43. The witnesses examined before both Committees consisted of the same varieties. 1. Bank directors. 2. Private bankers. 3. General merchants. 4. Independent witnesses. On reading over the evidence by these respective sets of witnesses, we find that the opinions given by the English Bank directors and merchants were precisely similar to those of the Irish Bank directors. The directors of both banks vehemently repudiated the idea that the Bank paper was depreciated; they equally maintained that it was the price of specie that had risen; they both admitted that, while they were liable to pay their notes in specie, they were obliged to regulate their issues by the foreign exchanges and the price of bullion; they both admitted that since the restriction they had paid no regard to their former rules, and they denied the necessity of so doing. They both denied that the issues of their notes had any effect upon the exchanges, or were in any way the cause of the high adverse exchange, and they both denied that a limitation of their issues would have the slightest effect in reducing the exchange to par. They both maintained that there could be no over-issue of their notes so long as they were confined to the discount of paper of undoubted solidity founded upon real transactions.

44. Nothing can be more remarkable than the perfect identity in sentiment in every point of opinion and policy, between these two sets of directors, but we must remark a circumstance that will detract considerably from the weight of their opinion, namely, that they were all interested witnesses. In the first place, since the restriction upon paying in specie, and so being relieved of fulfilling their obligations, they had extended their discounts enormously, and their profits upon their extended issues had been proportionate, the dividends to the proprietors had greatly increased; and secondly, they were in the position of semi-defendants; their policy was certainly impugned; the Committee was a species of court of inquiry into their conduct, and it certainly was not likely that they would admit that the principles they were acting upon could be wrong, when they were so very lucrative to the proprietors of the Bank. The same objection of interested testimony equally applies to that of the merchants, for they were interested in obtaining as large an amount of accommodation from the Bank as possible, and a restriction of its issues would have curtailed their

operations, speculative or otherwise; consequently their interests were better served by the doctrines and policy of the Bank directors. Both Committees, however, examined witnesses of an independent position, who had no interest one way or the other, and in each case they totally disagreed from the opinions of the Bank directors, and condemned their policy. And in both cases the Committee, having examined all those witnesses of different shades and opposite opinions, presented reports strongly condemning the opinions and practice of the directors of each bank, and called upon them to alter their policy the report, in the Irish case, in language of great severity, that in the English case equally strong in fact, though milder in expression.

:

45. As this division of opinion on these financial questions seems to be as permanent and deep-seated as the divisions on political questions, it may be of advantage to state shortly and precisely the points upon which the respective parties were at issue. The facts, of course, were easily ascertained and agreed upon. They were as follows

1. That the Mint price of gold bullion, or the legal standard of the coin, was £3 17s. 10d. per oz.

2. That the market price of gold bullion was then £4 10s. per

oz.

3. That the foreign exchanges had fallen to an enormous extent; that with Hamburg, 9 per cent.-that with Paris, 14 per cent.

4. That the increase of bank notes had been very great during the last few years, and was rapidly augmenting.

5. That specie had disappeared from circulation.

46. Upon this acknowledged state of facts, the opposite issues maintained by the two parties, were as follows:—

The one party maintained—

I. (a) That the Bank notes were depreciated.

(b) That the difference between the market price and the Mint price of gold bullion, was the measure of the depreciation.

II. (a) That the extreme limit to which the foreign exchanges could, by the nature of things fall, in any case, was defined, and easily ascertained, and con

III.

IV.

sisted of the expense of freight, insurance, and some

other minute causes.

(b) That, in the then state of the exchanges, there was a very large excess of depression over and above that

limit, which was not attributable to any of these

causes.

(c) That this residual depression of the foreign exchanges, and the rise of the market price above the Mint price, was caused by the excessive issues of Bank notes in circulation.

That a diminution in the quantity of Bank notes would increase the value of the domestic currencywould cause the foreign exchanges to rise to par— and the market price of gold to fall to the Mint price.

That the Directors of the Bank of England ought to follow the same rules in the extent of their issues during the restriction of cash payments, as they were obliged to do before, viz., by regulating them by the foreign exchanges. When the exchanges were favourable, and bullion flowing in, they might enlarge them; when the exchanges were adverse they must contract them.

