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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."

"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

"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."

"What do you say to an excessive currency, though not forced?"

"I do not conceive the thing possible."

"What do you mean by a forced paper currency?"

"A paper which I am obliged to take against my will, for more than its value; it is not forced so long as people take it willingly, which they will naturally do whilst undepreciated."

"May not the quantity of metallic currency be increased in proportion to payments which it has to effect, by an increased issue from the mines; and will not that have the effect of raising the money prices of all commodities?"

"I conceive an increase or abundance of silver or gold would have the same effect upon those precious metals, as a glut of any other commodity upon the market."

"And, in the same matter, may not that paper currency which continues to preserve its credit unimpeached, and which commercial people are perfectly willing to receive, be so augmented in quantity as to raise the local prices of commodities?"

"I do not conceive that that piece of paper, for which I am obliged to give a valuable article of merchandise, can be increased beyond the want of it; nobody will give a valuable article for a piece of paper that does not want it."

"Have you ever happened to pay any attention to the history of the paper currency of Scotland between 30 and 40 years ago, or to that of Ireland about the year 1804?"

"Some years ago I remember reading something about them, but the recollection is rather faint upon my mind.”

"Do you call that paper, in your sense of the word forced, a forced paper currency, which either by law as it stands, or by the force of public opinion, is not convertible into specie at the option of the holder?"

"If it be convertible into other objects of my gratification without depreciation I do not consider it forced."

"At the Mint price of standard gold in this country how much gold does a Bank of England note for £1 represent?"

"Five dwts. three grns."

"At the present market price of standard gold, of £4 12s. per ounce, how much gold do you get for a Bank of England note for £1?"

"Four dwts. eight grns."

"Do you consider that a Bank of England note for £1, under these present circumstances, is exchangeable in gold for what it represents in that metal?"

"I do not conceive gold to be a fairer standard for Bank of England notes than indigo or broadcloth."

(Question repeated.)

"If it represents twenty shillings of that metal at the coinage price, it is not."

"Will you state to the Committee, in your opinion, to what cause is referable the present unfavourable state of exchange between England and the continent?"

"To the balance of payments being against this country."

"Can you give cases to illustrate the fact that you have assigned of the balance of payments being against this country?"

"Large British armies upon the continent; slow returns for exports; quick payments for imports; and very large stocks of imported goods now on hand in the country."

"Is there any other cause to which you attribute the present state of exchange?"

"I know of none other that can affect it, excepting that of a forced depreciated paper."

"Is it your opinion that the currency of England is depreciated?"

66

"Certainly not."

50. Upon this, Mr. Huskisson remarks-"In these answers this leading doctrine is manfully and ingeniously asserted, and maintained; and all who stand up for the undepreciated value of Bank paper, however disguised their language, must ultimately come to the same issue." It was, in fact, as the same writer just before states, that these persons had persuaded themselves, and endeavoured to persuade others, that Bank paper is the real and fixed measure of all commodities, and that gold is only one of the articles, of which in common with others, the value is to be ascertained by a reference to this invariable standard and universal equivalent, Bank paper.

51. It is certainly amazing to think how persons of ordinary intelligence, could seriously make such answers as Mr. Chambers

VOL. II.

D

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