issues of paper by the price of guineas and the exchange with London. Whenever they had an unusual demand for guineas, and the exchange was adverse, they had been obliged to diminish their issues to prevent the continuance of the demand for guineas. As soon, however, as they were released from paying in cash, they no longer thought themselves bound to follow the same rules, and we have seen how prodigiously they had extended their issues. They admitted, however, that it was a possible case, that their issues might be too great, and a new theory was now advanced which we shall be called on to discuss at some length in a future chapter, but we notice it now because this appears to have been the first occasion it was propounded by mercantile men. Mr. Irving being asked if, in his opinion, Irish Bank notes were depreciated, said that he did not think so, although guineas were selling at a premium

"Explain your reasons."

66

"I am of opinion that a bank, managed with prudence, would only issue notes in proportion to the demand which may be made for those notes, in exchange for good and convertible securities, such as mercantile bills of exchange payable at specific periods of undoubted respectability, founded upon real mercantile transactions, upon Government securities such as exchequer bills, in the purchase of Spanish dollars, or other bullion; and the circumstances of the bank notes of Ireland being demanded for such good and convertible securities, I am of opinion, is a proof that they are not too large in amount, and that their value is not depreciated."

We shall see afterwards that this theory was adopted by the directors of the Bank of England. It is one quite opposed to that by which the Irish directors acknowledged themselves obliged to follow whilst they were liable to pay their notes in gold. Hence, if it was correct, it inevitably followed that the issues of a bank should be governed on totally different principles under a convertible and an inconvertible paper currency.

26. After accumulating a considerable body of evidence upon the subject, and examining witnesses of all sorts of various opinions and various professions, the Committee reported that the real exchange was in favour of Ireland, and that the difference between the real and nominal exchange arose from the depre

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ciation of the Irish paper. They pointed out the absurdity of supposing that the value of gold had risen, and not that the paper was depreciated. They said that the difference between the rate of exchange could never vary more than the cost of transmitting specie from one to the other, and that any excess above that could only arise from other causes. They then noticed the enormous increase of the paper currency that had taken place, since the only check against over-issue was removed, namely, convertibility into gold at the will of the holder-the great quantity of base and counterfeit coin fabricated and forced into circulation-and shewed that, under an unfavourable state of the exchange, the paper currency had always been diminished. "If prudence had not dietated such a course, necessity would have compelled a diminution of issues, by diminishing the stock of specie which could only be replaced at a loss proportionate to the existing rise of exchange, and your Committee observe that, in fact as well as in theory, the result of such practice always was and must be the redress of the unfavourable exchange. Since the Restriction Act, however, the directors had acted exactly upon the opposite principle, when the exchange was unfavourable, they had greatly increased their issues. Excessive issues of paper produce a proportionate rise in the rates of the exchange, for these are obviously influenced by the value of the medium in which the payments are made and the quantity of that medium necessary to effect a given payment must be increased as the value of the medium diminishes, no matter whether the payments be made in a degraded and adulterated coin, or in a depreciated paper. If paper by depreciation comes to represent a less quantity of money than it professes to do, it must make the exchange which it is to pay appear unfavourable, in the same manner as coin in which it were to be paid would have done, if by degradation it should cease to contain the same portion of gold which it used to do; and the removal of the degradation in the one case, and of the depreciation in the other, would have the same effect in bringing the exchange to par, or whatever might be its real state."

27. After recommending several minor remedies the committee said "But all the benefits proposed by this mode of

remedies would be of little avail, and of very limited duration, if it did not promise at the same time to cure the depreciation of paper in Ireland, by diminishing its over-issue.

And your Committee do, in express terms, declare their clear opinion, that it is incumbent on the Directors of the Bank of Ireland, and their indispensable duty, to limit their paper at all times of an unfavourable exchange, during the continuance of the restriction, exactly on the same principle, as they would and must have done, in case the restriction did not exist, and that all the evils of a high and fluctuating exchange must be imputable to them if they fail to do so."

28. They then noticed the miserable state of the silver coinage, or rather the base metal, and notes and I. O. U.'s substituted in its place, which they said was clearly to be traced to the unfavourable exchange. As long as the exchange continued in that unfavourable state, all the genuine silver coin transferred itself to England, and the place of the genuine silver coin was supplied by these small silver notes in the country districts, and in Dublin, where they were not issuable, by an extremely base silver coinage which was privately fabricated in great quantities, all of which evils could only be cured by the restoration of the exchanges to their true state, and the issue of a genuine silver coinage.

