowed upon them, according to the principles of the former reign.

In 1702, interest was so low, that government got money at 5 per cent. It continued so till 1704, when some loans began to be made at 6 per cent and at this rate it stood during the war.

But in 1706, the exigencies of government were far greater than what all the money to be borrowed, or raised on the subject, could supply. This opened a door to the abuse of paying the growing deficiencies upon the taxes with exchequer bills, chargeable on distant funds. These fell constantly to great discount; and the unhappy servants of the state, who received them in payment, were obliged to dispose of them to people who could wait for an usurious reimbursement by parliament.

When these exchequer bills had once got into the hands of the monied people, they had interest with government to engage the bank to circulate them at 6 per cent interest: but as the funds upon which they were secured happened at that time, 1706, to be engaged for discharging debts previously contracted, the bank, during that interval, could receive no payment of this interest of 6 per cent so the expedient fallen upon, was to pay the bank compound interest for all the tallies and bills they were to discount, until the funds appropriated should be relieved.

This expedient, bad as it was, and burdensome to the state in the highest degree, proved of infinite service, both in establishing the credit of exchequer bills, and relieving those who received payment in them.

This operation was quite similar to those of banks of circulation upon mortgage. The bank of England was here employed in converting into money exchequer bills, secured upon the faith of government. Banks upon mortgage convert into money the property of individuals upon private security. Had, therefore, banks upon mortgage been established in England at this time, all those who had property would have got credits from them, and would have been enabled thereby to pay their taxes, and carry on their industry, without diminishing their consumption. The exchequer would then have had no occasion to issue discredited bills and tallies for making up deficiencies; because taxes would have been productive, and the state would have been relieved of this excessive burden of interest at 6 per cent accumulated quarterly in favour of the bank.

What extraordinary profit must have accrued to the bank by this operation, every one must perceive. They were not here procuring funds to lend at a great expence; all they did was to augment the quantity of their paper upon government security; which they knew well would remain current in the common circle of payments within the country; and the public borrowings were sufficient to furnish credit for the sums sent out of the country. In this view we may conclude, that almost the whole accumulated interest paid, became a pure profit to the bank, as well as a great augmentation of the national debt.

This operation of the bank in 1706, did not prevent subsequent deficiencies, in the payment of the navy, army, ordnance, and of many other articles. In 1710, they amounted to above nine millions sterling. This was too great a sum to be borrowed; and the bank durst not venture to discount more than what domestic circulation could support: so that after this great debt had circulated upon the discredited obligations which had been issued for it, and in this way had fallen again into the hands of monied people, at 30 and 40 per cent below par, the new proprietors of it were all incorporated into one great company, with a governor and directors, who got 6 per cent for the whole capital, with an allowance of 8000 l. a year for charges of management.

Thus all the original creditors for these deficiencies lost the discount; the monied people gained it, and the public paid for all.

When credit is in this languid state, every expence of government must rise in proportion to the discredit of the paper with which they pay, till at last the whole sum, with interest, accumulation, and expence, falls upon the state, as if every farthing of it had been frugally expended in ready money.

This is a general view of the state of credit in Queen Anne's reign.

Government had not, as in the former war, the inconveniences flowing from the disorder in the coin to combat with. These contributed more than any other circumstance, to raise the capital of the debts at the peace of Ryswick. Circulation, too, was considerably augmented, in consequence of the increase of taxes, public debts, and the operation of the bank in circulating exchequer bills and tallies. Yet money was still scarce, in comparison of what it night have been, had proper methods been contrived to preserve it upon a level with the occasions for it.

The incorporation, also, of nine millions capital in the hands of a corporation, which afterwards was called the South Sea Company, was an assistance to public credit, by increasing a monied interest, the principal view of which was to fill the government loans, on the lucrative conditions offered for them. And last of all, the strictly adhering to the public faith of engagements, without seeking, by acts of power, to indemnify the state for the losses it had been obliged to incur, from the circumstances of the times, laid the solid basis of national credit for the future.

