that as much produce must be sold to pay the present taxes, nominally reduced, as was sold to pay them when they were nominally a quarter higher; had this mass of taxes not been removed, taxation would in reality have been increased; you will. perceive, Sir, the great importance of constantly attending to the difference between real and nominal prices, or values; and you will further perceive, that our system of funding and taxation, and the system acted upon in Mr. Peel's bill, are so placed as not to assist, but to counterbatter each other.

You will perhaps say, "as to the currency, I have not thought much about it, but I have no alarms about the debt, because I have been constantly told that the Sinking Fund would provide for its liquidation." Sir, the system of this Sinking Fund is one of the greatest fallacies the world has ever seen: it originated from a knowledge of the accumulating powers of compound interest; but those powers are confined to accumulation alone, there is nothing creative about them; the deception lies in this; for compound interest to be effecttual there must be two parties to the transaction. If I deposit money in the Bank, they will give me interest for it; if I also deposit the interest, they will give me interest upon the interest, that is compound interest, and great will be the accumulation; but here are two parties, the one pays the interest, the other deposits the capital. Now see how far different would be the transaction if I were to deposit the money in my own chest, and pay myself the interest; this would not be increasing but saving, and could only happen if my means exceeded my expenses, and if that were the case I should have no debt. If the Government were to deposit a sum of money in the French or American funds, it might accumulate at compound interest; but the present Sinking Fund has been created and kept on foot by Government putting a portion of the taxes into the public chests, and paying the interest by another portion of the same taxes; in the whole of this transaction there has never been more than one party.

But Sir, it is time to bring my letter to a close; my object in writing, is to show that the agriculturist is wrong in his assertions as to the cause of our distress, and in great error as to the remedy he seeks; to my mind this is as clearly and as conclusively shown, as it is shown by Euclid that figures which are similar to the same right-lined figure, are similar to one another. I mean, that the deductions follow the reasonings and premises, as naturally as they do in the propositions which mathematicians have given us. I am not stirred by party views, I have no party feelings to gratify. It is my wish shortly to discuss the question, as far as my abilities will allow, more in the calm temper of a philosophical enquiry, than in the heated temper of every-day politics. If you are right, all

our difficulties can be conquered in an hour; but if I am right, they are enough to appal the stoutest.

Before I conclude, I have a word or two to add. Much, very much, light has been thrown upon the important science of political economy in latter years; but it is belonging to truth to observe, that the mischief and the errors of our funding system were clearly foretold many years since. The transaction of the corn rents, before mentioned, might have afforded useful hints; but this lesson of wisdom was as much disregarded as though Lord Burleigh had in reality" shaken his head and said nothing.'

Twenty-five years since, Paine published a little work called "The decline and fall of the English system of Finance;" undoubtedly it shows much penetration and knowledge upon the subject: his plan was to reason upon facts, and to show from them, that the system must break up before Mr. Pitt would attain the age of man. If Mr. Pitt were now alive, he would, I believe, be about 60 years of age; there is therefore, sufficient time to show the truth, or otherwise, of the predictions. Paine imagined he discovered that the increase of the debt, in each successive war, would form a progression, not arithmetical nor geometrical, but somewhere between the two: here he was assuredly wrong; from the war that ended in 1697, to the end of the American war, there does seem to be the ratio of increase he alludes to, but subsequently the ratio has taken a start, and seems inclined to baffle calculation; nevertheless, it seems in the nature of things, that our system should contain within itself a principle of self-destruction; every war, from that which ended in 1697, to that which terminated in 1814, required additional taxes and new loans, and if the system can go on, future wars will doubtless require the same. The increase in the issues of paper will be found, by the returns, always in the ratio of the new loans and taxes; the Bank notes were in fact required to pay the interest upon the loans-to pay the taxes; each successive issue of paper increased the price of all commodities, hence the expense of every year of war necessarily exceeded that of its predecessor, and hence the principle of self-destruction in our system of funding.

However, the trash Paine wrote about religion was the means of his being detested, and not listened to.

It is also belonging to truth to say, that Cobbett pointed out the errors of the system, and its mischievous consequences, but his ap'parent hostility to all persons and parties, languages, and things, caused him also not to be listened to.

Towards the close of the last, and the beginning of the present century, a stand against the system was attempted in Parliament,

but attempted in vain; those who opposed the Bank Restriction Act, were looked upon as Jacobins, or laughed at as fools.

