HC Deb 01 February 1810 vol 15 cc269-77
Mr. Horner

pursuant to notice rose to move for a variety of accounts and returns respecting the present state of the circulating medium, and the bullion trade. He expressed a decided opinion, that it was necessary for the House to make an Inquiry into the causes of the present high price of bullion, and the consequent effect upon the value of the paper currency, not only on account of the real importance of the subject, but in consequence of the great misconceptions which too generally prevailed respecting the causes of the actual situation of the country with reference to this subject. The most effectual mode of investigating this highly interesting question would be by a Select Committee, and it was therefore his intention on an early day to move for such a Committee. But it would be not only convenient but indispensable, in the first instance, to obtain all such information on the whole of the subject, as papers might afford; which information could afterwards be referred to the Committee. He would not adopt the opinion which prevailed among some people, that the high price of gold, and the depreciation of paper, (for depreciation in a certain sense it was) were to be ascribed to the number of country banks; for the better their nature and operation were understood, it would the more clearly appear, that they formed an essential part of our system of credit and currency. Nor was he prepared at once to adopt another conclusion which had been urged in various forms before the public, that the explanation of the cause of the present evils must be referred wholly to an undue issue of notes by the Bank of England: for, though an excess in the market price of gold above its mint price, would be one certain consequence of such an undue issue, yet that same excess might originate from other causes, or be enhanced by other circumstances. He did not presume as yet to form a clear or confident conclusion upon the subject; it was to arrive at a correct opinion that he wished the House to call for the information and undertake the Inquiry he meant to propose. His present conjecture was, that the high price of gold might be produced partly by a larger circulation of Bank of England paper than was necessary, and partly by the new circumstances in which the foreign trade of this country was placed; by which a continual demand for bullion was produced, not merely to discharge the balance of trade as in the ordinary state of things, but for the purpose of carrying on some of the most important branches of our commerce; such as she purchase of naval stores from the Baltic, and grain from countries under the controul and dominion of the enemy. He believed the former cause to operate, because the market price of gold had been higher than the mint price almost ever since the restriction of bank payments in 1797; and he suspected the influence of the latter from this circumstance, that there was not merely a nominal depreciation of paper as compared with bullion, but a real demand for bullion itself all over the country. The state of the exchange was no doubt in some degree the cause of this demand for bullion; but, perhaps, it was in some degree also the effect of that transfer of bullion from this country, which was created by the necessities of trade and the new system of commercial warfare. But all this was matter for Inquiry. What remedy ought to be provided, would, of course, turn upon what should be ascertained to be the nature and cause of the evil. If it consisted in an excessive issue of paper by the Bank of England, the remedy would be in the hands of parliament, and had been already resorted to in the case of the misconduct of the Bank of Ireland. If the real cause of the high price of gold was the demand for it, as an article of trade or a medium for carrying on our trade, there was no other cure for that but an adequate supply; and it was one of the many important considerations which arose out of the present situation of the colonies of Spain in the new world, how their immense resources of precious metals might best be rendered available for our accommodation. Those colonies, independently of the Brazils, might easily furnish above the value of nine millions sterling annually of the precious metals. The mines of Mexico were said to produce annually about 25 millions of dollars; those of Peru 15 millions, and it was thought that if the mines of Peru were better worked they would prove infinitely more abundant in the production of bullion than even those of Mexico. When the state of our circulating medium came to be inquired into in the Committee, there were several peculiarities which had been too long overlooked, especially the depreciation of our silver coin, which it would be necessary in order to a clear understanding of the subject particularly to attend to. It was quite unnecessary for him to state to the House that silver still continued according to the laws of our mint, the standard measure of all commercial value. Nothing could be more obvious then than the necessity, in an inquiry concerning the state of the circulating medium generally, of previously ascertaining any and what precise fluctuations may have taken place in the value of that metal, to which the whole is referable as a permanent standard. Another fact also, that would occupy necessarily much of the attention of the Committee, was the alteration that had taken place in the relative value of gold and silver, from that fixed by the regulations of the mint. In the time of Edw. 1, the ratio of silver to gold was as 1 to 9: at a much later period as 1 to 15; subsequently again as 1 to 15 and a very small fraction; but the ratio or proportion at present was 1 to 15½. From documents which he had seen, and upon the accuracy of which he had every reason to rely, it appeared that for more than fifty years back, the supply of bullion gold and silver from the mines of America had not increased very much; and that the increase of the latter was in a much greater degree than that of the former. The hon. gent. concluded by moving "That there be laid before this House—1.An Account of the quantity of gold and silver exported from the different ports of the United Kingdom to foreign parts in each of the last ten years, to the 1st of February 1810, distinguishing gold and silver, distinguishing bullion, wrought plate, and coin, and distinguishing the ports and places from and to which the said exportation were made.—2. An Account of the quantity of gold and silver imported into the United Kingdom in each of the last ten years to the 1st of February 1810, distinguishing gold and silver, distinguishing bullion, wrought plate and coin, and distinguishing, as far as the same may be done, the foreign parts from which the said importations were made.—3. An Account of the export and import of gold and silver from and to Ireland, from the year 1803 to the 5th of January 1810; distinguishing gold and silver, and distinguishing bullion, wrought plate and coin.—4. An Account of the number of licences for the issue of promissory notes payable on demand, which were granted by, or by authority of, the Commissioners of Stamps, for the year ending the 10th of October 1809.—5. An Account of the quantity of bullion or coin which has been seized in the two years ending the 1st of February 1810, under the authority of the Statutes which regulate the exportation of bullion and coin.—6. An Account of all dollars issued by the Bank of England to the latest period to which the same can be made up—7. An Account of the amount of the Notes of the Governor and Company of the Bank of England in circulation on the 7th and 12th days of each month, from December 1808 to the 12th of January 1810, inclusive; distinguishing the Bank Post Bills, and distinguishing the amount of Notes under the value of live pounds.—8. An Account of the quantity of gold and silver exported by the East India Company to China and the East Indies, whether on account of the Company or of private persons, from the year 1788 to the latest period to which the same can be made up; distinguishing the export to China, and bullion from coin."

