§ The order of the day being read, for the House to resolve itself into a Committee of the whole House, to consider of the Report which, in the last session of Parliament, was made from the Select Committee appointed to enquire into the cause of the high price of Bullion, and to take into consideration the state of the circulating medium, and of the exchanges between Great Britain and foreign parts; Ordered, 1. "That the said Report be referred to the Committee. 2. That the Report from the Committee of Secrecy appointed by the Lords to enquire into the causes which produced the Order of Council of the 26th, day of February 1797, for restraining the Bank from the issue of specie (and which Report was communicated to this House upon the 26 day of May 1797) be referred; to the Committee. 3. That the Report. which, upon the 13th day of June 1804, was made from the Committee appointed to enquire into the state of Ireland, as to its circulating paper, its specie and current coin, and the exchange between that part of the United Kingdom, and Great, Britain; together with the Minutes of, Evidence, and the Appendix thereto, which were reported to the House by the said Committee upon the 4th and 16th days of May 1804, and upon the said 13th day of June, be referred to the Commit tee. 4. That the several Accounts and. Papers which have been presented the House in this session of Parliament relating 799 to Money, Bullion, and Exchanges be referred to the Committee."
§ The House having accordingly resolved itself into the said Committee, Mr. Lushington in the chair,
§ Mr. Horner
rose and spoke to the following effect:
Mr. Lushington; Before I enter into any detailed explanation of the subject to which I propose to call the attention of the Committee, I feel it necessary to apprise the Committee thus early in the discussion, that it is my intention to separate the last of the Resolutions which I have already submitted to the consideration of the House, and which it is my intention to call upon the Committee to agree to, from those which precede it; because the preceding Resolutions embrace and embody what appear to me to be the causes and effects of the scarcity of bullion; whereas the last points out the remedy which, in my judgment, is best adapted to correct the evil, and in which I mean to call upon the Committee to concur. I am the more inclined to take this course, because a great variety of opinions prevail upon the subject, and many gentlemen who approve of the principles and opinions expressed in the first series of Resolutions, may not coincide with me as to the propriety of the last. I consider it, therefore, of considerable importance, to keep the two questions as distinct as possible; and with this determination, I intend to state fully the view which I take of the subject in the first instance, and then to propose the whole of the Resolutions, with the exception of the last, which I mean to move distinctly. Having premised thus much, I shall now proceed to the consideration of this important subject in all its" Gearings, giving to it all that attention, and stating all those circumstances which pressed upon my mind so strongly, as to induce me to propose such Resolutions as appear to me just and proper to be adopted by the House. I am aware that the subject is one to which many other gentlemen are more competent than myself; that it has in fact been much better and more ably examined by them; but, however, having conceived it my duty to give the subject much and serious attention, I come prepared to this discussion with my general view of it, which for the convenience of the House, I shall endeavour to compress within as narrow limits as possible. In so doing, I am afraid, however, 800 that I shall be obliged to trespass longer on the patience of the Committee than I should wish to do.
Among the various opinions and discussions agitated on this and similar subjects out of Parliament, many, as might be expected, go into the most violent extremes. Some are hardy enough to affirm, that our paper currency is of itself sufficient for all our necessities, and that our financial interests would be much improved by an entire substitution of paper for the precious metals. According to this creed, the greatest of all modern discoveries in the improvements of commerce, is the exclusive substitution of a paper currency founded, not upon the basis of the precious metals, but on the basis of confidence alone. Others, blind to the benefits of this proposal, blind to experience, blind to the great advantages of a well regulated paper currency, propose our reverting to ancient systems. Others, again, and in my opinion the best class, venture to recommend, that we should have as extended a paper currency as is consistent with the stability of the circulating medium, and that this currency should have for its basis the precious metals. It is my wish, and I desire it to be distinctly understood, not to proceed to either extreme; my object is to impress the Committee with the propriety of reverting to the doctrines and opinions of the ablest and most practical statesmen of this country previous to the period of the Bank Restriction. The principle of those doctrines was, that the circulation of paper was in itself beneficial, and sufficiently guarded against possible excess by its constant liability of conversion into gold.
And here I must observe, that I do not by any means concur in another opinion which has gone abroad upon this subject—an opinion erroneous enough, but which, opinion is entertained by many persons, namely, that the only remedy for the existing evil is not to limit the paper issues, but to do them away altogether. There, are persons, too, who entertain a jealousy and suspicion of the Bank of England, as an institution.—(hear! hear!) Whoever feels a proper respect for his country, can never agree with those who hold such doctrines; for the origin of that institution was highly praise-worthy, connected as it then was, with the liberties of the country. It is impossible that every effort to preserve and uphold the just credit of the Bank of 801 England should not be made by those who consider the advantages of which it has been productive to the country—who consider the useful and splendid efforts made by its founder—efforts, which entitled him hot only to the praise of restoring the liberties of this country, but, in a great degree, of Europe itself. No man who has ever attended to the distresses which, in various periods of our history, war has produced, can doubt for a moment that from the Bank of England not only the government, but the commercial credit of the country have received the most important assistance.—It is to that assistance alone, so beneficially rendered on so many trying occasions, that in the prospect of similar exertions and efforts on the continent, we can look for support. The interests of the Bank of England, therefore, form a great and integral part of the public credit of the state. In saying thus much, I wish to guard against the possibility of mistake in any opinions which I may utter as to the view, which I entertain upon the subject, and the means of remedying the evil, which is pretty generally admitted. The only means which can be effectually resorted to are to restore things to what they were, previous to the year 1797, when the restriction was first laid upon the Bank payments. Upon this point of the case however I must declare, that my great and ultimate object is to restore, with as much care and circumspection as may be fairly claimed by partial and particular interests, but at the same time with as, much promptitude as still more urgent considerations must dictate, the circulating medium to its original state—a state attested and proved by a long experience to be not less favourable to private than propitious to public prosperity—a state, every departure from which must be injurious to public credit and national interests in the full proportion, of the extent to which it is carried.
But here I am called upon to notice a prejudice which has been strongly excited against me and those who coincide with, me in opinion on this subject; a prejudice that represents us, as mere theorists, and as setting up our theory against the conclusions of practice and experience. With respect to the theory which I mean to inculcate, I have to observe, that it is the theory of those persons who in the best of times founded the Bank of England; and if it be a theory to believe what will prove a practical good, if adopted, it is one built 802 upon a solid basis, a metallic foundation. In this opinion I am not singular; for I have the satisfaction of knowing, that I am subscribing to the doctrines held by most of the practical statesmen of which this country has boasted; who had given to them previous to their adoption all the consideration and weight necessary to a right conclusion. They took the opinions of the best informed practical merchants and bankers, and of those most competent to give upon such a subject useful information: and the ministers of that day must have had but an imperfect notion of what was conducive to the interests of the state if they had neglected so to do. The most important, essential, and indispensable information is to be derived from all classes of practical men engaged in commercial pursuits. If, therefore, it shall be charged against me that I entered into the consideration of the subject with opinions preconceived, to that charge I was liable; and indeed I believe every member of the Bullion Committee might be charged with equal justice upon the same score. But, with-out considering whether it be possible to commence any such enquiry free from any such preconceived opinions, I shall venture to say, not only for myself but for the rest of the Committee, that no investigation ever was begun with a firmer determination to make the most ample, accurate, and impartial scrutiny into the subject, and to suspend judgment till that scrutiny was accomplished. (Hear! hear!.) The names of the members of the Committee area sufficient security perhaps for this, and render it unnecessary for me to repel any accusations on that score;
With respect to the Resolutions of my right hon. friend (Mr. Vansittart), it would have been a great convenience to me, if I could have guessed, which of the Resolutions I have proposed are to be controverted; but that I cannot even guess. The last of my right hon. friend's Resolutions gives me all I can wish; for it admits, that it would be expedient to remove the restrictions, with this qualification however, "but not prior to the term, of six months after conclusion of a definitive treaty of peace." I was fully prepared for hearing doctrines in opposition to what I should state; which doctrines have up to the present day been doubted. To shew the fallacy of such doctrines, I shall endeavour to satisfy the Committee, that the causes of the high price of bullion are not attributable to the unfavourable state of 803 the Exchanges, when the house delegated to the Committee up stairs full powers to inquire into the causes which led to the high price of gold bullion, and this great excess in the market price over that which is settled by the standard of the realm. Since that inquiry, the evil complained of has greatly increased. The standard price of gold is 3l. 17l. 10d.; last summer it was as high as 4l. 10s.; this year as high as 4l. 10s.; and in some tables it has been quoted as high as 4l. 18s.; but on comparing these with other tables, it is perfectly clear that the average is 4l. 14s. being an excess in the market price of 20 per cent. above the price settled at the mint. This high price of gold in the market, is most evidently a departure from the standard value of the coin of the realm. The lawful currency of the realm being coined gold and silver, all issues of paper money are of course nothing more than stipulations to pay in the lawful coin of the realm, just so much, as the issues of paper bear on the face of them a promise to pay. This being the case, the bank-note of one-pound, must be taken altogether as a stipulation, or agreement to pay on demand twenty-shillings of lawful coined money of the realm. Now, as bank notes of that value purport to represent gold and silver, and as the real value of a note of that discription estimated from the high price of the gold bullion above the price settled by the mint, is of course depreciated in value, the real quantity of precious metal which it will purchase is 15s. 10d. and it is no longer therefore, a quantity of gold and silver to the value of twenty shillings. I am prepared broadly to state and argue, that it has deviated from its original value to that extent. I do not expect that it will be controverted in this House, when I assume it as fact, that the legal standard of the realm is of great political importance to the interests of the country; that cannot be denied No doubt, there have been periods in our history when many of our sovereigns imitated the conduct of arbitrary monarchs; and to support foreign wars, have debased the value of the coin of the realm. Parliament, however, has on all such occasions very wisely judged it expedient to urge them to restore it to its lawful value, and it has been uniformly so restored shortly afterwards. The last operation of this kind occurred in the reign of queen Elizabeth; since then a standard has been established 804 both with respect to the fineness and the weight of the metal, which standard has hitherto remained unaltered. All the statutes upon the subject invariably provide, that no legal tender in payment shall be made except in the current coin with re ference to the standard; and by the 14th of the king no tender in silver of a sum above 25l. shall be good, unless reference to the standard as fixed at the mint shall be made. This is the law upon the subject, law so invariable, that there had never been the smallest question as to the point, up to the time when the restriction on the bank took place in 1797. Very different doctrines have indeed been broached since that period, which, however I have no doubt the House will consider as extraordinary and fallacious, asthey are unfounded either in fact or reason. If we look to the law of the land, to the king's proclamations, or to the proceedings of parliament, on the subject of the lawful money or coin of this country, we shall find that one opinion only had prevailed on this very important point. From the early period in which it had first been taken into consideration, the greatest care and anxiety has uniformly been shewn to prevent any alteration in its value, either as to weight, standard, or fineness: but particularly to prevent the smallest diminution in any of these points.
With respect to what has been the invariable policy of our ancestors upon this point, I believe, no difference of opinion can exist. I come now therefore to a more recent authority. In the last regulation made on this subject, in the fourth year of the reign of George 1, there is in the Journals a Resolution of the House, that they would not alter the standard value of gold and silver; and to add to its weight and importance, this Resolution was sent up to the other House for their concurrence, to which the Lords immediately agreed; and it thus became a Resolution of both Houses of Parliament, that they would not alter the gold or silver coin of the kingdom, either in weigh, standard, or fineness. After such peculiar care and attention had been then paid to the standard value of the Com, in both these precious metals, not only by the greatest statesmen, but by the parliament of that time, as well as in all antcedent periods, whenever the subject was adverted to, is it not very extraordinary that we shall now be told that there is no such thing as a standard—that it is a mere creature of 805 the fancy, an imaginary phantom, that has no existence—but that it has crept into the minds and vocabularies of men, who hare lately turned their thoughts to the subject, and had no business to remain there any longer; such is the doctrine which has been lately resorted to, by many of the ingenious theorists, who have indulged themselves, by writing and publishing pamphlets, for the instruction of that House, and of the public, since the Committee made a Report on the high price of bullion. It was at first said, that no depreciation in the paper currency of the country has taken place, but that ground was found to be untenable; and those ingenious gentlemen have at last boldly advanced this very extraordinary and monstrous doctrine, that the conduct of all practical men goes to shew, that this is ideal, and that they have all concurred in opinion that there has never been any such thing as a standard, either as to law, weight, or fineness. The first gentleman who published his thoughts upon the subject, did not, indeed, bring this doctrine forward till the second edition of his work, and he then introduced it with a dexterity and delicacy peculiar to himself, and which certainly did no small credit to his abilities, so far as a change of argument went from one broad position, to its direct converse. This gentleman who is certainly a man of eminent talents, was at first greatly puzzled; but at last he found out what was meant by standard, and hit upon this "that a unit must be found to make it; that the interest of 33l. 6s. 8d. three per cents, being 1l. was that unit, and that interest, of course, being paid in a Bank note, it was money of account." This is a deduction which goes far beyond the ideas even of any Aristotelian theorists I have ever heard or read of, and in my mind appears to be no standard at all. now, money of account can be called or taken to be a standard, a measure of circulating medium, of a commercial country, which has in all times before been founded on the precious metals as its basis, I can by no means account for. This speculative standard was followed by another still more remarkable, emanating not from a theorist, but a practical man; and this gentleman has called in, to aid in his fanciful work, all the ingenuity and metaphysical reasoning, he could muster, to convince the public that a Bank note is abstract; currency. Another author, however, has broached a doctrine still more 806 remarkable; for he says, that "standard is neither gold nor silver, but something set up in the imagination to be regulated, by public opinion."
From these abstract and curious opinions I shall appeal to the law of the country; and I hope we shall hear from some of the hon. gentlemen opposite, who are taking notes, all these wild theories disclaimed; and that they will not advert to any standard but that recognized by the law. These theorists gave an important admission of the fact, that a departure has taken place from the standard value. Before I leave this part of the subject, I shall refer to the third resolution of my right hon. friend, premising, that my resolutions stated, "That the actual value of a 1l. note is less than the nominal value." In answer to that proposition, for it must be taken as an answer, my right hon. friend has said, "That bank notes are held to be equivalent to the legal coin of the realm, in all pecuniary transactions to which such coin is legally applicable." In the amendments made to these resolutions, it is staled, "That promissory notes of the Bank of England are held in public estimation, and generally accepted." In the resolution thus proposed, his right hon. friend has not denied the statement set forth by me, namely, that the value of a one pound note is less than it ought to be. I am prepared wholly to deny the assertion of my right hon. friend, that bank notes are held in public estimation equivalent to coin; for I must contend, that public estimation is quite the other way; and were it not for a notion of law, which most people have got in their heads, there would be found in every market' in the country, in every shop almost, a distinct price would be established in estimation for the Bank of England note and specie. It is well known that the king's coin has totally disappeared, and that there is he money but that of the Bank.
With respect to the word coin, what is it? Does it make any difference as to the standard? The coin is the King's assurance to his subjects that their property shall be protected; that the coin shall be of that fineness and weight necessary to give to all in their dealings an equal security and an equal participation of justice. To say, then, that bank notes are held in public estimation equivalent to coin, is to evade altogether the argument. The question is one wholly of fact. Is the Bank of England note worth what it purports to 807 be worth? It certainly is not; as I shall shew presently. It has been correctly asserted by an hon. gent. opposite in his book, (Mr. Huskisson) that as things now stood a light guinea would pass for more than the value of a heavy guinea. When a guinea is worth more than it formerly was, see to what it will tend. Suppose, for instance, a person is indebted to another 26l. and he is called upon to discharge that debt, which ought to be done in the lawful coin of the realm, he must give his creditor, if in silver, at the rate of 5s. 2d. per oz. 100½ ounces; but suppose he should give him 26l. in notes, they would, in consequence of their depreciation, only purchase 86 ounces and two thirds. So far then from Bank notes being equivalent to the standard value of coin, a debtor might discharge a debt of 26l. in Bank paper, which, if converted into silver, would only produce 86 ounces; whereas, by the lawful standard of the realm, the creditor is entitled to receive ICO ounces, the Bank note of 11l. being now worth something less than 16s. If this be so, then it becomes necessary to ask who are to blame, and where the remedy for the evil is to be found? In that respect it is only necessary for the House to institute an inquiry, and from the evidence adduced to form its conclusion where the remedy-is to be provided.
The most important consideration to a civilised nation is the standard value of coin. All civilized nations have at all times considered a measure of value as essential to the interest of the state. If our measure of value be deteriorated or lost, then it becomes the legislature to provide a remedy. What is the consequence of this deterioration? it is the cause of infinite loss to creditors, has a great effect upon monied incomes, gives an undue advantage to debtors, and affcets materially persons holding stations in society, which property of that description gives. The revenue was injured and taxes ceased to be productive, for the money paid into the. King's exchequer would not do that, which it was calculated it would be sufficient to do. In turning our attention, therefore, to the most effectual and expedient remedy for the existing evil, it is in the first place necessary for us to ascertain the cause. All that has been urged by the adversaries of the Bullion Report in explanation of the present state and circumstances of our currency and circulation appears to be reducible to two 808 points:—first it is said that gold has experienced an actual rise in its real value from a positive scarcity, and secondly it is stated that the unfavourable state of the Exchequer has caused a local rise in its price at home. The first of these positions implies that the demand for gold has greatly increased on the continent; the second has no foundation whatever in fact, and is in my opinion a complete fallacy. The money value of gold cannot rise in this country. Its real price is unquestionably subject to ail the variations arising from the increase or diminution of the amount of the supply: but its standard value as a measure of exchange cannot possibly fluctuate under any change of circumstances. In Africa, and many parts of the East, salt is the common measure of value. It is quite obvious, that salt is an article, the real price of which must often vary: but when it is used as a common measure of value it is as immutable as any other article; and the apparent variations in it as a standard are in fact variations in the prices of other commodities estimated by that common measure. In like manner in those, countries where silver is the standard, the money price of silver can never vary:—and, in Great Britain, where gold constitutes the standard, it is impossible that any change can be produced in its value as a measure of exchange. The only effect, therefore, which can take place by any diminution of the circulating medium in any country, must be to make all commodities cheap, and I will put it to the Committee whether by the disappearance of specie, any such effect has been produced in this country. But let us look to those periods, when an unusual demand for coin reduced the quantity in circulation, and decide from what happened then, whether a diminution of the amount in circulation or an occasional demand for coin had the effect of raising the money price of gold. In 1795 there was a great scarcity of gold arising from the large sums which were necessary to be paid in that period of scarcity for foreign grain. In 1796 there was an unusual demand for specie, as also in 1797 for internal purposes, and from the apprehension of external danger, the practice of hoarding was carried to a very; great extent. Yet during the whole of this period not the smallest rise took place in the market price of gold. On one occasion only and to meet a particular purpose a very small quantity was imported 809 from Portugal at the high price of 4l. 8s. per ounce, including the loss by exchange and the expence of freight. But, Sir, I will go farther and slate that from the 1797, to the year 1796 inclusive, there had been no regular or sensible, nor indeed! any alteration in the market price of gold,: as is most clearly proved by the very valuable document on your table from the mint.
With respect, however, to the alleged rise in the price of gold on the continent, I am ready to admit, as I believe, that some, though small, rise has taken place there. But this rise bears no sort of proportion to the rise, the extravagant rise which has taken place in this country. In consequence of the excess of the importation of silver above gold, it has undoubtedly been found necessary to revise and regulate the mint values of the two precious metals, so as to make them correspond with the proportion they bear to earn other in the general market of Europe. From the cause I have mentioned, the increased importation of silver, therefore, gold has accordingly risen somewhat in value as compared with silver, in those states where silver is the measure of value; and silver has sunk somewhat in value as compared with gold in those states, where gold is the measure of value At Paris a new mint has been established, by the regulation of which such an alteration in the relative values of gold and silver has been effected, as makes the proportion of their mint prices correspond with their proportions of price in the market. By an account which I have lately received of the prices current in that city, I find that on the 16th of April English pure gold was worth only 3l. 19s. 6d. per ounce there. The prices at Hamburgh nearly correspond, at Amsterdam the English guinea sells for 12 guilders and a fraction, whereas a 1l. note passes for little more than seven guilders. But it is not the gold alone that has undergone this extraordinary rise in the market. Silver also has risen considerably in price, and as this is not to be attributed to any diminution of the amount of supply, it can be traced to no other source than to the depreciated state of our circulating medium, instead of any diminution in the supply of silver, our importations of that precious metal have greatly increased. From the situation of the continent, and the circumstances of the contest in Spain, and the consequent influence 810 of such a state of things upon the Spanish colonies, Great Britain has become the channel through which the supply of silver is distributed to all the countries of. Europe. Add to all this the fact, now too well known to be controverted, that the great drain of silver to supply the East Indies has been stopped, and I will ask the Committee whether the rise in the price of silver is to be ascribed to the scarcity of that article in the English, market.—I will ask any hon. member who heard me whether it can fairly be attributed to any other cause than the depreciation of our circulating medium?
But it is not alone, from the extraordinary rise in the market prices of the precious metals in this country; a rise not to be accounted for on the ground of any correspondent rise in the markets of Europe, that the depreciation of our currency is demonstrable. The equally extraordinary rise in the prices of the necessaries of life, not as compared with the precious metals, but as compared with the actual circulation, affords a clear and convincing proof of its depreciation. The great and paramount standard of all value, Sir, is corn; and in order to enable the Committee to form an estimate by this standard, I shall beg leave to call the attention of gentlemen to the extravagant rise which has within the last few years taken place in the prices of that article. For the sake of greater precision and to avoid any possible cavil, I propose to leave out of my consideration, the prices in those years in which any considerable scarcity has been felt.
It appears, from the Appendix to the Bullion Report, that, from the year 1771 to the year 1785 inclusive, a period of 15 years, the average price of wheat, was 46s. per quarter. I' also appears that from 1786 to 1797 inclusive, being a period of twelve years, the average was 52s., but omitting the years 1795 and 1796,. which were years of peculiar scarcity, the average was 47s. and 2d. Since the year 1797, however, a very different rate of increase will be found to have taken place, from that which existed between the two periods I first mentioned, as will be seen from the statement I am now about to submit to he Committee. During the period of twelve years from 1797 to 1798 inclusive, omitting altogether the two years 1800. and 1801 as years of scarcity, the average price of the quarter of wheat was 71s.; and if the two years of scarcity were in- 811 cluded would amount to 79s. (hear! hear!) What facts can possibly be required more strongly and indubitably to prove the in-contestible depreciation of the currency? What evidence more decisive of that circumstance can be produced than that, whilst the precious metals, the practical measure, and bread corn, the real standard of all value, have maintained their due proportion towards each other, and both have equally risen as compared with our circulating medium, that such circulating medium is depreciated precisely to the motto of the rise of those real standards above its actual value? An unfavourable state of foreign trade has, I am very ready to admit, a strong tendency to lower the rate of foreign exchanges; but the' influence of this cause must necessarily be confined within certain limits. Admitting for the sake of the argument, however, what I know not to be the case in fact, that the whole of the existing depression of exchanges is a real depression without any reference whatever to the depreciation of our currency, yet I must most strenuously deny, that such a depression of our exchanges could possibly have the effect of raising the price of gold. It will be readily admitted to me, even by the most violent opposers of the principles laid down and asserted in the Bullion Report, that the foreign exchanges have during the last century been subject to occasional and considerable depressions: yet I challenge any gentleman to produce a single instance during the whole of that period in which the depression of the rates of exchange has had the effect of enhancing the price of gold. I can upon this point appeal with confidence to the papers upon our table: I can refer to the return made from the mint of the prices of gold for the last hundred years, and I am prepared to contend, that the result of the most diligent examination of. its contents will be to prove that the alterations to which the exchanges may have been subject during that period have never produced any corresponding effect An the prices of bullion.
Yet, Sir, the present depressed state of the exchanges (unexampled as it is in the history of the country, except in periods when the national currency has been debased) is a point which not only deserves attention, but calls for immediate investigation. In the reign of William 3, and in the seven years war the exchange fell 25 per cent. and' guineas rose to 30s. but since those 812 periods there had not, it was clear, been any instance whatever upon record. Suppose even that I were to allow, for the sake of argument, that the balance of trade has of late years been extremely unfavourable to this country; still there will be considerations arising from that supposition which deserve the most serious attention of parliament. It is allowed that the principal article of import in the last year was grain, and that import was enormous. Now, it appears to me, that the House should most seriously consider what could be the reason that produced a necessity for an imputation of about 2,000,000 of quarters in one year, which was not a year of famine. When we consider the great part of our population which is employed in manufactures, and the great and increasing portion of that population which is on the list of paupers, no man can look to the possibility of another year of dearth without feeling the most painful and serious alarm. I look upon this increase of the price of corn as a very strong argument in support of the opinions which I have taken the liberty to state to the Committee.
Nothing can in my mind more effectually shew the depreciation of the relative value of our currency, than the fact, that although by the alteration made in the corn laws, in 1793, the price of 54s. was fixed, as that under which no grain should be exported, it became necessary in 1804 to raise that protecting price to 66s.; and so rapid has been the depreciation of money, that, if it be intended to carry on the system of protection, it. Will be now necessary to raise this protecting price to above 70 shillings The whole question, therefore, as far as the balance of trade is concerned, rests on the real' state of our foreign payments. What that is, it is difficult to discover. I am disposed to trust those who have the means of information in their hands, and, who have declared that that balance from the foreign expenditure is greatly against this country. And yet, if the Committee look at the accounts on the table, they will, see that the excess of exports over imports has been much greater than formerly, particularly during the last two years. The official value of the imports of 1811 was 33,100,000l.; of the exports 45,800,000l.; leaving an excess, of 12,700,000l. The details, too, of this excess are still more satisfactory. The exports of cotton manufactures during the 813 last two years were nearly double, what they had been in the two years preceding. How these statements can be reconciled with the present arguments and declarations, I am yet to learn. The question may, indeed, be explained by shewing that the military expenditure made up the difference; but at present it is wholly unexplained. It is now, however, for the first time intimated, that the balance of trade has been so unfavourable to this country, as to render the exportation of bullion absolutely necessary. But the Committee will recollect, that in 1808 and 180y, when this great excess of exports was stated, by the right hon. gent. opposite, (Mr. Rose), I expressed my doubts, with respect to the real nature of it. In the last session, during the discussion of the Lords Commissioners Speech, the right hon. gent. opposite also contended, that although there was a great foreign expenditure, yet the excess of exports was so considerable, as to leave the balance very much in our favour. Now, Sir, how is this reconcilable with the present argument. But, even if these two statements could be reconciled, I contend that they would not shew the true cause of the present state of the currency of the country. It has ever been the opinion of the best practical as well as theoretical men, that the legitimate depression of the real exchange must necessarily be limited by the expence of the transmission of specie; and that where it is found that the depression exceeds that limit, such depression must inevitably arise from some circumstance connected with the currency of the country.