America and France have each had their systems of paper money, and in both cases the system died by self-destruction, leaving us examples to be avoided; but alas! how have we profited by the legacy?

goes

All these interesting subjects have lately received great light from the pen of Professor Say. In showing that markets for commodities are created by, and depend upon the production of commodities because we purchase one commodity with another, though money may help in the exchange, he shows that the well doing of one country tends to promote the welfare of another; and this to inculcate, that the best policy for nations, as well as men, is to do unto others as they would be done by, which maxim is one of the foundation stones of the Christian dispensation; so that in fact, the doctrines so fully and ably illustrated by this great master, tend, in a measure, to encourage and extend the beneficent labors of the Saviour of the world.

This celebrated person came hither in 1816, as he says himself,' "for the explanation of many phenomena, of which the result only were known, and to measure that lever which more than once has raised up Europe."

He looked at us, our system, and our institutions, with a keen and unprejudiced eye; in committing to paper the conclusions to which he came upon the subject, he makes this apposite remark: "Economy is now no longer a science of mere speculation or amusement; the knowledge of it is necessary; and we may boldly predict, that every Government which is ignorant of it, or who despises its principles, is destined to perish by its finances."

It must be remembered, that it is not " one of the vile Opposition, who want to get their opponents out and themselves in," who says this; it is not "a crack-brained disciple of the Spencean school, whose object is a division of property, who says it;" neither is it "a ragged Radical, who wishes to level the great and set up the little;" but it is a cool calculating philosopher, a master in his art, a man of science, a man not properly of any nation, but the ambassador of all. And such a man says, if we do not attend to the principles of political economy, we shall perish by our finances.

When I look at the picture of misery and distress which this country exhibits; when I look at the figures which represent the state of its finances; when I look at the passions and prejudices which are abroad; when I look at the divisions into which the country is

' England and the English people.

2 Ibid. p. 35.

thrown-"King's men" and "Queen's men," "loyal" and "disloyal," "radicals" and "ultras." Whenever, I say, I look upon these things, the passage I have quoted from the Professor's writings seems, as it were, to flash upon my imagination with awful and prophetic warning.

But the discussion of the questions which form the subjects of this letter, is not confined to national distress, whether that distress presses on agriculture, on manufactures, on commerce, or on all; these subjects are mixed up with the great questions that concern our character as a nation, our station amongst nations, and our security and independence. Power, and power only, can preserve these great ingredients; and without them, what are we? But national power is not a principle self-created, self-subsisting; what is its source? Unquestionably wealth is the source of power, in nations, as well as in individuals. But half the wealth we can with our utmost industry produce, is pre-occupied, is anticipated in the homely language of the cottage, "We have eaten our cake, and therefore cannot have it."

Where then is our wonted power? comparatively in the dust!

You will perhaps tell me, that our paper concerns cannot be compared to those of France; because theirs blew up quickly, whereas our endures. It is so; but mark the distinction: the Republic issued paper for the whole amount of the money lent; we fund the principal, and issue paper for the interest; therefore it has been calculated that the period of endurance for the funding system, as compared with the other system, is as 20 to 1, which is the ratio between principal and interest at 5 per cent.'

If you ask me for a remedy for all these evils; I reply, that such a discussion would greatly exceed my limits, and would besides be foreign to my purpose. Let the disease be well understood, and the remedy will be very soon applied.

The ultimum remedium and pessimum, that is, a compromise with our creditors, has been alluded to in Parliament; the bare mention of such a scheme produced alarm and agitation within and without those walls; but should the funding system fall by its own weight, who can calculate the alarm and agitation that would then exist?

Since I commenced this letter, I observe that the first Minister still perseveres in an opinion before expressed, that the agricultural distress arises from harvests too abundant! I cannot convey to you any notion of my surprise on hearing this opinion from so able a personage. See what Adam Smith wrote upon this subject:

! Decline and Fall of the British system of Finance.

"Food not only constitutes the principal part of the riches of the world, but it is the abundance of food which gives the principal part of their value to many other sorts of riches."

To have wealth, we must possess those commodities which we want, or which we can exchange against such things as we want: now the most valuable of all commodities is the food of man; hence, according to his Lordship, it is the excess of our wealth which causes our misery. This would have sounded well to the ear of Diogenes, but how will it sound to the ear of a starving weaver ? But, Sir, we live in strange times, we hear strange arguments, we see strange measures.

It appears that Captain Kater has discovered a volcano in the moon: at first I concluded that this persevering and skilful observer had increased the powers of the telescope, and thus had obtained a clearer view; but I suspect his merit is not so great as at first I was disposed to believe. I suspect the moon has in reality come nearer to us: many appearances indicate such an approximation of this planet.

I must now bring my letter immediately to a close.

London, Feb. 1821.