Insuchasituation，Ifairlyacknowledge，thatIcannotdiscoveranyexpedienttoavoidabankruptcy。Engagingtheforeigncreditorstobecomecitizens，bytheallurementsofthegreatestprivileges，andbillsofnaturalization，arevainspeculations。Unlesssomeresource，hiddenfromme，should，uponsuchanoccasion，openitself，inthedeeprecessesoffutureevents，Ibelievethenationwouldsoonbedrivenuponthefatalrockofbankruptcy。Theideaofanation’sbecomingbankrupttoitself，Ihavealwayslookeduponasacontradiction；butthatitmaybecomebankrupttotherestoftheworld，isquiteconsistentwithreasonandcommonsense。
Ishallnottakeuponmetosuggestwhatmodeofbankruptcywouldinsuchacasebethebest；atotal，orapartialone。Thepartial，Iamafraid，would，inEngland，workeffectsalmostashurtfulastheother。Butifeverthecaseshouldhappen，theonlywaywillbe，towatchovereverysymptomoftheapproachingcatastrophe，andtoimprovecircumstancestothebestadvantage。
Icannotomitinsertinginthisplacetheopinionofamostsagaciousandmostintelligentforeignmerchant，mostconsolatorytoGreatBritain，withrespecttothedebtssheowestoforeigners。
ThelateMrMegens，wholivedmanyyearsinEngland，composedatreatiseinGerman，whichMrHorsleytranslatedin1752，underthetitleoftheUniversalMerchant。Inthe31stSectionofthisworkisthefollowingpassage:
’Andalthoughitcannotbedenied，thatforasmuchasforeignersarebecomegreatcreditorsinthepublicdebtsofEngland，agreatsumofinterestmustbeannuallymadegoodtothem。Yetifitappearthattheprivatepeopleabroad，aremoreindebtedtotheprivatepeoplehere，thansuchinterestamountsto；thenationhasnoprejudicialdraughtuponit，onaccountofsuchdebt；andthatthegeneralbalanceoftradeishighlyinfavorofEngland。’
Fewpeople，Iampersuaded，haveanysuchideaasthislaiddownbyMrMegens。Happy，forGreatBritain，coulditbeverified！
OfwhatinfiniteconsequenceisitthenforaBritishstatesmantoinquireintotheamountofdebtsowingtostrangers，andintothestateofthebalanceoftrade？Inspeakingofexchange，Ithrewoutmanythingsconcerningtheideaofputtingthatbranchofbusinessintothehandsofthebank，inconjunctionwiththeexchequer。Werethestatebroughtintothedilemmaofeithersubmittingtothisgradualdeclineoftrade，fromacausewhichcouldnotberemoved；orofbeingpushedtothenecessityofleapingintotheterriblegulphofadeliberatebankruptcy；insuchadilemma，Isay，whatinfiniteadvantagesmightnotbedrawnfromthemanagementofexchange？
Ihavehearditsaid，thatthedebtowingtostrangerswasagreatadvantagetoEngland；becauseitdrewpeopletothatmarketwheretheirfundsaresettled。Iallowalltheforceanyonecangivetothisproposition:Butalas！whatwoulditavail，wheneverEnglandbecomesincapabletofurnishgoodsequivalenttoallherimportsfromabroad，addedtoallsheowestoherforeigncreditors？
IamveryfarfromsupposingthepresentsituationofEnglandtoforebodetheapproachofanysuchdisaster；butitisgoodtorepresenttoone’sselfsomedeterminateobject，bywhichwemayjudgeofoursituationintimestocome。
Debtshaveincreasedfarbeyondtheimaginationofeverymortal。Greatmenhaveutteredprophecies，whichhaveprovedfalse，concerningtheconsequencesofadebtofonehundredmillions。Fromthismostpeopleconclude，thattheywillgoonuntilsomeunforeseenaccidentshalldashthefabrictopieces。I
havebeenpretendingtoshewhowtheymaygooninaperpetualchain。Butalas！onefatalcircumstancewasthereomitted；andnowthatithasbeentakenin，Ithinkitservesasadatum，toresolvethemostimportantproblemofthisscience，viz。Howtodeterminetheexactextentofpubliccredit。Thesolutionofwhichis，Thatitisnotnecessarythatpubliccreditshouldeverfail，fromanyaugmentationofdebtswhatever，duetonatives；
andthatitmustfail，sosoonasthenationbecomestotallyunableeithertoexportcommoditiesequaltoalltheirimportsandforeigndebts，ortopayoffaproportionalpartoftheircapital，sufficienttoturnthebalancetotherightside。
Fromthispropositiontwocorollariesmaybedrawn。
First，Thatthemostimportantobjectinpayingoffdebts，istogetquitofthoseduetostrangers。
Secondly，Thatwhatevercircumstancehasatendencytowardsdiminishingtheburdenofforeigndebts，shouldbeencouraged。
Ifitbesaid，thatwheneverourforeigndebtsexceedthebalanceofourtrade，thebestwaywouldbetobreakfaithwithstrangers，andkeepitwiththesubjectsofthestate:Ianswer，thatwerethethingpossible，whichIapprehenditisnot，theconsequencemightproveequallyhurtful。
Thegreatestofalltheinconveniencesproceedingfromabankruptcy，istheruinofindustry，andthestopputtocirculation。Canitthenbesupposed，thatacountrymightexecutesoglaringaschemeoftreacherytoallherneighbours，andstillcontinuehercorrespondencewiththemintheopenwayoftrade？Certainlynot。Wereallforeigntradetobestoptatonce，whatarevolutionwoulditoccasion！Thecirculationofforeigntrade，inthecityofLondononly，exceedsperhapstheamountofallthetaxes。Astopputtothiswouldoccasionsuchastagnation，aswouldruinthenationasmuchasifthebankruptcyweretobecomeuniversal。Idonotherepretendminutelytotraceconsequences，whicharefinite:allthatcanbedone，istosuggesthints，whicheveryonemaypursue，inproportiontotheextentofhiscombinations。
Theintentionoftouchinguponthissubjectatall，istoshew，thattheexpedientofaspunge，whichisfrequentlytalkedofasaremedyagainsttheconsequenceofdebts，is，perhaps，moredangerousthananythingwhichcanbeapprehendedfromthem。
Thereasonis，thatthespungeimpliesamoresuddenbankruptcythananyonebroughtoninagradualway，bynaturalcauses。
WerenaturalandirresistiblecausestotallytocutoffallprofituponthetradeofBritain，onecannotsayhowfartheothernationsofEuropemightnotfindittheirinteresttoassistus，providedwedidourutmosttopreserveourgoodfaithtothem。AndasIthinkIhavemadeitsufficientlyevidentthatnothingcanbegainedbyopenlyviolatingpublicfaith，thebestresolutionanationcantake，istoadheretoittothelastextremity，andtobanishfromtheirthoughtseveryideawhichmayberepugnanttoit。
Chap。X
MethodsofcontractingandpayingoffpublicDebtsWearenowtocollecttogether，inoneview，theseveralmethodsofcontractingandpayingoffthedebtsofanation。Suchmethodsmaybededuced，eitherfromprinciples，orfromwhatpracticehaspointedout。
Thefoundationuponwhichpubliccreditisbuilt，istheexistenceofasureandsufficientfundforperformingtheengagementscontracted。
When，intheearlytimesofpubliccredit，therepaymentofthecapitalwasanexpressconditionoftheloan，amuchmoreextensivepublicfundwasnecessarythanatpresent，whennomoreisrequiredthanthepaymentoftheinterest。Assuchfundsnevercanbeformedbutfromtaxes，orgeneralcontributionsfromthepeople，thegreatertheyare，thelargermustthecontributionbe。Wheneverthereforethereisoccasiontocontactdebt，thechiefobjectofastatesman’scareshouldbe，tomodelthespiritofhispeoplesoastodisposethemtoconcurintheproperresolutionstorendertheplanproposedaseasyaspossibleintheexecution。
Inthefirstplace，thebodyofthepeoplemustbemadesensiblethattheconsequenceofcontactingdebtsmustimplyadiminutionupontheincomeofsomeindividuals；butthatthefewertheobstaclesthrowninthewayoftheloanare，thelesswillthisdiminutionbe。
Inthesecondplace，hemustgaintheconfidenceofhispeople，sofarastoimpressthemwithafirmbeliefthathewillconsulttheirgood，andnothingelse，inwhatheundertakes。
Andinthelastplace，hemustgaintheconfidenceofthosefromwhomheistoborrow；andconvincethemthatallcovenantsbetweenthepublicandthemwillbereligiouslyperformed。