There are two changes of value, of which the domestic currency of any country is susceptible: the debasement, to which metallic currency alone is subject; and excess, which more particularly belongs to paper. The returns from the Mint, which are inserted in the Bullion Report, afford satisfactory and full information on this point. It will there be found that from 1758 to 1773, during the debasement of the coin of the country, a depreciation of the circulating medium took place. As to an excess of metallic currency, that can take place only in countries possessing mines; and even there Only to a small extent, and for a short period. Thus it will be found, that in Spain silver, and in Portugal gold, are generally a little lower after the importation from the mines, until the superabundance is 814 transmitted to other, countries. The evil in such cases remedies itself. But in countries in which paper is not convertible into specie, excess admits of no remedy; and if the excess be without limit, equally indefinite must be the effect it will produce on foreign exchanges. The doctrine of exchanges, is now as clear and indisputable, in my opinion, as any question in mixed mathematics; and the only means that exist of repelling its deductions is the production of mutilated facts, and imperfect statements, with the quotations of parts of cases, the remainder being either unknown or studiously concealed. This practice has been pretty generally adopted out of doors; but at least it is incumbent upon those who set up their new cases to account for those brought forward on the other side. But though I conceive the principles of foreign exchanges to be perfectly known and settled, yet it is very possible that some cases may be stated which would puzzle those who are quite right in their general reasoning. If those cases, however, are examined which appear to militate against the natural deductions of reasoning from established principles, it will be generally found, that in such cases even as are stated so confidently, some material parts are almost always suppressed. Thus, for example, one may be deceived by statements about the rale of exchange, unless the state of the currency of the different countries is mentioned. For example, it was stated last year, that the exchange with Portugal was at par. The reason of it, however, was, that by law in Portugal one half of every debt or bill is paid in paper which is depreciated 26 per cent. There fore, that which was last year stated as an exchange at par was, in reality, an exchange of 13 per cent. against us. So with Sweden, the state of our exchange is also wholly attributable to the discount on the paper currency of that country. In all countries, indeed, with which we have any thing like a settled course of exchange, the same alteration has taken place in the exchanges; as at Paris; Hamburgh, and Amsterdam. I am not perfectly apprised of all the circumstances attending the exchange with America but I understand that in May 1809, the course of exchange was at a discount of nearly 11 per cent. and that at present it is about 10. In the West Indies the premium on bills, which used to be from 15 to 20 per cent. is now only 5. I am inform- 815 ed likewise, that a similar effect has taken place in the East Indies, and that bills drawn on this country at Calcutta, are at an exchange of 22 per cent. against us.
But, in order to place this point in a stronger light, I must beg to call the attention of the Committee to the state of the exchanges between Hamburgh and the capitals of the continent. At Vienna, the par with Hamburgh is 140 guilders; the exchange at present is 900 guilders! To what is this attributable? To the depreciated state of the paper in Vienna. The paper currency of Sweden is also depreciated: and what has been the consequence? The consequence is, that although the par with Hamburgh is 48 stivers, the present exchange is 136! In Copenhagen also, in which the paper is depreciated, and in which the par with Hamburgh is 125 rix dollars, the present exchange is from 750 to 800! But at Paris, in which there is a metallic currency, and no depreciation, the par with Hamburgh being 184 livres, it appears, by the last return, that the exchange is 180—being four in that number in favour of Paris.
How is it possible, Sir, after hearing all these facts, to resist the inference, (hat a main cause of the present situation of our exchanges is the state of our currency? But farther by referring once more to the returns from the Mint, it will appear, that in 1792 and 1793, the exchanges with France, fell from 22 to 17, to 15, to 12, to 9, to 4, and ultimately to nothing. Nobody has ever pretended that this was owing to any thing but to the enormous paper currency, the assignats of France at that period. Seventy years before, when there was an excessive issue of paper in France, an issue not so-infamous as that to which I have just alluded, of assignats, but an issue for the purpose of executing a wild and visionary scheme,—I mean the famous Mississippi Scheme, the exchange of Paris with London fell from 28 to 22, to 13, to 10, and eventually to 7. When also a project of a similar nature was set on foot in England, in 1720, the price of standard gold in bars rose as high as 4l 2s. 6d. per ounce, a rise which could be owing to nothing else but the diseased state, of the circulation in London. All these facts therefore, I maintain tend to prove the accuracy of the conclusions to which the Bullion Committee has arrived: Can more direct evidence be demanded of the excess of paper money? But I shall 816 stop to consider this point for a moment; During the restriction on cash payments, the excess might be occasioned in two-ways; one by the Bank issuing more paper than could be absorbed in the general circulation; the other, a given amount being already out, and a change in trade rendering that amount more than sufficient for the general circulation, by the Bank abstaining from withdrawing a portion of that already issued. On an examination of the evidence given by the Bank Directors before the Bullion Committee it will appear, that although the restriction on the cash payments would of itself have created an excess, yet the Bank increased that excess by issuing an additional quantity of paper. And here, Sir, I wish particularly to call the attention of the Committee to the increase of Bank of England notes even since the investigation and Report made upon the subject by the Bullion Committee. By the Report of the Committee the average of the notes in circulation in 1809, is staled to be 19 millions: the average of the last half year of 1809, to be 19,600,000l. the average down to the 12th of May 1810, to be 21,200,000l. By the documents now on the table, it appears, that the average of the Bank notes in circulation taken for the whole of the year 1810, rose to 22,700,000l. and that the average of the first 17 days of the present year was 23 millions and a half; being an increase in the number of Bank notes in circulation of above 2 millions, since the Bullion Committee made their Report; To me this appears one of the most wanton, and unjustifiable acts that can well be conceived. I understand that if is to be defended on the ground, that such commercial distresses unfortunately existed in the last year, as the Bullion Report itself pointed out as the proper subjects of relief from the Bank. But whatever may have been the nature of those distresses, the want of money can: certainly not be one of them; for money was in abundance. What other defence; of their conduct in this instance the Bank' can set up, I know not. But this I do knows, and assert with confidence, that the doctrine of the Directors of the Bank, as set forth in the minutes of evidence before the Bullion Committee, is wholly novel' and quite inconsistent with the principles by which the conduct of the Bank Directors of former days were governed. It is a doctrine which, if not checked by parliamentary interference, most soon bring 817 complete ruin on the whole of the financial and pecuniary affairs of the country.
What, I will ask, was the situation in which the Bank of England has been placed? It is not my wish to impute to the Bank any original blame, or to revive the controversies of former days. The existing evil is sufficient without any such recurrence.—In the origin of the business I do allow that the Bank was placed in compulsory circumstances. The Bank directors were forced to suspend their cash payments. But still, influenced by the true and sound principles, which had influenced their predecessors, the directors were anxious to resume those payments, and made such exertions to return to the good old practice of discharging their notes in specie, that in the month of October, in the same year, they declared their willingness and wishes to return to their former system. Parliament, however, then declined the removal of the restriction; and that which was first enacted as a temporary measure for only 50 days became a permanent war measure. The Bank directors being then placed in a new situation, had new duties imposed upon there, and they should have exercised with great judgment and exemplary moderation, the discretion which was thus vested in them, of issuing their paper without check or restraint. It had been before that period a part of the royal duties and cares to provide a sufficient and proper proportion of circulating medium for the use of the nation. There was, however, under such circumstances, little danger to be apprehended from an over issue of gold and silver coin of standard fineness and value. But when it devolved on the Bank directors to provide in paper, not convertible into gold or silver, whatever quantity of circulating medium they thought proper, and when it is considered what temptation they had from feelings of private interest to make large issues, it is extremely important to attend to the new maxims and opinions which the Bank directors seem now to have adopted.
And, upon this part of the subject, I must be allowed to say, that the Bank directors appear to me to have been and to be evidently and avowedly unacquainted with the sound principles, which ought to have governed their conduct under such trying circumstances. Their doctrine, as appears in the evidence taken before the Committee is this, that there can be no excess of issue, with regard to their paper, 818 as long as it is demanded; that the extent of the demand ought to be the only limit; and that the rate of interest makes no difference whatever in the consideration of the amount to be issued. I beg leave to call the attention of the Committee on this part of the subject to the evidence given by the Governor of the Bank of England, a most respectable individual, Mr. Whitmore.
When that gentleman was asked, "Does not a rise in the value of any species of money or currency mean a fall in the prices of commodities?" He answered; "I did not mean to state that, nor do I mean to state to the Committee any matter of opinion; I would rather wish to leave that to the judgment of the Committee, and I am ready to answer any points of fact." And again when asked, "Supposing the currency of any country to consist altogether of specie, would that specie be affected in its value by its abundance or by its diminution, the same as copper, brass, cloth, or any other article of merchandize?" His answer was; "I hare already said that I decline answering questions as to opinion; I am very ready to answer any questions as to matters of fact; I have not opinions formed upon the points stated in this and the preceding question sufficiently matured to offer them to the Committee."
This was certainly most candid and perfectly intelligible on the part of Mr. Whitmore. But I will ask any hon. gent. whether it is equally reconcileable with the line of strict duty, and deliberate discretion, which ought to have regulated the conduct of the Bank directors under such circumstances? Surely the head of an establishment, to which the discretionary power of feeding and adjusting the circulating medium, ought not to have been so uninformed upon the first principles of the operation entrusted to his management and should at least have furnished himself with the means of forming a distinct opinion upon so important a branch of the subject? It was to have been expected that the governor of the Bank and the other directors should be acquainted with the plainest maxim of political economy, that the rise in the value of money or currency is equivalent to a fulfill the prices of commodities. This, however, seems never to have occurred to the governor or the other directors of the Bank, and to this negligence or ignorance on their part may be 819 traced the cause of the excessive issue of paper which has taken place. The Committee are aware that by law the Bank of England is restrained from taking more than five per cent. for their discounts. When the Committee, therefore, considered the spirit of speculation and extravagant commercial enterprise which appears to have prevailed during the last three years, it very naturally occurred to them, that in the hope of considerable profit from such undertakings the adventurers might be inclined to apply for a greater amount of discounts than the natural circulation of the country would require, and that in this way an excessive, issue might have taken place. With a view to ascertain this point, they examined the governor and deputy governor of the Bank as to the principles upon which they limited the amount of their discounts. The Bank could take no more than five per cent: the speculators might flatter themselves with the prospect of a larger profit by extending their, applications for discount at that rate, and hence it became necessary to inquire into the practice of the Bank upon the subject of discounts, and to learn whether there was any thing in the amount of the discount or the circumstances of the application that could be considered as a settled principle and an invariable security against improvident and excessive issue. With this view Mr. Whitmore was asked:
"Is it your opinion that the same security would exist against any excess in the issues of the Bank, if the rate of the discount were reduced from five to four per cent?—Answer: Mr. Whitmore.—"The security against an excess of issue would be, I conceive, precisely the same."—Mr. Pearse.—" I concur in that answer."
" If it were reduced to three per cent?—Mr. Whitmore.—" I conceive there would be no difference, if our practice remained the same as now, of not forcing a note into circulation."—Mr. Pearse.—" I concur in that answer."
And again: "You have stated, that the control which guards the public against any excess in the issues, is that no person would be disposed to pay at the rate of five per cent. interest to the Bank for the use of their notes, if his occasions did not require such an advance, and this is the criterion by which you judge of the occasions of the public being adequately supplied; might not such person be disposed to obtain this accommodation from the 820 Bank, if any prospect offered itself to his speculation by which great profit might be derived from the use of a capital so obtained, although the wants of the circulation might not require any such addition?—Mr. Whitmore. "In my view of the subject, nobody would pay three per cent. interest even, or any interest of money unless it were for the purpose, of employing it for speculation; and provided the conduct of the Bank is regulated as it now is, no accommodation would be given to a person of that description."
It must be evident to the Committee from the part of the evidence of these gentlemen which I have read, that the Bank directors had no fixed or settled principle to go by in regulating their discounts, and that their issues have been limited by no other consideration than the extent of the demand. Is it to be wondered at then, if the circulation of their paper has increased to the amount to, which I have already, stated it to have been carried, or that the effect of such a growing and indefinite accumulation should have been the depreciation of the currency to which I am anxious to fix the attention of the Committee? In point of fact, it is obvious, that whilst the Bank directors found good names on the paper presented to them for discounts, which promised to secure them from eventual loss, they sent forth their paper into circulation without ever attending to the injurious consequences to the public that must result from any over issue.
With respect to the Bank restriction measure, which upon any sound and hitherto received notions upon the subject cannot but be considered an evil, justifiable only upon the ground of the greater magnitude of the evil which it was intended to prevent, the Bank directors appear to entertain equally strange and singular opinions. The Committee well knowing that no excessive issue of paper could take place whilst Bank notes were optionally convertible into specie, very naturally considered that measure as the original source of the present excess of paper. They were anxious, therefore, to ascertain the sentiments of the governor and deputy governor of the Bank upon the subject, as they had previously come at a knowledge of their opinions respecting their issues and the limits they thought fit to put to them. Accordingly Mr. Pearse was asked:
"What inconveniences would you see 821 in your view of the operation of the restrictive system, to its being a permanent measure, supposing the Bank to regulate its issues in the manner you have described?" To which he replied, "From our experience, and in my view of it, I can see no positive inconvenience likely to result from its being a permanent measure; nor do I see any advantage that will arise from its being continued when our political and commercial relations will admit of its removal; and I am Farther of opinion, that in addition to the satisfaction, which, as a Bank director, I should derive from the removal of the restriction (when the necessity for it ceases) the feelings of the public would not be satisfied, unless it had in expectation such a change."
In this opinion Mr. Whitmore concurred. Now I will ask any hon. gent. who hears me, whether he can contemplate the permanence of the Bank restriction, to which these gentlemen can perceive no objection, without the most serious and alarming apprehensions? Undoubtedly no inconvenience will be felt by the Bank, whilst it enjoys the lucrative traffic in discounts, which has produced to it such an enormous amount of profits since the restriction was first imposed. But will not the public be exposed to inconvenience? Is it not at this moment suffering all the evils which a depreciated currency and the total disappearance of the precious metals never fail to draw after them? And what hope of remedy, what prospect of redress of the crying grievance is there, unless by the removal of that restriction, the public in the convertibility of paper into specie shall have a security against the imprudent and excessive issue, which has led to the present depreciated state of the circulation? But let us see, whether, whilst the Bank directors have placed no limit to their issues but the actual demand, that demand has or has not increased with the increased facility of issues, and the constant and acknowledged practice of the Bank. Upon this point, it appears that if the issues were limited by the demand, the demand has not been stationary. And indeed how should it? The facility of accommodation must have greatly tended to the encouragement of those desperate speculations which after having first deluded the country with a redundancy of depreciated' paper, afterwards shook public credit to its foundations by the consequences of their failure. In this gradual 822 and latterly grievous growth of discounts, we have a clear and convincing proof Of the inadequacy of the maxims acted upon by the Bank to guard the public against an over issue of paper and all the evils of a depreciated currency. If we had no other proof of the fact, this alone would be sufficient to expose the fallacy of all their principles, and impress the Committee with the necessity of taking some effectual step, whilst there is yet time to counteract the existing evil, and to guard against its recurrence. But let us hear what Mr. Whitmore says upon this point. Upon being asked; "Since the suspension of the Bank payments in cash down to the present time has there been any material extension of its commercial discounts?"
Mr. Whitmore—" I find the commercial discounts have varied nearly in proportion to the Bank advances upon other securities; the amount of the Bank notes before parliament is a certain criterion of the aggregate of their advances on different securities to government; and on all securities the discounts have certainly en-creased since 1797, owing, as I conceive, to the encreased trade of the country."
" Have they encreased in a very large proportion?"—"Within the three' last years they have encreased considerably."
Do we require any thing more to satisfy us, that the whole of the evil, which has been most sensibly felt within these last three years, during which period the discounts have considerably increased, and consequently the circulating medium, is to be ascribed to the excess and necessary depreciation of paper? Can any doubt exist in the mind of any hon. gent., who reflects upon the subject and takes this ad mission of the Governor of the Bank into his consideration, that the great cause of the evil lies in the excessive issue of paper, and that whilst the power of regulating that issue upon the principles professed by the Directors of the Bank, is left to their discretion, the evil must progressively and incurably accumulate? The only security the public can have against the ruinous effects of the alarming and rapid course of depreciation, is, in the recurrence, as soon as circumstances of convenience to the Bank and considerations for the public interest will admit, to the old state of things, to a national currency consisting of a metallic circulation concurrent with paper convertible into specie at the will of the holder. Yet Messrs. Whitmore and Pearse can "see no positive inconvenience from 823 making the restriction a permanent measure." However they admitted," that the feelings "of the public would not be satisfied, unless it had in expectation such a change," (a removal of the Restriction). Upon this point the Committee wished to be more fully informed by these gentlemen. They therefore, in a subsequent examination, put the following question to Mr. Pearse.
" If it were not for this feeling or expectation on the part of the public, should you be of opinion, that it would be expedient to continue the restriction as a permanent measure, inasmuch as it would not only relieve the Bank from the ex-pence of purchasing and keeping a large Supply of bullion, but also effectually protect both them and the public from a repetition of those inconveniences which first led to the restriction, and that these advantages would be produced without creating any other inconvenience by which they might be counterbalanced?"
Mr. Pearse. "I have already slated in answer to a former question, that I am not aware of any posive inconvenience resulting from the present operation of the restriction Bill, or likely to result from its being rendered permanent, except as far as regards an expectation on the part of the public that it will be removed; but this circumstance is, in my opinion, essential and cannot be kept out of view in any consideration of the subject. Whether it would be advisable to secure the public against a liability to the recurrence of the inconveniences that, led to the restriction Bill, by sacrificing their feelings on this point, and absolutely removing all expectations of its being only a temporary measure, appears to me to be entirely a political question on which I do not conceive myself qualified to give an opinion, but I may venture to observe, that public credit and public opinion always go hand in hand, and that the one is invariably influnced by the other. As far as concerns the keeping of bullion, I am of opinion that the Bank does not entertain a wish to be relieved from having a large supply, having in this, and all other instances, always governed itself by an attention to the public interest as-well as its own."
Unquestionably this statement of Mr. Pearsels falls short of a distinct and positive declaration of an opinion, that the restriction of cash payments-ought to be made a permanent measure. But it is quite evident that the possibility of its 824 being made a permanent measure had passed through that gentleman's mind when he could have been brought himself to declare that "he was not a ware of any positive inconvenience resulting from the present operation of the Restriction Bill of likely to result from its being rendered permanent." Now, when to this declaration we add the doctrine maintained by both the governor and deputy governor of the Bank, that there can be no excessive issue of paper, as long as the actual issue is confined to the existing demand for it and also the very zealous and active-part taken by the Directors of the Bank in the discussion of this question out of doors; enough appears in my humble judgment to warrant the conclusion, that the propper checks have, not operated upon the Bank; issues, and that consequently the present depreciation of the currency is entirely owing to the excessive issue of bank notes. It seems, however, that there is a large class of merchants in the metropolis, who, filled with the same erroneous notions as the governor and deputy governor of the Bank, deny this obvious conclusion,' anti still continue to contend that, regulated as the operations of the Bank are regulated, there can be no excess of paper currency. But whatever may be the weight and respectability of these gentlemen, and no man can be mote ready than myself to do justice to both, I must still contend that their view of the subject is fallacious; and false, and in this opinion I am fortified by the concurrence of a very large majority of the mercantile community-a majority consisting of all the great old capitalists of the city, whose practice and praise it has been to have supported through good and through evil times the commercial credit of Great Britain. These gentles, men, to whose authority on such a subject as this, now under our consideration, the Committee will, I am sure, be prepared to show every deference and respect, are decidedly of opinion, (contrary to: the visionary speculations of those to whom I have just alluded) that the issues of the Bank have not been regulated by the principles, or the precedents of good old times; and: that the departure from the previously established regulations at the Bank has indisputably led to the depreciation of the currency to which it is now my object to direct the attention of the Committee.
Amongst the eminent and distinguished commercial men who coincided in the 825 views of this question taken by the Bullion Committee, I can refer with confidence to a most respectable individual now unfortunately no more, (the late sir Francis Baring) whose opinion, no less from his known integrity, than his extensive commercial experience, and highly cultivated intellect, is entitled to as much consideration and attention as that of any other individual in the whole range of the mercantile community. It was the opinion of sir Francis Baring, that there could be no security against an excessive issue of paper, unless in the optional convertibility of paper into coin. The Committee were anxious to ascertain precisely the opinions of that intelligent merchant upon this subject, and with that view he was asked:
"Are you of opinion that any certain and adequate provision can be made against an occasional excess of paper circulation in any country, and especially in a commercial country, where that paper is not I convertible into specie at the option of the holder?" To which he answered, "In this country, if I may judge from experience, I should doubt it; but if the Bank conducts itself upon the same principles at present when they do not pay specie, as they did when they were compelled to pay in specie, I should think that it might be safely left to the discretion of the Bank."
And again, "What do you mean by that experience in this country which leads you to doubt it?" "I mean that in the year 1797, and some years previous to that, the issue of the Bank notes was not more than 11 millions sterling; I have seen a printed paper, which has been laid before the House, in which it is stated that the circulation at present of Bank notes exceeds 21 millions; I am decidedly of opinion that it is more than can circulate with safety to the general circulation of the country."
With respect to the doctrine laid down by the governor and deputy governor of limiting the issues only by the demand, sir Francis Baring was asked; "Do you conceive that the Bank of England will effectually guard against the possibility of any excess in the circulation of the country (as well their own as the paper of country banks) if they regulate their issues by the demand for discounts of good bills founded on real mercantile transactions, as the occasions of the public may appear to require?—It hat 826 been ascertained by long experience, that wherever paper has circulated under, the power or influence of government on the continent, that it has failed. The paper of the Bank of England, has stood firm for above a century, and flourishes at this moment with unabated confidence. The power reposed in the Bank is great; their paper is the basis on which the best in-rests of the country rests; it is the seed which serves to produce the whole of its commerce, finance, agricultural improvements, &c. &c. Such a power may remain with safety, so long as the Bank is liable to discharge their notes in specie, because that circumstance constitutes a complete counteraction to any disposition (if it should be entertained) to increase the circulation beyond a reasonable and safe limit, and, under that circumstance, things (foreign exchanges, &c.) will find their proper level."
So much I have felt it necessary to say, upon the subject of the evil. If I have succeeded in impressing the Committee with a conviction of its existence, and pointed out its great and primary cause, it will remain for the House of Commons in its wisdom to consider of and to apply the proper remedy. That, which, upon the most mature consideration I could give to this important subject in all its complicated bearings, has suggested itself to my mind, I am prepared to submit to the candid and deliberate decision of the Committee. I am fully aware, that many of those who do me the honour to concur with me up to this point in my Resolutions may differ from me as to the remainder. But notwithstanding any discouragement, which may arise from the defection of those whose support I may hitherto possess, I am not the less persuaded that the remedy pointed out by the Bullion Committee in their Report is the only measure that can be successful. It is undoubtedly a remedy of a description that ought to be administered with great caution, but which sooner or later must be resorted to. At the same time, however, lam free to confess that, if parliament were to stop short, even with a simple declaration of the existence and nature of the evil, such a declaration would have a powerful effect upon the conduct of the Bank of England, and consequently in checking the progress of the excessive issue and the increase of the depreciation. Yet, notwithstanding this impression, as a member of parliament I feel it my duty to propose a positive, 827 efficient legislative proceeding upon the subject.
The only argument of any apparent force which I have yet heard against the repeal of the Bank Restriction art, is that which has been drawn from the state of the war in which this country is now unfortunately engaged. But however reasonable such a consideration may be ostensibly, I do not think it in reality of sufficient importance to deter the legislature from an endeavour to restore the currency of the country to a sound and legitimate state. Great as I consider the mistake committed in 1797 by the adoption of the Restriction act, I look upon the continuance of that act at the commencement of the present war infinitely more erroneous and impolitic. The former measure professed only to be temporary, called for by an unexpected exigency, and to be abandoned as soon as the circumstances that appeared to render its adoption necessary should have ceased to require its continuance. But the act of 1803, at the commencement of this war, took from it the character of a temporary measure, and gave it a permanent shape. Why should this have been the case? What difference did the state of war make? It was not in the exportation of bullion for corn, that the necessity or supposed necessity of the bank restriction originated. Every one knows, that the cause of the original measure was not an unusual exportation of bullion, but an unlooked for state of internal alarm—not a permanent evil but a temporary embarrassment. In the year 1797 a most extensive failure of country banks took place, which shook the foundation of internal credit and confidence, and consequently prompted the holders of every kind of paper to demand payment for it in specie, the value of which could not he affected by the failure or solvency of any banks. A run, therefore, immediately took place, and the legislature, at the suggestion of the Bank, but apparently on the recommendation of Mr. Pitt, resorted to the measure of restriction. In my judgment the adoption of that measure was most impolitic, because it was unnecessary; but at all events there was not a shadow of reason for continuing it in operation one moment after the temporary embarrassment that gave rise to it had passed away, and internal credit was re-established upon its former footing. There is no connection whatever between the original cause of the Bank Restriction 828 act and a slate of war:—the stagnation of internal credit might as well occur from such a cause in peace as in war;—and consequently the renewal of the Restriction act at the commencement of the present war cannot be justified upon any principle of necessity, the only ground of-plausible defence that can under any circumstances be set up for so violent and suspicious a measure.
