Simon clement
Encyclopedia
Simon Clement
Simon Clement spent his early career as a stock jobber and merchant. He served in Vienna
as secretary to the Earl of Peterborough
on his embassy to the Emperor from 1711–12, later acting as Peterborough’s “charge d’affaires” in Vienna from April 1711 until late 1714.
What little is known of Clement’s life comes from the British Library
’s collection of a series of letters saved by Robert Harley, Earl of Oxford
. From the letters we learn that in 1712 Clement was almost 60 years old, that he had a son Daniel in London who attended Oxford University, and that he was married to Mary Hollister. Mary’s niece was Hannah Callowhill, who became William Penn’s second wife in 1696. Through Penn, Clement achieved some influence with Harley.
Clement’s writings concerned exchange and specialization, paper money
, inflation
, the money multiplier, scarcity of coins, and international trade. In A Discourse of the General Notions of Money, Trade, and Exchanges (1695), Clement explained the advantages of trade and specialization, and the importance of metallic money
in facilitating trade. He advocated restricting imports as a means of preventing the export of bullion, and favored recoinage of worn British coins, while opposing devaluation of the coins. In A Dialogue Between a Countrey Gentleman and a Merchant Concerning the Falling of Guinea’s (1696), Clement argued against raising the value of Guineas, on the grounds that this would under-value silver and create arbitrage
opportunities for currency traders, to the detriment of the nation. In Remarks Upon a late Ingenious Pamphlet (1718), Clement claimed that an unprecedented scarcity of silver had been caused by excessive British imports from India
, a problem that would not be remedied “whilst people have the Vanity to give more for a tawdry Callicoe, than for a good silk of our own making.” The true remedy, he claimed, was for consumers to restrain their consumption of India
n goods. He also argued against “the absurd Opinion, that the Raising our Coin would advance its Value, and prevent its being carried out of the Nation”.
Clement’s most influential work was Faults on Both Sides (1710). This was a wide-ranging pamphlet that briefly discussed paper money and the influence of credit on trade. The pamphlet (widely attributed to Harley) produced several replies, which Clement answered in A Vindication of the Faults on Both Sides (1710). In it he dismissed what modern economist
s call the money multiplier
, on the grounds that all bank-issued money is backed, either by the “valuable and sufficient security” offered as collateral by the borrower, or by the “proper stock” of the banker himself. Thus a banker need only take care to issue money to borrowers who offer sufficiently valuable collateral, and the value of the bank’s money will be preserved regardless of the quantity issued. This idea is the basis for what later became known as the real bills doctrine
, and Clement was one of the earliest defenders of that doctrine. As recently as 1945 Clement’s exposition of real bills principles was attacked by Lloyd Mints, who incorrectly attributed Clement’s writings to “Richard” Harley.
It is noteworthy that Clement’s exposition of the real bills doctrine required only that money be issued in exchange for sufficiently valuable collateral, and not necessarily to finance “productive” activity. Thus he avoided the errors of later writers, including Adam Smith
, who thought that a policy of only issuing money for “real bills” would prevent inflation by making the quantity of money move in step with real output.
Simon Clement spent his early career as a stock jobber and merchant. He served in Vienna
Vienna
Vienna is the capital and largest city of the Republic of Austria and one of the nine states of Austria. Vienna is Austria's primary city, with a population of about 1.723 million , and is by far the largest city in Austria, as well as its cultural, economic, and political centre...
as secretary to the Earl of Peterborough
Earl of Peterborough
Earl of Peterborough was a title in the Peerage of England. It was created in 1628 for John Mordaunt, 5th Baron Mordaunt . He was succeeded by his eldest son, Henry, the second Earl. He was a soldier and courtier. Lord Peterborough had two daughters but no sons...
on his embassy to the Emperor from 1711–12, later acting as Peterborough’s “charge d’affaires” in Vienna from April 1711 until late 1714.
What little is known of Clement’s life comes from the British Library
British Library
The British Library is the national library of the United Kingdom, and is the world's largest library in terms of total number of items. The library is a major research library, holding over 150 million items from every country in the world, in virtually all known languages and in many formats,...