Inalimitedandfreegovernment，thesethreerequisitesareessentialtothefirmestablishmentofpubliccredit。
Wherethepowerofthestatesmanisunlimited，hemaysubstitutehisauthorityoverthepeoplewhoaretopay，insteadofconfidence；butwithrespecttothosewhoaretolend，hewillfindnoroomforanysuchsubstitution:confidencehereistheonlyexpedient。
Allthereforethatisrequiredofthestatesmanwithrespecttothepeople，istoenablethemtodowhatherequiresofthem。
Forthispurposehemustestablishcreditwiththem，forfindingthecontributionsheistoexactofthem；becausetheywillhaveasmuchoccasionforcredit，inpayingwhatisdemandedofthembyauthority，ashehimselfhasinpayingwhatheisobligedtopay，inconsequenceofhisengagements。
Ifthisgeneralplanbenotfollowed，theconsequencewillbe，thattheproduceoftaxeswillfailononehand，andpubliccreditontheother。
Ifallthisoperationcannotbepreviouslyconcerted，theplanofborrowingmustbecircumscribedtofundspreviouslyestablished。
Whenmoneyisborrowedbeforethefundbeprepared，everyobstaclewhichoccursinestablishingit，becomesadrawbackupontheconfidenceofthosewholend，andrenderstheconditionslessfavourabletothestatewhichborrows。
Inthecontractofloan，thefirstarticletobeagreeduponistherateofinterest。Wehave，inthebeginningofthisbook，examinedthecausesofitsriseandfall；andhaveingeneraldetermined，thatwhenthedemandisforborrowing，interestrises；whenforlending，interestfalls。
Astheobjectoftheborroweristohaveinterestlow，thestatesmanwhointendstoborrow，mustuseallpossiblemeanstoincreasethequantityofmoneyincirculation。
Butifcoinalonebeusedasmoney，andifthiscoinbesentoutofthecountry，whenborrowed，andifwhatissentawaycannotbereplacedatwill，theschemeofaugmentingmoneybecomesimpracticable:itwilldailybecomemorescarce，moredifficulttoprocure，andinterestmustrisehighereveryday。
Symbolicalorpapermoney，thatiscredit，mustthenbeestablishedathome，uponthefirmestbasis:thiswillenableeveryonetopaywhatheowes；consequently，thetaxeswillbepaid，thecreditorswillreceivewhatisduetothemregularly，moneywilleveryyearaugmentinproportionasdebtsarecontracted；andifborrowingdonotaugmentbeyondthisproportion，interestwillnotrise；andifborrowingshouldfallbelowthisproportion，interestwillsink。
IsnotthiswholedoctrineverifiedinthestrongestmannerbytheoperationoftheMissisippi？AtthedeathofthelateKingofFrance，moneyhaddisappeared。Someyearsbefore，hehad，forsevenmillionsincoin，engagedhiskingdomforthirty-twomillions；uponadistantfundindeed，butstillitbecameadebttobepaid。Papermoneyhadnotbeenintroducedthreeyears，wheninterestfellto2percent。Thepaperindeedwasactuallyabubble；butwehaveshewnthatitbecamesofrombadmanagementonly。
Bytheaugmentationofmoney，capitalsceasetobesovaluable。Bythemeltingdownofproperty，theverycapital，thoughinthehandsofthestate，maybeturnedintomoneybythecreditor，wheneverhehasoccasionforit；inthesamewayasthecoinwhichisburiedinthevaultsofthetown-houseofAmsterdam，isconstantlyperformingalltheusesofcirculation。
Themethod，therefore，ofborrowingmoneytothebestadvantage，ispreviouslytoestablishafundofcredit，arisingfromannualtaxes；toprovidethepeoplewhoaretopaythem，withcreditormoneyinproportiontotheirpropertyorindustry；
andtopreventthelatterfromeverfailingforwantofthemedium，money，forcaringiton。
Ifintimeofpeaceinterestshallstandhigh，relativelytootherstateswithwhichyouareatwar，throwasmuchmoneyaspossibleintothehandsofyourcreditors，inpaymentofthedebtsalreadycontracted；becausethemoreyouthrowinthere，themoreyouwilldrawout，ifyouhaveoccasiontoborrowmore；
andifyouhavenooccasiontoborrowmore，theloweryouwillreducetherateofinterest，byaugmentingthefundofmoneytobelent。
FromtheseprinciplesIconclude，thateverynationwhichsetsoutbycontractingdebtswithitsowncitizens，mustbeginbyborrowinguponconditionofrepayingthecapitalinashorttermofyears。Thisisalsothebestmethodtoengagethepeopletocontributelargelywithoutmurmuring。Thereasonis，thatwhentaxesbegintobeimposed，themassofcirculationbecomesproportionallyaugmented；andthepayingbackofconsiderablesumstothecreditors，prevents，ontheonehand，thedebtsfromincreasingsofast，andsuppliescirculationandfacilitatesnewborrowingsontheother。Whilethisplanofaugmentingcirculationiscarryingon，thestatesmanmustpreventhisexpenceabroadfromdiminishingcirculationproportionallyathome。Thisistobeaccomplishedbyopeningloansforforeignexpenceinforeigncountries，andbypayingtheinterestonlyofsuchloans，withthegreatestpunctuality。
Thedifficultyofperformingthis，isnoargumentagainstit。
Itmusteitherbedone，orcreditwillbehurt；becausewithoutobtainingcreditabroad，itisimpossibletodefrayanyexpenceincurredabroad，beyondwhatthemetalsofyourcountryandtheexportsfromitcanpay:thatis，inotherwords，beyondthequantityofmetalsexported，andgeneralbalanceinyourfavouruponallreciprocalpaymentswiththeworld。
Ifitbesaid，thatnationsneverpaytheinterestoftheirdebtsanywherebutathome，Ianswer，thatitissomuchtheworseforthem；becausewhereverthedebtsorinterestistobepaid，thelenderalwaysstateshisaccountasifthepaymentweremadeinhisownhouse。Alltheexpencetohimofsendinghismoneytotheplaceofsubscription，andofdrawingbackhisreturns，arecomparedwiththeinterestofferedbytheborrower；
andifuponthewholethelenderfindhisaccountinthebargain，hesubscribes；otherwisenot。Sincethereforethemoneyborrowedmustinthiscasebesentabroad，itisanadvantagefortheborrowertobeunderanobligationtoprovideamethodofsendingit；andbythismeanshewillborrowcheaperthanhecando，whenherefundstoeverylenderallhisexpenceandtroubleingettinghisinterestremittedtohim。
Iamnowdeducingprinciples，andthereforeshallnotenterintoadiscussionofthemanyobjectionswhichoccuragainstthisplan，fromforeignconsiderations；suchasthefacilityitmightprocuretoastatesmanindefraudinghisforeigncreditors，andseveralotherswhichmightbeformed:allIsayis，thatthisisacheaperandmoresystematicalwayofborrowing，andithasthisgoodeffect，thatitconstantlypointsoutthestateoftheexternaldebt，fromwhichaloneabankruptcyistobefeared。
Wereafavourablebalancetoreturnafteranexpensivewar，thepaymentofthisforeigndebtwouldbetheconsequencethen，asmuchasnowwhenthepaymentismadeathome，andrathermoreso；becausewhoeverowedabalancetoEngland，IsupposewouldthenpayhisdebtsatLondon，withmoneyduebyEngland，payableatAntwerp，forexample；consequently，hewouldremitatdiscount；andwhenheremittedinfavourofanEnglishman，thedebtsmightbeconsideredasdischargedupontheforeignfund，andstateda-newuponthefundspayableinLondon。Couldthepaymentoftheinterestofthepublicdebtsberenderedsusceptibleofsuchtransfersuponalloccasions，itwould，I
imagine，havearemarkableeffectinfavourofpubliccredit。
Thisthoughtsuggesteditself，whileIwasconsideringthesituationofacountrywhereborrowingisinitsinfancy；anditoccurredasanexpedientforpreventingforeignexpencefromdrainingthecountryofthemoneynecessaryforcirculationathome。This，ineverycombinationofcircumstances，isthemostimportantobjectofastatesman’scare，whileheisengagedinwarsabroad。
Nowwhetherthemoneyofacountrybepaperorcoin，itisequallytakenoutofcirculation，byeveryforeignpayment。Whenitiscoin，itgoesoutofthecountry，aswellasoutofcirculation:whenitispaper，itdoesnotgooutofthecountry，certainly，butbycominguponthedebtorinitforpayment，itisequallytakenoutofcirculation；andwhatthedebtorgivesforitviz。abillofexchangeuponanothercountrygoesoutofthecountry。Andunlessthisbillofexchangecanbepaidwithvalueexportedinmerchandize，itwillremainadebtuponthecountry，contractedinfavourofsomeothernation。