Although the many taxes added to the former revenue, did not increase it in any proportion to the load laid upon the subject during this war, they served, however, as a good foundation for improvement, as soon as the effects of peace restored them to their full production. But the securities affecting these taxes having become every year greater, government was obliged to engage certain funds for thirty-two years to come, and sometimes longer; and many branches of taxes, which formerly had been granted for short terms, were then made perpetual. After the peace of Utrecht, the expences of the state were greatly diminished, and money began to regorge: so that in the year 1716, the first foundation of the sinking fund was laid, by opening a subscription for paying off about ten or eleven millions sterling, at that time, charged upon several branches of taxes, the produce of which amounted annually to 724,849 l. sterling.

The proprietors of these debts were allowed to subscribe into this new fund, at an interest of 5 per cent redeemable by parliament: and in case the whole subscription should not fill at that rate, the bank and South Sea company became bound to make it up, upon receiving a like annuity in proportion to their subscriptions.

The bankers' debt, of which we have spoken, the only public debt owing at the revolution, made part of those which were to be subscribed for.

The taxes which had been appropriated for the discharge of those capitals, from temporary, were made perpetual; with a clause added, that when the surplus of the fund, after payment of the interest, had discharged the capitals of all the national debt due the 25th of December in that year, the whole produce of the fund itself should remain at the disposal of parliament.

After this first operation in reducing the interest, the bank complied with a reduction to 5 per cent of what was due to them; and they began to circulate exchequer bills at a more moderate interest than formerly.

Public credit was now daily gaining ground. In 1719, the South Sea company, the capital of which was then swelled to eleven millions at 5 per cent with a sum of 9397 l. sterling for the expence of management, enlarged their views; and finding large profits to arise from so great a fund under one administration, formed a project of acquiring a farther sum of the public debts, which remained outstanding upon the original funds appropriated for them.

For this purpose they proposed to government to acquire, first, The property of above 16 millions of redeemable debts, bearing then 4 and 5 per cent interest; and to reduce the whole to 4 per cent at midsummer 1727. Secondly, To acquire the property of 794,000 l. of annuities upon lives, and for long terms, as they should agree with the proprietors, at 5 per cent upon the purchase-money, until 1727. and at 4 per cent afterwards. Annuities were then valued at fourteen and twenty years purchase, according to their length: they rose, however, during the operations of the South Sea, to 25 and 30 years purchase. Thirdly, They were to have a sum added to their former allowance for the charge of management, in proportion to this augmentation of their stock. Fourthly, That for the advantage which might follow upon this agreement with government, the company was to pay into the exchequer above seven millions sterling, toward discharging other national debts outstanding. And in the last place, they engaged to circulate a considerable sum of exchequer bills, and to pay the interest of 2 pence per cent per diem, which should grow upon them during seven years. (1)

From the operations we have been describing, we perceive, that the point of view in England, from the peace of Utrecht, has always been, to reduce the interest of the national debt; but never to leave in the hands of the creditors, any part of the savings made, in order to diminish the capital. These savings have constantly been thrown into a sinking fund supposed to be intended for extinguishing the capital: and were it employed for this purpose for a few years only, and not diverted to other uses, I am persuaded the consequence would be, to reduce the interest of money in England lower than ever perhaps it has been seen in any nation. That interest may be reduced, by making money regorge in the hands of the lenders, is, I think, an uncontroverted principle: that by regorging in France, anno 1720, it reduced interest to 2 per cent is a fact indisputable. I shall not pretend to say positively, that the total appropriation of the sinking fund, and an augmentation upon annual grants, to make up the void, would in Great Britain work this effect in a few years; but I think it is very probable that it would: and if the domestic creditors, in any state, where debts, due to strangers, are swelled to such a height as to exceed the whole profits made upon trade, shall by their influence, and from a motive of present advantage, obstruct a scheme of this nature; the consequence will prove, in the first place, to discourage, and then totally to extinguish commerce, and in a little time to occasion an unavoidable bankruptcy; as shall be farther explained in a succeeding chapter. I return to the South Sea company.

The proposal of the South Sea company, mentioned above, was accepted of, and ratified by act of parliament, 6 Geo. I. Chap. 4th. But the disaster which befel credit, in consequence of the ambitious views of those who were in the administration of that company, prevented the nation from reaping all the advantages which might have proceeded from it.