Mr. Davies Giddy

thought that this was a subject which, like many others, had been industriously wrapped up in a sort of mystery that did net belong to it. If it was looked at through the plain medium of common sense and reason, it would appear by no means the involved and abstruse question it was generally thought to be. The fact appeared to him to be sim- ply this, that the price of gold and silver, like the price of any other commodity, was regulated by the demand for it. If any substitute could be found that could answer the required purpose, as well as the commodity so much sought for, and that substitute could be had at a much cheaper rate, it would follow, by necessary consequence, that the commodity itself could not continue to be in such demand, and that its price would proportionally decrease. He would illustrate to the House his meaning—if the copper used in sheathing both our military and mercantile navy should be postponed, by the preference given to some other cheaper and as durable substance, and our shipping should be sheathed with that substance, there would be, of course, such a rush of copper into the market, as to occasion a very great reduction of price and general circulation of that metal. He differed from the hon. gent. who so ably introduced this subject in one point, and that was with respect to the country banks. He could not think them of such service to the credit and commerce of the country as that gentleman seemed to think them. With respect to the great circulation of paper money however, he thought that it materially contributed to throw the specie into the market. But so long as the tax gatherers should continue to receive paper money at par, there would be no great danger of any depreciation of its value from what was called an over issue. He was not prepared then to go fully into the question, but should content himself with adding that in his opinion it was a subject well worth the most serious attention of that House.

Mr. G. Johnstone

said he could not but compliment what he might call the philosophical speech of the hon. mover. He thought the subject deserved to be maturely weighed, and that every effort should be made to trace the present unfortunate state of the currency to its true cause; which he believed to be the excess of paper issues.

Mr. M. Dorrien Mugens

thought it in the first instance necessary, that the House should with all convenient dispatch possess itself of every possible information upon this very important subject. He had not hastily formed his opinions upon it, but, however confident he might feel in the justice of these opinions then, he should defer stating them till the House should be better enabled to come to some conclusion. He acknowledged, that if it were his in- tention at that time to go into detail, he believed he should be led to take a very different view of the paper currency of the country, and its consequences, from that which others who preceded him seemed disposed to take. He hoped the motion of the hon. gent. would be acceded to, as the question appeared to him to be of such pressing interest and great magnitude, that it could not be too rally entered into.

Mr. Patteson

approved of the motion, and vindicated the country bankers from the objections made to them by an hon. gent. (Mr. Davies Giddy.) He thought them a source of great commercial convenience in as much as their own notes they always changed for bank of England notes, and it was not to be supposed that they could have got them without a due equivalent.

Mr. H. Thornton

said, the most important fact to ascertain was, what was the real price of bullion. The number of notes of the bank of England in circulation might vary; so might country bank notes; the amount of the paper in circulation, therefore, could not enable the House to form an accurate judgment upon the subject; the price of gold alone was that to which the circulation of the country ought to conform. The bank of England paper, however, was that to which parliament should most particularly attend; for the directors of the bank of England might, by reducing the value of their paper, compel the country banks to do so likewise. It had been said, this evil had a natural tendency to correct itself, but it had not yet corrected itself. It was well known that nobody could get gold from the bank of England.