ThisIhopewillbesufficienttorecalltomindwhathasbeensofullyexplainedinthe13thchapteruponbanks；wherethesamequestionwasstatedwithregardtothepaymentsScotlandwasobligedtomaketoEngland，towardstheendofthelastwar。Thesameprinciplesoperateinthecasebeforeus，andmaybeappliedtoeverycircumstanceofit；withthisdifferenceonly，thatherethestatesman’sinterestissupposedtobemorecloselyconnectedwiththatofhisbanksthanwasthecaseduringthedistressinScotland:becauseifhedonotsupportthembyasystematicalchainofconduct，hewilldrainthefundofcirculationbyhisremittances；hiscreditwillfail；histaxeswillnomorebepaid；andhispeoplewillbeoppressed。Butifhepursuehisplansystematically，circulationwillbekeptfull；hiscreditwillbesupported；histaxeswillbepaid；hispeoplewillbeeasy:
becausenocheckwillbeputeithertotheirindustryorconsumptionforwantofmoney；agreatpartofthesolidpropertywillbemelteddownintomoney；whateverpartofthismoneyislenttothestatewillbe，bythatoperation，consolidatedintoanewspeciesofproperty，thepublicfunds；andif，aftertheborrowingschemeisoverthatis，whenpeaceisrestored
circulationshouldbecontracted，apartofthemoneywillthenstagnateinthehandsofindividuals，andwill，intheirfavour，berealizedinthatpartofthesolidpropertywhichwasformerlymelteddowninordertoproduceit。Thatis，landswillbesoldbytheformerproprietors，andwillbeacquiredbythosewhohavemoneynotrealizedinstock；andforwhichmoney，circulationhasnofartherdemand。Thisisthereasonwhy，attheendofeverywarwhichhasrunthenationindebt，landshaveconstantlyrisenintheirvalue，evenwhenconsiderablequantitiesofthemhavebeenofferedtosale。
Ifitbesaidthatthestock-holdersarethosewhomwecommonlyseebuyingthelands，andnotthosewhohavesumsnotrealized:
Ishall，inanswer，observe，thatthestock-holderscannotbuylandsunlesstheyselltheirstock，tothosewhohavemoneynotrealized；soitisstillthemoneynotrealizedwhichisemployedinbuyingeveryarticleofsolidproperty:andevenafterthisoperation，thesamemoneywillstillremainincirculationasbefore；becauseitisimpossibletorealizeevenpapermoneyitself，exceptwhenthecreditorinitbecomesproprietorofthepropertyuponwhichitissecured；andifthemoneybecoin，itisplainthatthiscannotberealizedanyfartherthanitisbynature。Whenthereforewesay，thatamanrealizeshismoney，wedonotmeananythingfarther，thanthathegiveshismoneytoanotherinexchangeforsolidproperty。
Thuswhenanestateisboughtinacountrywherebanksuponmortgageareestablished，apartofthepriceiscommonlytakenoutofcirculationaltogether；becauseinconsequenceofthepricepaid，thebankisrefundedwhatithadmelteddownofthelandsold；consequently，thispaperbecomesconsolidateda-new，asitwere，withthelandswhicharerelievedofthemortgage。
Butwhenlandsaresoldinacountrywherethereisnopaper，thepriceremainsincirculationasbefore；andifthequantityofcoinincirculationshouldexceedtheusesforit，acasewhichseldomhappensinthesedays，itwouldbeexported，andrealizedabroad。
Whenthiscomplicatedandsystematicalschemeofcreditisnotestablished，thefallibleconsequenceis，thatmoneydisappears:consequently，interestrises。Thetaxesformerlyimposedcannotbepaid:consequently，itisinvaintoseektoaugmentthem；becauseinproportionastheyareaugmented，theybecomelessproductive。Ifmoneybeborroweduponremotefunds，engagedforotherdebtspreviouslycontracted，andifpublicfaithbeatalleventstobepreserved，theconsequencemustthenbe，thatthepublicwillbeeatupbyusurers。
ThiswasthecaseinEnglandduringthewarsofQueenAnne。
Soearlyas1706，government，ashasbeensaid，begantoborrowat6percentuponfundsalreadyengaged。Whatwastheconsequence？Theexchequerhavingnomoneytopaytheinterestasitfelldue，paidwithtallies；thesefelltogreatdiscount，andhadtheyremainedlonginthatdiscreditedsituation，lendingwouldhavestopt，orinterestwouldhaverisen，asinFrance，sohighastolosethenameofinterestaltogether。Thiswasthecase，intheexampleabovecited，whensevenmillionsreadymoney，borrowedbythelatekingofFrance，becameadebtofthirty-twomillionsonthestate。
Upontheoccasionabovementioned，governmentavailedthemselvesofthebankofEngland，asIsayeveryprivatecitizenshouldhaveapowertodo，oneveryoccasion，whenhiscreditisgood，thoughmoneyshouldfailhim。Theyengagedthebanktodiscountalltalliesissuedfortheinterestofdebts；thatis，inotherwords，toturnthosesticksintomoney:butaspubliccreditwassolowthatmoneycouldnotbefoundtodischargeeventheinterestoftheadvancemadebythebank，thegovernmentconsented，thatalladvancesofthatkindshouldbearcompoundinterestquarterly，at6percent。Whatamonstrousprofittothebank！whatachargeuponthestate！Hadabankofcirculationuponmortgagesbeenestablishedatthattime，moneywouldhavecomeinatamoderatesimpleinteresttoindividuals，whowouldhaveavailedthemselvesofthem，forthepaymentofallpublicburdens。Insteadofwhich，industrywasmadeto，sufferthepublicmoneydidnotcomein；taxationstopt；expenceswenton，anddeficiencieswerepaidbythepublicatthismonstrouscharge。
Ontheotherhand，haditnotbeenfortheassistancethebankthengavethestate，incirculatingthoseexchequertallies，bills，&c。itisverycertainthatcreditwouldhavefailedastotallyinEnglandasithaddoneinFrancein1708，whenDesmaretzundertookthefinances。Thisministerhadnobanktoavailhimselfof，andaccordinglyherunFranceindebtattherateoftwohundredmillionsoflivresperannum，duringsevencampaigns；ofwhich，Iampersuaded，hedidnotreceiveonehalf，ornearit，ineffectivevalue。
WhatIhavesaidwill，Ihope，besufficienttoshewthattheonlywayforanystatetoborrow，ispreviouslytoprovideafundformakinggoodwhatisagreeduponwiththelenders；andthatallexpedientstosupplythewantofitwillintheendbringgreatexpenceuponthepeople，eitherbyinvolvingtheminanexcessiveburdenofdebts，incasepublicengagementsshouldbeheldsacred，ashasconstantlybeenthecaseinGreatBritain；orbydrivingthestatetoabankruptcy，aswasthecaseinFranceuponthedeathofthelateKing。Icallitabankruptcy，becauseallthatwasowingwasnotpaid。Amanwhopaysnomorethan19s。
113/4d。inthepound，isabankrupt，aswellashewhocannotpayonefarthing。
Icomenexttothemethodsofpayingoffdebtswhenalreadycontracted。
Publicdebtsmaybedividedintotwoclasses，redeemableandirredeemable。Redeemabledebtsmaybepaidoffinseveralways，whichweshallbrieflyenumeratebeforewecomparetheirseveraladvantages。
Firstthen，suchdebtsmaybepaidoffatonce，byrefundingtothecreditorsthewholecapital，withallarrearsofinterest。
Secondly，Theymaybepaidoffyearly，accordingtoacertainruletodeterminethepreference，andorderofpayment:forthispurpose，adeterminatesummustbesetapartasasinkingfundfordischargingthecapitalandinterest。
Thirdly，Theymaybepaidoffcumulativelyandproportionallyeveryyear，byincorporatingthesinkingfundintothemoneyappropriatedfordischargingtheinterest，andbyplacingallthatispaidbeyondtheinterest，aspaymentinpartofthecapital。
Fourthly，Theymaybepaidinonesense，asshallbefartherexplainedbyreducingtheinterestuponthecapitals，withoutdiminishingthem。
Fifthly，Theymaybepaidoffbyconvertingthemintoannuitiesforlives。
Sixthly，Andlastly，theymaybepaidoffbelowthevalueofthecapitals，bythemeansoflotteries；wherethestatemaygainwhatthecreditorschoosetolosefromadesireofgaming。