The reign of K. George I though little disturbed by foreign wars, produced not the smallest diminution upon the capital of the public debts; and those which subsisted at the peace of Utrecht, stood, at his death, at 50,354,953 l. The same taxes subsisted; and every one almost was by this time made perpetual, except indeed the land tax and malt duty, which to this day continue to be annual grants.

But alas! this apparent revenue, arising from a multitude of taxes, was of no use towards defraying the smallest extraordinary expence of government. Every article of it was engaged for debts; and the operations for reducing the interest were calculated only to produce a fund for discharging the capital. The civil list, indeed, that is to say, the expence of civil government, exclusive of army, navy, ordnance, and incidental articles, was paid from the permanent taxes, and considered as a charge upon them. But were not armies and navies then become as regular an expence upon every state in Europe as judges and ambassadors? Undoubtedly they were. Yet after the peace of Utrecht, in laying down the plan which has constantly been followed ever since, for defraying the regular expence of British government, these two great and unavoidable expences were considered as contingent only, and provided for by annual grants: and because armies, in time of peace, in former reigns, had proved dangerous to liberty from the abuse of power, they were still considered in the same light, at a time when liberty and trade were continually threatened from their armed enemies and rivals abroad.

When the continuance of peace, in the reign of George the First, had produced the effect of reducing interest, on many occasions, to 3 per cent the sinking fund began to gather strength. The land tax, from the year 1722, had not exceeded two shillings in the pound; and the extraordinary expence of government, according to the annual grants of the 13 years of his reign, did not exceed 34,800,000 l. or 2,670,000 l. a year. Public tranquillity was very little disturbed during the first twelve years of the succeeding reign; and all the extraordinary expence did not much exceed three millions per annum: yet this expence, small as it was, compared with what it has been since, was almost every year made out, by taking one million at least from the sinking fund: and in the years of the least expence, such as 1731 and 1732, the land tax was reduced to one shilling in the pound, at the expence of taking two millions and a half from the sinking fund.

These steps of administration I neither censure, or approve of. I must suppose every statesman to have good reasons for doing what he does, unless I can discover that his motives are bad. May not the landed interest, who composed the parliament, have insisted upon such a diminution of their load? May not the proprietors of the public debts have insisted on their side, that no money out of the sinking fund should be thrown into their hands, while the bank was making loans upon the land and malt duties at 3 per cent? Might not the people have been averse to an augmentation of taxes? When three such considerable interests concur in a scheme, which in its ultimate, though distant consequences, must end in the notable prejudice of perpetuating the debts, although opportunities offer to diminish them, what can government do? They must submit; and, which is worse, they cannot well avow their reasons.

Such combinations must occur, and frequently too, in every state loaded with debts, where the body of the people, the landlords and the creditors, find an advantage in the non-payment of them. It is for this reason that I imagine, the best way to obviate the bad consequences of so strong an influence in parliament, would be, to appropriate the amount of all sinking funds in such a manner, as to put it out of a nation's power to misapply them, and by this to force them either to retrench their extraordinary expences, or to impose taxes for defraying them.

The second period of George IId's reign, was from the breaking out of the Spanish war in 1739, to the peace of Aix-la-Chapelle in 1748. During these ten years, (1748 being included,) the extraordinary expence was, upon an average, very near seven millions; and at the end of the year 1738, the public debts amounted to 46,661,767 l. bearing 1,962,053 l. interest.

The first expedient for borrowing money during this war, was to continue the duty on salt for seven years; and to mortgage it at once for 1,200,000 l. according to the old plan. To this was added, the expedient of lotteries, and loans upon indeterminate annuities, according to the current value of money.

An additional excise upon spirituous liquors, brought in wherewithal to compensate these additional sums of interest; and the East India company, for lending one million at 3 per cent upon this occasion, had their charter continued from 1766 to 1780. This operation I also consider as an anticipation; and as it was to commence at the distance of 23 years from the time of the grant, could not fail of being very burdensome to the nation, however convenient it might be at that particular time.

Were the India company now, 1766, to purchase the renewal of their charter for 14 years, what a sum might be expected from it! Yet the value given for the grant they then obtained did not exceed 30,000 l. because the other annuities of 3 per cent. were sold at that time for 97 l. or, in the language of the funds, at 3 l. premium for every 100 l. subscribed; and this so early in the war as 1743.