’s collection of a series of letters saved by Robert Harley, Earl of Oxford
Robert Harley, 1st Earl of Oxford and Mortimer
Robert Harley, 1st Earl of Oxford and Earl Mortimer KG was a British politician and statesman of the late Stuart and early Georgian periods. He began his career as a Whig, before defecting to a new Tory Ministry. Between 1711 and 1714 he served as First Lord of the Treasury, effectively Queen...
. From the letters we learn that in 1712 Clement was almost 60 years old, that he had a son Daniel in London who attended Oxford University, and that he was married to Mary Hollister. Mary’s niece was Hannah Callowhill, who became William Penn’s second wife in 1696. Through Penn, Clement achieved some influence with Harley.
Clement’s writings concerned exchange and specialization, paper money
Banknote
A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. In addition to coins, banknotes make up the cash or bearer forms of all modern fiat money...
, inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
, the money multiplier, scarcity of coins, and international trade. In A Discourse of the General Notions of Money, Trade, and Exchanges (1695), Clement explained the advantages of trade and specialization, and the importance of metallic money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
in facilitating trade. He advocated restricting imports as a means of preventing the export of bullion, and favored recoinage of worn British coins, while opposing devaluation of the coins. In A Dialogue Between a Countrey Gentleman and a Merchant Concerning the Falling of Guinea’s (1696), Clement argued against raising the value of Guineas, on the grounds that this would under-value silver and create arbitrage
Arbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
opportunities for currency traders, to the detriment of the nation. In Remarks Upon a late Ingenious Pamphlet (1718), Clement claimed that an unprecedented scarcity of silver had been caused by excessive British imports from India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, a problem that would not be remedied “whilst people have the Vanity to give more for a tawdry Callicoe, than for a good silk of our own making.” The true remedy, he claimed, was for consumers to restrain their consumption of India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n goods. He also argued against “the absurd Opinion, that the Raising our Coin would advance its Value, and prevent its being carried out of the Nation”.
Clement’s most influential work was Faults on Both Sides (1710). This was a wide-ranging pamphlet that briefly discussed paper money and the influence of credit on trade. The pamphlet (widely attributed to Harley) produced several replies, which Clement answered in A Vindication of the Faults on Both Sides (1710). In it he dismissed what modern economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s call the money multiplier
Money multiplier
In monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money...
, on the grounds that all bank-issued money is backed, either by the “valuable and sufficient security” offered as collateral by the borrower, or by the “proper stock” of the banker himself. Thus a banker need only take care to issue money to borrowers who offer sufficiently valuable collateral, and the value of the bank’s money will be preserved regardless of the quantity issued. This idea is the basis for what later became known as the real bills doctrine
Real bills doctrine
The real bills doctrine holds that issuing money in exchange for real bills is not inflationary. It is best known as "the decried doctrine of the old Bank Directors of 1810: that so long as a bank issues its notes only in the discount of good bills, at not more than sixty days’ date, it cannot go...
, and Clement was one of the earliest defenders of that doctrine. As recently as 1945 Clement’s exposition of real bills principles was attacked by Lloyd Mints, who incorrectly attributed Clement’s writings to “Richard” Harley.
It is noteworthy that Clement’s exposition of the real bills doctrine required only that money be issued in exchange for sufficiently valuable collateral, and not necessarily to finance “productive” activity. Thus he avoided the errors of later writers, including Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, who thought that a policy of only issuing money for “real bills” would prevent inflation by making the quantity of money move in step with real output.
Further reading
- Snyder, Henry (1977), ‘The Authorship of Faults on Both Sides’, Philological QuarterlyPhilological QuarterlyThe Philological Quarterly is a peer-reviewed academic journal covering research on medieval European and modern literature and culture. It was established in 1922 by Hardin Craig. The editor-in-chief is Alvin Snider....
56: 266-72. - Mints, Lloyd (1945), A History of Banking Theory, Chicago: University of Chicago PressUniversity of Chicago PressThe University of Chicago Press is the largest university press in the United States. It is operated by the University of Chicago and publishes a wide variety of academic titles, including The Chicago Manual of Style, dozens of academic journals, including Critical Inquiry, and a wide array of...
.