Tooneorotherofthesemethods，maybereducedallthefairandhonestexpedientswhichastatemayemploytogetridofitsdebts，withoutanybreachofpublicfaith，orwithoutproceedingtotheextremityofprescribingconditionsofpayment，whichthecreditorsareforcedtoacceptagainsttheirwill。
Asfortheirredeemabledebts，Iapprehend，that，withoutconsentofthecreditors，nochangeupontheconditionofloancanjustlybemade。
Ishallnextpointouttheadvantagesanddisadvantagesoftheseveralmethodsofdischargingdebts，astheymayaffecttheseparate，orcumulativeinterestofastate。
Werelargedebtswhichhavesubsistedforalongtimetobepaidoffallatonce，itwouldoccasionasuddenandaviolentrevolution，whichisalwaysattendedwithinconveniences。
Were，forexample，theproprietorsoflandstoconsenttoselloffapartoftheirestatesforthepaymentofthepublicdebts，thequantityoflandbroughttomarket，wouldsinkthepriceofitveryconsiderably；fromwhichwouldariseagreatdetrimenttolandlords。Ishallnothereinquirefromwhencesuchasumofmoneycouldcome；thatitmaybeproducedisverypossible，fromwhathappenedinFranceintheyear1720。
CouldatreasurebebroughtfromIndialetmesuppose
sufficientatoncetodischargethedebtsofGreatBritain，circulationwouldbecomesogluttedwithmoney，thatinterestwouldfalltonothing。Thiswouldbeatemporarylosstoalltheformercreditors，untiltheyhadtimetolendtotheotherstatesofEurope；whowould，inconsequenceofthiscircumstance，sinktherateofinterestupontheirowndebts。SomethinglikethiswastheconsequenceofpayingoffallthedebtsofFrancewithbanknotesin1720，uponwhichinterestfell，aswehaveobservedabove，to2percent。
When，inthesecondplace，debtsarepaidoffpartiallyeveryyear，accordingtoacertainrule，itisexpedienttohavethecapitalsreducedintosharesofadeterminatevalue，asisthepracticeinFrance，thattheymaybedrawnoutasinalottery。
Thelotsdrawnmaythenbepaid，andnodetrimentwillfollowtoanyparticularcreditor，morethantoanother。becauseifbybeingpaidtherebeeitherprofitorlosstothecreditor，itwillaffectthevalueofthewholestockinproportion。If，upontheestablishmentofsuchaplan，thestockbefoundtorise，itwillbeaproofthateithertheinterestformerlypaidwasbelowthecommonrate，orthatthecreditofthestatewaslookeduponasprecarious:ifitshouldsink，contraryconclusionsmaysafelybedrawn。
ThisisacommonmethodofpayingoffdebtsinFrance，wherefundsaremorecommonlydividedintosharesthaninGreatBritain。
In1759，theKingopenedasubscriptionforseventy-twomillionsoflivresuponthegeneralfarms:thissumwasdividedintoseventy-twothousandactions，bearing5percentanditwasstipulated，thatupontherenewalofthefarmsin1762，twelvethousandactionsshouldbedrawnbylot，andpaidoffmonthly；sothatinsixmonthsthewholedebtwastobedischarged。Thethirdmethodofapplyingwhatisannuallypaidabovetheinterest，inextinctionofthecapital，isthemeasureproposedbyCardinaldeRichlieufordischargingthedebtsofFrances。onlytheCardinalwenttoworkinaveryarbitraryway，bothindeterminingtheinterest，andinfixingavalueuponthecapital，equallydetrimentaltothecreditors。
Toapplythistoanexample。HadEnglandatthetimegovernmentfirstestablishedasinkingfund，arisingoutofthesavingswhichweremadeuponreducingtherateofinterest，fromtimetotime，continuedtopaytothecreditorsthesameannualsumsasformerly；andtherebyappliedwhatwaspaidbeyondtheinterest，tothepaymentofthecapital，therecouldnothavebeenanymisapplicationofthesinkingfund；andthedebtsbythistimewouldhavebeengreatlydiminished。Whereasbyapplyingthesinkingfundtotheserviceoftheyear，fortheeaseofthepeopleandadvantagetothecreditors，theconsequencesmayproveexceedinglyinconvenient。
ThefourthmethodofreducingdebtsisthatadoptedbyGreatBritain，viz。byreducingtheinterestpaiduponthem。Fromthiswediscoverthereasonwhytaxes，evenintimeofwar，areseldomaugmentedinthiskingdommuchabovetheproportionoftheinterestofthemoneyborrowed。
Wehave，inthesecondchapterofthefirstbook，boldlydeclaredthistobeagainstprinciples，andtheauthorsofsuchaschemeweretherestigmatizedasmenofnoforesight:wenowseehowmuchpeoplemaybemistakenintheirconclusionsinpoliticalmatters，whentheyareformedupontoonarrowcombinations。
Werecapitalsintendedevertobepaid，nodoubttheconclusionwouldbejust；butifitberesolved，thatcapitalsshallneverbeconsideredastheobjectofattention，andthattheinterestaloneshallbelookeduponastherealburden，thenallpaymentofcapitalsisunnecessary，exceptsofarasbypayingapartofthem，itmayservetoreducetheinterestupontherest，bymakingmoneyregorgeinthemarketbeyondtheusesfoundforit。
Thisplancannotbecarriedonwhileanationisengagedinanexpensivewar，whichabsorbsallthemoneytobelent:butitbecomestheobjectofastatesman’scare，afterpeaceisrestored，andwhentradebeginstobringinabalanceuponexportations。
Wehaveseenhowthisbalancetendseveryyeartodiminishthecapitalsduetostrangers，andtokeepmoneyathome。Thenisthetimetoextendtaxationbeyondtheusesfoundformoneytopaytheinterest。Twoorthreemillionsextraordinary，raisedatthecloseofawar，andthrownintothehandsofthecreditorsofGreatBritain，inextinctionoftheircapitals，wouldsoonengagethemtocryformercy。TheywouldfindnooutletbutFranceforsuchsums；anditispreciselyafterawar，thatFranceisbusyinplayingoffthearbitraryoperationsonherdebts，whichreduceshercredittoolowforanyonetotrustherwithmoney。
Letpeacecontinueforatractofyears，confidencewillthereadvanceapace，andthenitwillbecomemoredifficulttomakemoneyregorgeinEngland。
Tosaythattaxesarealreadybeyondallbounds，is，inotherwords，tosaythenationisnomoreinastateofdefence:
because，shouldBritainbeagaininvolvedinanunavoidablewar，theconsequencewillbe，eithertorendermoretaxesindispensable，ortoobligethenationtosubmittoanytermsdemandedbyherenemies。
Ifitbethereforetrue，thattaxesmaystillbeaugmented，themostpropertimeforaugmentingthem，is，attheverycloseofawar；becausetheneverycircumstancefavoursthescheme，asweshallnowexplain。
Wehavesaidabove，andexperienceprovesthetruthofit，thatattheendofawarcirculationbecomestoofullfordomesticuses；andthatthesuperfluityofmoneyisrealizeduponproperty。Thisistheconsequenceofasuddenstopinnationalexpence。Weretaxesatsuchatimeaugmented，partofthisregorgingmoneywouldfindaventbytheaugmentationupondomesticcirculationwhichtaxeswouldoccasion；whichaugmentationwouldcirculateintotheexchequer，insteadofbecomingconsolidatedwithproperty，ashasbeensaid，andcomingintothehandsofgovernment，wouldbepouredintothoseofthecreditors，inpaymentofpartoftheircapitals。Thereitwouldregorgeanew；becauseitisobserved，ingeneral，thatthosewhohavepropertyinthefundsarenotapttosquandermoneywhenunexpectedlythrownintotheirhands；onthecontrary，theyarecommonlyfoundtoliveverymuchwithintheirincome。8*
Butsupposeitshouldnotimmediatelyregorge，itwouldthenincreaseexpenceandconsumption；consequently，wouldadvanceindustry，andrendereverybranchofexcisemoreproductive。Ineverysuppositionwecanmake，publicopulencewouldbeaugmented:moneywouldregorgeatlast；andthenthecreditorswouldcomewiththeirapplicationtogovernmenttosuspendthereimbursementofcapitals，andtoaccept，inlieuofthat，adiminutionupontheinterest。