The practice of borrowing upon premiums had taken place in Queen Anne's reign, and has of late years been very common. The credit of Great Britain is so firmly established, that in whatever way government inclines to borrow, the moneyed men are willing to lend, provided the loan be made according to the rate of interest at the time.

To avoid therefore the establishment of funds at different rates of interest, in proportion to the fluctuations of money, the bargain is made at one determinate rate. Suppose, for an example, 3 per cent. Then, according as money is found to rise above this rate in the market, a premium is paid out of the money subscribed; as in this case 3 l. was paid out of the 100 l. subscribed; that is, the subscriber retained it, and obtained his 3 l. annuity, for the payment of 97 l. so this remained a 3 per cent loan, instead of being, as it really was, at 3 9/97 per cent. and was sold and transferred as every other 3 per cent without occasioning any perplexity.

As the war continued, interest rose, from the demand for money, when the supplies became deficient.

The year following, viz. 1744, this manifested itself, by the conditions offered by government, which were. That, of two millions to be borrowed at 3 per cent as before, upon the whole sum, 1,500,000 l. should be formed into perpetual annuities, and the remaining 500,000 l. into a lottery, consisting of 50,000 tickets, to be sold at 10 l. each. The original subscribers to this loan subscribed therefore 10 l. for the ticket, and 30 l. for the annuity, in all 40 l.; for which they were to receive 3 per cent. But the premium consisted in this; that every subscriber for 10 tickets, that is, 400 l. of the total fund, had an annuity for life given to him of 4 l. 10s.

This made five thousand annuities on lives, of 4 l. 10s. each, or 22,500 l. a year to be added to the interest of 3 per cent. on the two millions, that is, to 60,000 l. a year of perpetual annuities. So that the whole loan of two millions this year cost government 82,500 l. of interest, of 4 1/8 per cent; 22,500 l. of which was to extinguish with the lives of the subscribers.

Now, if we suppose these life-annuities worth 20 years purchase, (2) this was the same thing as if government had given a deduction of 90 l. out of the 400 l. subscribed; consequently the remainder, which was 310 l. produced 12 l. This makes the rate of interest upon the loan to have been 3.87 per cent. And as government inclined that the loan should be made in this way, the lenders were willing that it should be so; and the difference between 3.87 per cent (the then rate of money) and 4 1/8 interest, which was paid by government, was a sinking fund, as it were, for the gradual extinction of the capital of the lottery for 300,000 l. during the lives of the annuitants.

In 1746, perpetual or indeterminate annuities were constituted at 4 per cent and the premium upon the ten lottery tickets was raised to 9 l. life-annuity.

It would be unnecessary to trace the various methods of contriving the premiums given in the succeeding years of this war. The principle upon which they were regulated was always to proportion them to the rate of interest at the time; and the motive was, I suppose, that by this method of borrowing, a part at least of the debt would become extinguished with the lives of the subscribers. There might perhaps be another, to wit, that by swelling the capital, for value not received, there was an appearance of borrowing at a lower rate of interest than what in reality was the case. Thus in 1747, when 6,300,000 l. were borrowed; instead of giving not quite 4 1/2 per cent. for this sum, they gave 4 per cent. upon 6,930,000 l. which capital, although money should return to 3 per cent was still to stand at its full value; whereas, had 6,300,000 l. been borrowed at 4 1/2 per cent. there would have been a saving of 600,000 l. upon the capital; and at the peace, the interest of 4 1/2 per cent would equally have come down to 3 per cent with the other funds.

During this first war of George the Second, the land tax was constantly at 4s. in the pound; and new branches of customs, excise, or other inland duties, were created in proportion to the swelling of the national debts, which, on the 31st of December 1748, amounted to 78,293,313 l. sterling, bearing 3,003,325 l. interest; and the sinking fund, or surplus of all permanent taxes then imposed, after paying the civil list, and the interest upon this capital, amounted to 1,060,948 l. sterling. During this war, the debts were increased above what they were at the end of 1738, by 31,631,346 l. sterling capital, and by 1,043,272 l. of interest or annuities.

The war was no sooner over, and the national expence diminished, than money began to regorge in the hands of the monied interest: an infallible consequence of such a violent revolution, when extraneous circumstances, such as occurred after the peace of 1763, do not prevent it.