If the suspension of cash payments were actually a remedy for an evil existing, it might very properly have been resorted to. But when the evil was removed, the remedy was no longer necessary. Let the prescription be discontinued when the disease is removed. We should not apply the same medicine indiscriminately in sickness and in health. But as the restriction has been so long continued beyond the necessity that called for it; there might perhaps be some danger, there certainly would be much inconvenience, in putting an end to it abruptly. To be useful the measure of repeal should not only not be precipitate, but should be cautiously resorted to, and deliberately fixed for such a period as would allow full time to all the feelings and interests connected with this great national question to accommodate themselves to the prospective restoration of the old system of currency.
By the existing act, it is provided that the restriction shall cease six months after the conclusion of a definitive treaty of peace. This provision appears to me too indefinite in one view, and too severe in another. To put off the repeal to the uncertain period of six months after the termination of a war, the termination of which no man can possibly foresee, must render the Bank careless of making the necessary arrangements for the resumption of cash payments in time, and if a peace' should happen to take place within six months from this period, it would be oppressive to call upon the Bank upon so short a notice to pay in specie. Anxious undoubtedly as I am that the restriction should cease, I am still no less anxious that it shall cease in a manner most beneficial to the community as well as least injurious to the interests of the Bank.
And here, I have no hesitation to say that, upon the fullest and most mature consideration, it is my firm and decided opinion, that even during a period of war, and particularly during the present war, there exists no solid ground for continuing the restriction, and that, therefore, it is 829 the imperious duty of parliament to repeal that measure under the qualifications which I have before stated. In the present state of the world we have to look to a protracted period of war. We have to contemplate in the course of such a prolonged, contest, the continuance of a very considerable foreign expenditure. When the Committee reflect upon the melancholy fact, that we suffer a loss of nearly one fourth of all the sums expended in foreign service, they will agree with me as to the propriety of adopting such measures as may restore the exchanges to par, and consequently save to the nation all that in the present state of our currency is lost by the unfavourable balance against us. Without the adoption of such measures, the country cannot maintain for any time such an extent of foreign expenditure as may be necessary to maintain its former high and mighty character amongst the nations of the continent, and to enable it to aspire, perhaps, to the future deliverance of Europe. I hope and trust, I shall not hear argued in any quarter that the depreciation of the currency is productive of a positive advantage to the public, as it enables the government to discharge the national debt at a reduced rate I trust, that a declaration so contrary to every principle of public honour, of national faith, and parliamentary virtue, which it has hitherto been the pride and the boast of Great Britain to cultivate and maintain, will not be made on this occasion, I am far from imputing any such intention to the right hon. gentlemen opposite: because I am convinced that, if it can enter into any man's heart to conceive, that man must be a weak and short-sighted calculator. Such a man must forget, that although the public might gain something in the payment of the interest of the debt already contracted, it must lose equally if not more upon the loans which are yearly accumulating. But, it is not public justice alone, that calls upon parliament to arrest and remedy the depreciation of the circulating medium; we are bound by a regard to the degree of private suffering it produces throughout all classes of the community. This consideration must come so directly and forcibly home to the feelings and consciences of every member of the Committee, that I should consider it an insult to their understandings and an imputation upon their humanity, were I to dwell on the grievances to which public creditors, annuitants, and others 830 are exposed by the present state of the currency, or upon the injurious effects it has upon all legal contracts and obligations. It is enough barely to advert to these circumstances: and therefore having trespassed so long already upon the patience of the Committee, I shall detain them no longer, but conclude by moving my first Resolution.
§ The honourable and learned gentleman then moved the first of the following Resolutions:
- 1. "That the only Money which can-be legally tendered in Great Britain, for any sum above twelve pence in the whole, is made either of Gold or Silver; and that the weight, standard, and denomination, at which any such Money is authorized to pass current, is fixed, under his Majesty's prerogative, according to law.
- 2. "That since the 43rd year of the reign of queen Elizabeth, the Indentures of his Majesty's Mint have uniformly directed that all Silver used for Coin should consist of 11oz2dwts. of fine Silver, and 18dwts.. of Alloy in each pound Troy; and that the said pound Troy should be divided into 62 Shillings, or into other Coins in that proportion.
- 3. "That since the 15th year of the reign of King Charles the Second, the In-dentures of his Majesty's Mint have uniformly directed, that all Gold used for Coin, should consist of 11oz. of pure Gold and 1oz.. of Alloy in each pound Troy; and that the said pound Troy should be divided and coined into 44 Guineas and one Half-Guinea, or into other Coins in that proportion.
- 4. "That by a Proclamation of the 4th year of the reign of King George the First, it was ordered and directed, that Guineas; and the several other Gold Coins therein named, should be current at the Rates and; Values then set upon them; viz. the Guinea at the rate of 21 Shillings, and other Gold Coins in the same proportion thereby establishing, that the Gold and, Silver Coins of the Realm should be, a legal tender in all Money Payments, and a Standard Measure for ascertaining the value of all contracts for the payment of Money, in the relative proportion of 2859/13640 Pounds weight of Sterling Silver to one Pound of Sterling Gold.
- 5. "That by a statute of the 14th year of the reign of his present majesty sub-
831 sequently revived and made perpetual by a Statute of the 39th year of his reign, it is Enacted, That no Tender in payment of Money made in the Silver Coin of this Realm, of any sum exceeding the sum of 25l at any one time, shall be reputed in law, or allowed to be legal tender, within Great Britain or Ireland, for more than, according to its value by weight, after the rate of 5s. 2d. for each Ounce of Silver.
- 6. "That by a Proclamation of the 16th year of the reign of his present Majesty, confirmed by several subsequent Proclamations, it was ordered and directed, that if the weight of any Guinea shall be less than 5dwts 8grs. such Guinea shall cease to be a legal tender for the payment of any money within Great Britain or Ireland; and so in the same proportion for any other Gold Coin.
- 7. "That under these laws (which constitute the established policy of this Realm in regard to Money) no contract or undertaking for the payment of Money, stipulated to be paid in Pounds Sterling, or in good and lawful Money of Great Britain, can be legally satisfied and discharged in Gold Coin, unless the Coin tendered shall weigh in the proportion of 20/21 parts of 5dwts. 8grs. Standard Gold for each Pound Sterling, specified in the said contract; nor in Silver Coin, for a sum exceeding 251. unless such Coin shall Weigh in the proportion of 20/62 of a Pound Troy of Standard Silver for each Pound Sterling specified in the contract.
- 8. "That the Promissory Notes of the Bank of England are stipulations to pay, on demand, the Sum in Pounds Sterling respectively specified in each of the said Notes.
- 9. "That when it was enacted by the authority of Parliament, that the payment Of the Promissory Notes of the Bank of England in Cash should for a time be suspended, it was not the intention of Parliament that any alteration whatsoever should take place in the Value of such Promissory Notes.
- 10. "That it appears, that the actual Value of the Promissory Notes of the Bank England, (measuring such Value by weight of Standard Gold and Silver as aforesaid,) has been, for a considerable period of time, and still is, considerably less than what is established by the laws of the Realm to be the legal Tender in
832 payment of any money contract or stipulation.
- 11." That the Fall which has thus taken place in the Value of the Promissory Notes of the Bank of England, and in that of the Country Bank Paper which is exchangeable for it, has been occasioned by too abundant Issue of Paper Currency, both by the Bank of England, and by the Country Banks; and that this Excess has originated, from the want of that Check and Controul on the Issues of the Bank of England, which existed before the Suspension of Cash Payments.
- 12. "That it appears, that the Exchanges with Foreign Parts have for a considerable period of time been unfavourable to this Country, in an extraordinary degree.
- 13. "That, although the adverse circumstances of our Trade, together with the large amount of our Military Expenditure Abroad, may have contributed to render our Exchanges with the Continent of Europe unfavourable; yet the extraordinary degree, in which the Exchanges have been depressed for so long a period, has been, in a great measure, occasioned by the depreciation which has taken place in the relative Value of the Currency of this Country, as compared with the Money of Foreign Countries.
- 14." That during the continuance of the suspension of Cash Payments, it is the duty of the Directors of the Bank of England to advert to the state of the Foreign Exchanges, as well as to the price of Bullion, with a view to regulate the amount of their Issues.
- 15." That the only certain and adequate security to be provided, against an Excess of Paper Currency, and for maintaining the relative Value of the Circulating Medium of the Realm, is the legal Convertibility, upon demand, of all Paper Currency into lawful Coin of the Realm.
- 16. "That in order to revert gradully to this security, and to enforce meanwhile a due Limitation of the Paper of the Bank of England, as well as of all the other Bank Paper of the Country, it is expedient to amend the Act which suspends the Cash Payments of the Bank, by altering the time, till which the Suspension shall continue, from Six Months after the Ratification of a Definitive Treaty of Peace, to that of Two Years from the present Time."
spoke as follows*:
The state of my health, as well as anxiety to avoid wasting the time of the Committee, will induce me to obtrude myself on their patience no longer than shall be indispensably necessary from the magnitude of the subject, and the detail into which the statements in the Report under our consideration will unavoidably lead me. Before entering, however, on these, I must make some observations on What has fallen from the learned member who has just sat down. In a speech remarkable for its eloquence and display of talent, he has relied more on his own views of the subject than on the Report of the Committee of which he was an active and distinguished member; aware, probably, how open that Report is to solid and un answerable objections, and how contrary the opinions expressed in it are to almost the whole of the evidence in the Appendix.
I have a confident persuasion that, if my strength shall not fail me, I shall be able to shew to the Committee not only that there has been no depreciation of Bank paper from excessive issue, but that there are more errors and mis-statements in that Report than in any that was ever made to a House of Parliament. I feel confident also of shewing that if the recommendation contained in that Report were enforced by a law, a compliance with it on the part of the Bank would be utterly impracticable; and that if contrary to my conviction, it were practicable, and should be adopted by the Bank, not the slightest advantage would accrue to the public.
The learned gentleman, in the opening of his speech, stated that there were two descriptions of persons with whom he did pot agree; the one, those who are of opinion that the circulation of paper alone is perfectly sufficient for the use of the country, and that there need be none of the precious metals; the other, those who maintain that there should be nothing in circulation except the precious metals. I certainly concur with the learned gentleman in differing from both those descriptions of persons. My opinion has invariably been, that although it is extremely desirable that a considerable proportion of the circulation should consist of the precious metals, yet that in the case of their unavoidable absence, the deficiency may* From the original Edition printed for Cadell and Davies, At D.1811834 be supplied by the circulation of paper without any serious inconvenience to the, commerce of the country. I am, moreover, convinced that the issue of Bank', of England paper can have, no possible effect on the price of gold or on foreign exchanges; which will be proved from the experience of nearly a century.
The hon. gentleman next expatiated on the advantages derived to this country from the institution of the Bank of England—a point on which, I presume, we are all agreed; though very different sentiments will be entertained in regard to the observation which he added; namely, that unless the Bank should regulate its future conduct in the manner recommended in the Report of the Committee, it would very soon cease to contribute to the national prosperity. He dwelt much on Bank notes not being equivalent to money; but I maintain that they are so, for every common and legitimate transaction in life, except for foreign remittances; and even for these, the access to Bank discounts afford great facilities, enabling the merchant to make provision for heavy payments for exports, and to await a sale for imports, for which, from various causes, there may be no immediate demand.
The learned member proceeded to advert to the rapid advance in the price of our commodities as attributable to an excess of Bank paper. That they have risen, and rapidly, is beyond dispute; but has there been no rise of commodities on the continent, even in those countries where specie alone is in circulation? I am disposed to think that the great and sudden increase in the price of corn here has been the cause of the advance in other articles; and the rise of that great necessary of life, I attribute, in a considerable degree at least, to the advance of importation prices by the acts of the legislature: an advance has taken place between, 1791 and 1804 of no less than 35 ½ per cent. on the prices previous to the former of these years. The increased price of corn has of course enabled the landed proprietors to advance their rents; but it may be fairly questioned whether these gentlemen have not suffered more by the consequent enhancement of other articles, indispensable to their own consumption, than they have profited by the augmentation of their rents.
The hon. gentleman complains of the large importation of corn lately as a great evil, and threatens inquiry respecting it 835 which inquiry I am ready to meet whenever it shall be instituted; as the evil, if it has been one, is in some degree attributable to me; the noble lord, who is president of the Board of Trade, having, when the measure was taken, held the seals of the Foreign office. My defence will be short, but, I hope, satisfactory:—had the importation not been permitted, the distress for bread would have been extreme. With the aid of two millions of quarters of foreign corn, the quartern loaf was at fifteen pence, and without such aid it would probably have been at half a crown. The consequences which must arise from paying foreigners for so large a quantity of corn as would probably be imported were too obvious not to have been foreseen; but in such a dilemma there was no hesitation between submitting to the inconveniencies of the nature apprehended, and to the want of bread to the necessitous part of our population.
The next topic adverted to was the state of our trade, from which it is said there is no prospect of our being able to have the course of exchange in our favour, the balance being so much against us; for the learned gentleman makes our exports only 33, and our imports 45 millions. No assertion can be more erroneous, and, for its refutation, I need only refer him to the documents in the Appendix to his own Report. But if reference be had to other papers before the House, it will be seen that our exports have for many years greatly exceeded our imports. I admit, however, that no clear inference can be drawn from the state of our exports and imports alone, even at their real value, at any time, for reasons I shall enter upon particularly hereafter; least of all can we place any reliance on the apparently favourable balance of 1810, because for some of our exports in that year no payment has been, and probably never will be made—I mean such as have been confiscated or destroyed; while another part, saved from confiscation, has been redeemed at a heavy expence.
To the charge of my having come down to this House with statements of our trade which have afterwards turned out to be incorrect, my answer is, that I never made a statement except from actual accounts; and that I never presumed to undertake that bur trade should continue in so flourishing a condition as we had experienced.
I shall conclude this part of the subject by observing, that the hon. member has 836 alledged, that he has the authority of the great capitalists of the metropolis for his assertion, that the present relative value of bullion and of paper is owing to the excessive issue of bank-notes. This, if it were true, could not be opposed to undeviating experience; but it will be seen, that all the witnesses selected by the Committtee as most eminent for character, intelligence, and fortune, were, with the exception of two, of an directly contrary opinion: one of these, however, though a most respectable man, has more of Continental than of British interests; the other, sir Francis Baring, is entitled to all possible respect; I shall, therefore, enter fully into the consideration of his evidence in a subsequent part of what I have to offer.
I proceed now to enter on an examination of the Report; in doing which, I must rely more on the indulgence of the Committee than I have ever had occasion to do in the course of my parliamentary life. The magnitude of the subject can alone make me hope to obtain their attention throughout the series of observations which I feel myself called on to make.
I am the more anxious to obtain it, because the hon. member has hardly referred to the Report, though it is upon that, and not on his speech, however eloquent, that we are called to decide.
It will be seen in the 2d page* of the Report, that the Committee, after dwelling on the high price of gold, make the following observation:
" So extraordinary a rise in the market price of gold in this country, coupled with so remarkable a depression of our exchanges with the Continent, very early, in the judgment of your Committee, pointed to something in the state of our own domestic currency as the cause of both appearances. But before they adopted that conclusion, which seemed agreeable to all former reasonings and experience, they thought it proper to enquire more particularly into the circumstances connected with each of those two facts; and to hear from persons of commercial practice and detail, what explanations they had to offer of so unusual a state of things."
In regard to the "reasonings" alluded to by the Committee, I cannot know on what authority they rely; but I am sure from facts which I shall adduce, that "experience" at least is most decidedly against them. Gentlemen are often apt* See Vol. 17, App. p. cciv.837 to set out with a firm assurance that their own side of a question is the right one; and having once taken up an opinion, they collect and lay hold of whatever, favours it, while under the influence of that pre-conceived opinion they exclude every thing of a contrary tendency. Almost all writers on the intricate subject of the theory of money and exchange have differed widely from each other, and some of them from themselves; This is the case with no less considerable a man than Mr. Hume, whose views of policy, and knowledge of the human mind are so distinguished, and who has attained even, in the department of political economy, the praise of discovery. He was ambitious of establishing a new theory, and accordingly, in one place he considers an increase of circulating medium an evil, because it raises the prices of commodities, on which ground he disapproves of Banks in general; while in another place he approves of one at Edinburgh, because it was a land-bank, which is undoubtedly the worst of any. At one time he says that an abundance of money is injurious to trade; at another, that it is a stimulus to industry: at one time he deprecates the increase of currency; at another he recommends the debasement, and consequent depreciation, of our coin to the extent of a penny in the shilling. Almost every writer since has taken a separate line, agreeing only that formerly received opinions were mistaken. Adam Smith, the highest of authorities in political economy, is doubtful whether an unfavourable exchange leads to the export of money. Lord King and Mr. Blake, men of distinguished ability, and Mr. Henry Thornton with the advantage of experience added to a cultivated understanding, are favourable to the resumption of cash payments by the Bank. Mr. Wheatly, supporting the same opinion, finds occasion to differ in other respects from all those writers, (except Mr. Blake, who published after him,) as well as from Locke, Davenant, and lord Liverpool. Under such circumstances as these, it would be inexcusable in me to enter into a contest on the theory of money in this House; and it would be the more unpardonable, because the truth or fallacy of such theories do not, in my opinion, affect the present question. I am desirous of trying the positions of the Bullion Committee by the test of experience, to which they refer in general terms only. As the Committee have alleged that the 838 extraordinary rise in the market-price of gold here, coupled with a remarkable depression in our exchange with the continent, points to something in the state of our domestic currency as the cause of both appearances, let us go back to the earliest period of the accounts before us; and put in the shape of a table the amount of Bank-notes in circulation, the price of gold, and the rate of exchange with Hamburgh, in order to discover how far the progressive increase of the first has had an influence on the other two.
|Bank in Circulation.||Market Price of Cold.||Exchange with Hamburgh|
In arithmetical statements of such complexity as this, it is difficult to follow the member who reads them, but the one I have now made can be given to the learned gentleman, if he shall desire to compare it with the accounts on the table. The Committee will perceive from it, that in January 1805 the issue of Bank of England paper was 17,849,000l., and the price of gold the same as in the year 1710, when the issue of the paper was certainly under 2,000,000l. and that the rate of exchange was infinitely more favourable to this country in the latter year than in the earliest of which we have any account. It will be seen, indeed, that the amount of Bank Notes in circulation produced no effect whatever, either on the price of gold, or on the foreign exchange, during the whole period. In July 1809, when, the issue of bank paper was 18,813,000l., the course of exchange was 28–6, yet in October 1810, when the issue of bank
* These prices were furnished from the best source that could be found. In the month of December Mr. Merle sold gold for 4l. 2s. 6d. when Bank Notes had increased to 25,015,000l.
§ paper had increased to 24,833,000l., the exchange, instead of falling, rose to 316; and it is very remarkable, that between 1793 and 1796, though the price of gold remained steadily below the mint price at 3l. 17s. 6d. an ounce, and the amount of bank paper underwent a diminution, the exchange fell from 37–2 to 32–7. In which three years a gold coinage took place to the extent of above four millions from foreign gold.
§ This summary of facts alone appears most completely to contradict the "experience" on which the Bullion Committee profess to rely, in support of their opinion, that increase of bank paper has raised the price of gold, and lowered the exchange. In truth, during the whole period, since the termination of the American war, the course of exchange with the continent was uniformly favourable to England, until the middle of the year 1795, when the remittances to Austria, through Mr. Boyd, depressed it during the remainder of that year, and the early part of the next. It then rose very considerably above par, and continued so until September 1799, when a renewal of subsidies, and an immense importation of corn, (the latter amounting in the course of two years, to the extraordinary sum of nineteen millions) kept it under par till October 1802. It then rose above par, and continued so, except in one month, until November 1805, when the Austrian and Russian subsidies again threw it down for a short time. In February 1806, it again rose above par, and remained so till October 1808. And let me press upon the attention of the "Committee, that during the period from 1784 to 1808, the amount of bank notes was increased from 6,391,000l. to 17,218,000l. without any correspondent effect on the exchange, or price of bullion. If we advert to particular periods, we find that in July 1793, the amount of bank notes was 12,713,000l. the exchange 37–2, the price of gold 3l. 17s. 6d. an ounce, while in January 1790, with a reduction of bank paper to 10,632,000l., and gold at the same price of 3l. 17s. 6d. an ounce, with a large gold coinage, the exchange fell greatly.
§ The result of this appeal to experience therefore is, that till October 1808, no unusual effect was produced on the price of gold, or on our foreign exchange; and even since that time we have seen the price of gold fall somewhat, and the exchange rise considerably, under a rapid 840 increase of Bank issues. But there are other reasons, of no doubtful character, for the rise in the precious metals, and the fall of exchange, since the autumn of 1808. It was in the summer of that year that the measures of the French ruler began to produce the effect of creating great delays in remittances from the continent for our exports. The notoriety of these measures and of their consequences renders it superfluous for me to enter into any detail of them. I speak in the hearing of intelligent merchants, who know the extraordinary situation in which our export trade to the different parts of the continent was placed for some time before the last violences of our implacable enemy, his confiscations and his burnings, were resorted to. These are evils peculiar to the present time, and to which the history of the world offers no parallel. The commerce of Europe is paralyzed, and the inhabitants of the whole continent are driven to despair, to gratify the malignant passions of one man, whose conduct, while it is mischievous for a season to this country, is ruinous to that which he governs.
§ Other circumstances of a new and extraordinary nature have greatly contributed to counteract a favourable balance of our exports. During last year more than seven millions sterling were paid by us for foreign corn, and not less than five millions and a half for foreign freights, from the impracticability of employing British shipping to the ports in the north of Europe. In addition to these heavy outgoings, we cannot compute our foreign expenditure in the different branches of the public service during the last year at less than 11,300,000l. The naval pay drawn, and dividends in the funds remitted to foreigners, form at least an additional million; and on summing the whole to get her we find a total sent out of the country, unconnected with its ordinary course of trade, of 24,800,000l.! Neither must we lose sight of the effect produced by the excessive export of our manufactures to the Portuguese settlements in America, on the first opening of the inter course, which has for a time considerably lessened the demand from Brazil. There are, however, still other causes which have affected our exchanges, as will be shewn before I sit down.
§ In asserting that there exists no actual scarcity of gold, the Committee appear to have fallen into a singular error. They 841 say that the evidence laid before them has led them to entertain much doubt of the alleged fact that a scarcity of bullion has been recently experienced in this country. Referring, in support of this, to the evidence of Mr. Merle, they observe, that "a very extensive borne dealer acknowledged that he found no difficulty in getting any quantity he wanted, if he was willing to pay the price for it." The passage on which the Committee formed this conclusion is as follows:
§ Question to Mr. Merle. "You have Stated that the price of gold at home has not lately been equal to the demand you had; have you at any time found any difficulty in providing yourself with any quantity of gold which you wanted in order to sell for home consumption, if you were willing to give the price of foreign gold?—No, I should have found no difficulty; but then I should lose a great deal of money if I was to sell it for home consumption at the price of English gold: we have been obliged to raise the price five shillings an ounce as it is.
§ "Q. Is the Committee to understand it is the high price, and not any defect in quantity, which has caused the supply not to be equal to the demand?—Certainty; for the supply of foreign gold would be more than equal to the supply here.
§ "Q. There is always gold in the market?—Yes, if you will pay the price for it."
§ But the Committee, in their haste to arrive at the inference that there was no scarcity of gold, have overlooked the important consideration that Mr. Merle's evidence applies to the home demand only. This he has since confirmed to me personally; and, it is besides expressed both in the first part of the question and in the following, which is also a part of his evidence:
§ "Q. Do you find it more difficult to get the supply of that required for the home trade than you used to do?—Certainly; we have been obliged to stand still sometimes.
§ "Q What have yon done to relieve yourself?—We have been obliged to wait till we could get it."
§ The next point to be ascertained is the proportion which the home manufacture bears to the general demand. Mr. Merle's evidence does not indeed afford a solution to this question; but we are enabled to attain it from an authority of equal re- 842 spectability, that of Mr. Aaron Asher Goldsmid. He is asked,
§ "Q. Can you state at all what proportion of the gold you sell may be for home consumption?—I cannot.
§ "Q. Is it less than a 10th?—It is less than a 20th; but I cannot state precisely the amount."
In facther support of this reasoning relative to the price of gold, the Committee slate, that "the price of all commodities has risen, and gold appears to have risen in its price only in common with them." Here again the most positive evidence is in contradiction to the assertion of the Committee. So far from following the progressive rise of other commodities, gold was lower in 1799, two years after the Restriction Bill, than it had been in 1710; although in that period the price of other articles had increased more than* two-fold. But confining ourselves to the interval only since the Bank restriction, we find the price of other commodities advancing yearly, while in gold there was no considerable rise till the year 1809. Let it not however be imagined that a rise in the articles of life has been confined to this kingdom alone. A most attentive inquiry has satisfied me that the expence of living has gone on in a ratio of increase, throughout various parts of the continent, as well where the precious metals have been the sole circulation, as where paper has been abundant; and all this without any connection with the price of gold. In France, where no paper circulates except in the capital, and there only a very limited amount, we have the following evidence to that effect. In a Report to the Agricultural Society at Paris in 1805, M. Silvestre observes, that, "in most of the departments
* Extract from a Table in the Philosophical Transactions for 1798, of the price of articles, with the depreciation of the value of money; the mean appreciation deduced by interpolation; constructed by sir George Shuckburgh.
§ Wheat was in the year 1797 only 7s 10d. a bushel, when the table was constructed.843
§ partments the price of labour is increased since 1789 by one-third at least, and in some by one-half; in a few it is doubled; and this rise is more general with respect to workmen than to servants at yearly wages. The society has ascertained, that all the instruments of cultivation are raised in price in a proportion nearly similar; that building materials have risen also from a third to a fourth; beasts of labour about one-half, and all the articles requisite for the maintenance of a farmer's family in the same proportion." In a speech of Monsieur Daru to the legislative body in January 1810, he observed that the revenue which was appointed for the support of Lewis the 16th in 1791, and continued to Napoleon, was no doubt very considerable; but if attention be paid to the difference between the real value of money at that time and at present, it will not be thought an extravagant assertion, that the same income does not now represent more than two-thirds of what it did then.