Thisisthegoldenopportunityfordiminishingthepublicburdenoccasionedbydebts；andthismethodofcompassingsodesirableanend，isfarpreferabletothatofcompellingcreditorstosubmittoadiminution，byofferingasuddenreimbursement，whichwasputinpracticeinBritainintheyear1749，ashasbeenobserved。Hadthepublicwaitedwithpatienceoneyearlonger，andthenthrowninafewmillionsmorethantheydidintothehandsofthecreditors，theproposalofreducingtheinterestwouldhavecomefromtheotherquarter；whichinallbargainswithcreditorsisofthegreatestconsequencetothedebtor。
Thesumofinterestthusdiminished，uponanobligationtosuspendthereimbursementsofcapitalsforalimitedtime，threequestionswillnaturallyoccur:1。Whetherthetaxesshouldbediminishedinproportion:or2。Iftheyshouldbeallowedtosubsistwithaviewtoapplytheoverplusofthemtonationalpurposes:or3。Whetheritmaynotbemostadviseabletoturnsuchapartofthedebtsintoannuitiesforlives，asmayabsorbthesavingupontheformerinterestpaid。ThefirsttwoquestionsIreserveforthefollowingbook，wheretheywillbefullyexamined；thelastisthefifthexpedientalreadyproposedforacquittingthepublicdebts。Asthenatureofitisabundantlyevident，IshallrepeatonlywhatIformerlyobserved，namely，thatthismethodofestablishingasinkingfund，hastheadvantageofbeinglessexposedtomisapplicationsthananyother。
Thelastexpedientofpayingoffcapitals，belowtheoriginalvalue，bythemeansoflotteries，shouldtakeplaceonlyaftertheinterestofmoneyisbroughtsolowastocutoffanynearprospectofreducingitstillfarther。
Ishallnotpretendtoguessatthelowestpointtowhichtherateofinterestmaybebrought，bytheexpedientsofincreasingmoneyatwill，bythemeansofbanksuponmortgage。Ihaveintheseventhchapterofthefirstpartofthisbook，thrownoutahintofaland-bank，whichopensaverywidefieldofspeculation；butinthisplace，itwouldbeunnecessarytoenlargeuponthatsubject。
LetmesupposetherateofinterestbroughtlowerinBritainthananywhereelse，itwillneverthelessbesubjecttoperiodicalrisings，onmanyoccasions。
Uponeverysuchemergency，capitalswillsinkinthemarketbelowpar。
Itisthenonlythatastatecanhaverecoursetothislastexpedientofopeninglotteries，andtakinginsubscriptionsatthemarketpriceofthefundssubscribedintothem。Andalthoughtheannuitiestobepaiduponthelotteryfundberegulatedbytherateofinterestatthetime，andconsequentlyabovethestandardoftheotherdebts；yetthesamemethodsofreducingitafterwardswillconstantlyproducetheireffects，andtherebydiminishthecapitalbydegrees。
Inlikemanner，intimeofwar，whenthepublicfundsfallgreatlyintheirprice，governmentmayopennewsubscriptions，andreceivepaymentforthemintheirownpaperatthemarketprice，allowingasmallpremiumintherateofinterest。Ifthecreditorswillinglysubscribeupontheseconditions，noviolationofpublicfaithcanbealleged。Bythisoperation，thecapitalswillbediminished，andtheadvancedrateofinterestpaidduringthewar，willreturnuponthepeacetowhereitwas:thenthenewsubscriptionsmaybepaidoff，orsubscribedforagainatalowerratethanbefore。
Supposeitthenresolved，thatintimeofwar，thenation’screditorsshouldbeallowed，atcertaintimes，tosubscribetheircapitalsinbooksopenedatthebankforthatpurpose，onequarterpercent。abovethesellingprice。Wouldnotthishavethegoodeffectofsupportingthepriceofstocksononehand，andofreducingthecapitalofthenationaldebtupontheother？
Example:
Letmesupposethatintimeofwar，the3percents。sellat743/4，mightnotgovernmentreceivethemat75，andconstitutethenewsubscriptionat4percent？Whatinterestcouldanyonehavenottosubscribe，whoatsuchatimeintendstosellhisstock？His3percentsoldtogovernmentat75，andturnedintoa4percent。wouldafterwards，whensoldinthemarket，produce1/4percentmorethanifithadnotbeensubscribedintothenewfund。
PerhapsinChangeAlley，wherecalculationiscarriedtotheutmostpitchofrefinement，eventhiseventualadvantagetogovernmentmightsinkthevalueofthenew4percents。Letthisbeallowed。Theansweris，thatwhenpeoplecomputewithsuchnicety，andcomprehendintheircalculationseverycircumstancethemostminute，itis，Ithink，theinterestofastatewhoseviewsshouldextendfarbeyondtheperiodofhumanlifetograntapremiumuponsuchsubscriptionsmorethansufficienttoindenmifythesubscribers，accordingtothemostrigidcalculationconcerningtheirpresentadvantage。
Thesmallestprofittobediscoveredbythenicestpenwillengagethemoniedmantosubscribe；consequently，thecapitalsofdebtsmaybediminished，atalosstothepublicalmostimperceptible。Andforthisimperceptiblelossinthemeantime，thegreatestnationaladvantagemaybeobtainedatadistantperiod。
Itisnowfulltimetoclosethisbook，whichhasswelledfarbeyonditsdueproportion。Thesubjectofcreditanddebtsissoconnectedwithmanyquestionsrelatingtotaxes，andtotheapplicationoftheiramount，thattheunityofthesubjectwouldhavesufferedlittleinblendingthemtogether。ButasIfindittobeagreatrelieftothememorytointerpose，nowandthen，apause；andastaxeswereintendedtobetreatedofbythemselves，accordingtotheplanIatfirstproposed，Ishallmakenoalterationinit。
Attheendofthefirstandsecondbooks，Isubjoinedachapterofrecapitulation；inthethirdbook，thiswassuppliedbyaveryfulltableofcontents；here，becauseoftheintimateconnectionofthesubjectofthisandthefollowingbook，Ishallreferthereadertotheendofthevolume，forafullrecapitulationofboth。
NOTES:
1。AfterthelongandparticularaccountIhavegivenoftheMissisippi，Ishallnotenterintoalikedetailconcerningaschemewhichproceededupontheverysameprinciples；towit，theartificallyraisingthevalueofastock，bypromisingdividends，outoffundswhichwerenowiseproportionedtothem。
Ishalltherefore，inaveryfewwords，firstcomparesomeoftheoperationsoftheSouthSeaschemewiththoseoftheMissisippi；andindoingit，pointouttheprincipaldifferencesbetweenthem。
ThegreatprofitsupontheMissisippiwereexpectedfromtheinterestpaidbygovernmentforthegreatloan，fromthefarmsoftherevenue，andfromtheprofitsupontheirtrade。
ThoseoftheSouthSeawere，atsettingout，first，Theprofitsupontheirtrade:secondly，Theallowancemadethembygovernmentfortheexpenceofmanagement:thirdly，Thedifferenceofreceiving5percentforthemoneytheylaidoutinpurchasingthepublicdebts，whenmoneywasat4percentasitwaswhentheschemewassetonfoot:andfourthly，Thesurplusmoneysubscribedintothestockabovepar，inconsequenceoftheartificesusedtoenhancethevalueofit。
Thesevenmillionstheyweretopaytothestate，seeminglyfornovaluereceivedwereasortofcompensationforreceivingthe5percentfor7years，atatimewhenmoneywasworthnomorethan4percent。
Theseadvantagesraised，atfirst，thevalueoftheoriginalstockofelevenmillions。Theconsequencewas，thattheproprietorsofthe16millionsoftheredeemabledebts，whichweretobeboughtin，whentheycametosubscribetheircapitalsintothenewstock，transactedthemataproportionaldiscount；
whichdiscount，beinggoodagainstthegovernmentinfavourofthecompany，servedtodischargeproportionallythesevenmillionsthecompanywastopay。Thisgaveanadditionalvaluetothestock；andsoitrose，greatlyindeedabovethisproportion。
Thenthecompanypromisedadividendof10percentforonehalfyear，upontheircapital，atmidsummer1720；thisdividendwastobepaidinstock，whichwasconstantlyrisinginitsvalue；butnoinformationwasevergiventothepublicconcerningthefundswhichweretoproducethisdividend；soeveryoneconcludedthattherewerehiddentreasuresinthehandsofthecompanywhichenabledittopromisesuchlargedividends。Accordingly，stockrosefrom300percentto375；thento400，andatlastto1000