To profit of this conjuncture, government, early in 1749, proposed that all the public creditors upon capitals bearing 4 per cent interest, redeemable by parliament, and amounting to upwards of 57 millions, who should accept of 3 per cent from December 1757, should have their debts made irredeemable until that time; and in the interval should continue to have 4 per cent till December 1750; and 3 1/2 per cent from thence, until the total reduction to 3 per cent in December 1757.

This bold undertaking had the desired effect. Many obstacles were thrown in the way; but the regorging capitals in the hands of many, made every one fear the reimbursement for himself; and the credit of France was then so low, that very few chose its funds as an outlet for their superfluous money.

But an outlet, unfortunately, was not wanting at the end of the last war in 1763, as we shall shew in its proper place.

Here then is a notable instance of the effects of regorging money. A small sum, when compared with a nation's debt, operates upon the whole capital; as a small balance upon trade affects the whole mass of reciprocal payments.

The reimbursement of 57 millions offered by government, in 1749, was, to the conviction of all the world, an impracticable scheme; but the stockholders seeing a large sum ready to be subscribed, at the interest offered, and feeling the effects which that regorging money must, in all events, have produced; willingly, and wisely perhaps, consented to the offer made them. Had they refused, and had the scheme proposed become abortive thereby, perhaps the nation, from the disappointment, might have been so far animated against the creditors, as to have consented to be at the expence of defraying the service of the following years, without encroaching upon the sinking fund. What effect this would have produced upon the rate of interest, in that conjuncture, no man can tell, nor will the real consequence of such a measure be ever known, until the happy trial be made. That it would have brought interest below 3 per cent in December 1757, is, I think, evident: for as matters stood, had the creditors of 57 millions been able to hold out, I must do them the justice to believe, they would not have accepted the proposal made to them; and an addition of all the sinking fund thrown among them annually, at a time they could not dispose of what they had, upon better terms than those offered to them, would undoubtedly then, as at all times, operate a very great national relief, in bringing down the interest of money.

During the tranquillity which continued from the peace of Aix-la-Chapelle, in 1748, to the commencement of hostilities in 1755, the money expended for extraordinary services amounted on an average to above four millions per annum. The expence of government was then increased, by supporting the colonies, and by several great and uncommon outgoings at home, for purposes mentioned in the supplies of those years.

A little before the breaking out of the last war, that is to say, on the 5th of January 1755, the national funded debt was reduced to 72,289,674 l. upon which was paid an annuity of 2,654,500 l. and the sinking fund amounted to 1,308,814 l. At the end of 1763, the year of the peace, the funded debt amounted to 130,586,789 l. 10 s. besides above 9 millions not provided for. So that at the end of last war the national debt exceeded 140 millions; besides the value of the annuities granted in 1757, 1761, and 1762. Hence it appears, that the war occasioned an augmentation of upwards of 58,297,116 l. upon the funded national debt; (3) besides the difference between the unfunded debts at the beginning and end of the war; and also the value of those annuities.

I shall, before I conclude this chapter, present a short scheme of the state of the nation at that time: but first let us take a view of the methods used to borrow so large a sum in the short period of eight years.

Until 1757, money was borrowed by government, at very little more than 3 per cent but then a loan of 5 millions being necessary, government consented to create annuities of 4 1/2 per cent irredeemable for 24 years. By this expedient the monied people eluded the operation of reducing the interest of this fund, upon the return of peace. How far this expedient was to be preferred to the former, of increasing the capital beyond the money paid; or whether it would not have been still better to have paid for the money wanted, according to the current rate of interest in the market at the time, waiting until a peace might afford a favourable opportunity of reducing it, I shall not take upon me to determine. (4)

I have observed how rash it is for any one to censure acts of administration, when the motives of a statesman's conduct are unknown. This, however, I have sometimes ventured to do, in speaking of things which happened many years ago; but we ought to be more cautious as we come nearer to our own times, because not having, as in the case before us, a course of experience to point out the errors, we must entirely rely upon our own sagacity, and reason from analogy only.