§ Having shewn, I hope satisfactorily, that the increased price of articles in this country has not been occasioned by an excessive issue of paper, I come next to the position of the Committee that "the whole cause of the depression of the value of the gold coin of this country, in exchange for Commodities, which has occasionally arisen or could arise at those times when the Bank paid in specie, and gold was consequently obtainable in the quantity that was desired, has been constituted by two circumstances; first, by the coin after it had become current, being gradually diminished in weight by use, and producing therefore, if melted, a less quantity of bullion; and secondly, by the difficulty under which the holders of coin have been placed when they wished to convert it into bullion." To which obsevations Mr. Locke and lord Liverpool furnish me with a better answer than I could give myself:
§ "Whether silver in our coin will not always, during the prohibition of its exportation, be a little less worth than silver in bullion, whilst the consumption of foreign commodities beyond what our's pay for, makes the exportation of silver necessary; and so during such a state, raise your money as much and as often as you will, silver in coin will never fetch as much as silver in bullion."—Locke in one of his Questions to Lowndes.
§ "Whenever bullion is wanted for ex- 844 portation, it will always be at a small advanced price above that of the Mint; and whenever the demand is very great, the price will be still higher; and it is probable that the value of the coin would in such case rise in a like proportion, if that value was not limited by public authority."—Lord Liverpool.
§ The error into which the Committee fell in representing gold as the only legal lender in large payments, having been corrected by the learned gentleman in the resolutions which he has moved, I shall forbear to make any observations on it, farther than to remark, that it is difficult to conceive how, with the statute of the 14th* of the King before them, they should have fallen into the mistake.
§ The Committee conclude the first part of their Report, with stating that
§ "In this manner, a general rise of all prices, a rise in the market-price of gold, and a fall of the foreign exchanges, will be the effect of an excessive quantity of circulating medium in a country which has adopted a currency, not exportable to other countries, or not convertible at will into a coin which is exportable."
§ This observation, in the absolute shape in which it now stands, may be said to apply to our currency in every time of its history. It may be said to apply, not only to notes, but to guineas, since we never had a currency exportable to other countries. According to this principle an excess of gold and silver would be productive of as much mischief as paper; a conclusion on which I shall merely remark, that it ought to caution us against the indefinite language of the Committee, and the length to which they permit themselves to be carried by the influence of theory.
We have now arrived at the second division of the Bullion Report; namely, that which treats of the depreciated state of the exchange. The Committee rely, in the first instance, on the authority of Sir Francis Baring and the continental merchant. They observe that the former stated "the two great circumstances which affect the exchange in its present unfavourable state to be the restriction upon trade with the continent, and the increased circulation of this country in paper, as productive of the scarcity of bullion." The words of the baronet, extracted literally from his evidence, are as follow:
* Continued and made perpetual by subsequent statutes.
§ "During the seven years war, there were no restrictions upon trade, the same operations to perform on the continent, of remitting money from hence to pay the increased quantity of naval and military stores, and yet in no one instance was there a want of Bullion. The same was the, case during the American war; through the whole of it there was no want of Bullion. And therefore I think that if we could continue our payments in specie, as heretofore, and there had been no restriction upon trade, the course of exchange would not be unfavourable to the country: I therefore consider the two great circumstances which affect the exchange to be the restrictions upon trade and the increased circulation of the country in paper as productive of the scarcity of Bullion."
§ However high the character of this witness most deservedly stands, the authority of his opinion must be affected if it can be shewn to have been founded on a misconception of facts. Few persons can know better than myself the respect due to the memory of sir Francis Baring; no man, I believe, ever acquired a large fortune in trade with a more unblemished reputation; and the extent of his mercantile knowledge was not inferior to his integrity. My opinion is founded not only on the concurrent sense of those who knew him, but on my personal knowledge of his conduct when he was employed by lord Shelburne to transact all the mercantile business of the Board of Treasury in 1782 and 1783. A frequent and almost daily intercourse with him during that time gave me an opportunity of ascertaining that such a trust could not have been placed in better hands, so long as it should remain committed to an individual; in such hands, indeed, the public interest was as safe as it could be under any arrangement. And it is but justice to the noble lord who employed him to say, that in every instance, as far as I was acquainted with his lordship's views, they were prompted by the most laudable feelings for the public welfare. It is, therefore, with the fullest impression on my mind of the purity of sir Francis Baring's intentions, that I proceed to explain the misconceptions under which he laboured. The statement that there was no want of Bullion in any one instance during the seven years war could not have been from his own knowledge; and we have evidence before us that in 1761, 1762 and 1763, gold rose to 4l., 4l. 0s. 6d.846
§ and 4l. 1s. 6d. although for a long time before 1760 it had not been higher than 3l. 18s. 6d. And if his memory had been as good at the close of his valuable life as in an earlier period, he would have recollected the unexampled drain of specie in 1782, and that at his own pressing instance with lord Shelburne, as well as on the urgent solicitations of the Bank, the most peremptory orders were sent to the Commissioners of the Customs to prevent the coin from being sent out of the country. If my letter conveying these directions in 1782 was not written at his instance, it could not have been written without his knowledge; that, and another to the same effect from a right hon. gent. who succeeded me, are now on the table. Indeed the Committee themselves quote the evidence given by Mr. Bosanquet before the Committee of Secrecy of the House of Lords, to prove the drain of cash in the Bank in 1783; and refer also to that drain in the same year in a question put by them. If, therefore, there existed a fundamental error in regard to the facts on which sir Francis stated his opinion to be grounded, his authority, otherwise so highly respectable, cannot be relied on in this instance.
§ His examination respecting an increased circulating medium is worthy of attention; in the course of it will be found the following questions and answers:
§ "Q. You conceive an excess of paper circulation may be guarded against in this country, if the Bank conducted itself, under the restriction, upon the same principles which governed their issues when they were compelled to pay in cash; what do you conceive is the principle by which the Bank should now regulate its issues, as well as the best criterion by which to judge of an excess, and the best corrective of that evil?—A. Before the restriction, the experience of above a century proves that the administration of the affairs of the Bank has been wise and correct; the public have been satisfied; the country has flourished; and, I am persuaded that the Bank of England has proved a most important invaluable instrument in promoting public prosperity, This experience points out the only principle on which the public can rely with confidence, namely to return again to payments in specie, whenever it shall, be in the power of the Bank to do so."
§ "Q. Have not the improved methods of carrying on dealings in money contributed very much to render a smaller 847 quantity of circulating medium sufficient for the commerce of the country, than when specie formed a considerable part of it?—A. I have not sufficient practical knowledge to enable me to judge. The want of specie may produce a reduction, unless increased by other means. There are likewise causes which I do not thoroughly understand, and which may render a smaller quantity of circulating medium sufficient; but I doubt whether the last can prove an object worthy of attention."
§ "Q. Supposing the excess of the circulation of paper to be in a degree such as to increase the price of commodities, would that increase of price produce any effect upon the foreign exchange, until it arrive to the degree so as to check the exportation of merchandize?—A. An excess of paper circulation will, no doubt, affect and raise the price of the whole of the productive labour and industry of the country. The proportion that is exported will participate to the extent of its value; and as the necessary consequence of high prices is a reduction on the demand, it must operate decisively on the foreign exchange, unless they are supported, or the fall counteracted, by an export of bullion. But, until the demand or exportation is checked, an increase of price will produce a beneficial effect on the foreign exchange."
§ "Q. Is it your opinion that the increased capital of the country, whether consisting of that which is commercial and trading, or whether consisting of that which is agricultural, and belonging to the public revenue, does not require a proportionate increase of the circulation of paper or specie?—A. If the public revenue, or trade, required 1,000l. to be remitted to London formerly, and that 2,000l. is required at present, there must be an addition of 1,000l. in paper," &c. &c. In the remainder of this answer, however, he says he thinks 11,000l. is far more than sufficient.
§ The examination of Sir Francis is closed by his saying, "I consider the opinion entertained by some persons, that the Bank-ought to regulate their issues by the public demand, as dangerous in the extreme, because I know, by experience, that the demand for speculation can only be limited by a want of means, and I think the Bank would not be disposed to extend their issue beyond three-fourths of the present amount, if the restriction was removed;" but he adds, "It may prove dangerous to impose any positive restraint on the Bank, 848 by law or otherwise; for cases may and wilt arise when an excess will be proper, and that it would be culpable to withhold it. But if the House shall be disposed to entertain an opinion, and will pronounce it distinctly, I think the Bank may be left with full power to act under their responsibility."
§ On this evidence I shall have some observations to make hereafter. But, in the first place, I shall proceed to comment on some extraordinary mistakes into which the Committee have fallen, which I shall take in their order. They state that, "
§ It appears to your Committee to have been long settled and understood, as a principle, that the difference of exchange, resulting from the state of trade, and payments between two countries, is limited by the expence of conveying and insuring the precious metals from one country to the other; at least, that it cannot for any considerable length of time exceed that limit. The real difference of exchange, resulting from the state of trade and payments, never can fall lower than the amount of such expence of carriage, including the insurance. The truth of this position is so plain, and it is so uniformly agreed to by all the practical authorities, both commercial and political, that your Committee will assume it as indispensable."
§ I read this passage with no common degree of surprise, assured that the truth of the case was indisputably different from this representation, as had been proved by experience, and in the plainest and strongest manner by the existing state of things. Not chusing, however, to rely entirely on calculations of my own, I obtained from most respectable sources of information in the city the two following Statements, to show how much the difference of exchange does now actually exceed the expence of conveying and insuring the precious metals from one country to another.
§ No. 1.
§ SILVER—1,000 dollars = 866 oz., worth in London at the price of 5s. 11d. an oz. 256l. 3s. 10d. sterling, will produce in Paris, at the rate of 5 livres 7 sols per dollar, 5,275 livres Tournois; the amount of which being vested in bills in London, at the present exchange of 17 livres per
|Pound sterling, will give||£310||6||0|
|Deduct cost as above||256||3||10|
§ or 21 per cent.
§ If from this profit of 21 per cent. we deduct 3½ per cent. for commission, freight, and shipping charges, with 1½per cent. for insurance against the risk of sea and fire, which are the only hazards, there being licences from both countries, making in the whole 5 per cent., there will remain a clear profit of 16 per cent.
§ GOLD—100 oz. English standard, at 94l. cost in London 470l. sterling, equal at Paris to 91 oz. pure gold, at 105 franks per oz. amount to 9,673 livres Tournois. This sum invested, as in the former case, in bills on London at 17 livres per pound sterling, will yield
|Deduct the cost||470||0||0|
§ making a profit of 21 per cent. Deduct the charges, which are nearly the same as on the dollars 5
§ Clear profit 16 per cent.
§ No. 2.
§ The price of dollars being at Hamburgh 28 per mark fine, and the price here 5s. 11d. per oz., these rates are equal to an exchange of 30. 2; deducting the charges which are nearly as follows:
|Insurance||4 per cent.|
|Expencesto Yar mouth||½|
|Expences to Cux haven||1||Exchange produced|
|7⅛ equal to 2||2||0||0|
§ But the present exchange being so low as 24, there is consequently a profit of 4 sch. on every 24 or about 16½ per cent. by sending the dollars to Hamburgh, and having the returns made by a bill of exchange.
§ Gold being in Hamburgh 101, and in England 94 per ounce, the same quantity of gold which will produce in Hamburgh,
|will cost here at the present exchange only||42||0|
|Deduct the charges||7|
§ The charges may vary one or two per cent. according to the particular facilities which the exporter has in sending his gold to the continent, but there can be no question of the fact, that a very considerable profit must result from the transactions above-mentioned.
§ The next mistake into which the Committee have fallen, on the subject of exchange, is not less extraordinary, because it arises out of papers before them, and out of an examination taken by themselves. In treating of the balance of our trade for the year 1809, they observe:
§ "Your Committee are disposed to think, from the result of the whole evidence, contradictory as it is, that the circumstances of the trade of this country, in the course of the last year, were such as to occasion a real fall of our exchanges with the continent, to a certain extent; and perhaps at one period almost as low as the limit fixed by the expence of remitting gold from hence to the respective markets. And your Committee is inclined to this opinion, both by what is stated in regard to the excess of imports from the continent above the exports, though that is the part of the subject which is left most in doubt," &c. &c.
§ The Committee, when they thus expressed themselves, could not surely have adverted to the Accounts presented by Mr. Irving, by which it appears that
|Our Imports from the Continent were in 1809||£19,821,000|
|Our Exports to the Continent that year||27,190,000|
|Our Total Imports in 1809||*51,133,000|
|Our Total Exports||66,017,000|
In considering these accounts, even of the real value, it should be recollected, that in the estimate of imports, the mercantile profits and freights (British as well as foreign) are included; whereas in the exports nothing is included for either of these large charges. It was not till Mr. Pitt
* This sum is what remains of the real value of imports, after deducting the produce of the fisheries, and making allowances for the remittances from the East and West Indies.
§ Pitt came into office that an attempt was made to ascertain the true state of our exports and imports; till then the only rule by which a judgment could, be formed was the table of official values constructed nearly a century back. This source of information could assist in forming a comparison of the increase or decrease of quantities only, without any accurate indication of value. The following extract from the Appendix to the Report of the Bullion Committee will show not only how the value of our imports and exports has altered, since the Table was made by Davenant, but in what different proportions that alteration has taken place.
|In 1809. the Official Value of Imports was||£ 9,551,000|
|Real value||* 19,821,000|
|Official Value of Exports||23,722,000|
§ The Committee, I am inclined to believe, could not, on this part of the subject, have adverted to the information given them by the Inspector General so early as the 16th of April, for it is otherwise difficult to conceive how such observations as the following could escape them:
§ "Your Committee, however, place little confidence in deductions made even from the improved document which the industry and intelligence of the Inspector General has enabled him to furnish. It is defective, as Mr. Irving has himself stated, inasmuch as it supplies no account of the sum drawn by foreigners, (which is at the present period peculiarly large,) on account of freight due to them for the employment of their shipping; nor, on the other hand, of the sum receivable from them (and forming an addition to the value of our exported articles) on account of freight arising from the employment of British shipping."
§ Compare this with the evidence which Mr. Irving gave, on delivering in an account shewing the total balance of trade in favour of, or against, Great Britain, in her commerce with all parts of the world, during the last five years.
"Q. In what manner have you calculated the actual value of imports into this country in the paper you have now delivered in?—A. I consider the account
* This is, however, infinitely beyond the usual proportion; owing to the very high freights to foreigners inwards.
† The disproportion in these is much greater usually.
§ objectionable in some respects. The values are calculated at the prices in this market; of course the imports include the mercantile profits and the freights inwards; the exports are exclusive of the freights outwards; consequently the actual balance in favour of Great Britain will be much more considerable than appears upon the face of the account. The correct principle would be, to estimate the imports at the first cost of the goods in the foreign country, adding thereto, the freights in foreign vessels; and the exports according to the real value at the port of exportation, adding the freights in British vessels, as so much additional value on the goods, to be paid for by the foreign consumers. I have no means of ascertaining those particulars.*"
§ Before quitting the subject of our foreign trade, I must take notice of another erroneous position of the Committee, which I am the more desirous of doing, as it is one which has been very generally countenanced. I allude to the opinion, that our exports are considerably increased by a large foreign expenditure. A plain refutation of which, from recent experience, was before the Committee at the very time when they alleged that, "a favourable balance of trade on the face of the account of exports and imports, presented annually to parliament, is a very probable consequence of large drafts on government for foreign expenditure, an augmentation of exports, and a diminution of imports, being promoted and even enforced by the means of such drafts."
§ The refutation to which I allude will be found in the page preceding the one from which this passage is extracted. From the documents there it will appear that the highest foreign expenditure referred to in that report was, in 1795 and 1796, in which two years it amounted to 21,689,000l.
If we refer to a year of peace as a season for ascertaining the proportion which our exports bear to our imports, when not affected by extraordinary expence abroad, we find that in 1792, the most flourishing year of peace, our imports amounted to
* The accounts of the real value of exports and imports are still more defective than here stated, inasmuch as the produce of all our fisheries, and the whole of the remittances of British property in the East and West Indies are included in the amount of imports; the balance thus becoming less favourable than it would otherwise be.
19,659,000l.; our exports to 24,905,000l.
§ The average of our imports, 1795 and 1796, was 22,961,000l. which according to the proportion of 1792, should have raised our exports to the amount of 29,100,000l., while in fact they did not exceed 26,431,000l.
§ If we take a comprehensive survey of the whole of the present war, in the eight years from 1803 to 1810 inclusive, we shall find the average of imports to have been £31,194,131 And the average of exports 37,752,399 The latter, instead of exceeding the proportion of peace, as the report would lead us to imagine, falls short of the ratio of the year 1792, which would have given, at the proportional amount of exports during these eight years, the sum of 38,822,000l.
§ The Committee however add, that "they have enlarged on the documents supplied by Mr. Irving for the sake of throwing further light on the general question of the balance of trade and the exchanges, and of dissipating some very prevalent errors which have great practical influence on the subject now under consideration!"
§ On the value of the light so thrown on the general question, I forbear to comment further, but as the Committee revert to their former position, "that the real exchanges against this country with the continent materially exceeded the limit fixed by the cost at that time of transporting specie;" I must say a few words, as they refer here to a respectable authority in the Appendix, in support of it, which, when attended to, is directly against them. They add, "that from what has been already stated, with respect to the par of exchange, it is manifest that the exchange between two countries is at its real par when a given quantity of gold or silver in the one country is convertible at the market price, into such an amount of the currency of that country, as will purchase a bill of exchange on the other country for such an amount of the currency of that other country as will there be convertible, at the market price, into an equal quantity of gold or silver of the same fineness." The authority on which they rely is that of Mr. Greffulhe, who states, "that the price of 105 fr. for gold at Paris, exchange at 20 livres, is equal to 4l. 19s. sterling for an English oz. of gold."
§ At the exchange of 21 livres, it will of course be equal to 4l. 14s., which being the marked price in London, would follow, 854 according to this rule of the Committee, that the real par of exchange between London and Paris is 21 livres; whereas from the value of currencies, it has been ascertained to be 25 livres, 10 sols.
§ The Committee conclude this second head of their report, by saying,
§ "From the foregoing reasonings relative to the state of the exchanges, if they are considered apart, your committee find it difficult to resist an inference, that a portion at least of the great fall which the exchanges lately suffered, must have resulted, not from the state of trade, but from a change in the relative value of our domestic currency. But when this deduction is joined with that which your committee have stated respecting the change in the market price of gold, that inference appears to be demonstrated." Of the value of this demonstration I trust I have enabled the House to form a correct judgment.
§ The fallacy of the market price of gold having been affected by the issue of paper, has been already incontrovertibly shewn by the experience of nearly the whole of the last century, as recorded in accounts on which we may safely rely. That the exchange should be affected by it is against all experience, as well as against the evidence annexed to the report. The continental merchant, whose testimony is so much relied on by the Committee, when he is asked,
§ "Do you consider our paper as depreciated from 10 to 13 per cent., in consequence of its non-convertibility into cash?—answers, As I value every thing by bullion, I conceive the paper currency of this country to be depreciated to the full extent of the 15 to 20 per cent., to which the exchange has fallen; or rather the difference in this country between the price of bullion and the rate by which the coin is issued from the mint."—But in a subsequent part of his evidence he adds, "When I stated it to be my opinion that paper was always depreciated, when not convertible into cash, it was only with regard to such issues on the continent. The causes I should assign for the very high rate of exchanges after the suspension took place in this country was, that during the commencement of the suspension of payment of cash at the bank, the public opinion here was exalted to that degree, that, for a considerable length of time, no traffic at home was carried on between bank paper and gold at an advanced rate: 855 the situation of trade between this country and the continent was particularly favourable, and the balance greatly in its favour, which not only tended to raise the exchange above par, but made it worth the foreigner's while to liquidate a great proportion of his debt by sending gold to this country, of which some millions sterling were imported; when circumstances changed, and a temporary balance existed against this country, and which could only be liquidated by allowing the re-exportation of bullion, this was withheld, and which must have tended to increase the effect both in reality and as matter of opinion. In fact, I only know of two means to liquidate an unfavourable balance of trade,—it is either by bullion or bankruptcy."
§ And when this gentleman was asked, to what he ascribed the present unfavourable course of exchange; It is answer was,
§ "The first great depreciation took place when the French got possession of the North of Germany, and passed severe penal decrees against a communication with this country, at the same time that a sequestration was laid upon all English goods and property, whilst the payments for English account were still to be made, and the reimbursements to be taken on this country; many more bills were in consequence to be sold than could be taken by persons requiring to make payments in England. The communication by letters being also very difficult and uncertain, middle-men were not to be found, as in usual times, to purchase and send such bilis to England for returns; whilst no suit at law could be instituted in the Courts of Justice there against any person who chose to resist payment of a returned bill, or to dispute the charges of re-exchange. Whilst those causes depressed the exchange, payments due to England only came round at distant periods. The exchange, once lowered by those circumstances, and bullion being withheld in England, to make up those occasional differences, the operations between this country and the continent have continued at a low rate, as it is only matter of opinion what rate a pound sterling is there to be valued at, not being able to obtain what it is meant to represent."
§ The Committee, not satisfied with that answer, press him further, on the ground of the bank restriction, and ask him," The exchange against England fluctuating from 15 to 20 per cent., how much of that loss 856 do you think may be ascribing to the effect of the measures taken by the enemy in the north of Germany, and the interruption of the intercourse which has been the result; and how much to the Bank of England paper not being convertible into cash, to which you have ascribed a part of that depreciation?" which produced the following explanation: "I ascribe the whole of the depreciation to have taken place originally in consequence of the measures of the enemy; and its not having recovered, to the circumstance of the paper of England not being exchangeable for cash."
§ Here then is an acknowledgment from the witness, on whom the committee very much relied, that the excess of bank paper had no influence whatever in lowering the exchange; but he thought its not being convertible into cash prevented the exchange recovering. Let us see, however, how he afterwards qualifies that opinion: he says, "A free circulation and liberty to export the coin of the country is, in my opinion, the only effectual remedy: if that is not deemed practicable, I, however, conceive that many palliatives may be applied." Now, as the exportation of the coin is prohibited under forfeiture, no possible advantage could have been derived to the exchange in the judgment of this witness, without a positive violation of the law at the risk of severe penalties and forfeitures. And again he says, "I believe in the course of my evidence I have assigned a variety of causes for the low rate of exchange, independent of the inconvertibility of paper into cash."
§ I shall trouble the Committee with only one more question and answer from the evidence of this gentleman:
§ "Q. In point of fact, has not the exchange of this country with the north of Europe been in our favour since the restriction of cash payments at the bank?—A. Yes, it has for a considerable time, and very materially; so much so, that a great part of the balance due to this country was liquidated by bullion sent here from the North of Europe"
§ Several experienced merchants, of the most extensive dealings and enlightened understandings, strongly confirm the opinion, that the issue of Bank paper had no effect on the foreign exchanges. Mr. Greffulhe says, "I conceive that the state of the paper currency of this kingdom, and the state of the exchanges upon foreign parts, are two subjects almost unconnected, 857 and that have but very little influence upon each other: "which he supports by a statement of facts. Mr. Chalmers attributes the unfavourable exchange "to the balance of payments being against this country." In these sentiments there is a general concurrence of all the witnesses, with the partial exceptions already noticed.
§ From the whole of this evidence, it must, I think, appear quite clear to the Committee, that cash payments by the Bank can be of no avail towards improving the exchanges, without a direct breach of the existing laws; a breach which can only be accomplished by means of fraud and perjury. Before, however, I quit this part of the subject, I am desirous of taking notice of some passages in the pamphlet of my hon. friend (Mr. Huskisson) in which he shews a marked disregard for what he calls erroneous opinions most generally received in the theory * of the mercantile world. These passages are as follows:
§ "1st. That, whenever the exchange is against any country, the natural and general course of balancing the account is by a payment in bullion.
§ "2dly. That the balance of these payments in favour of any country is finally to be measured by what is called the balance of trade; or the excess of exports above imports.
§ "These two positions lead to a third, which is the fashionable doctrine of the day; namely,
§ "3dly. That the balance of payments may, for a time, be very much against a country, although the balance of trade is, at the same time, very much in its favour: that is, that a country buying for ready-money, and selling at long credits, may be exporting a great quantity of its bullion; although a much greater quantity is actually due to it, and will be forthcoming in the adjustment of its accounts, when these credits come to maturity.
§ "Such is affirmed to be the present situation of this country, and the true explanation of the very depressed state of our foreign exchanges.
"The first of these positions," he says,
* The theoretical merchants examined were Mr. Goldsmid, Mr. Merle, Mr. Lyne, Mr. Hughan, Mr. Greffulhe, Mr. Chambers, Mr. Thompson, Mr. Coningham, Mr. Irving and others, besides the Bank Directors.
"is so little conformable to truth, and to the real course of business between nations, that there is perhaps no one article of general consumption and demand, which forms the foundation of so few operations of trade between the different countries of Europe as bullion: and that the operations which do lake place originate almost entirely in the fresh supplies which are yearly poured in from the mines of the new world; and are chiefly confined to the distribution of those supplies through the different parts of Europe. If this supply were to cease altogether, the dealings in gold and silver, as objects of foreign trade, would be very few, and those of short duration."
§ The extreme confidence with which my honourable friend expresses himself, will not, I am persuaded, induce the Committee to agree with him, in direct contradiction to the opinions of enlightened men, who have been engaged all their lives in foreign trade, every one of whom will admit that when the general balance, arising from our transactions with the whole of the countries with which we have dealings, is against us, there can be no possible way of settling the difference, but by bullion. The words of the continental merchant have been already alluded to; "by bullion or by bankruptcy." And sir Francis Baring says, "a reduction of our exports must operate decisively on the foreign exchanges, unless they are on the fall, counteracted by an export of bullion." These are the two witnesses on whom the Committee most confidently rely. And lord Liverpool, whose authority my hon. friend respects, says, "Gold cannot be carried out of the country unless the general balance of trade is against us. If it is against us, remittances must be made in coin or bullion."
§ We have the support also of other great authorities, among which are Mr. Locke and Mr. Harris.
§ "The reason of high exchange," says Mr. Locke, "is the buying much commodities in foreign countries beyond the value of what they take from us."
§ Where over-balance on either side demands payment, there bills of exchange can do nothing; but bullion or specie must be sent "Whenever the whole of our foreign trade and consumption exceeds the exportation of our commodities, our money "must go to pay our debts so contracted, whether melted or not melted."