percent；andinproportionasitrose，thewealthoftheformersubscribersaugmentedfromthesurplusabovepar，paidbythelatter，andthosewhosubscribedlast，boreallthelossupontheblowingupofthescheme。
ButonegreatdifferencebetweentheSouthSeaandMissisippi，wasthis:ThatinFrancetherewasabundanceofmoneyinthehandsofthepublic，forpurchasingtheactions，attheexorbitantpricetowhichtheyrose；butinEnglandtherewasnot:consequently，inFrance，therateofinterestfellto2percentandinEngland，thegreatdemandformoneytoborrow，raiseditbeyondallbounds。
Thosewhosubscribedinmoney，paiddownnomorethan10percentatsubscribing；butbecameboundtopayuptheremainder。
Butwhenthestocktumbled，peoplewerebetterpleasedtolosethe10percenttheyhadpaid，thantopayuptheremaining90
percentaccordingtothetermsatsubscribing。Thoseindeedwhosubscribedtheirformercapitalsatavastdiscount，didnotlabourunderthesameinconvenienceforwantofmoney；butthisdiscountbecameasrealalosstothem，asthecashsubscribedbecamealosstothemoneysubscribers，themomentthatthosewhowereinthesecret，andwho，bythemostinfamouschainofartifices，hadblownupthepublicfrenzy，begantorealizeandsellout，andthatthewholewasdiscoveredtobeacheat。Sothatuponthewhole，theEnglishschemehadintrinsicallyamuchworsefoundationthantheFrench。Thefirstblewupfromanabsolutenecessity，andforwantofanybottomatall；thelastfrommisconduct，andratherfromfollythanknavery。Ireturntoanaccountofthescheme。
TheoriginalcapitaloftheSouthSeacompany，was11，750，000
l。Theredeemabledebtswhichtheproprietorsofthiscapitalafterwardsproposedtopurchase，amountedto16，750，000l。；andthevalueoftheirredeemable，orwhatwerecalledtheabsoluteterms，wascomputedat15，058，000l。together31，808，000l。
sterling。
Theproprietorsofthisoriginalcapitalof11，750，000l。
consultedtheirownadvantageonly，inpurchasinginthislargesumofdebts，whichweretobeconvertedintoadditionalstock；
andthereforesoundedveryhighthegreatadvantagesofsuchatransformationofthem；first，Fromtheprofitsofthetrade，whichtheyweretoenjoyexclusively。And，secondly，Fromthegreatadditiontotheirwealth，fromtheconstantrisinginthepriceoftheirstock。Theycarriedtheirviewstonothinglessthanobtainingamajorityinthehouseofcommons，bytheweightoftheirwealth，andofbecomingtheabsoluterulersofthenation。
Thepublicbeingfromthebeginningintoxicatedwithsuchideas，subscriptionsforstockwereopenedat200percentabovepar；andsomeoftheproprietorsofthe31，808，000l。subscribedatfirsttheircapitalsataproportionaldiscount；thatis，theymadeoveradebtof100l。for331/3inSouthSeastock；andsuccessivelythesubscriptionroseto1000percent。Theseimmenseprofitsbeingincorporatedintothegainsofthegeneralstock，wereproportionallysharedbythesubscribersthemselves，whobecameproprietors；andthehigherthestockrose，themorethesegainsaugmented。Thisinfluencedtheinfatuation；andthedividendsaugmentinginproportiontothepriceofsubscription，thereappearednoendoftherisingofthestock。
Thefirstdividendoffered，ashasbeensaid，was10percenthalf-yearlyinstock；thiswasafterwardsconvertedintonolessthan30percentinmoney，forthathalf-year:andwhenstockroseto1000，adividendofnolessthan50percentperannum，inmoney，waspromisedfortwelveyearstocome。
Hadstockrisento2000percentthedividendcouldhaveaseasilybeencarriedto100percentperannum，asithadbeento50percentwhenat1000。
Butwhencewasthisdividendtobepaid？Thecompanyandthedirectorstookgoodcarenevertogivetothepublicanylightastothisparticular。
Toprevent，therefore，suchabusesintherisingoftheSouthSea，itoughttohavebeenprovidedbyparliament，thatintakinginsubscriptions，andofferingdividends，thedirectorsshould，ontheonehand，haveinformedthepublic，first，Ofthemoneyowingtothembygovernment，secondly，Ofthemoneygainedbythesubscriptionsabovepar。Andthirdly，Oftheprofitsupontheirtrade。And，ontheotherhand，ofthedebtsduebythem；andofthenettbalanceupontheirbooks，intheirfavour。
Thiswouldhavebeenfairdealing。Buttopretendthenecessityofsecrecy，inapointwhereanationisinterested，wasinitselfamerepretext；andhaditbeenotherwise，itmighthavebeenanswered，thatacompanywhichisobligedtohaverecoursetosuchsecrets，oughttobepreventedfromdealingwiththosewhoweretoremainignorantofthem，howeverdeeplyinterested。
2。Thismayseemahighvaluation，andis，infact，farbeyondwhatanyofthoseannuitiessoldfor:butastheinterestofmoneycannotbeestimated，foraconstancy，atmorethan3percentandthatprobablythebestliveswerechosen，thevaluetogovernmentofsuchannuitiesmaywellbeestimatedat20yearspurchase。ByDeMoivre’stables，annuitiesforthemostfavourableages，interestbeingat3percentarevaluedat19。87
yearspurchase；andhisvaluationsaregenerallyallowednottobetoohigh。
3。Theannuitiesof1757，areestimated，bytheauthoroftheConsiderationonTradeandFinances，at472，500l。orat14
years’purchase；andtheannuitiesof1761，1762，at6，826，875l。
orat271/2years’purchase。Butthisvaluationseemstoolow。
4。Thisquestionhasbeendeterminedintheaffirmative，inapamphletascribedtoMrG。Grenville，entitled，ThePresentStateoftheNation，an。1768:page12inthenote。
5。Ifindthatthesinkingfundisnowestimatedat2，100，000l。
bytheauthoroftheConsiderationsonTrade，etc。abovecited。I
amalsoinformedthatthenetproduceofthecustomsexceeds2，200，000l。considerably:but4，600，000l。isratherthegrossthanthenetproduceofthepermanentdutiesofexcise；thatis，ofalltheexciseduties，exceptingtheannualmalt-duty。Itmustalsobeobserved，thattheannuitiespayabletothenationalcreditorsamounted，the5thJanuary1764，tomorethan4，720，000
l。Butontheotherhand，theinterestoftheunfunded9millionsisratedtoohigh，asappearsfromtheauthorabovequoted。I
cannotpretendtogiveexactdetails。Thegeneralsketchherestatedissufficientformypurpose。
6。Theloanof1766，was1，500，000l。at3percent。Everysubscriberfor100l。hadanannuityof3percenton60l。and4
lotterytickets，valuedtothembygovernmentat10l。each，inall100l。Theprizesandblanksinthelotteryamountto600，000
l。andbear3percentpaidbygovernment。Theannuitiesamountto900，000l。andbearalso3percent。Thenumberofticketsare60，000。Henceat10l。each，theyamountto600，000l。
Theadvantagegovernmentreapsbythiswayofborrowing，is，thatthedesireofgaming，raisesthelotteryticketsabovetheirvalue，whenthrownintothehandsofthepublic；andthisadvancedvaluebeingaprofittothosewhoreceivetheminpartoftheirsubscription，thisprofittheysharewithgovernment。
Example。InApril1766，whengovernmentborrowed1，500，000l。at3percent，the3percentswereat89:consequently，thedifferencebetween89and100，whichis11l。musthavebeensupposedtobethesumwhichthesubscribers，fromthepropensityofpeopletogame，hadareasonable，orratheracertainexpectationofgaininguponthesaleof4lotterytickets，thatis，2l。15s。uponeveryone。
Toknowthereforetherealparofalotteryticket，youmustproceedthus:itcoststhesubscribers10l。forwhichtheyreceivefromgovernment3percent。This10l。as3percentsstoodat89，isworthatthatratenomorethan8l。18s。Addtothissumwhatthepublicmustpayforthelibertytoplay，whichwehavestatedaboveat2l。15s。andyouhavetheexactparofalotteryticketat11l。13s。
Whatevertheysellatabove11l。13s。isprofittothesubscribers，whatevertheysellbelow11l。13s。isalosstothem。
Thisprofitthoughsmallinappearance，isgreatlyincreasedfromanothercircumstance，viz。