During the last war, as in that preceding it, taxes were increased in proportion to the interest of the money borrowed; and new impositions were now laid on the articles of great consumption, which produced abundantly. The new malt-duty of 3d. per bushel, and the new beer-duty of 3s. per barrel, bring in net into the exchequer near 820,000 l. per annum, and discharge the interest of above 27 millions sterling, at 3 per cent. Such a sum raised at the end of a war so very expensive, and at the very time when the credit of France was totally fallen, must have operated in the strongest manner, and did in fact operate more, perhaps, than any other consideration, to put an end to that war, the most glorious that Europe has beheld since the beginning of this century, or perhaps in any age whatever: advantageous to Great Britain, notwithstanding all the expence, provided that the consequences happen to correspond to what may be reasonably expected.

I shall now set before my reader a short state of the taxes, debts, and public funds of Great Britain, at this bright period of her history.

From the best authority I have been able to procure, the revenue of the state, considered under the three general branches of customs, excise, and other inland duties, which comprehend the whole permanent income of this kingdom, was then as follows:

Customs net into the exchequer, about £2,000,000

Excise in all its permanent branches net, about 4,600,000

Other in land duties net 1,000,000

Land tax at 4s. in the pound 2,000,000

Annual malt tax net 613,000

In all 10,213,000

Let us next state the annual charges and appropriations settled upon this fund.

First then the civil list, to the amount of 800,000

Secondly, The interest of about 131 millions of funded debts at different rates of interest, about 4,500,000

Thirdly, The interest of nine millions not then provided for, supposed to be at 4 per cent. 360,000 In all of regular and permanent annual charge 5,660,000

So there remains free, about 4,553,000

From which if we deduct the annual grants of land and malt-taxes, which extend together, as above, to 2,613,000

There will remain as the produce of the sinking

fund (5) 1,940,000

In this state, nearly, stood the affairs of Great Britain after the conclusion of the peace in 1763.

It now only remains to offer some conjectures why, after the conclusion of this peace, as after the peace of Aix-la-chapelle, money was not found to regorge, so as to furnish an opportunity of reducing the rate of interest upon all redeemable debts, and by that to raise the amount of the sinking fund, and more firmly to establish the national credit.

After the fall of the credit of France toward the end of 1759, Great Britain had the command of all the money to be lent in Europe; and accordingly amazing sums were borrowed in 1760, 1761, and 1762. Of the sums borrowed, a great part, no doubt, was the property of strangers; but they, not being so well acquainted with the affairs of this nation as the English themselves, instead of subscribing to the loans, lent the money to our own country people, who, in hopes of a great rise upon the return of peace, filled the subscriptions with this borrowed money.

The consequence was, that no sooner did the funds begin to rise after the peace, than many creditors demanded their money of those who had invested it in the public funds. This obliged the latter to bring their stock to market, and this again had naturally the effect of keeping the funds very low. Some, more prudent than the rest, had borrowed upon a long term of repayment: which had the effect of putting off still longer the settlement of the funds in the hands of the real proprietors, and of taking them out of those who only held them nominally.

Besides this accidental cause of the low price of the funds, other circumstances, no doubt, greatly contributed to produce the same effect.

How great soever the balance of trade, that is, of exportations above importations, may have been of late in favour of England, still the mighty sums drawn out by the foreign creditors have certainly, upon the whole, prevented much money from coming home on the general or grand balance of payments. While this continues to be the case, it is impossible that much money should regorge at home in the hands of the natives, and until this shall happen, there can be no hope of seeing the 3 per cents rise above par. But then the rise, small as it is, since the peace, may encourage us to hope that this favourable change is not far off: for had the profits of our trade been quite unable to balance the loss upon our foreign debts, the funds would undoubtedly still continue to fall, which is demonstrably not the case from the circumstances of the loan in April 1766, obtained by government, with the assistance of a lottery indeed, at 3 per cent. (6)

Here then was an outlet provided for more money than all that could regorge at home, viz. the payment of those foreign creditors, to whom the stockholders were indebted. besides this, the sale by government, of such tracts of land in the new acquired islands in the West Indies, provided another; money was even placed in the funds of France soon after the peace, until the adventurers were checked by the operations of the King's council, in reducing both capitals and interest upon them, contrary to the original stipulations with the creditors. A lucky circumstance for Great Britain, as it forces, in a manner, all the money of the continent into the English funds, which equally remain a debt upon the nation, whether high or low in the market.