§ An over-balance of trade is when the 859 quantity of commodities which we send to any country do more than pay for those we bring from thence, and is brought home in bullion." In another place he says, "the export of silver" (then certainly the measure of commerce,) "and the balance of trade must regulate the exchange: these two together regulate exchange in all the countries of the world." And in other parts of the same work Mr. Locke illustrates these opinions by examples; but we find not a word about the excess of paper,—although his treatise was published at the very period of the measures for the relief of the Bank, re-coinage, &c.
§ Mr. Harris ,
who wrote in the middle of the last century in support of Mr. Locke's opinions, says, "But the exportation of bullion is a certain sign of the exchange being really in favour of that country to which it is sent; and the variations in the exchange point also the variations in the balance of trails; though in general the rate of the exchange, at a particular time, is scarce sufficient for determining on which side the balance then turns."
Our transactions in bullion with the continent are frequent; and our supplies from thence occasionally great.
My hon. friend supports his opinions by an observation, that if the exchange were affected by the balance of payments "the long credits or protracted payments would regularly come round, whilst others were taking place; so that, although different parts of the world are constantly indebted to this country, the aggregate amount of those debts cannot, in the ordinary course of things, vary very materially." A satisfactory answer to which is, that the exchange was coming round in the beginning of 1809, even in the then extraordinary state of things, till interrupted by acts of increased violence. The proceedings of the enemy which have been alluded to, threw it down to 31; and in July to 28 6; but in spite of these, payments came round, and in October 1810 it got up to 31 6, notwithstanding Bank notes were increased from 17,397,000l. in January 1809 to 24,835,000.l in October 1810; and notwithstanding also an importation of corn in the year of 7,000,000l.; but in that month the confiscations and burnings on the continent took place, and the exchange fell again rapidly.
If the exchange is against us with one country, and in our favour with another, arrangements may be conveniently made 860 by bill remittances, so as to avoid transporting the precious metals; but when exchanges preponderate against us on the whole, we have no resource but exporting gold or silver: and it is perfectly notorious that our transactions of that sort with the continent are considerable and frequent. Mr. Huskisson says, such transactions are less profitable than in merchandize. Nothing can be more true; and it is not pretended that recourse is ever had to such exports when a vent can be found For goods: but that has its limits, as we have learned unfortunately by recent experience.
We come now to the third head in the Report,—the system of management of the Bank of England. The Committee, after commenting on the evidence given by the governor and the deputy governor of the Bank, and by one of the directors, make the following observations:
"The Committee cannot refrain from expressing it to be their opinion, after a very deliberate consideration of this part of the subject, that it is a great practical error to suppose that the exchanges with foreign countries and the price of bullion are not liable to be affected by the amount of a paper currency, which is issued without the condition of payment of specie at the will of the holder. That the exchanges will be lowered, and the price of bullion raised by an issue of such paper to excess, is not only exhibited as a principle by the most eminent authorities upon commerce and finance, but its practical truth has been illustrated by the history of almost every state in modern times which has used a paper currency; and in all those countries this principle has been finally resorted to by their statesmen as the best criterion to judge whether such, currency was or was not excessive."
Here again I have experience with me against the Committee. In four years; from the end of 1768 to the end of 1772, (six years after the termination of the seven years' war, and four years before the commencement of hostilities with America,) the exchange was never higher than 33 9,—seldom so high; during which' period the price of gold fluctuated generally from 4l. to 4l. 1s.: amount of Bank notes at the end of it under 7,000,000l. This was the state of things in a time of profound peace with all the world, when the paper of the Bank was payable in. gold. In March 1797 payments in specie there were suspended; exchange then at 861 34–9; gold 3l 17s. 6d.; the amount of Bank notes 9,203,000l. At the end of the year the exchange rose to 38 2; and although it was greatly depressed between 1799 and 1802, by immense importations of corn, it rose again to 35 9 and 36 in 1804, seven years after the stoppage of payments in gold at the Bank; the price of gold fluctuating from 3l. 17s. 6d. to 31. 17s. 10½d. in these seven years; at the close of which the issue of Bank notes was 17,158,000l. These facts, proving incontestibly that the rate of exchange was higher, and the price of gold lower, with a large amount of Bank notes not convertible into specie on demand, than with an issue of those notes much less than one-half of that amount payable immediately in specie, the proof of which before us, I oppose to the practical truth referred to by the Committee in general terms only.
In regard to the discredit of paper, the Committee, putting on one side cases where an excess of paper has been accompanied by a want of confidence, stale, that examples of the other sort, in which the depreciation was produced by excess alone, may be gathered from the experience of the United Kingdom: and they refer in the first instance to the passage in Adam Smith, wherein he remarks on the superior advantage of the Carlisle bank, which paid its notes in specie, over the one at Dumfries, which did not. It is, however, to be observed, that the advantage alluded to did not arise merely from the former paying in cash, but that the latter took advantage of an option they had as to the mode of discharging their; notes, with others payable at uncertain times: it is not wonderful, therefore, that there should have been a difference of 6 per cent. in the value of the paper of the two banks.
But when the Committee refer to the experience of the Bank of England in support of their positions, they fall into the most extraordinary train of inconsistencies and errors I almost ever met with. This is their opening on the subject:
"The experience of the Bank of England itself, within a very short period after its first establishment, furnishes a very instructive illustration of all the foregoing principles and reasonings. In this instance, the effects of a depreciation of the coin, by wear and clipping, were coupled with the effect of an excessive issue of paper. The directors of the Bank of England did not at once attain a very accurate 862 knowledge of all the principles by which such an institution must be conducted. They lent money not only by discount, but upon real securities, mortgages, and even pledges of commodities not perishable; at the same time the Bank contributed most materially to the service of government for the support of the army upon the continent. By the liberality of those loans to private individuals, as well as by the large advances to government, the quantity of the notes of the Bank became excessive, their relative value was depreciated, and they fell to a discount of 17 per cent.*"
We are then referred to two works, which I feel almost confident the members of the Committee had not read themselves—" A Short Account of the Bank," by Mr. Godfrey, one of the original directors; and "A Short History of the last Parliament," in 1697, by Doctor Drake†; both in lord Somers's Collection of Tracts. For their not having read the first I have presumptive, and for the latter, I think, I have positive, evidence. It will be recollected that the Committee strongly mark their disapprobation of the opinion expressed by the Governor and Deputy Governor of the Bank—that no inconvenience would result* The Committee do not state their authority for this; it may be correct, but I have not been able to trace it.† With the work of Mr. Godfrey, who was certainly a man of considerable note in the city, I was well acquainted; but conceiving Dr. Drake's "History of the last Parliament," to be the libellous work under that title for which he was prosecuted on an address of the House of Lords, I had not taken the trouble to read it. I find, however, the Doctor wrote two treatises with the same title: the one recommended by the Committee contains a fulsome panegyric on the ministers of king William, who not rewarding him for it, be published the second, in which his abuse was so little measured as to occasion the Lords to address the queen to prosecute him; and from that time to his death, he was in the hands of the Attorney General for different publications. The selection of these two authors by the Committee is the more extraordinary, as there were twenty or thirty other pamphlets written about the same time on exchanges, coin; &c. some of them by men of great ability and experience.863 from their discounting paper at an interest below that generally paid by persons borrowing: in which disapprobation I concur. But I am desirous here of saying a word in extenuation of answers given suddenly on points which witnesses have not been previously apprized that they were to be examined upon: I mean that if the Governor and Deputy Governor of the Bank had been apprised of the question respecting their discounting at low interest, they would have given a different answer; which I am led to believe from a conversation with the former. I return however to Mr. Godfrey, whose performance, so recommended to our notice, savours a little of the hand-bill of a mountebank, holding out temptations, eventually ruinous to the Bank itself, to draw customers to it from all the private goldsmiths or bankers. At a time when the established interest of money was six per cent. Mr. Godfrey published that the Bank lent money on mortgage at five, and on foreign bills at four and a half per cent.; to those who kept cash with them, at three per cent.; and that they discounted inland bills generally at six, but to customers at four and a half per cent., for which bankers were in the habit of taking from nine to ten per cent. He added that they would open a lombard to the poor at one penny per month, instead of sixpence or a shilling, as was usually paid; and that in a few years they would reduce the interest of money to three per cent., in which they failed so entirely that there was no alteration in it till 1714, when it was lowered to five per cent.
The real causes of the distressed situation of the Bank at the time in question were the loans advanced by them on securities of every sort, and the consequent delay of repayments; together with the loss which they sustained by taking at par the clipped silver, diminished nearly one half, (there being a deficiency of 107,647 oz. on an amount of 57,200l.) and by the melting of the new silver after it was coined. So much for the value of Mr. Godfrey's information.
The Committee proceed to observe, "At this time there appears to have been no failure in the public confidence in the funds of the Bank; for its stock sold at 110 per cent., though only 60 per cent. upon the subscriptions had been paid in.—By the conjoint effect of this depreciation of the paper of the Bank from excess, and of the depreciation of the silver coin 864 from wear and clipping, the price of gold bullion was so much raised, that guineas were as high as thirty shillings; all that had remained of good silver gradually disappeared from the circulation, and the exchange with Holland, which had been before a little affected by remittances for the army, sunk as low as 25 per cent. under par when the bank-notes were at a discount of 17 per cent."—I beg particular attention to what follows: "Several expedients were tried, both by parliament and by the Bank, to force a better silver coin into circulation, and to reduce the price of guineas, but without effect."
This is the positive evidence on which I rely to prove that the Committee, or rather the framer of the report, could not have read Drake's pamphlet, because the Doctor not only states that the parliament did reduce the value of the guinea in that session, but attributes to them great merit for their having done so. And what makes the mistake into which the Committee fell quite inconceivable is, that there are two acts of that same session in the statute-book for reducing the value of the guinea.
The 7th and 8th of William 3, c. 10, sect. 18, reduced it from 30 to 26s., and c. 19, sect. 12, of that year, further reduced it to 22s. These statutes are followed by a resolution of the House of Commons of the 16th of February 1698, that no person is obliged to take a guinea even at that rate; the board of Trade, of which Mr. Locke was a member, having, in the month of September, recommended that the guinea should pass for 21s. 6d. only; and it was not till 1717, that it was fixed by proclamation at 21s., its present value, in consequence of an Address of the House of Commons, grounded on a report of sir Isaac Newton, master of the mint *.
The report next proceeds to state:
"At length the true remedies were resorted to; first, by a new coinage of silver†, which returned that part of its currency* When I asserted, in a subsequent part of the debate, that sir Isaac Newton had not written on the subject, I could only mean in the controversy; because I had a copy of this official Report in my hand, made 20 years after the close of that.† Which disappeared in a few years, after costing the public two millions and a half.865 to its standard value, though the scarcity of money occasioned by calling in the old coin brought the Bank into streights, and even for a time affected its credit: secondly, by taking out of the circulation the excess of Bank-notes. This last operation appears to have been effected very judiciously: Parliament consented to enlarge the capital stock of the Bank, but annexed a condition, directing that a certain proportion of the new subscriptions should be made good in Bank-notes. In proportion to the amount of notes sunk in this manner, the value of those which remained in circulation began presently to rise. In a short time the notes were at par, and the foreign exchanges nearly so." And the Committee conclude the paragraph by observing that, "These details are all very fully mentioned in authentic tracts published at the time, and the case appears to your Committee to afford much instruction upon the subject of their present inquiry."
Thus, therefore, the instruction which the Committee think so useful is evidently in part derived from an author who makes a merit of the Bank granting discounts at a lower rate than private bankers; and in part from another, the eulogist of the parliament, whose highest panegyric on them was that "other parliaments have been able to raise great sums of money when the defence of the country required it, but it was the peculiar honour of this to make it:—They created money without bullion, and distributed great quantities of coin without the help of the mint."
May I presume to ask the learned gentleman if these are the proceedings which he would recommend for our adoption? The real proceeding with respect to the Bank, which is supposed to have afforded them such effectual relief, and which produced such admirable effects, was that the new subscription should be 4–5ths in tallies at an immense discount, and l–5th in their own notes, with liberty to issue new paper to the extent of the addition made to their capital. The remedy was, however, so far from being effectual, that so early as 1708 the credit of the Bank failed again, which led to the necessity of raising the interest of their advances to the public from 3 to 6 per cent.; when the crisis was such as to induce lord Godolphin, the duke of Marlborough, and others, to support them with their private credit.
The Committee next derive a sanction 866 for their reasonings from what passed in 1804, respecting the depreciation of the Irish exchange. They say,
"Many of the witnesses before the Committee, (in 1804) however unwilling to acknowledge the real nature of the evil, made important concessions which necessarily involved them in inconsistency. They could not, as practical men, controvert the truth of the general position, that the fluctuations of exchange between two countries are generally limited by the price at which any given quantity of bullion can be purchased in the circulating medium of the debtor country, and converted into the circulating medium of the creditor country, together with the insurances and charges of transporting it from the one to the other. It was at the same time admitted that the expence of transporting gold from England to Ireland, including insurance, was then under one percent.; that before the restriction the fluctuations had never long and much exceeded this limit; and moreover, that the exchange with Belfast, where guineas freely circulated, at the time of the investigation by that Committee, was then l¼ per cent. in favour of Ireland, while the exchange with Dahlia, where only paper was in use, was 10 per cent. against that country. It also appeared from such imperfect documents as it was practicable to furnish, that the balance of trade was then favourable to Ireland." On which subject the Committee appear to me again to have fallen into a train of errors. On the subject of remitting by bills or bullion, and their comparative advantages, I have already addressed the Committee; but I must arrest their atttention here for a moment, to show how unfounded the statement in the report is in regard to the balance of trade being at the period in question, in favour of Ireland. From documents before the House it appears that the imports and exports of Ireland were then as follows:
These are according to official value, 867 which I prefer quoting, because the accounts are on the table: according to real value, the difference against Ireland was still greater.
Imports. Exports including foreign goods. 1802. £ 6,087,000 £5,090,000 1803. 5,275,000 4,770,000 1804 5,712,000 5,074,000 17,074,000 14,934,000 14,934,000 2,140,030 Average excess of imports 713,000 About ⅛of the whole imports,.
The reference made by the Committee to the evidence of Mr. Colville, a director of the bank of Ireland, who stated that "in 1753 and 1754, the Dublin exchange being remarkably unfavourable, and the notes of the Dublin Bank being suddenly withdrawn, the exchange became singularly favourable," is of little or no importance, because the circulation of notes at that time was confined to those of private bankers, there having been no chartered bank in Ireland till about the year 1782.
The Committee go on to say, "In the spring of 1804 the exchange of England with the continent was above par, and the exchange of Ireland was in such a state, that 118l. 10s. of the notes of the Bank of Ireland would purchase only 100l. of the notes of the Bank of England. Therefore if the notes of the Bank of Ireland were not depreciated, and it was so maintained, it followed that the notes of the Bank of England were at more than 10l. per cent. premium above the standard coin of the two countries." I should have thought that reasons for this state of things in Ireland, might have occurred to the enlightened members of the Committee, unconnected with any issue of paper. 1st. The balance of trade, (as has been shewn) was much against Ireland. 2nd. The great increase of absentees at the time 3rd. The large sums remitted for security, during the disturbed state of things, by many of those who did not leave the country. 4th. Loans made in Ireland, held principally by English proprietors, (to whom, of course, the interest was remitted here,) which have, to a great extent, been since transferred to Ireland. With an increasing number of bank notes in Ireland, for the last two or three years the exchange has been progressively falling there, down to the date of my last account (April,) when it was 9¼l., the par being 8⅓l. At Belfast, to the exchange at which place the Committee particularly refer; the manufacturers having been accustomed to coin, would receive nothing else in payment; but the purchasers of the bills were fully aware they would be paid in Bank of England notes, and therefore could not conceive these notes were depreciated. That Irish securities, however, are worth less than English is evident, 868 from the Irish 5l. per cent. stock, payable at the Bank of England, being usually 2l. or 3l. below English 5l. per cent. stock.
The Committee, pursuing the subject of Irish exchanges, add, "The principles laid down by the Committee of 1804, had probably some weight with the directors of the bank of Ireland; for, between the period of their report (June 1804) and January 1806, the circulation of the notes of the bank of Ireland was gradually (though with small occasional fluctuations) reduced, from about 3,000,000l. to 2,410,000l. being a diminution of nearly one-fifth, at the same time all the currency which had been issued under the name of silver tokens, was by law suppressed."
This passage contains two most inconceivable mistakes, of which the proof is clear and positive, and was immediately before the Committee. I refer, for the first, to the account of Irish bank-notes called for by the House, and to an account of the exchange with Ireland. From which documents the following statement is made, demonstrating that instead of the increased issue of banknotes raising the exchange, that was the most favourable to Ireland when the amount of bank-notes was at the highest.
As a proof of the second mistake on the, part of the Committee, it will be sufficient to refer to the 44 Geo. 3, cap. 71, which proves that instead of the Irish silver tokens having been by law suppressed, as the Committee allege, they not only remained in currency, but it was made felony by that act to counterfeit them*.
Irish Bank Notes. Exchange Dublin on London. 1804, January £.2,936,000 15½ January June 2,916,000 11 June 1805, January 2,902,000 8½ June 2,813,000 11 1806, January 2,465,000 11½ June 2,581,000 11 1807, January 2,618,000 11 June 2,782,000 9¾ 1803, January 2,732,000 9¾ June 2,894,000 10 1809, January 3,141,000 8¾ June 3,101,000 9½ 1810, January 3,192,000 8 June 3,165,000 8⅛* The framer of the report seems to have confounded the small paper notes in Ireland with the tokens; when the latter were legally put in circulation, the former became unnecessary.869 As far as opinion can influence a judgment how far the amount of Bank-notes in circulation can have an effect on the price of gold or the rates of exchange, it may be sufficient to refer to the evidence of Mr. Aaron Asher Goldsmid and Mr. Merle, two gentlemen as capable of deciding on the subject as any who could be found in this kingdom. The former is asked, whether he has remarked, that as the quantity of bank notes has increased, gold has got proportionally dearer: his answer to which is; "Not perceiving that the increase or decrease of Bank-notes has any connexion with or influence upon the price of gold, we have paid no attention to that subject."—Mr. Merle, in answer to the question, "What do you conceive is the reason for the high price of gold bullion:" says, "The exchange making it so much more favourable to transmit it than Bills." And Mr. Harman, a partner in one of the most experienced and longest established mercantile houses connected with the continent, tells the Committee, that "a diminution of the Bank paper would have no effect whatever, in tending to an improvement of the exchange, either immediately or remotely." And when pressed on that point, he says, "he must very materially alter his opinion before he can suppose, that the exchange will be influenced by any modification of our paper currency."
On the theoretical opinion alluded to in the following paragraph of the report, I feel less confidence than on other points brought under our consideration by the Committee:
"In connexion with the general subject of this part of their report, the policy of the Bank of England, respecting the amount of their circulation, your Committee have now to call the attention of the House to another topic, which was brought under their notice in the course of their inquiry, and which, in their judgment, demands the most serious consideration. The Bank directors, as well as some of the merchants who have been examined, shewed a great anxiety to state to your Committee a doctrine, of the truth of which they professed themselves to be most thoroughly convinced, that there can be no possible excess in the issue of Bank of England paper, so long as the advances on which it is issued are made upon the principles which at present guide the conduct of the directors; that is, so long as the discount of mercantile Bills are confined to 870 paper of undoubted solidity, arising put of real commercial transactions, and payable at short and fixed periods. That the discount should be made only upon Bills growing out of real commercial transactions, and falling due in a fixed and short period, are sound and well established principles. But that, while the Bank is restrained from paying in specie, there need be no other limit to the issue of their paper than what is fixed by such rules of discount, and that during the suspension of cash payments the discount of good Bills falling due at short periods cannot lead to any excess in the amount of Bank paper in circulation, appears to your Committee to be a doctrine wholly erroneous in principle, and pregnant with dangerous consequences in practice."
I am, however, persuaded that if the Bank shall confine itself to discounting Bills with names upon them of established reputation, payable at short dates, its credit cannot be impaired; although it should be admitted that inconvenience might result to the country from a possible excessive issue of its paper. The solvency of the Bank was established beyond all doubt by an attentive examination of their affairs by the secret Committee of the House of Lords in 1797, when it was proved that their surplus funds amounted to 15,000,000l. beyond all demands upon them.
If the Bank directors, on the advice of the Committee, should govern the amount of their issues by the state of foreign exchanges, I will venture to say the inevitable consequence would be most mischievous; for instead of the discretion remaining in gentlemen acting under a, severe responsibility, and who have no personal interest to sway their judgment it would be transferred to the exchange merchants here and on the continent, who, connected with each other, as they would soon become in that stale of things, would affect the course of exchange at pleasure to answer their own purposes. Without making an invidious distinction between one set of men and another, I may be permitted to say it is more prudent to trust the direction in this case to gentlemen of whose conduct we have had long experience, than to others without responsibility, who would have a great and an immediate interest in abusing it. The Committee observe that, "The Directors of the Bank of England, in the judgment of your Committee, have exercised the new 871 and extraordinary discretion reposed in them since 1797 with an integrity and a regard to the public interest, according to their conception of it, and indeed a degree of forbearance in turning it less to the profit of the Bank than it would easily have admitted of, that merit the continuance of that confidence which the public has so long and so justly felt in the integrity with which its affairs are directed, as well as in the unshaken stability and ample funds of that great establishment." But they add, "that the recent policy of the Bank involves great practical errors, which it is of the utmost public importance to correct." This opinion, as to the policy, is in opposition to the sentiments of the most enlightened men upon subjects of this nature, and is an assumption contrary to the most tried experience.
We come now to the fourth head of inquiry of the Committee; whether there has been an issue of paper of the Bank of England, and of country Banks, greater than was called for under all the circumstances in which the country was placed? Respecting the latter no remedy is proposed; but the Committee observe that, "It appears from the accounts laid before the Committee upon the Bank affairs in 1797, that for several years previous to the year 1790, the average amount of Banknotes in circulation was between ten and eleven millions; hardly ever falling below nine millions, and not often exceeding to any great amount eleven millions."
Here they have fallen into a mistake of no great importance.
The Committee then go on to say that the "whole amount of Bank-notes in circulation, exclusive of 939,990l. of Bank Post bills, will be found on the average of the two returns of the 5th and 12th of May last, to be 14,136,610l. in notes of 5l. and upwards, and 6,173,380l. in notes under 5l.; making the sum of 20,309,990l. and, including the Bank Post bills, the sum of 21,249,910l.;" observing, at the same time, that by far the most considerable part of this increase since 1798, it is to be observed, has been in the article of small notes, part of which must be considered as having been introduced to supply the place of the specie which was deficient at the period of the suspension of cash payment."
In July 1791 the amount was £ 1,343,000 1792 11,496,000 1793 12,713,000
872 And "That with respect to the amount of commercial discounts, your Committee did not think it proper to require from the Directors of the Bank a disclosure of their absolute amount, being a part of their private transactions as a commercial company, of which, without urgent reason, it did not seem right to demand a disclosure. The late governor and deputy-governor however, at the desire of your Committee, furnished a comparative scale, in progressive, numbers, shewing the increase of the amount of their discounts from the year 1790 to 1809, both inclusive. They made a request, with which your Committee have thought it proper to comply, that this document might not be made public; the Committee, therefore, have not placed it in the Appendix to the present Report, but have returned it to the Bank. Your Committee, however, have to stale, in, general terms, that the amount of the discount has been progressively increasing since the year 1796, and that their amount in last year (1809) bears a very high proportion to their largest amount in any year preceding 1797. Upon this particular subject your Committee are only anxious to remark, that the largest amount of mercantile discounts by the Bank, if it could be considered by itself, ought never, in their judgment, to be regarded as any other than a great public benefit, and that it is only the excess of paper currency thereby issued and kept out in circulation, which is to be considered as the evil."
Whether the discounts have been progressively increasing since 1796, it is not in my power to say, but that is important only so far as the issue of Bank paper may or may not have been increased thereby. Let us therefore see how that stands, including even the notes under 5l. which have been issued more to serve as change than for any other purpose in the last eight years of that period.
And without small notes, or Bank Post Bills, the circulation 873
1802. July 17,094,000 1803. Jan. 15,650,000 July 14,290,000 1804. Jan. 17,151,000 July 16,974,000 1805. Jan. 17,849,000 July 15,674,080 1806. Jan. 16,295,000 1807. 16,004,000 1808 16,619,000 1809. 17,397,000
Then follows, "But your Committee must not omit to state one very important principle, that the mere numerical return of the Bank-notes out in circulation cannot be considered as at all deciding the question, whether such paper is or is not excessive? It is necessary to have recourse to other tests. The same amount of paper may, at one time, be less than enough, and at another time, more. The quantity of currency required, will vary, in some degree, with the extent of trade; and the increase of our trade, which has taken place since the suspension, must have occasioned some increase in the quantity of our currency."—And after reasoning upon the quantity of currency bearing no proportion to the quantity of commodities, the Committee say, they "are of opinion, that the improvements which have taken place of late years in this country, and particularly in the district of London, with regard to the use and œeconomy of money among bankers, and in the mode of adjusting commercial payments, must have had a much greater effect than has hitherto been ascribed to them, in rendering the same sum adequate to a much greater amount of trade and payments than formerly; some of those improvements will be found detailed in the evidence: they consist principally in the increased use of bankers drafts in the common payments of London; the contrivance of bringing all such drafts daily to a common receptacle where they are balanced against each other; the intermediate agency of bill brokers; and several other changes in the practice of London bankers, are to the same effect, of rendering it unnecessary for them to keep so large a desposit of money as formerly. Within the London district it would certainly appear that a smaller sum of money is required than formerly to perform the same number of exchanges and amount of payments, if the rate of prices had remained the same."
In 1791, was £ 10,864,000 In 1809, 13,302,000
This is contradicted by Mr. Thomas, who has the management of the concern, in express terms, whose evidence is,
"The system of clearing has been in existence above thirty-five years; that of the last fourteen months is a new arrangement, but it docs not at all alter the amount of Bank notes passing: there has been no material improvement in the system of late years so as to reduce the quantity of Bank notes necessary for making payments"
874 The Committee proceed to observe, that, "all these circumstances must have co-operated to render a smaller augmentation of Bank of England paper necessary to supply the demands of our increased trade than might otherwise have been required, and show how impossible it is from the numerical amount alone of that paper, to pronounce whether it is excessive or not. A more sure criterion must be resorted to; and such a criterion your Committee have already shewn is only to be found in the state of the exchanges, and the price of gold bullion."