The Chancellor of the Exchequer

did not rise to oppose the motion that had been made With so much ability. He would, however, venture to suggest his difference of opinion, with respect to one or two points. First, he confessed he could not understand, how the reduction of the bank of England paper could affect the price of bullion. He thought, that they must consider gold as an article of trade; and if a guinea, that is, the quantity of gold coined into a guinea was worth, at Hamburgh, more than 21 shillings, no reduction of their home circulation of paper currency could affect the rate or the value of bullion in the foreign market, which rate or Value was to be ascribed to other causes. They were to look to the extent of the wars so long carried on, which could not be carried on without money, for the decrease of bullion in this country and its consequent augmentation of price. The additional demand for bullion; the considerable interruption in the supply of bullion, in consequence of so long a war with Spain; the quantity that might be supposed to be hid and buried, in consequence of the alarms, real or unfounded, arising from the critical circumstances of the times,—could all this be said to be owing to the increased circulation of paper? An hon. gent. had furnished them with an illustration; but with what view? The substitution of something else for copper in sheathing shipping would throw that copper into the market, certainly; but would it not cheapen that copper? Whereas, in the case of the paper currency, the paper was put as a substitute for gold; but the gold had not lessened in price, it had increased, so that he could not see the analogy, for the paper was to the gold as the supposed substitute to the copper. He, however, threw out these suggestions with great diffidence, as he was aware that he was not as well informed on the question as he hoped yet to be, when the various papers were before the House. He, therefore, should reserve to himself the right of retracting any opinion upon this subject, which more knowledge and maturer deliberation might induce him to change.

Mr. Marryatt

agreed with the right hon. gent. that the quantity of paper money in circulation had not occasioned the scarcity in bullion so justly complained of; but at the same time, he could not admit, that bullion had increased in value all over the world in the same proportion as it had done here. All the evidence which by acceding to the motion would be laid on the table, he was satisfied would throw no light on the subject; and the question would be found at last wholly to depend on the difference in the rate of exchange against us in the different markets, being from 20 to 35 per cent. Every person who could carry a guinea over to the continent, would receive 28s. in return, and all the regulations the House might adopt would not be sufficient to bring one back. All the evil, he was satisfied, was to be traced to the indiscriminate use of licenses, by which all the staple commodities of France and her allies were brought to this country in return for bullion and specie. The influx of these commodities turned the rate of exchange against us to the enormous degree already mentioned. The great importation of naval stores, too, for government, all of which must be paid for in specie, had contributed greatly to this end; all was to be traced to the destructive practice of licenses. If this system were done away, things would be turned speedily into their old channel.

Mr. Baring

thought the papers moved for might be of some service in correcting theories of the different gentlemen, which, in his opinion, were radically wrong. He did not, however, say, that the papers themselves would be sufficient to enable the gentlemen to form a fair judgment on the subject. The difficulty, he suspected, would be found to be in the state of the trade of the country. Undoubtedly, a paper circulation did expose the country to have the rate of exchange turned against her whenever the trade was against her. In sir W. Temple's time, when this country wished to grant a subsidy to the bishop of Munster, it was found impossible to do so, because we could not send the coin in which it was to be raised. This could not affect our paper; but if in the present change of circumstances it were resolved to make an exertion, we must send our paper abroad for the purpose of raising the money, this must immediately produce a depreciation. A guinea, at this moment, brought 26s. or 27s. and a pound brought only 19 livres French, whereas it used formerly to be worth 24 livres. Much as he disliked the trade by licenses, he could not attach to them the whole cause of the depreciation on the Foreign exchange, because these licences were for imports as well as exports. We had, however, during the last year, immense imports of naval stores from the Baltic, the trade of the former year having been interrupted, and this year the imports were probably equal to the consumption of two or three years. All this must be paid for in specie. Formerly these imports were made in our own ships; on the present occasion, foreign vessels had been employed. The expence of freightage consequently must also be paid in specie, and on a moderate computation could not be reckoned at less than 1½ million. What was formerly obtained for one million might now be fairly estimated at 200,000l. more; and where a foreign merchant formerly drew for 100l. he now drew for 120l. We now received no bullion as we were formerly, accustomed to do from the Brazils, but rather sent bullion thither. The present system of commerce tended to deteriorate our rate of exchange. Every encouragement was given to the importation of cotton wool from Brazil rather than from America, although the former must be paid for in specie, while the latter had been, and still might be obtained by giving our own manufactures in exchange. The same was also the case with respect to foreign shipping employed in this trade, the freight of which must likewise be paid in bullion. These, he was satisfied, were the causes of the rate of exchange being so immensely against this country, and there was not a merchant of any experience who might be called before the committee, who would not confirm what he had stated.—The Motions were then agreed to.