29. The Committee contented themselves with declaring, in the most emphatic terms, that the Bank of Ireland ought to regulate its issues by the state of the exchanges, but it did not discuss the new theory propounded, that the paper currency should be regulated by the mercantile bills of exchange offered for discount. No one who has paid any attention to the principles of the subject, and carefully considered the facts produced before the Committee, can fail to acquiesce in their judgment, and we cannot fail to remark that none of the professional witnesses, i. e., the directors of the Bank of Ireland, or the other Bankers examined, had attained the smallest glimpse of the principles which governed their own business, and by which they should have directed their policy. Its true principles were clearly seen and announced solely by the extra-professional witnesses, and laid down by the statesmen who formed the Committee. We may suppose that fear of

giving offence to their customers, and so diminishing their business and profits, may have somewhat dimmed their perception.

30. As it was evident that as long as the different currencies between the countries continued, there must be an exchange from the want of a common medium of payment, the Committee strongly recommended that the moneys of circulation and account should be assimilated, and that Bank of Ireland notes should be payable in Bank of England paper, and that the Bank of Ireland should establish a fund at their credit in London for that purpose, and that all bills should be payable at a fixed date, which measures had been found to reduce the Scotch exchanges to par, and maintain them so ever since the year 1763, through all the political and commercial convulsions of the period.

31. The presentation of this report does not seem to have excited any discussion in the House till many years afterwards. In 1809 Mr. Parnell moved that the currencies of England and Ireland should be assimilated in accordance with the recommendation of the Committee, which was rejected without a division. The Report does not seem to have been printed for public circulation till 1826; but it was probably communicated to the Bank, and produced some effect upon their policy. A fact was stated by Mr. Foster in the House that in the months of May, June, and July, 1804, the directors diminished their issues from three to two millions and a half, and the exchange rose; in August they increased them again, and the exchange fell. The Chancellor of the Exchequer (Addington) declared that it was a perversion of terms to infer that the depreciation of paper had any real effect on the exchange. The excessive issue of paper might produce a depreciation, but each country had a different circulating medium, and the depreciation of either could only have a nominal effect on the course of exchange. Mr. Addington wholly overlooked the fact that payments were made in Bank of Ireland paper, and the course of exchange referred to that paper. If payments had been made in silver coin of full weight, then it would have been true that the exchange would not have been disturbed by the depreciation of the paper. But the course of exchange always relates to the medium in which the payment is actually made, and a depreciation of that medium necessarily causes an adverse state, in

whatever state the other parts of the currency may be, which are not the medium of payment. Of this we have seen a conspicuous instance in 1696, when the restoration of the silver coinage immediately rectified the exchange, although Bank paper continued to be depreciated long afterwards. Mr. Fox, with premature exultation, said that he was glad to hear that the Chancellor of the Exchequer allowed that an excessive issue caused a depreciation, and that the House was never again to hear the fantastical opinion that the paper was not depreciated, but the value of gold raised. Had Mr. Fox been able to look forward only six years he would have found that this fantastical opinion not only re-appeared, but was maintained with more stubbornness and pertinacity than ever.

32. Such was the occasion of the first declaration by a Parliamentary Committee, of the principle that the issues of the Bank should be regulated by the foreign exchanges; a Committee, comprehending almost all the great names of the different parties of all opinions. As it was not then the custom to publish the lists of the divisions in committees, we are not able to say whether they were unanimous on the subject; but, from the exceedingly strong and decisive language of the Report we may fairly infer that the opinion of the Committee was equally strong and decided, and that if any minority differed from the resolutions of the majority, it must have been a very small one.

33. We have not much to detain us in the few following years. In 1804 the scarcity of the silver coinage was so severely felt, that the Bank issued 5s. dollars to supply the want, of which 1,419,481 were put into circulation. In 1806 the loan of three millions, which was the consideration for the renewal of the Charter in 1800, became due; but the Bank was persuaded to renew it at 3 per cent. per annum until six months after the ratification of peace. In 1807 a Committee was appointed to inquire into the various branches of the public expenditure, and, amongst others, into the payments made into the Bank of England. In the second report are some interesting details respecting the connection between the Bank and the Government.

34. At this period political circumstances occurred, which led to a great derangement of the British currency, and of which we may be allowed to give a short summary-“ For ten