The question here is, has that been satisfactorily shewn? In order to ascertain it, let us enquire whether circumstances which have occurred, do or do not account for the increase of our paper circulation to the full amount of the issues.
In 1798 (the first year after the payments in cash ceased) the amount of Bank-notes was 12,062,000l., our exports, according to official value, 30,290,000l. In 1810, the Bank-notes 22,236,000l. the exports 50,300,000l. In 1798, the nett revenue paid into the Exchequer, exclusive of loans, was 28,667,000l. In 1810, it was 66,098,000l. On this subject the opinion of Mr. Henry Thornton is deserving of great attention. In his evidence to the Committee of Secrecy of the House of Lords in 1797, in the first report he says, "the increased trade of the country has actually created a necessity for an increased use chiefly of notes to bearer on demand, though partly bills of exchange and cash; guineas being used only for small or broken sums."—And that "in consequence of our assumed scarcity of Banknotes it has been in contemplation of persons, especially bankers, to endeavour to provide some additional means of circulation for the metropolis, but that doubts were entertained of the legality of such a measure, and that there was a reluctance on the part of some bankers to be universally security for all; observing, that a given quantity of commerce in time of war requires a greater capital to carry it on, arising from the increased expence of freights, insurance, and mercantile charges, than the same commerce would require in time of peace."
In the third report of the Committee, the same gentleman states, "I am clearly of opinion, that if the circulating medium had been much further reduced, many failures would have been the consequence. I know the distress of many merchants, 875 and also of some bankers, to have been considerable, and have had conversations with some of them on the subject of substituting a new circulating medium, with a view of relieving the existing distress." And in the first report above referred to, Mr. Bosanquet states:
"Increased use of capital employed, whether in agriculture, manufactures, inland trade, and of exports and imports, must obviously require an increase of cash or bills in circulation.
"An increase in exportation, subject to long credits, must occasion an increased demand within the kingdom of cash or paper before the returns are made."
I have shewn an increase of revenue of more than 37,000,000l. within the period of 12 years, and of 20,000,000l. in the official value of our exports, the real value of which of course was much more largely augmented; while the increase of Banknotes was little more than 10,000,000l. notwithstanding the almost total disapearance of the gold coin, to the amount of more than 30,000,000l.
Here I may be allowed to refer to the authority of sir Francis Baring, who, although he thought 11,000,000l. was far more than sufficient for the remittance of the public revenue, was of opinion, "that if the public revenue or trade required 1,000l. to be remitted to London formerly, and 2,000l. is required at present, there must be an addition of 1,000l. in paper. Country paper (always too abundant) takes its origin from a variety of sources, and cannot be considered as a general medium of circulation. Bank of England notes constitute the only general paper currency, the only adequate reperesentation of the precious metals. They alone admit of correct regulation, because they issue from a single source."
My hon. friend (Mr. Huskisson) however, in his pamphlet, suggests, "that the amount of paper is not to be measured by the public revenue;" in proof of which assertion "he thought it unnecessary to go into a minute statement of the course of proceeding in the Exchequer, although it is by such a detail that the proof would be most completely established. It was sufficient, he said, for him to state that in the evening of each day the whole receipt of revenue within that day was carried to the Bank; and that from the Bank, the whole amount of such revenue may be, and probably is, put in circulation again 876 in the following day, in discounts or in government securities."
I confess this surprised me a good-deal, because it is not merely for payments into the Exchequer that Bank notes are wanted, though even for that purpose a new necessity has been created since the payments in cash have been stopped; because till then no Bank notes were permitted to be locked up in the Exchequer. Notes as large as 500,000l. in one sum have occasionally been locked up; an amount not very likely to get into circulation.
And in 1809 and 1810, the Bank advances to government were more than three millions higher than in 1798.
In 1803, the notes in the exchequer amounted at one time to £2,409,000 In 1804. to 2,020,000 In 1805. to 3,021,000 In 1806. to 4,515,000 In 1807. to 6,289,000 In 1808 to 3,294,000 In 1809. to 526,000 In 1810. to 2,022,000
It is, however, for the collection of the revenue throughout the kingdom, and for the remittance of it to London, in addition to the want created by our increased commerce, that paper became necessary infinitely more than for payments into the exchequer, and to supply the deficiency of specie which had been withdrawn. The latter seems not to have attracted notice in accounting for the increased issue of Bank notes. It is important, therefore, to shew the extent of it.
The following statement will shew that the amount of gold in circulation in 1798 could not be over-rated at £40,000,000.
877 About 2,000,000 in light guineas sent to America, were supposed to be brought back after the war, and made a part of those coined from 1778 to 1798, for which no credit is taken here: and as there was then no temptation to send coin out of the country, or to melt it, the price of gold never having exceeded the Mint price in that whole period, (except in a few months 1½d. an ounce, in 1783,) and was generally below it, we may fairly estimate the coin in circulation at 40,000,000l. after making large allowance for wear, &c. Mr. Wheatly, however, (with the Mint account before him) insists that the whole coin in circulation and deposit at the time he wrote, in 1806 or 1807, when gold had not been higher than 4l. an cz., did not exceed 5,000,000l.; but that in 1792 it might have been from 10,000,000l, to 12,000,000l.
Coined from guineas 1773 to 1777 £16,597,356 From foreign gold 2,898,494 19,495,850 In 1772 the Bank sent in foreign gold coined in 1733 950,245 20,446,095 Coin remaining in circulation, at the lowest estimate, during the re-coinage 5,000,000 25,446,095 Coined from 1st Jan. 1778 to Dec. 31,1798 33,831,231 Deduct coinage from light guineas 15,922,207 17,909,024 43,355,119
To what an extent specie is withdrawn from circulation may be judged of from the collection of the revenue in the county in which I live; a statement of which was furnished me lately by the gentleman who received it. The assessed taxes were 342,000l., and of the excise that went through his hands 84,000l., making a total of 426,000l., of which he received 476l. 8s. in specie. The whole of the excise was in Bank of England notes; and such part of the assessed taxes as was received in country Bank notes was converted into Bank notes, on the remittance to London.
This I am persuaded will be thought a reasonably strong proof of the absolute necessity of a large increased issue of Bank paper, for the revenue only. How far the manufactures of the country have demanded an increase of it, may be judged of from the following instance. In the town of Manchester and its neighbourhood the annual payments before 1797 were about 1,040,000l., of which two-thirds in specie, and one-third in Bank notes. The proportion in specie was then reduced to one-half, and afterwards to a third. Now the whole payments are 3,640,000l., of which only 10 or 11,000l. are made in specie. In three other large towns in Lancashire the payments are supposed to be equal to these, amounting to 7,280,000l. in the whole, which shows the necessity for a large supply of Bank paper in that county only, as there is not a country Bank note issued in it. If then, in estimating the coin in 1798, we rate it, instead of 878
Here then is a sum of 20,000,000l. in the whole less than in 1798, notwithstanding the immense increase of our revenue, commerce, and manufactures; from which, however, should be taken the amount in deposit in the Bank, whatever that may be.
40,000,000l. at £ 35,000,000 The Bank of England notes then in circulation were 11,278,000. 46,278,000 Coin in circulation now (perhaps a high estimate) £3,000,000 Bank of England notes in circulation 23,000,000 26,000,000
Is it not then matter of surprise that the issue of Bank notes has not been greater, than the sum abovementioned? And can it be advisable in the judgment of any reflecting man to make a sudden and considerable reduction of the paper? If it were admitted, contrary to all experience and to the opinion of the enlightened men selected by the Committee, that the good effects supposed by the Committee would be produced by such a proceeding, the mischief that would inevitably follow to the manufacturers and traders, would greatly overweigh them. The necessity indeed would be so urgent, as to compel the issue of some paper, on security less substantial than that of the Bank*.
Sir Francis Baring says,—" The only general circulating medium, as a general representative of bullion at home, is Bank of England notes."—Unless we act upon, that opinion, or find a better substitute to supply the temporary absence of our coin, the worst consequences must inevitably follow. These are too obvious to make it necessary to dwell on them: we should feel the want of a sufficient circulating medium in our trade with other countries, particularly to the continent, oppressed as that is by high foreign freights and unexampled delays in payments, as well as* A member of this House (Mr. Marryatt) has published a pamphlet, finding great fault with the conduct of the Bank, and proposing the establishment of another Bank, neither of them to be compellable to pay in cash.879 in our domestic trade and manufactures, in which numbers of the lower class of people are employed. All internal improvements would be checked; the most important of them would indeed be entirely stopped, and the collection and remittance of the revenue would be most seriously embarrassed. There is no exaggerates here; the certainty of these consequences must be apparent to every one who hears me: I will, however, refer to a few of the answers given on the subject by persons most competent to judge of it.
is asked, "Q. Suppose an advance to be made upon goods that may be pledged with the Bank instead of bills, would that, in your opinion, create an excess of circulation?—A. I consider it to be highly proper that the securities discounted by the Bank, should be payable at short and fixed periods.
"Q. Do you conceive that all that would be requisite to prevent a depreciation of paper-currency in any country would be that such paper should, in no instance, be issued but as the representative; of a good security payable at a fixed period?—A. I answer that in the affirmative, certainly.
"Q. Do you conceive that there exists the same security for the public against the inconvenience of an excess of circulation when the payments in cash at the Bank are suspended as when the Bank was at liberty and under obligation to make its payments in cash?—A. I conceive so, if the Bank adhere strictly to the system of discounting no bills but of undoubted solidity, and government securities; the latter with due moderation, and the caution pointed out before."
Mr. Abraham Goldsmid, of the house of Goldsmid, Son, and Eliason, Q. "When gold is above par, would you not say, when compared with guilders, the currency of Holland, that guilders are depreciated in value?—A. No, I should not.
"Q,. According to this principle, does it follow that Bank-notes must be depreciated when compared with gold, the Mint-price of guineas being 3l. 17s. 10½d. and the market-price of gold 4l. 12s?—A. I never considered Bank-notes as depreciated."
Mr. Greffulhe again. "Q. In what is the paper circulation of this country, as it at present exists, different in its practical operations, from a forced circulation?—A. In the first place, the paper of this country is no legal discharge of a debt; 880 secondly, the Bank paper of this country-is issued when called for, in exchange for valuable securities, in which respect it is essentially distinct from what I call a forced paper, which may be issued both without limits and without any security whatever."
Baring having been asked by the Committee, "Whether he conceives that the Bank of England will effectually guard against the possibility of an excess in the circulation of the country (as well their own as of country banks), if they regulate their issues by the demand for discounts of good bills, founded on real mercantile transactions, as the occasions of the public may appear to require?"—concludes a long answer by saying, "It may prove dangerous to impose any positive restraint on the Bank by law or otherwise; for cases may and wilt arise, when an excess will be proper, and that it would be culpable to withhold it. But if the House shall be disposed to entertain an opinion, and will pronounce it distinctly, I think the Bank may be left' with full power to act under their responsibility."
Mr. Trotter. "Q. Suppose the issues of the Bank of England to be diminished one-half, what effect would that produce upon the general confidence and credit of the country?—A. It would be very injurious; and it would be very difficult, if not impossible, to conduct the affairs of the metropolis, if the large notes were to be diminished in that proportion.
"Q. Would that effect take place, supposing the diminished quantity of Banknotes were supplied by a corresponding-quantity of gold?—A. I suppose in a very considerable degree it would, because the large payments in business have not heretofore been made in gold."
Mr. Harman. "Q. Do you conceive that the diminution of the paper of the Bank would, either immediately or remotely, tend to an improvement of the exchange?—A. None whatever."
I here close my observations on the Report, in the length of which, I am conscious of having trespassed a good deal on the patience of the House, especially in referring to the evidence before the Bullion Committee. The excuse which I humbly submit for this is, that it is on the Report we are called to decide, and not on the speech of the learned gent. who opened this debate, however eloquent and able I admit that to have been. If I have 881 succeeded in proving incontrovertibly that there are inaccuracies and errors throughout that performance, such as never occurred in any Report deliberately made to this House; and that the opinions therein contained are not supported by the evidence of gentlemen who were selected as witnesses, I trust this Committee will not come to the conclusion proposed by the learned gentleman.
Deeply sensible of the indulgence I have experienced in the comments I have felt it my duty to make on the Report, I still hope for an extension of it, while I make some farther observations on this very important subject. A publication of an hon. friend of mine below me, who was a member of the Committee, may be considered as an exposition of the Report, or as a supplement to it, and therefore to come naturally under our consideration in this discussion. Of the motives of my hon. friend in that publication no man can entertain a doubt, because he could not possibly be influenced by a bad one; few men can have stronger incentives to promote the public interest than himself;—his talents, his experience, the public situations he has already filled, and his time of life, all contribute to afford him a prospect of being again eminently useful in a situation of trust and confidence. In thus acquitting him of any possible ill intention, which, undoubtedly, the most malignant mind could not successfully impute to him, I cannot avoid observing, that his publication appears to me to have a greater tendency to degrade the national character, and to be injurious to the public interest, than almost any one I recollect to have read; because the sentiments and opinions expressed in it derive great weight from the character of the author, and from his experience acquired in official situations.
My hon. friend is an instance, added to many others I have met with, of a person with the best and purest intentions pursuing an object appearing to him to be a right one, without looking to the consequences of what he publishes to the world.
In speaking of the Bank of England he says,
"It is now many years since I had occasion to look into the treatise of the famous Mr. Law; and from not having it at hand, I have no opportunity of referring to it at this moment: But I have a confident recollection that there exists a very strong resemblance between the principles 882 upon which his celebrated scheme was founded, and this leading doctrine of the Bank."*—Let us, therefore, refer to what were the principal features of Mr. Law's celebrated scheme. His bank was first established in 1716; and, in 1717, by an Order in Council, the Western or Mississippi Company was created, and attached to it, with a grant of all Louisiana, a province utterly uncultivated and of no real value, which was the basis for the establishment of its credit. Those who took shares were allowed to pay a part in state-paper, at a depreciation of 54l. to 60l. per cent. In 1718 they were declared royal. The Regent then became the sole proprietor of the shares: Mr. Law was named director, under the King, and Regent, and from that time a stroke of the Regent's pen was all-sufficient for whatever was to be done. In the end of that year, batiks, dependent upon this, were established in several great towns. In 1719, the interest of money was reduced to 3½ and 2½, and at last to 2 per cent., keeping the value of money in a state of constant fluctuation by contradictory edicts. In 1720, there was an edict, that no corporation or individual was to keep more than 500 livres in specie, on pain of a heavy fine and confiscation of the cash discovered; and the officers of justice were ordered to make all the searches required of them by the directors of the Bank.
At an assembly of stock-holders (the Regent being present) a benefit of 120 millions of profit, and 40l. per cent. as the next year's dividend, were held out. Then followed a prohibition to all persons in France, corporations and others, to keep any coin in gold after the 1st of May 1711, on pain of confiscation. On the 21st of May a reduction of half the shares was ordered; and on the 27th an order was made to restore paper to its full value; but all payments at the Bank were suspended:* By this is meant the declared opinion, "That there can be no excess of Bank of England paper in circulation, so. long as it is issued only in the discount of bills of undoubted solidity, founded on real mercantile transactions; and payable at fixed, and not distant dates (60 or 90 days at the utmost), or upon loans to Government for public securities; Government not being able to dispose of such securities to butter advantage in the open market,883 —Of course it was not long before this scheme, founded entirely in speculation, and which never had any solid basis, entirely failed. The premium which the shares bore at one time was so excessive, that the value of the whole mass is calculated by M. Necker at six milliards of livre conceive, equal to about 230,000,000l. sterling.
Where my hon. friend finds any resemblance between the principles on which this celebrated scheme was founded, and the leading doctrine of the Bank of England, I am altogether at a loss to conceive. The ravings of Buonaparté to all Europe of our national bankruptcy, and of our being driven to the use of fictitious paper, were very little regarded; but, with such an auxiliary as my hon. friend, it is difficult to say how great an alteration in that respect may be produced.*
His observations on the credit of our public funds seems to me also likely to be attended with very hurtful consequences with respect to both foreigners and natives. He says, "If the public creditor does receive his dividend, he is compelled to leave two shillings in the pound, or 10l. per cent. in the hands of the Bank, as lent for the use of the state. He is equally compelled to receive the remaining 18 shillings in Bank-paper; subject however to the same option of not receiving them at all. A payment in such paper is a virtual deduction from his dividend of three shillings more, or of 15l. per cent.; just as much a real and a forced deduction, as if it were made directly from 18 shillings of standard money, and under all the powers and penalties of the property act. The public creditor therefore receives 15 shillings in the pound of standard stationary* Something occurred afterwards in the course of the debate, which would have led to a belief that it was Mr. Law's plan for a Bank in Scotland that was alluded to by Mr. Huskisson in his pamphlet, if that plan, which was never acted upon, had not been entirely dissimilar to the institution and mode of conducting business of the Bank of England. The Scotch plan was for a Bank, the notes to be issued by forty Parliamentary Commissioners, to purchase land, &c. Paper-money to rise 10l. per cent. above stiver. See Law's account of it in the collection of papers of lord Somers. Mr. Huskisson, in the note at the bottom of p. 135, alludes directly to the Mississippi scheme.884 money, and no more." May we not here be permitted to ask what the property-tax has to do with this question; and if not necessarily connected with it, why it was introduced.
In a subsequent passage my hon. friend asks, "Can any one believe that considerate men will much longer look to the public funds of the country as a safe and proper deposit for any permanent provision which they may be enabled to make for their families, if the principles on which the value of our currency now rests, should either be countenanced and supported upon a system, as beneficial to the state, or defended and continued as a necessary evil admitting of no remedy?" Considerate men in other countries, as well as in this, have to this hour thought them a safe and proper deposit, and I trust that well-founded confidence will not be shaken even by the authority of my hon. friend.
On the subject of the national character he says, "Whilst our merchants are individually reputed as pre-eminent for good faith and fair dealing, the opinion entertained of us as a nation is, that we are little short of sharpers in trade; and that whatever we gain by it, is so much lost to those who deal with us. For the countenance given to this opinion, prejudicial to every country, but not least to ourselves, we have, I think, more to answer than the most envious of our neighbours,"
Who we are, is not explained, nor on what ground that opinion is formed by foreigners (if really entertained by them) or concurred in by my hon. friend; it is therefore very difficult to combat. I can only say that my own view of the subject, as published in 1798, was very different, as will be seen from the following extract from a pamphlet of mine printed in that year.
"Great Britain, as the annexed tables will shew, derives the means for carrying on the war from the increasing manufactures and trade of her people, and from a commercial intercourse, beneficial to foreign countries at the same time that it adds to the wealth and prosperity of their, own."
The sentiment here expressed is very much to the effect my hon. friend says it would be our true policy to profess.
On the passages in his pamphlet, respecting the wages of valour, talent, industry, and labour, being paid in a depreciated currency, I forbear to comment for obvious reasons, beyond observing that 885 persons with intentions very different from those of my hon. friend, may make a most dangerous use of his authority; as he places these inconveniences in a much stronger point of view than the Committee did.
Other opinions of my hon. friend, though of less importance than those we have referred to, are still deserving of our notice: he says,
"There is not, therefore, nor can there be, any difference whatever, between any given coin, and an uncoined piece of the same metal of equal weight and fineness, except that the quantity of the former is accurately ascertained and publicly proclaimed to all the world by the stamp which it bears." And in another place,
"Every man has a right to receive a pound weight of standard gold for every 46l. 14s. 6d. of his just demand, because the pound is divided into 44½ guineas."
On the law of this I am not now disposed to enter; I could, indeed, add nothing to what has been ably argued by a professional gentleman of eminent talents*, but I would here again refer to the authority of Mr. Harris, for the practical inconvenience, which I have the less hesitation in doing, as he was a man of great eminence and learning who wrote in the middle of the last century.
"But although we are all agreed that gold and silver, like all other things, have increased or depreciated according as they grow scarce or in greater plenty; and that the coins made of them do, in this sense, share the same fate with the bullion; yet coins, as such, or as money, escape the fluctuations of markets, and the standard coins which are the measures of contracts are to be considered as having their value remaining permanent and unalterable:"—of course, except by legal authority. Let us for a moment consider what would be the consequence if it were otherwise; that is, if every man should be allowed to demand a pound weight of standard gold for every 46l. 14s. 6d. of his just demand. The perpetual inconvenience and uncertainty to which we should all be subject, in such a state of things, is evident. On every payment, the gold must be assayed to determine its fineness, the price of the day must be ascertained, the gold must be divided, weighed, &c.; in short, under such a system, the inconvenience would be intolerable, and the confusion inextricable.* John Raithby, Esq. of Lincoln's Inn.886 From another observation of my hon. friend, "that in whatever mode a subsidy be remitted, it must augment to that amount what is called the balance of trade," I must dissent: the contrary has been already shown from experience in the years of the largest expenditure, of which there were accounts before the Committee. I will not say that no instance can be found which militates against that experience; but I am perfectly sure that an increased foreign expenditure does not necessarily augment our exports. This is proved to a certainty, by the observations already made on a passage in the Report of the Bullion Committee. Mr. Wheatly, however, in his Essay on the Theory of Money and Principles of Commerce, goes somewhat be-yond my hon. friend; for he says, "It is not only practicable that the posture of a subsidy should be so favourable as to preclude the efflux of money; but it is practicable that it should be favourable to such an extent as to cause the influx of money in any quantity at the very time the subsidy is in payment:" Which he illustrates by stating, "that the Prussian subsidy was paid, 500,000l. in bills at an advantage of 20,000l.; and 700,000l. in bullion to a disadvantage of 10,500l., which produced together 1,209,000l. But as its exclusive remittance in bills would have given to the court of Berlin 1,248,000l. it is impossible to frame any adequate apology for the singular interposition of the bullion: and as it is evident that Mr. Harman would not, of his own accord, have selected this channel for the remittance, it is necessary to refer to the Bank of England for an explanation of his conduct."
Why this reference is made to the Bank of England it is difficult to guess; they were merely the sellers of the dollars when called upon for them; and had no more to do with the rest of the transactions than Mr. Wheatly himself. Mr. Harman, who was resorted to as a merchant of the first intelligence and experience in the city, was the sole adviser; he, of his own accord, (to use the author's words) selected the channel of remittance alluded to, and he did it wisely and prudently: I mention him confidently as the adviser, because he is still living and may be referred to. I will briefly state the case as it was. Nearly half a million was to be remitted to Berlin by a given day. Mr. Harman, aware of what must inevitably 887 happen if one house should sweep away all the paper that was to be had, to answer a demand so pressing, took the determination of proceeding in the manner so strongly objected to by Mr. Wheatly; the consequence of which was the exchange rose and the price of silver fell. The silver first sent was bought of the Bank at 5s. 1d. an ounce, and afterwards as low as 4s. 11d., which was exchanged at Amsterdam and Hamburgh for gold, and the latter sent on to Burlin. The exchange rose from 34.7 early in June 1794, soon after the first payment was to be made, to 35.10 in August. Such a charge however, against Mr. Pitt in a transaction of this sort, is not very surprizing from a gentleman* who could say of him,
"Mr. Pitt evinced a singular disac-quaintance with the principles of public (economy; and as all practice must be imperfect, unless the grounds upon which it should proceed be understood, he was necessarily erroneous in action. Of the real resources of his country, of the theory of circulation and exchange, and of the governing cause of the efflux and influx of money, his conceptions were wholly illusive! All the fond and idle sophisms of the old school,—all the fallacies of a Stewart, a Liverpool and a Rose,—respecting the importance and indispensable intervention of money, had complete possession of his mind, and every effort which he made to rescue himself from his difficulties was instantly subdued by the never absent thought that money was wanting."
Here I may appeal, I think, to those who differed most widely from Mr. Pitt in political matters, that in whatever way-he decided on points that arose, he followed the dictates of his own judgment, however disposed he was to listen with the most patient attention to the suggestions, and to avail himself of he experience of others. His knowledge of finance was profound in all its parts; and I will venture to say, that men the most experienced will admit, that in the circulation of money and exchange his judgment was correct. It was indeed almost intuitive on every point. But that it should be imputed to him that* To the general character of Mr. Pitt, (except as a Financier) for every thing that could render him estimable as a public or private man, this author bore most ample testimony in a high eulogium upon him. P. 183.888 his conceptions of the real resources of his country were wholly illusive, is inconceivable. For a vindication of so extraordinary a charge I need only call to the recollection of this Committee the state of the revenue at the time he came into office; the amount of permanent taxes was then 10,196,000l. very little more than equal to the charges on the aggre gale fund; a floating debt of nearly 30,000,000l.; the 3l. per cents at 56l. after the restoration of peace, and the means of taxation apparently exhausted, as those imposed by lord North in the American War were in 1784, 2,246,000l. short of their estimated produce. Under all these disadvantages, he so brought forth the resources of the country as not only to provide for its expenditure in all its blanches, but to establish in 1786 a Sinking Fund, securely protected, the income of which now considerably exceeds what the whole revenue of the country was when he entered on the management of it. It had increased, when the world was deprived of him, to the amount of 48,995,000l.: and what is a most unquestionable proof of this merit, our trade, manufactures, and internal prosperity in every respect kept pace with the rapid increase of the revenue. Need a minister of finance have a higher praise? With other political matters, we have in this enquiry nothing to do.
Having shewn that Mr. Pitt was right in sending bullion for the Prussian subsidy, conformably with the opinions of Mr. Harman, it may not be amiss to see how far Mr. Wheatly is supported in his position of the preferable mode of remitting by bills by the authority of Mr. Locke, in whose works the following passage will be found.
"Returning money by exchange into foreign parts, keeps not one farthing from going out: it only prevents the more troublesome and hazardous way of sending money backwards and forwards."
It is hardly necessary to add, that in making foreign remittances we should be governed by no fixed rule, but make use of bills or bullion, according to circumstances, as they shall occur from time to time. The charge against Mr. Pitt, and the observations naturally arising from it, are so immediately connected with the subject under discussion, as to justify me, I hope, in the opinion of the Committee, for having taken up a small portion of their time in commenting on them.