Thatthesubscribersmayselltheirsubscriptionsatatimewhentheyhavereallyadvancedbutasmallpartofit。Thefirstpaymentiscommonlyof15percentontheirsubscription:whentheysell，theymakethisprofituponthewholecapital。Supposethen15percentpaidin:iftheprofituponsellingbenomorethan1percentuponthecapital，that1percentturnsoutnolessthan62/3percentuponthemoneytheyhaveadvanced。Thusapersonwhoispossessedof1500l。only，maysubscribefor10，000l。inthisloan:hepaysinhis1500l。andreceiveshissubscription；whenhesells，hesells10，000l。subscription，uponwhichhegains1percent，1percent。of10，000l。is100
l。soinonemonthsupposehegainsbythismeans100l。fortheuseof1500l。Butasacounterbalanceforthisprofit，herunstheriskofthefallingofthesubscription，whichinvolveshiminaproportionallossifhesellsout；orintheinconvenienceofadvancingmoremoneythanhehadtoemployinthatway，incaseheshouldpreferkeepinghissubscriptionforalongertime，inhopesofariseinthepublicfunds。Bythismodeofborrowing，governmentprofitsbythedispositionofthepeopletogame。Butthispropensityhasitsbounds，andatpresentitisfoundbyexperiencenottoexceed60，000lotterytickets，or60，000l。Were，therefore，asubscriptionof3millionstakeninuponthesameplanwiththepresentof1，500，000l。theregorgingnumberofticketswouldsoglutthemarket，thatthewholewouldfallbelowtheparoftheirsupposedvalue。
7。Wemustalwayscarefullyavoidconfoundingthegrandbalanceofpaymentswiththebalancebetweenimportationandexportation，whichIconsiderasthebalanceoftrade。
8。Experienceshews，thatwhenthedebtsofanationhavecometoaheight，thepubliccreditorsbecomepeopleofgreatconsequence，uponaccountoftheeaseandaffluenceoftheircircumstances。Theyarenotexposedtothemanyhiddenexpencesincidenttolandproprietors。Theyareaclassinthestatebutlatelyknown；thecapitaloftheirwealthishidden；andopinionsconcerningtheirrank，andthefiguretheyoughttomake，areasyetunformed。Whereasthefamilyofalandproprietorisknown；
hisexpencemaysurpassthatofhispredecessorswithoutmuchobservation；butifitshouldfallbelowit，hecommonlysinksintheestimationofhisneighbours，whoseldomputcircumstancestogetherwhichcanonlybeguessedat。Anheirtoalandedestate，isbredupfromhisinfancywiththenotionoflivinglikehisfather:thesonofamoniedmanhascommonlyverydifferentsentiments；andevenwhenanyofthisclasstakesaturntoexpence，thelustreofitisalldisplayedroundhisownbody；thatis，inhisownhouse，andinhisownfamily:nocountryseats，hounds，horses，servantsineveryquarter，familyinteresttokeepup，littleeconomyinspending。Inaword，everyonefeelsbetterthanIcandescribethatlandedmencommonlyexceed，andmoniedmencommonlylivewithintheirincome。
AnInquiryintothePrinciplesofPoliticalOeconomyBookV
OfTaxes，andoftheProperApplicationoftheirAmountIntroductionThesubjectoftaxesissocloselyconnectedwitheverybranchofpoliticaloeconomy，thatIhavenotbeenabletoavoidanticipatingasubject，which，accordingtomyplan，isleftfortheconclusionofthiswork。
Whathasbeenhithertointroducedconcerningtaxation，intreatingofindustry，trade，money，credit，anddebts，relatesprincipallytotheeffectsoftaxesuponcirculation，prices，andseveralotherthingsrelatingtothosesubjects。
Whatthereforeremains，notasyettouchedupon，chieflyconcernstheprincipleswhichdeterminethenatureofeverytax，relativelytotheinterestitisintendedtoaffect。
Toinvestigatethedifferentconsequencesoftaxeswhenimposeduponpossessions，andwhenuponconsumption，arequestionswhichrelatedirectlytotheprinciplesoftaxation。
ButinthisbookIshallalsohaveoccasiontotraceout，fartherthanasyetIhavedone，certaincombinationsconcerningtheeffectswhichtaxeshaveinmultiplyingthefundofcirculation:
andastheaugmentationoftaxestendsgreatlytoincreasemoney，Iamthenceledtoexamine，howfartheadvantagegainedbythesuppressionoftaxesmaynotbemorethancompensatedtoanation，bytheinconveniencesproceedingfromsogreatadiminutionofcirculation。
Taxeshaveallalongbeensupposedtoenhancethepriceofliving；weshallthereforehaveanopportunityofinvestigatingtheproperextenttobeallowedtothatgeneralproposition。
Chap。I
OfthedifferentKindsofTaxesTaxeshavebeenestablishedinallagesoftheworld，underdifferentnamesoftribute，tithe，tally，impost，duty，gabel，custom，subsidy，excise；andmanyothersneedlesstorecapitulate，andforeigntomysubjecttoexamine。
Thoughineveryspeciesofthisvoluminousclass，therearecertaincharacteristicdifferences；yetoneprincipleprevailsinall，uponwhichthedefinitionmaybefounded。
Iunderstandthereforebytax，initsmostgeneralacceptation，acertaincontributionoffruits，service，ormoney，imposedupontheindividualsofastate，bytheactorconsentofthelegislature，inordertodefraytheexpencesofgovernment。
Thisdefinitionmay，Ithink，include，ingeneral，allkindsofburdenswhichcanpossiblybeimposed。Byfruitsareunderstoodeitherthoseoftheearth，ofanimals，orofmanhimself。Byservice，whatevermancaneitherbylabouroringenuityproduce，whilehehimselfremainsfree。Andundermoneyiscomprehendedtheequivalentgivenforwhatmaybeexactedintheothertwoways。
Ihavenooccasiontoconsiderthenatureofsuchtaxesasarenotinuseinourdays。Tributesofslavesfromconquerednationsareaslittleknowninourtimes，ascontributionsofsubsistencefromthesubjectsofthestate。
Idivide，therefore，moderntaxesintothreeclasses。
1。Thoseuponalienation，whichIcallproportional:2。Thoseuponpossessions，whichIcallcumulativeorarbitrary:and3。
Thoseexactedinservice，whichIcallpersonal。Thesetermsmustnowbefullyexplained，thatImayusethemhereafterwithoutbeingmisunderstood。
Aproportionaltaxpresentsasimplenotion。
Itispaidbythebuyer，whointendstoconsume，atthetimeoftheconsumption，whilethebalanceofwealthisturningagainsthim；andisconsolidatedwiththepriceofthecommodity。
Examplesofthistaxareallexcises，customs，stamp-duties，postage，coinage，andthelike。
Bythisdefinition，tworequisitesarenecessaryforfixingthetaxuponanyone:first，hemustbeabuyer；secondly，hemustbeaconsumer。Letthisberetained。
Acumulativeorarbitrarytax，presentsvariousideasatfirstsight，andcannotwellbedefineduntilthenatureofithasbeenillustratedbyexamples。
Itmaybeknown，First，Bytheintentionofit；whichistoaffectthepossessorinsuchamanner，astomakeitdifficultforhimtoaugmenthisincome，inproportiontothetaxhepays。
Secondly，Bytheobject；wheninsteadofbeinglaiduponanydeterminatepieceoflabourorarticleofconsumption，itismadetoaffectpastandnotpresentgains。
Thirdly，bythecircumstancesunderwhichitislevied；whichimplynotransitionofpropertyfromhandtohand，noranychangeinthebalanceofwealthbetweenindividuals。
Examplesofcumulativetaxesareland-taxes，poll-taxes，window-taxes，dutiesuponcoachesandservants，thatuponindustrie，inFrance，andmanyothers。
Apersonaltaxisknownbyitsaffectingtheperson，notthepurseofthosewhoarelaidunderit。
Examplesofitarethecorv閑，inFrance；thesixdayslabouronthehighroads，andthemilitiaservicebeforepaywasallowedinEngland。1*
HavingthusexplainedwhatImeanbyproportional，cumulative，andpersonaltaxes，itispropertoobserve，thathoweverdifferenttheymayproveintheireffectsandconsequences，theyallagreeinthis，thattheyoughttoimpairthefruitsandnotthefund；theexpencesofthepersontaxed，notthesavings；theservices，notthepersonsofthosewhodothem。