47. In opposition to these principles, the other party maintained

I. (a) That it was not the Bank notes that were depreciated, but the price of specie that had risen.

II.

III.

(b) That there was no difference between the price of
bullion, whether paid in notes or specie.

That the depression of the foreign exchanges was in
no way whatever attributable to the depreciation of
the currency, but was entirely caused by the adverse
balance of payments to be made by Great Britain,
the remittances to the army, the continental measures
of Napoleon, and other political measures.
That no diminution or increase of the issues by the
Bank would have any effect whatever upon the
foreign exchanges, either in raising or depressing
them, or on the market price of bullion.

IV.

That since the restriction, there was no necessity for observing the same rules in issuing their notes by discounts as before, i. e., by observing the course of the foreign exchanges, but that the public demand was the sole criterion, and so long as they adhered to these rules, there could be no over-issue.

48. With respect to the first point at issue between the two parties, after the very full explanation of the principles involved in it, given in a previous chapter, we need say very little about it here, as, according to what has already been said, it is quite clear that it certainly was a very fantastic opinion to suppose that gold could rise in comparison to a "promise to pay gold." There was one circumstance, however, different in the cases of England and Ireland. In the latter country, the Bank notes were openly at a discount; there were two prices in every transaction, a money price, and a paper price: and there were specie shops where guineas were openly sold for Bank notes and several shillings over. In England this was not the case, partly because Bank of England notes were received at their full nominal value in payment of taxes, but chiefly because it was an indictable offence to sell guineas for more than 21s. Shortly before the Bullion Committee was appointed, a man named De Yonge was tried and convicted for the crime of selling guineas for more than 21s. This law only applied to heavy guineas. Light guineas, below 5 dwts. 8 grns. might be sold, and were usually sold, for a Bank note and 6s. or 7s. Considering, therefore, that by law it was a crime to sell guineas of full weight at their market price, it is clear that the value of guineas was not an open question-they were forcibly depreciated by law, and, consequently, that is no argument for the equality in value between the paper and the coin. If it had not been a criminal offence, there would have been two prices for every thing, a money price and a paper price.

Mr. Merle was asked

"What is the difference between the Mint price and the market price of gold per cent. ?"

"About fifteen or sixteen."

"When you buy gold you pay for it in Bank paper?" "Yes."

H

"The payment being made in Bank paper, the price is £4 10s. per ounce ?”

"What I have sold for the home trade I had only £4 8s. for." "If you were to pay in guineas, should you get the gold at a cheaper rate?"

"I could not pay in guineas, I cannot get them."

"Supposing you had guineas to give, could not you buy that gold at a cheaper rate than £4 10s. an ounce?"

"No, I should not offer a less price, certainly; if I was to buy any quantity of gold and pay for it in guineas, I should offer the same price as in Bank paper."

"When you speak of the Mint price being £3 17s. 10d. an ounce, do you calculate that in gold coin or in Bank paper ?"

"We make no difference; and I do not believe there has been any difference in paying in specie or Bank paper."

"Is not the reason why an ounce of gold is worth £3 17s. 10d. that as many guineas as weigh an ounce amount to that sum ?"

"Yes, if a gentleman came and brought me gold, I should pay him exactly the same, whether I paid him in gold coin or in Bank

notes."

"The Mint price of gold is the price calculated in gold coin?" "Yes."

"And the market price of gold at present is calculated by paper?"

"Yes, it is all paid in paper."

Thus, we see that nobody bought gold bullion at the market price in gold coin, but only in Bank paper.

49. Among the other witnesses who held the opinion that the Bank paper was undepreciated, we may cite that of Mr. Chambers, an eminent merchant, which condenses the whole subject into a single point

66

"Have you ever had occasion to consider the effects of an excessive or forced paper currency in any country, upon its foreign exchanges with other countries?"

"In a small degree, I have."

"What do you conceive the effect of such excess to be upon the foreign exchanges?"

"I apprehend the effect on the exchange would follow the depreciation of a forced currency."