889 I proceed now to consider how far there is any foundation for the blame imputed to the Bank, for not taking measures to make payments in cash. I am no advocate for that Company, on any other than public grounds, and no farther than I think them entitled to be defended, from their having acted wisely and uprightly in the conscientious discharge of an extremely difficult duty: nor would I contribute to protect them, in delaying for one hour to pay in cash after they shall have the possible moans of doing it. I admit too, that to effect that very highly desirable object, no expence should be spared. The Bank have derived large profits by the increase of their notes, and they ought not to hesitate at incurring any expence for the attainment of it, when that shall be practicable. But I contend that no expenditure, to whatever extent, could in the smallest degree contribute to it at present. The only suggestion for that purpose, from the Bullion Committee, is the reducing their issues, which I am persuaded would be attended by the pernicious consequences already alluded to upon our foreign and domestic commerce, our manufactures and internal improvements, and consequently on the labourers of the different classes; as well as upon the management of our revenue, without the intended effect being produced by it. Here again we have the benefit of experience. By the reduction of Bank-notes in 1796, from 10,632,000l, in January of that year to 9,203,000l. in January 1797, the drain of gold was not prevented in 1797.
At present gold is no where to be had in sufficient quantities to afford any thing like an adequate supply. My hon. friend says, "If a supply be necessary for our circulation, it must be procured by an exchange of other commodities, which we can spare, just in the same way as hemp, for instance; an article of which it is at least as much the interest of our enemies to intercept the supply:" but he does not tell us where the commodities are to he sent in greater quantities than our present exports. He must know that we already export all we can; and in the last year more than we ought to have done, according to his own shewing. In another part of his work, my hon. friend says, that "gold does not form the basis of the currency of any other country; that the quantity of gold in Europe is not less now, and is probably greater than it was at any former period; that the price has not 890 risen on the continent; that it is to be purchased in the markets there; in the markets of Africa and America; and in our own market." This is surely a most extraordinary assumption, when we have daily proof of purchases from the continent with such eagerness, as to set no limitation to prices. Respecting the markets of Africa and America, my hon. friend could hardly be serious; from the latter, remittances are already obtained to the extent of our manufactures, of which, for a time, there is unfortunately a glut, as has been already observed; and from the former, the supply for a long time has not been considerable. The home-market is utterly unavailable, in consequence of the demand upon it to satisfy debts on the continent, which are paid by our merchants with the strictest punctuality, while the payment of those due to this country from any part of the continent are universally suspended by the oppressive and tyrannical proceedings of our inveterate enemy.
§ On looking lately into the minutes of the Admiralty, in king William's time, which were in my possession, but which I have since presented to that Board, who had no copy of them, I found the following entry:
§ "Admiralty Office, Monday evening, "14th March, 1695.
§ "The EARL OF ORFORD,
§ "SIR GEORGE ROOKE,
§ "and three other Lords.
§ "The Secretary of State to be acquainted that captain Long is ready to proceed on his intended expedition, with his Majesty's ship the Rupert's Prize, to find gold, and that the board will give him directions to follow his Majesty's orders."
§ This struck me as a very singular measure when I read it, but I profess I think it is less extravagant than either of the suggestions of my honourable friend. The ship might, by an odd accident, have fallen in with an island in some unknown sea, where the streets were paved with the precious metals; but the places to which he would have directed the Bank must have failed them.
Mr. Aaron Asher Goldsmid
is asked, "Has much gold been received from the Continent of Europe?" to which he answers, "I believe none; I judge so by no continental merchants being sellers to us." And when asked whether any quantity has come from the Brazils, his answer is. 891 " Gold has been lately sent over to the Brazils; and silver also:"—from whence we know that supplies of the precious metals used to come. It is confidentially stated that the government there raised the value of their money as soon as the Bullion Report was seen, to prevent the coin being sent out of the country. Mr. Merle says, he could not get gold enough for the home trade (which does not call for the one twentieth part of the whole demand), and that he had been obliged to stand still some time. And when asked what he conceived to be the reason of the high price of gold bullion, he answered, "The exchange making it so much more favourable to transmit it than bills." And to the question, "Whether since the period of 1800, as bank notes have increased in quantity, has the price of gold bullion risen proportionably?" his answer was, "No; I do not think bank notes have had any effect upon gold." Mr. Goldsmid had said the same.
I would here again refer to Mr. Locke, to the perusal of whose writings my honourable friend so earnestly recommends us.
"The only way to bring gold and silver into the mint, for the increase of our money and treasure, which shall stay here, is an overbalance of our whole trade. AH other ways to increase our money and riches, are but projects that will fail us. The true and only good reason that brings bullion to the mint to be coined is the same thing that brought it to England to stay there, viz. the gain we make by an overbalance of our trade. When our merchants carry commodities abroad to a greater value than they bring home, the overplus comes to them in foreign coin and bullion, which will stay here, when we gain by the balance of our whole trade."
How much the balance of our trade has been affected by foreign expenditure has been already observed upon. If, however, it were possible, by any means, for the Bank to obtain considerable quantities of gold at the present prices, or even at a very great reduction of them, unless those could be kept down to little more than the mint price, not one guinea more would be in circulation than at present, as the money would be melted as fast as coined. The melting, though contrary to law, could not be detected, and of course not punished, as that operation is perforated in the most secret manner, 892 without assistance; and when the coin is converted into bullion, it may be carried to the Bank, and there sold; or to the Mint, and there again coined, without a question asked where it came from, or how the party came by it.
Neither perjury nor the aid of others is necessary, as in the case of exporting bullion produced from coin; until therefore, the price of gold can be greatly reduced, and we shall have the means of keeping it down, it would be destructive to the Bank to compel them to pay in specie, which would infallibly disappear as fast as it was issued. The folly of such a compulsory measure is strongly marked by Mr. Harris, who was himself an officer of the Mint, and would have profited largely by coinages.
"Besides debasing the standard, another expedient has been hit upon for feeding the mint, and that is purchasing bullion, at an advanced price, for coinage, or the giving more per ounce for bullion than it would be afterwards worth in coin. But although this measure is very harmless, as to any consequences attending it, except to those immediately concerned, yet it cannot be reckoned a very wise one; for whatever be the cause that prevents bullion from coming to the mint, whilst that cause subsists, (and coining will not remove it) the new coin will be melted into bullion again; and again coined; and so round in a circle, as long as a premium to the import of bullion into the mint is continued. And after all this expence, and all the expectation raised from it, no new coin will be seen. The same cause that created a scarcity before, will carry all that away, and nothing will be left but the gains that had been made at the mint." To which he might have added, and the profits of the fraudulent melter.
This is put so clearly, that I should waste the time of the Committee if I were to add any thing to shew how utterly useless it would be to the public to compel the Bank to pay in specie till bullion can be had at a reasonable rate; and, I trust, I have shewn how entirely it is out of the power of that Company to procure it even at a greatly advanced price, under present circumstances: while the consequences to them, and through them to the public, would be ruinous. On any means of providing bullion by the Bank, the Report before us is perfectly silent; but, in the exposition of it by my hon. friend, he suggests as an expedient to avoid some of 893 the inconveniences of recurring to payments in specie, that the whole of the 6,000,000l. advanced in consideration of the deposits of public money, if necessary, might be repaid to them; to which an answer might be furnished from the evidence given by Mr. Henry Thornton to the Secret Committee of Lords in 1797; who said, "The circumstance of government paying oft' their debt to the Bank, which has been supposed in the question put to me, would evidently, as I apprehend, make no difference in any part of the case which I have described. The debt which Government would pay to the Bank would be paid by a loan from the public, and would be raised immediately from the banking or mercantile world. I apprehend that the very negotiation of a loan in times of great difficulty and distress, since it occasions the payment of large instalments on particular days, would be the cause of peculiar apprehensions antecedently to those clays, and of very eager endeavours of some bankers to provide Bank-notes for the payment of whatever might be their expected share of the instalments; which share they would not know distinctly beforehand, since they are not informed of the proportions of the loan which each customer may have."
My fear of exhausting the patience of the Committee has induced me to limit very much the references to the evidence given to the former one, but I hope many of those to whom I now address myself have read the whole: I have done so with the closest attention, and I can most safely say, that I have met with nothing in any part of it which at all countenances the measure recommended by the Report, except in the examination of sir Francis Baring, and the continental merchant; the former of whom is decidedly against a compulsory measure with the Bank, and the latter plainly and explicitly says, that recurring to payments in specie would be of little use, unless we allowed that to be exported, in direct contradiction to laws which have been in force for several centuries; the expediency of enforcing the provisions of which may have been doubtful, and I have thought it so till this time; but if no such laws had been in existence now, I should have been inclined to recommend the enactment of an effectual one, as a temporary measure.
Our commercial distress cannot be imputed to the stoppage of payments in cash 894 at the Bank, as proofs of our rapidly increasing prosperity during the first twelve years of that suspension have been annually laid before Parliament, and through that channel have been made public. Our commerce did not suffer till measures were adopted by the inveterate enemy of this nation, such as were never practised before in any civilized country on earth. How long the nations of Europe will endure the tyranny under which they are suffering, still more severely than our commerce does, it is very difficult to calculate: the violence, as well as the injustice of. it, with the extent of the misery inflicted upon the inhabitants, may induce them so far to burst from their chains, as to open channels of trade to satisfy wants of the most urgent nature.
If I have shewn satisfactorily to the Committee, that the Report is not only full of errors, but is contrary to the whole of the evidence, with the exceptions before alluded to, which exceptions, if attended to, strengthen the case against the Report; that the Bank, with the best inclination to procure gold, could by no possibility obtain it; and that, if they could procure a large supply, the public could not derive the most trifling advantage or accommodation from it, unless the price could be reduced; I may venture to hope that the learned gent. will not prevail with this Committee to concur with him in the resolutions he has proposed, to compel the Bank to pay in cash at a stated period, even if he shall be disposed' to make that a later one than eighteen months.
No one can be more disposed to give the members of the former Committee the fullest credit for the purity of their intentions than myself; they are well entitled to the most favourable construction of their motives; but, carried away by opinions previously formed, they seem not to have been aware of the effects likely to flow from an adoption of their opinions. I feel this most strongly, and am persuaded the worst enemy of this country could not propose a measure more likely to be injurious to its best interests in a commercial view, than that which is now under our consideration. Gamier, a minister of Buonaparté, was the first who held out an expectation of the depreciation of Bank-notes: and every other minister since him has invariably dwelt upon the ruin in which this country must be involved by our Bank paper losing its 895 credit: I trust we shall not be instrumental in aiding their speculation.
It is now thirteen years since I ventured to represent "that on Great Britain rested the hopes of returning happiness, independence and security among nations;—that she was the bulwark against the flood which threatened to overwhelm the world." That bulwark, God be praised has stood firm;—my anxious hope is that it may not be shaken; and my earnest intreaty to the Committee is, that whatever injury it may suffer, may not be the work of our own hands.
§ Mr. Henry Thornton
said, that however ably, as well as fully, the learned gent. who opened this discussion, had treated the subject, he conceived that there were some important points which required amplification; and he should prefer entering on these, to the examination of those numerous and smaller questions respecting the accuracy of the report of the Bullion Committee, on which the right hon. gent. who preceded him had principally dwelt. A time would come, when the respective merits of the several propositions intended to be submitted by different members would be brought into minute discussion, and an answer to the right hon. gent. might then, perhaps, be more conveniently given. He trusted the House would agree with him in the propriety of his confining himself, for the present, to great and broad principles; he should apply himself to the spirit of some of the first resolutions now proposed, and to the main point at this moment in issue. That main point was, not whether the Bank should open at any particular time, or any change be made as to the law in this respect, which would be a second consideration; but whether with a view to facilitate such opening if it should be prescribed, or with a view to secure the due maintenance of our standard during the long continuance of the restriction of cash payments, if the continuance should be deemed advisable, it was or was not expedient that the Bank should regulate the issues of its paper with a reference to the price of Bullion, and the state of the exchanges. The Bank and the Bullion Committee were at variance on this leading and essential point. The Committee affirmed, that the quantity of paper had an influence on the price of bullion, and the state of the exchanges; all the directors of the Bank who had been examined, affirmed that it had not. The right hon. gent. over the way (Mr. Rose) 896 likewise insisted that it had not. "None whatever," were his words. This was a great practical question. If the Bank had in their own hand the power of improving the exchange, and lowering the price of bullion, and did not use it, if they had the means of restoring, or contributing to restore, the standard of the country, and did not at all believe that they possessed it, then it became the House, who had exempted them from the necessity of making payments in cash, supposing it to agree with the Bullion Committee, to take care that the Bank should resort to the proper remedy of the present evil, by interposing some suggestion of their own on the subject.
He would now proceed to prove, that quantity of paper had an influence on the price of bullion and the exchanges. There were two steps in this argument. First, he had to shew that quantity of paper influenced its value, or in other words, the relative value of commodities exchanged for it. Could it be doubted, on the first mention of the proposition, that the quantity of all articles affected their value? This was unquestionably true of the precious metals, for the augmented supply obtained from the mines of the new world, was acknowledged to have produced that general lowering of the value of money, which had been experienced in Europe for many years. And why was paper, the substitute for gold, to be exempted from this universal law? He had never yet found any man, who, when the simple question was put to him, whether an augmentation of paper had a tendency to reduce its value, or raise that of commodities, had been so singular as to refuse his assent to the proposition. One of the Bank directors of Dublin, when examined before the Committee on the state of the Irish Exchange, though firmly persuaded that an extension of paper currency had no influence whatever on exchanges, had been very ready to agree that it must have an effect on the price of commodities, and one of the directors of the Bank of England had then, if he rightly recollected, made a similar admission.
This point had been conceded only the other day in the House; for in debating the question of granting Exchequer Sills to the distressed manufacturers, it was generally affirmed and understood that the supply of those Bills, which would operate in some measure as circulating medium, and would facilitate their obtaining if, 897 would enable them to maintain their prices at a point higher than that to which they otherwise would have fallen. He himself well remembered having in 1796 observed the influence upon prices, which the restriction of the Bank discounts at that period had produced. He recollected to have then heard a West-India merchant, who had failed to obtain from the Bank the whole of his usual and expected accommodation, declare his intention of proceeding in consequence to sell some of his sugar at a somewhat reduced rate; half an hour after which, he heard a sugar-baker express his indisposition to buy sugar in consequence of the same scarcity of money which he also had experienced. Was it not obvious, that when these two men met in the sugar-market, some fall in the price of that commodity would be the result? When money was generally scarce, an influence of this kind would diffuse itself over all commodities: it was thus, in short, that general prices were regulated; and it was absolutely necessary to set out in such an investigation as the present, with the establishment of some great and fixed principles in the mind; for a thousand points would then become manifest and simple, which otherwise would be contradictory and perplexed. He did not mean to say, that equal quantities of paper would affect the value of equal quantities of goods in an exactly equal degree, under all the varying circumstances which might arise. Far from it. He insisted, however, that augmentation of paper always tended to the diminution of its value, and diminution to its increase. The principle was always operative: its tendency was uniform, though not always productive of an equal effect.
A great fall of prices had at one time been experienced in Dublin, in consequence of the suppression of a large part of the currency of the place, as one of the Irish Bank Directors had incidentally observed.
The hon. gentleman said he admitted that great pressure, and even calamity, might arise from any sudden and very Violent diminution of the circulating medium: he had himself complained, of what he thought too great and rapid a reduction of the paper of the Bank of England, in the year 1797, when called upon to give evidence before the Secret Committee of the Lords and Commons on that point. He was as earnest as any man to 898 prevent severity of pressure in any quarter, and having already shewn this disposition in the Bullion Committee, he was anxious to express it also in the House. But he was now investigating principles: he was aiming to shew the tendencies of things; and such tendencies were often most clearly evinced by the palpable effects manifested in some strong and striking case.
Assuming, then, the tendency of every increase of paper to lower its own value, or, in other words, to augment that of commodities exchanged for it; a point, as he had just observed, admitted on all hands, and so plain as scarcely to demand proof; he had, in order to establish the second and concluding part of his argument, merely to prove something which was as undeniable as any mathematical proposition, as plain as any common question in arithmetic, and of which he felt just as confident as of his own existence.
This was, that supposing an increase of paper to take place, and to augment the general price of commodities in exchange for that paper, it must influence also the state of the Exchanges, and raise the price of bullion. For what, in the first place, do we mean by the rate of our exchanges? We mean the rate at which the circulating medium of this kingdom passes in exchange for the circulating medium of other countries. Supposing, then, the. circulating medium (the gold or silver coin for example) of other countries to remain as before, that is, to bear the same price as before in exchange for commodities, while the value of our currency, in exchange for commodities, has been altered, it follows that our currency must exchange for a new quantity of such foreign coin. It also follows equally, that it must exchange for a new quantity of bullion; for foreign coin is itself made of bullion, deviates from it in only a limited degree, and is almost identified with it. Bullion, indeed, is a commodity: it comes from America in the same manner as other commodities—is subject to those laws which govern their rise and fall—and consequently, when it is affirmed that an increase of circulating medium raises the price of commodies, bullion must be considered as included among their number. It could not be supposed that one article would be affected by an increase of the general currency, and not another;—the produce of manufacturing industry, for example, and not the produce also of the 899 surface of the earth, and of the mines. All things, it is manifest, must ultimately partake in that increase of price which an augmentation of currency tends to produce, as well as in that depression of price which a reduction of it occasions.
The hon. gentleman next proceeded to observe on the doctrine which was maintained that the present high price of bullion and state of the exchanges resulted from the unfavourable circumstances of our commerce, and the present extraordinary state of the world. The evil was referred to what is called the unfavourable balance of trade or of payments, and was thought to have nothing to do with quantity of paper, inasmuch as this balance of trade and payments was deemed a separate and independent cause. He was willing freely to admit the influence of the present circumstances of our trade and expenditure, on exchanges and the price of bullion; but he could not allow that these had a separate and independent operation.
He should best explain himself, on this difficult but important subject, of the influence of balance of trade, as it is called, or balance of payments, by putting three several cases; in each of which cases, he would suppose that we had to struggle with political and commercial difficulties exactly resembling the present.
First, he would assume that we had no laws forbidding the melting and exportation of our coin, or limiting the rate of interest, or protecting the Bank against cash payments, it being the simple policy of the country to let every thing take its own course. By thus adverting to what might be called a state of nature, we should be able to discover what was the natural limitation of the evil to which we were now subject; and what the kind of corrective which administered itself. He was not examining whether it was wise to commit ourselves to this state of nature; he was now only investigating principles, that we might thus obtain some light to guide us amidst those difficulties of our own artificial system, in which our understandings seemed to be lost.
His second case would be, the actual case of this country before the cash payments of the Bank were suspended; and his third, our case at present.
First, then, he would suppose, that we were paying in cash, and that we had no usury laws and no law forbidding the melting or exportation of coin; the kingmerely 900 affixing his stamp to those pieces of gold which were the current circulating medium, in order to certify their quantity and fineness. For the sake of simplifying the subject, he would also assume the same circulating medium to be employed in surrounding countries. If, while we were thus circumstanced, the same evils of which we now complain were to arise, what would be the consequence? Doubt less much of our gold coin would be taken from us; and, perhaps, a larger quantity of this than of other articles. The whole, however, would not leave us; a high rate of interest would arise, and this extra pro fit on the use of gold, which would increase as its quantity diminished, would contribute to detain it here—some foreigners, probably, transferring property which would take the shape of the precious metals, or continuing to afford to us the use of it for the sake of this high interest, Such portion of our coin would be transferred, as would cause the remaining quantity to bear the same value in exchange for our remaining commodities, which the same coin in foreign countries bore to commodities abroad. In other words, gold and commodities would be exported in that relative proportion in which the exportation answered; and since every diminution of the quantity of our gold would produce an augmentation of it abroad, the relative value of gold to goods, in this and in foreign countries, would soon find one general level; and thus gold would remain the standard of value among us all. This, indeed, was simply to suppose the same case to occur in respect to Europe, which usually exists in respect to the different provinces of the same kingdom. He repeated, that he was merely putting a case for the sake of illustration; and the great point which he meant to press was this, that according to what he had denominated the state of nature, there would be a reduction of the circulating medium of this country under the present circumstances of our trade—a reduction which would tend to bring down our prices to the level of the prices which similar commodities, allowing for all expenses of transportation, were found to bear in exchange for gold in the general market of the world.
He would now put the second case. He would suppose our laws to forbid both the melting and exportation of coin, and to limit the rate of interest to 5 per cent.; and the Bank to be paying in cash. In 901 other words, he would assume that we were circumstanced as we were before 1797, and that exactly the same political and commercial difficulties which we now experience were to arise.
The effect of these difficulties upon the quantity of our currency, would resemble the effect assumed to be experienced in the former case, though it may not be exactly equal in degree. There would arise a similar demand for cash, with a view to exportation; and though the law would interpose some obstacle to its transmission, yet some of our gold would probably go abroad, and it would serve, as in the former case, both as a remittance which would contribute to pay our debts, and as the means of augmenting the circulating medium of foreign countries, as well as of diminishing our own. The Bank, in this event experiencing a drain, would, in some degree, contract its issues. It would not only not increase them, as it has in some degree done during the last two or three years of the very unfavourable state of our exchanges: it would diminish them; it would feel itself, in consequence of our new circumstances, under the painful necessity of straitening its accommodation either to merchants or government, or both; and some difficulty in effecting the limitation would arise out of the necessity under which the Bank would consider itself to be placed of still continuing to lend at only 5 per cent. It was only by limiting its paper that it could maintain its own cash payments. The reduction would undoubtedly be an evil, but it would be an evil to be balanced against another evil otherwise to be incurred, that of stopping payment, and Ceasing to abide by the standard of value which the King and the law had prescribed;
He was aware that this view of the case was not the most gratifying, and might not be welcome to some gentlemen around him; but it was the truth, and it was only by the right knowledge of the nature of our situation, that we could expect to come to any just conclusion. Thus, in the second case, exactly as in the first, there would be a reduction of the total quantity of circulating medium, which would be carried so far as to equalize, or nearly equalize, the relative value of our currency and commodities with the relative value of currency and commodities in other countries. Doubtless a pressure night arise which possibly might be considerable: 902 (A cry of Hear! Hear!) He wished to know whether his principles were admitted. Was it acknowledged, that if we were now paying in cash, as before 1797, the Bank would thus limit its issues, and by such limitation would lower the price of bullion, and rectify the exchange? He should be glad to have a distinct affirmative or negative to this question. What degree of pressure might result, was not the main point now under consideration. He did not care at this moment what gentlemen said as to that point. He was in search of a principle. Did they or did they not admit his fundamental position, namely, that when a very unfavourable exchange, resulting from what is called an unfavourable balance of payments, arises, the limitation of the currency of the country serves to limit the evil? He had shewn, first, that this was the corrective which applied itself in what he had called the state of nature; and, also, secondly, that this corrective applied itself under that partly artificial system, under which we lived before our cash payments were suspended.
He now advanced to his third, which was the present case. The Bank, since they became protected against the necessity of making cash payments, not unnaturally thought that they might use more liberality than they would have ventured to exercise under the same circumstances of our trade, if they had been subject to a drain for cash. They, perhaps, were not much to be blamed on this account. Indeed, they appear not to have believed that a reduction of their paper would mend the exchange, for they had not examined very deeply or philosophically into the subject. They had continued, although the exchanges turned much against us, gradually a little to augment their notes, as they had done for a long time before, they appearing to themselves not to increase, but merely to maintain the existing prices; and they hoped that the evil of the unfavourable exchange would correct itself. Possibly some new latitude might fairly be allowed under the new political circumstances in which we were placed. It was, however, important not to mistake leading principles, and not to fancy that an exchange running against us with all countries for two or three years, and reaching the height of 25 and 30 per cent. accompanied with a corresponding high price of gold, ought at no time and in no degree to be checked by 903 that limitation of the currency to which nature, as it were, as well as our own practice before 1797, taught us in such cases to retort. He was aware that before 1797, if our coin was sent abroad, it went illegally. (A cry of Hear! Hear!) The illegality of the transaction, however censurable it might render the individuals engaged in it, was no reason for dismissing the consideration of this part of the subject. It was by this illegal melting and exportation of our coin that the drain on the Bank used heretofore to be produced; and it was by the operation of that drain on the mind and practice of Bank Directors, that the evil of a high price of gold, and an unfavourable exchange, was checked.
It was affirmed in the Resolutions to be proposed by his right hon. friend (Mr. Vansittart), that there was a want of correspondence between the amount of bank paper in circulation at a variety of periods, and the state of the exchanges, the exchanges being often more favourable when the notes were higher, and less favourable when they were lower in amount. This might be the case in certain instances which might be selected; for a variety of undefinable circumstances would lead to little fluctuations, both in the exchange and the amount of notes. It, however, was remarkable, that three cases had occurred, and only three within the memory of persons now living, in which the experiment of a restriction of discounts had been made; and in each of these the effect had been conformable to the principles which he was affirming. He meant to say, that at three several times—namely, 1st in 1782 and 1783; 2dly, in the end of 1795 and the beginning of 1796; and 3rdly, in February 1797; and only at these three times the Bank had experienced a material drain of their cash;—that in each of these cases they had been led by the drain, as they themselves professed, to restrain their supply of discounts;—and that not long alter each of these three periods, the exchange and the price of bullion manifestly improved. Perhaps a question might arise, whether the improvement of the exchange through the year 1797, might not be referred to the restriction of paper in 1795 and 1796, rather than to that in the single month of February 1797: on which supposition the cases might be said to be two, instead of three; the effect of the limitations in the two latter periods being considered as combined.
904 That in the first period, namely, in 1782 and 1783, the experiment both was made and answered, was proved by the testimony of the late Mr. Bosanquet before the Secret Committee of 1797, who referred the improvement to this cause. The improvement of the exchange in 1796, and 1797 would be seen in the papers now before the House, and would also be found to be stated in the evidence of Mr. Pitt before the Secret Committee; by whose testimony it also would appear how earnestly the Bank had previously insisted on his repaying them some large advances, on the alledged ground of the existing drain; of which advances only a part was afterwards afforded in the way of accommodation to the merchants. A, resolution of a new and very strict kind had been passed by the directors, on the 31st December 1795, with a view of limiting the total amount of mercantile discount, and served remarkably to shew how much their liberality had been restrained, before the suspension of cash payments, by a drain of gold.