Thisholdstrueineverydenominationoftaxes。Informerdays，whenannualtributesofslavesweremade，andevenatpresentamongtheTurks，whereitiscustomarytorecruittheseragliosofgreatmenbysuchcontributions，Iconsidertheyoungwomenwhoaresent，aspartofthefruitsofthepeoplewhosendthem。Thisisafundamentalprincipleintaxation；andthereforepubliccontributions，whichnecessarilyimplyadiminutionofanycapital，cannotproperlyberangedundertheheadoftaxes。ThuswhentheDutchcontributed，notmanyyearsago，thehundredthpartoftheirpropertytowardstheserviceofthestate，Icannotproperlyconsiderthisinthelightofatax:
itwasindeedamostpublicspiritedcontribution，anddidmorehonourtothatpeople，fromthefidelitywithwhichitwasmade，thananythingofthekindeverboastedofbyamodernsociety。2*
Chap。II
OfproportionalTaxes，andtheirproperObjectWhateverexistsfortheuseofman，sofarasitisconsideredasafundfortaxation，maybeclassedunderthefollowingheads:1。Theproduceorfruitsoftheearth；2。theproduceoftheindustryofman；or3。hispersonalservice。
Farther，Fruitscannotbeobtainedwithoutthenecessarylabourofmanandcattle。Asthislabourpresupposesallthenecessaryconsumptionofmaintenance，&c。theproduceofthelandmustbeunderstood，relativelytotaxes，tobethatpartonlyofthefruitswhichremainsafterdeductinganequivalentforallnecessaryexpencesinmakingtheearthproducethem。Thenetproducealoneoftheearthistobeconsideredasafundliabletotaxation；andeverycontributionwhichbearsnotajustproportiontothisquantity，iswrongimposed，asshallbeshewnaswegoalong。
Again，astotheproduceofwork:thiscannotbebroughtintoexistencewithoutsomeexpence，viz。themaintenanceoftheworkman；thatistosay，hisfood，raiment，fire，lodging，andtheexpenceheisatfortools，andeveryothernecessary。Thisweshall，forthefuture，callhisphysical-necessary。Thevalueofthework，overandaboveanequivalentforthesearticles，istheonlyfundtobetaxedwithregardtotheworkman。
Astoworkitself，wehaveseenaboveBookII。chap。26。inthegeneraldistributionofthingswhichmaybepurchasedwithmoney，howitwasrangedundertheclassofthingsincorporeal。
Forthisreason，theworkperformedcannotcomeundertaxation；
andthereforethepersonworking，whobyworkacquiresabalanceinhisfavour，isbroughttobeaffectedbyproportionaltaxesuponthearticlesofhisconsumption；andwhenitisfoundthatthesearticlessuffernoalienationbeforetheyareconsumedbyhim，andconsequentlyescapetaxation，thenhemayeitherbelaidunderthecumulativetaxes，whichwillaffecthiswealth，orunderthepersonal，whicharepaidinworkitself，andinthisrespectmaybeconsideredasthefruitoftheman。
Nothingwouldbesoeasyasageneralruleforimposingproportionaltaxes，didthelabourersofthegroundactuallyconsumeapartofthefruitsoftheearth，andtheotherindustriousclassesapartoftheirownwork，inlieuofthewholeofthisphysical-necessary。Inthiscase，nothingbutwhatremainedoffruitsandwork，notalreadyconsumedbytheimmediateproducers，wouldcometomarketfortheuseofthosewhodonotwork；butwhohaveanequivalenttogiveforit，outoftheproduceofpastindustry。Werethis，Isay，thecase，thenatthetimeofalienationor，asweexpresseditinthe26thchapterofthesecondbook，atthetimewhenthebalanceofwealthisgoingtoturninfavouroftheindustrious，againsttheidleconsumerataxproportionaltothevalueofthealienationmight，withthegreatestpropriety，beimposed，asweshallpresentlydiscover。
This，Ihope，willrecalltomindtheprinciplesdeducedinthechapterabovecited，wherewemadeitappear，howtheindustriousclasses，whofurnishconsumablecommoditiesforthepriceoftheiroverplus，mustconstantlyhavethebalanceofwealthturningintheirfavour:andwhenoncetheyarriveatacertaindegreeofease，proportionaltotheirambition，thentheygiveoverworking，andbecomeincorporatedintotheclassofthosewhohaveenrichedthem。
Thusmattersgooninaperpetualcircle。Theindustriousbecomeeasy，andthepubliclaystheconsumersunderaperpetualcontributioninproportiontotheirexpence。
Thehypothesiswehavemade，isnotentirelyagreeabletomatteroffact；becausetheoperationoftaxesisfarmorecomplexthanwehavedescribedittobe；butbysimplifyingit，asIhavedone，itservestogiveanideaoftheresult，orgeneralconsequenceofproportionaltaxes，which，whenproperlyimposed，doaffecttheidleonly，butnevertheindustrious。
Were，Isay，theoperationoftaxationassimpleaswehaverepresentedit，nothingwouldbemoreeasythantodeduceitsprinciples。Nothingwouldcometoberefundedtothelabourerorworkman，atthesaleofhissurplus。Thissurpluswouldbeequaltothewholeproduceoftheearth，andwholeindustryofthecountry，deductingthephysical-necessaryofalltheindustrious；
andthisphysical-necessaryneednotthenbededucted；becauseitissupposedtobeconsumedintheveryproductionofthesurplus，astheaqueouspartofseawaterisconsumedbeforeyoucanhavethesalt。
Thisillustrateswhathasbeensaid，viz。thatthefruitsoftheearthareonlytobereckonedtoexist，afterdeductingthenecessaryexpenceofprovidingthem。Forthoughinfactafarmerpossessesallhiscropafterharvest，yetpartofit，astohim，isvirtuallyconsumedeitheroutofhisownstock，orthatofothers，whohavefurnishedhimfoodandnecessariesallthetimeitwascomingforward；thispartconsequently，canneitherbelongtotheground，ortothefarmer。
Ifitbeurgedstill，thatthewholemustbesupposedtoexistwithregardtothestate，Iagreetotheproposition；butaccordingtoourargument，itcannotbesupposedtoexistinfavourofthestate，totheprejudiceofthefarmer；becausethetotalofthefarmer’sexpencemustbeunderstoodtohavebeentakenfromthesurplusofotherpeople’sindustry，andthereforeifthecropbesupposedtoexistwithrespecttothestate，becauseitisinthefarmer’syard，thesurplusofotherpeople’sindustrywhichhehasconsumedmustnotbesupposedtoexistinfavourofthestate，atthesametime。Butasthefarmerissupposedtohavepaidthetaxuponwhathehasborrowedandconsumed，hemustdrawitbackfromthosewho，intheirturn，aretoconsumehiscrop:andifhedrawsitback，hecannotbesaidtopayit，althoughthestateprofitsofitasmuchasifhedid。
Doesitnotappearfromthisanalysis，thatastatecantakegratuitouslyandproportionallyoutofthesurplusonlyoffruitsandindustry？Nowwhatisherecalledsurplus，relativelytotheindustrious，isthenecessaryfundofconsumptionforalltherichandidle；consequently，werethestatetodiminishanypartofthequantity，theidleandtherichwouldbedeprivedofasufficiency:butinregardthatthosewhodonotworkgivemoney，whichisthepriceofallthings，inexchangeforwhattheyconsume，thestatestepsinatthetimeofthisexchange，andsays，weasknothingofthosewhohavenothingbuttheirphysical-necessary，thistheyhavebeenallowedtotake；wetakenoneoftheirsurplusfromthem，thisweallowthemtoselltoyou:butasforyou，whodonotwork，andhaveinyourcofferswherewithaltopurchasethelaboursofyourindustriousbrethren，thislabouryoushallnotprofitof，unlessyougivethestateacertainvalueoutofyourwealth，inproportiontotheworkandfruityouaregoingtoconsume，althoughyouhavecontributednothingtowardstheproductionofit。
Henceitappearsevident，thatwithoutmoneytherecouldbenotaximposed:forwerethestatetotaketheirproportionoftherealsurplus，anddisposeofitoutofthecountry，apartoftheinhabitantswouldbestarved。Butbyanequivalent’sbeingfound，quitedifferentfromthesurplusitself，ofnouseforsubsistence，thewholeproduceofindustryisleftfortheuseofthosewhohaveit；thestatetakeswhatpartoftheequivalenttheypleasefromtheidle；andnobodystarves，exceptsuchashaveneithermoney，norindustry，northetalentofexcitingthecompassionofthecharitable。
Bythissimplerepresentationofamostcomplicatedoperation，Ihavebeenabletodeducethecapitalprincipleofproportionaltaxation。Ifthereasoningbefoundsolid，itmayberetained:becauseweshallhaveoccasiontorecurtoit，atalmosteverynewcombination。