The limitation of paper in February 1797 was sudden and very great, and arose from a drain occasioned, not by an unfavourable change, but a totally distinct cause—an alarm produced through fear of an invasion. He had always thought, and still was of opinion, that the sudden limitation of paper at that period tended not to mitigate the alarm, but rather to increase it; but it unquestionably served to manifest the general habit of the Bank of reducing their issues when they found their gold taken from them. Since 1797, the Bank having been subject to no drain, in consequence of their being under no obligation to pay in cash, the experiment of a limitation of discounts had not been tried, and it had not been likely to be tried between 1783 and 1795, for that was an interval of peace, when exchanges are less subject to fluctuation, and when, moreover, the current rate of interest in the market being lower than in war, and as low perhaps as the rate charged by the Bank, there would be less disposition than in war to borrow of the Bank to an extent which should lead to an excessive issue of notes. It was in evidence before the Secret Committee of 1797, that the Bank had, at one period of the peace, deliberated whether they should not lend at a less rate of interest than five per cent., so small was then the demand for discount.
This subject, of the rate of interest, was 905 one to which he wished to call the attention of the House; it seemed to him to be a very great and turning point. If the principle adopted by the Bank was that which they professed, of lending to the extent, or nearly to the extent, of the demand made upon them by persons offering good mercantile paper, the danger of excess was aggravated in proportion to the lowness of the rate of interest at which discounts were afforded; and one cause, as he conceived, of the somewhat too great issues of the Bank, during the present war, had been the circumstance of their lending at five per cent., when rather more than five per cent. might in reality be considered as the more current rate paid by the merchants. Private bankers had generally found, during the war, that the growing demand of their customers on them, for discounts of five per cent. on very good bills, was apt to exceed the supply which any means of theirs could enable them to afford. If they gratified every wish, there would be no bounds to the gradual increase of application. They therefore gave the preference to some applicants, and the persons who obtained the accommodation conceived themselves to be receiving a favour. The usury laws forbid the banker to charge more than five per cent.; but be who borrowed from a private banker, naturally, and of his own accord, bestowed the benefit of his running cash, which was often an important consideration; while, in the case of his discounting at the Bank, he kept a running cash which was extremely insignificant, and therefore borrowed at the rate of exactly five per cent. in that quarter. Again, if he borrowed in what is called the money market, he gave to a broker a small per centage on every bill; and thus paid not less than five and a half or six per cent. per annum, in the way of interest.
It was material to observe, that there had, since the beginning of the war, been a continual fall in the value of money; he meant, of money commonly so called, whether consisting of cash or paper. This had been estimated by some at 60 or 70 per cent. and certainly was not less than 40 or 50 per cent.; which was, on the average, 2 or 3 per cent. per annum: it followed from hence, that if, for example, a man borrowed of the Bank 1,000l. in 1800, and paid it back in 1810 having detained it by means of successive loans through that, period, he paid back 906 that which had become worth less by 20 or 30 per cent. than it was worth when he first received it. He would have paid an interest of 50l. per annum for the use of this money; but if from this interest were deducted the 20l. or 30l. per annum, which he had gained by the fall in the Value of the money, he would find that he had borrowed at 2 or 3 per cent. and not at 5 per cent. as he appeared to do. By investing his money cither in land or in successive commercial undertakings, in the year 1800, and then finally selling his land or his commodities in the year 1810, he would find the produce amount to 200l. or 300l. above the 1,000l. which he had borrowed; which 2 or 300l. being deducted from the 500l. interest which he had paid, would make the neat sum paid by him to be only 200l. or 300l. It was true, that men did not generally perceive, that, during a fall in the price of money, they borrowed at this advantageous rate of interest; they felt, however, the advantage of being borrowers. The temptation to borrow operated on their minds, as he believed, in the following manner:—they balanced their books once a year, and, on estimating the value of those commodities in which they had invested their borrowed money, they found that value to be continually increasing, so that there was an apparent profit over and above the natural and ordinary profit on mercantile transactions. This apparent profit was nominal, as to persons who traded on their own capital, but not nominal as to those who traded with borrowed money; the borrower, therefore, derived every year from his trade, not only the common mercantile profit, which would itself somewhat exceed the 5 per cent. interest paid by him for the use of his money, but likewise that extra profit which he had spoken of. This extra profit was exactly so much additional advantage, derived from the circumstance of his being a trader upon a borrowed capital, and was so much additional temptation to borrow. Accordingly, in countries in which the currency was in a rapid course of depreciation, supposing that there were no usury laws, the current rate of interest was often, as he believed, proportionably augmented. Thus, for example, at Petersburgh, at this time, the current interest was 20 or 25 per cent., which he conceived to be partly compensation for an unexpected increase of depreciation of the currency.
The observations which be had made 907 had been suggested to him by his attention to a variety of facts; and he would now trouble the House with the statement of some specific cases, which would contribute to establish the truth of the doctrine, which he had asserted—namely, that an increase of the quantity of paper tended to diminish its value; and a reduction of its quantity, to improve it;—that when the quantity became too great, a drain of cash arose; that this drain was checked by a limitation of paper;—and that the excess, and consequent drain, were most likely to accrue when any circumstances rendered the rate of interest taken, less than the current and actual rate at the time in the common market.
The case of the Bank of Paris was remarkably in point, and it was full of instruction to the parliament and people of this country. That Bank stopped payment in 1805, the year when the war had again broken out. It was a Bank as independent as any such institution in France could be, of the French government. It had a good capital, and circulated notes around the metropolis of France; which it emitted only in the way of discounts, and, as far as he understood, only on the security of bills at short dates, and of a good character: it thus exceedingly resembled the Bank of England, though inferior in the extent of its transactions. The French government having occasion in 1805 for some advances on the security of what they call their anticipations, a species of security on which it was not consistent with the rules of the Bank of Paris to lend, borrowed the sum in question of some French merchants and capitalists, who then contrived to fabricate among themselves, and proceeded to discount at the Bank, as many securities as were sufficient to supply their occasions; so that the Bank was the true lender. The object of thus borrowing at the Bank, was to save something in the way of interest; for if these anticipations had been sold in the market, the price would have been very disadvantageous. The consequence of this transaction was, an augmentation of the paper of the Bank of Paris; a drain of their cash followed; the diligences were found to be carrying off silver into the departments, which the Bank, with a view to its own safety, had continually to bring back, with much expense and trouble. The circulating medium of the metropolis had now plainly become excessive. Greater, facilities were afforded for borrowing 908 in that quarter than in other places, and the country wished to partake in those opportunities of extending purchases which the metropolis enjoyed. But the paper of the Bank would not circulate in the departments; it was therefore necessary first to exchange it for coin; and the coin being then carried away from Paris, the plenty of circulating medium would equalize itself through the French territory. In England we had country bank paper, which was interchanged for Bank of England paper, and proportioned itself to it; bat no part of the English paper would circulate out of the country. What therefore the departments of France were to Paris, that Europe was to Great Britain. If large opportunities of borrowing were afforded in London, and over England, by a free emission of paper, there would arise a disposition to exchange that paper for gold, because the gold might then be sent abroad, and it would tend to diffuse over the continent that plenty of circulating medium which we had introduced into our own territory.—It might, perhaps, be thought that the cases were dissimilar, inasmuch as we had an unfavourable course of exchange, and a high price of gold, into which the evil which we suffered appeared to resolve itself. But it would be found that there arose also a premium on silver at Paris, and an unfavourable exchange. between Paris and the departments of France; and this was proportionate to the expence and trouble of bringing back the silver from the departments. There was, therefore, a similarity in the two cases. The Bank of Paris at length stopped payment; the government was consulted, the Bank was directed to reduce its paper; and in the course of three months, having pursued this principle, it opened without difficulty The discount on its paper, or, in other words, the premium on coin, had varied from I to 10 or 12 per cent.; but after the reduction of paper it ceased. The exchanges of France with foreign countries bad also turned about 10 per cent. against that country.
A special commission, of which M. Dupont de Nemours was the secretary, was subsequently appointed to inquire into the causes and effects of this stoppage of the Bank of Paris; and it was from the French Report published by this gentleman that he collected the facts which he had stated. The report proceeded to suggest the means of preventing the recurrence 909 of a similar evil, and it advised three things: first, that the government should never solicit any loans from the Bank, on the ground that such an application amounted to a demand, and might lead to issues inconsistent with the true nature of a banking establishment. It was unnecessary to observe, how unlike our circumstances, in this respect, were to those of France. Our Bank directors had sufficiently shewn, in 1796, their complete independence of the government; for they then peremptorily refused to afford to Mr. Pitt even the continuance of the existing advances. The second suggestion of the commission was, that the Bank of France should lend only on securities coming due within two months; and this, as well indeed as the other, was for the purpose of enforcing the third and principal admonition,—namely, that the Bank should always "draw in its discount as soon as it perceived the existence of a more than ordinary disposition to exchange bank paper for money*." "For what," added the Report, "mean these applications for money? They imply that there are more Bank notes on the spot than the circumstances of the time demand. And how are you to provide against this evil? By diminishing their quantity, through a reduction which shall exceed the new emissions†." It is then added, that if the directors of the Bank will but be attentive to the first signs of superabundance, if they will moderate the evil in the first instance, they will almost always retain the mastery; and thus the horseman (it is said) will not be thrown out of his saddle.
Many of the principles urged by the Bullion Committee, would be found to be remarkably confirmed by this report. It appeared by it, that the French over-issue arose from an attempt to turn certain securities into cash, at a rate of interest lower than that which was the natural one at the moment. The report dwelt much on the error committed in this respect.* "Reserrer pescompté, aussitôt que l'on s'appercoit qu'il se presente a la Caisse plus de billets à réaliser en argent que de coutume.†" Qu'estàdire que ces demandes d'argent? Qu'il y a sur la place plus de billets que les affaires du moment n'en exigent. Et comment y pourvoir? En diminuant leur quantité par un retrait plus fort que l'emission nouvelle.910 The anticipations, it said, ought to have been sold, though at a losing and discreditable price, at whatever might have been the rate in the market.
Again, the report stated that the limitation of the French bank paper did not produce an instantaneous, or exactly corresponding effect; but yet that after three months it issued in the expected consequences. All this was in exact conformity with the doctrines of the Bullion Committee. They had never said that every small fluctuation of Bank of England paper would be attended by either an immediate, or an exactly proportionate, influence on the exchanges, or on the price of gold. They had only affirmed that the unquestionable tendency of limitation was to improve exchanges; and had recommended that the Bank should feel its way. The discount of 10 per cent. on the French paper was not completely removed till the amount was reduced from 90 to 54 millions of livres; a scale of reduction unquestionably greater by far than would be found necessary here, under all the circumstances of our metropolis.
The Report affirmed another principle of the Bullion Committee, namely, that it was not merely the numerical quantity of bank paper which evinced either its deficiency or excess; the true test being the disposition of the public to demand payment for bank notes in cash. At one time the Report observed that one hundred millions of Bank paper had circulated at Paris, and that there was not a note too much, because there occurred no extraordinary demands for cash; but that at the period of the failure, 90 millions evidently were excessive; that at the time of publishing the Report, 44 millions was the whole amount. Circumstances were described as occurring from time to time, which called for a diminution of currency, or an increase.
The Bank of Sweden supplied another example which it might be useful to consider. It was not, properly speaking, a government bank, being a bank only of the States: and it issued its notes in the way of loan, at a moderate interest, and their amount, as he had been informed, there was reason to think had been much extended. This bank had ceased, for some time, to pay in cash, and its paper had fallen to about 70 per cent. discount. Sweden, in one respect, was circumstanced somewhat like ourselves: it had experienced great obstacles to the exportation 911 of many articles, with which it abounded; and, probably, the desire of keeping up the nominal price of those commodities, contributed to dispose both the government, the states, and the people to the existing system. The public in Sweden, according to what he had heard, were not fully persuaded of the depreciation of their paper; for many of their commodities, their iron in particular, had not risen in any proportion to the fall of their currency. Indeed, nations in general were usually insensible at first to the declension or the value of their circulating medium. They were accustomed to experience fluctuations of exchange, and they naturally referred, at first, even a serious depreciation of their paper, to the same commercial causes which they were in the habit of contemplating. He well remembered to hhve been himself, twenty or thirty years ago, employed in a Russian counting-house, where he had often heard conversations on the Russian exchange. It used at that time generally, and on the whole, to decline; but as it occasionally rose, and evidently fluctuated a little, with each political or commercial event, the general tendency to depression, as far as he remembered, was never ascribed to an increase of the quantity of Russian paper; but it was now plain, that quantity had had a leading and permanent influence upon it. The ruble, originally, was worth 48 pence Stirling; at the time when he was in the Russian counting-house, it passed for 35 or 40 pence: it was now worth only 12 or 14 pence. Was it possible, that merely what is called balance of trade, or political events, could in thirty years have reduced the ruble from 48d. to 12d? It was now perfectly well known, that the late empress, as well as the succeeding emperors of Russia, had, from time to time, greatly augmented the quantity of paper money; and hence, in truth, arose the depression. Many of those who narrowly watched the exchange, were the most misled on the subject. Thus, if a man watched the falling tide, he might be deceived by seeing a few occasional waves rise higher than the preceding ones, and might infer that the tide was rising when it was falling.
It was reasonable to suppose, that men should generally mistake in this respect. We naturally imagine that the spot on which we ourselves stand is fixed, and that the things around us move. The man who is in a boat seems to see the shore departing 912 from him, and it was the doctrine of the first philosophers that the sun moved round the earth, and not the earth round the sun. In consequence of a similar prejudice, we assume that the currency which is in all our hands, and with which we ourselves are, as it were, identified, is fixed, and that the price of bullion moves; whereas in truth, it is the currency of each nation that moves, and it is bullion, the larger article serving for the commerce of the world, which is the more fixed.
It was remarkable, that when the American banks, about the year 1720, issued their excessive paper, the merchants of America ascribed the consequent fall of the exchange to something in the state of trade; a circumstance which is noticed, in the recent history of General Washington, by Mr. Marshall.
All the banks which he had mentioned, except that of Russia—namely, the Bank of France, the Bank of Sweden, and the Banks of America, were establishments more or less independent of the government: they all emitted their paper in the way of loan, furnished at a moderate or low interest; and they had all issued it to excess. The adversaries of the Bullion Committee had grounded a great part of their argument on the following distinction between the Bank of England and all those Banks of which the paper had been depreciated:—The Bank of England, they said, issues nothing, except in return for something valuable: they receive a bill, representing real property, for every note which they emit; and therefore they can not issue to excess. Now the French Bank, the American Banks of which he had spoken, and he believed also the Swedish Bank, issued paper only in the way of loan; they received something valuable in return for every note which they put out—in this respect resembling the Bank of England. It was true, that the Austrian and the Russian Banks issued paper simply in discharge of the expenditure of the government: they were, strictly speaking, government Banks; and the excess in their case was more likely to be great. But it was of the utmost consequence to under stand, that, even when a supposed equivalent is received in return for the paper issued, excess might arise; and the excesses he had already said, was likely to, be great in proportion as the rate of interest was low.
The Bank even of Mr. Law, in France, issued its paper only in the way of loan. 913 This Bank had been adverted to by the learned gent. who opened the debate; and the right hon. gent. who spoke next to him had complained of the comparison between the establishment of that projector and the Bank of England. Undoubtedly the name of Mr. Law, and that of the present directors of the Bank, ought not to be mentioned on the same day, if the general nature of the two establishments, or the comparative character of the persons presiding over them, were the only subject for consideration. It was, however, not improper to point out what was the main error of Mr. Law. It very clearly exposed itself in a small Essay on Money and Credit, published by him in Scotland, containing a plan, submitted to the Scotch parliament, which was apparently not unlike to that which he had more successfully recommended in France. Mr. Law considered security as every thing, and quantity as nothing. He proposed that paper money should be supplied (he did not specify in his book at what rate of interest) to as many borrowers as should think fit to apply, and should offer the security of land, estimated at two thirds of its value. This paper, though not convertible into the precious metals, could not, as Mr. Law assumed, be depreciated. It would represent, as he said, real property, and would be worth even more than the precious metals, because land was not subject to the same fall in value as gold and silver. He forgot that there might be no bounds to the demand for paper; that the increasing quantity would contribute to the rise of commodities: and the rise of commodities require, and seem to justify, a still further increase. Prices in France rose to four times their antecedent amount; great seeming prosperity was experienced for a time; but in the end, the fall of exchanges, and the exportation of money, served to detect the error of the system; and successive alterations of the standard of the coin were among the means of recovery to which the government resorted. The Bank of Mr. Law preceded the French Mississippi scheme, and was formed, in some measure, after the example of the Bank of England; but its notes, after a short time, were made a legal tender, and they were lent at the low rate of 3 per cent. interest. In the progress of the scheme, the Bank became confounded with the Mississippi company, for whose actions the Bank notes were interchangeable; so that it was not easy to trace causes 914 and effects through the whole progress of those extraordinary speculations.
The present state of the currencies in Surinam and Demerara afforded another proof of the tendency of an increase of paper to influence exchanges. In one of these places, the circulating medium consisted of paper; in the other, of coin; and before these colonies came into our possession, the coin of Demerara had even been of less value than the paper of Surinam, that paper having been carefully limited. Through the facility of the government of Surinam, the paper, as he had heard, had been exceedingly augmented, and it was now of only about one-third its former value, and one-third the present value of the coin of the neighbouring settlement. In Austria there had been a manifest excess of paper, and a corresponding fall in its value, indicated by the exchange. The case was somewhat the same at Lisbon. Indeed, in all parts of Europe, Hamburgh, Amsterdam, and Paris excepted, the principle of a standard seeme to have been lost; a suspension of cash payments had every where taken place; and paper had been issued to excess, and had also been depreciated. It belonged, therefore, to Great Britain to take care that she did not follow the course of so many nations on the' continent; and it would be most presumptuous in her to assume that her Bank, on account of some undefined difference in its constitution, could act on their principles, and yet not share in their fate.
The Directors of the Bank of England, as he had already shewn, before the suspension of their cash payments, had been used to lessen their paper when they experienced a drain of their cash. The quantity of currency, indeed, when gold was in circulation, in the event of a very unfavourable exchange, lessened itself, for a part of it was transported to other countries. No such natural corrective now existed; and it therefore was important that the general and permanent state of the exchange should be regarded as the index of an excess of paper, and that the Bank Directors should not continue to act on the principle that a limitation of paper had no influence whatever on the exchange. This was the point on which they were at issue with the Bullion Committee. That Committee, as he conceived, would have rendered an essential service, even though guilty of all the errors with which the right hon. gent. had charged them—errors 915 however, which he was by no means ready to admit—if they had merely called the attention of parliament to this important subject. The parliament had now to decide on this point of difference between the Committee and the Bank. He would not affirm it to be totally impossible that the exchange should improve, or even recover itself, without any change of system: but his fears predominated. The circumstance that most encouraged hope, was the fact of our exchanges having been restored, after a great depression, in 1800, and 1801, and apparently without any effort to improve them made by the Bank. There were, however, three points of difference between that case and the present. First, the exchanges did not fall, in the years of scarcity of 1800 and 1801, more than about 8 or 10 per cent. below par—they had now fallen 25 or 30, and even more than 30 per cent. and had continued much depressed for nearly three years. Secondly, we had in 1800 and 1801 a great quantity of gold in circulation, the clandestine transmission of which undoubtedly contributed to improve the exchange, by constituting a remittance; perhaps also to diminish the sum total of the currency remaining in this kingdom; and it should be remembered, that it is the amount of currency in general, and not of paper in particular, which regulates the value. Thirdly, we had, after the fall of exchange in 1801 and 1802, the benefit of an interval of peace. If the right honourable Chancellor of the Exchequer would, assure the House of the approach of peace, he would contribute much to dissipate the present fear.
The right hon. gent. over the way (Mr. Rose) had spoken of the balance of payments as having lately been peculiarly unfavourable to this country. A short time before the appointment of the Bullion Committee, the same right hon. gent. had stated in his place, from documents to which he only had then access, how uncommonly favourable the balance of trade appeared to be up to that time. He was right in his statement; for, upon an inspection of the annual Custom-house accounts of the year 1809, afterwards presented to the House, it appeared that the balance of that year was no less than about sixteen millions in our favour, if reckoned according to the official value—a balance greater by several millions than it had been in any preceding year. The balance, computed according to the real 916 value, proved to be nearly as considerable, and equally exceeded the balance in real value of any preceding year. He admitted that the Committee had fallen into inaccuracy in stating some parts of this topic; but it was a subject on which he defied any man to arrive at any thing like precision, and he had chiefly to lament that they had attempted too much specification. They had been betrayed into this course by too great a wish to follow their adversaries into a detail, of discussion of this sort, which he was happy to find that the resolutions of his right hon. friend did not much countenance. He was convinced that it was impossible to form any estimate of the amount of precious metals which went out of the country, or of what was called the balance of trade, by instituting calculations of the value of exports and imports, and by then combining with these the amount of drafts drawn on government account, and all the other items which remained to be added to the two sides of the statement. The errors committed by those who had gone the furthest in such attempts were a warning on this subject. The right hon. gent. had remarked, that the sum paid for foreign freights had been erroneously stated by the Committee, as being to be deducted from the favourable balance; and he was right to a certain extent, in this observation. It, however, only followed from hence, that the Committee had. represented the balance somewhat less favourably than they should have stated it. The year which had passed subsequently to their Report, was certainly much more adverse than that to which they adverted, the large importations of corn in 1810 having materially augmented our imports. Neither this circumstance, nor the burning decrees of the enemy, on which much stress had been laid, were known at the time when the Committee made their report.
He must advert, before he concluded, to the important subject of the standard of our currency. There was great danger of our finally departing from it, if we suffered the present depreciation of our paper to continue. The first resolution of his right hon. friend appeared to him to be liable to the construction of laying in some claim to depart from it, if such a measure should hereafter be deemed expedient; for it asserted the King's right to alter the standard: and the very mention of such a right, at a period when the 917 temptation to exercise it was occurring, might naturally excite apprehension among the public. Indeed the argument in favour of a deterioration of our coin (or of a change of its denomination, which was the same thing), would, while the present state of things continued, grow stronger every day. To change the standard when the paper has been long depreciated, is only to establish and perpetuate a currency of that value to which we already are accustomed, and may also be made the means of precluding farther depression. The very argument of justice, after a certain time, passes over to the side of deterioration. If we have been used to a depreciated paper for only two or three years, justice is on the side of returning to the antecedent standard; but if eight, ten, or even fifteen or twenty years, have passed since the paper fell, then it may be deemed unfair to restore the ancient value of the circulating medium; for bargains will have been made, and loans supplied, under an expectation of the continuance of the existing depreciation. If, therefore, we were in earnest in our professions of attachment to the standard, we ought not to place ourselves in a situation of irresistible temptation. By the present decision of the House, the question of adherence to the standard might be determined. It had been said, that, by our present contest in Portugal, we were in truth defending England, since We were preventing a conflict which might otherwise take place on English ground. We might, by the parliamentary contest of this day, prevent a struggle for the maintenance of the standard of our coin. We were now, perhaps, fighting that battle, and at a time the most favourable for it. If the limitation of paper had been Urged when the exchanges were only six or eight per cent. against us, it might have been said, that the evil was not sufficiently considerable to deserve attention. If we waited till they were fifty or sixty per cent. against us, it might have been insisted, that the time for administering such a remedy was past, and that the mischief was become too formidable for us to deal with. Was it not at least prudent to take the side of limitation? He had no idea, that all that embarrassment would result from a moderate reduction of Bank paper, which some gentlemen might suppose. Let the whole subject be fairly understood, for much depended on the general-prevalence of sound opinions on 918 this question;—let the contending parties yield a little to each other; let it be known that the Bank proposes to do nothing sudden or violent; that they are determined to guard carefully against extensive failures; and to afford to the mercantile world reasonable facility for fulfilling the pecuniary engagements into which they might have already entered; let it be seen through the country, that there was no party spirit, or heat in our discussions: he should in that case have little fear of disastrous consequences. If, on the other hand, the question was to be carried with a high hand, and there was to be a triumph of the Bank over the Bullion Committee; if the Bank were to be encouraged in the extension of their issues for the sake of the temporary ease which these might afford to the merchants and to the government; and we were resolved to shut our eyes to the remoter consequences; the light might possibly, at length, break in upon us, as Mr. Burke, on another occasion, had observed, not through the ordinary apertures, but through flaws and breaches; and we might then lament, too late, that we had not made timely efforts to restore the value of our currency. Gentlemen, he feared, had not sufficiently considered the present state of the law on this subject. A question was suspended, the decision of which was expected every day, and might lead to the establishment of two prices. We were, moreover at the mercy of events. Many persons seemed to think that there was no particular evil to be apprehended from perseverance in the present system; and were unwilling to resort to a limitation of paper, because it was safer not to change our course: but they ought to reflect, that though a small depreciation of paper produces little or no evil, and even may, for a time, operate beneficially; and though a great depreciation may not bring on at once any striking mischief; yet the long continuance and the growth of it might lead to the most serious dangers. To the consequences of excess of quantity distrust might add itself: new laws might become necessary to enforce the receipt of the depreciated currency; and in order that they might be effectual their severity must increase as the depreciation extended itself. This had been the course in other countries. At the same time, there probably would not be-wanting ill affected persons, who would; endeavour to aggravate the evil and would 919 be glad to connect with the temporary discredit arising from the excess of our circulating paper, the discredit of the whole mass of our stocks, which had nothing to do with it. Surely it became the parliament to anticipate the possible occurrence of such a state of things, and not to wait the uncertain course of events, as if we had no power whatever to provide for our own safety, or contribute to the improvement of our condition.
On these grounds he now supported the first set of the Resolutions of the learned gentleman, which affirmed the doctrine of a standard, and which recommended, as the means of expediting and insuring our return to it, a cautions restriction of the paper of the Bank of England.
At half past one the further consideration of the question was adjourned till to-morrow.