did, and that these views pervaded the whole of the mercantile evidence adduced, the reply to which is so obvious. A Bank note was a promise to pay a certain specified weight of gold of standard fineness, and it did not profess to represent any amount of indigo or broadcloth whatever. A £1 Bank note professed to represent 5 dwts. 3 grns. of standard gold and nothing else, and if it was only really equivalent to 4 dwts. 8 grns., those who maintain that it was not depreciated must also assert that 4 dwts. 8 grns. is the same thing as 5 dwts. 3 grns. There is no escape from this conclusion. Those who maintained that a £1 Bank note, which was a promise to pay 5 dwts. 3 grns. of gold was still a "pound" when it was only worth 4 dwts. 8 grns., ought also to have maintained that if the fifth part were to leak out of a pint bottle of wine, it was still a "pint of wine" because it was contained in a pint bottle. In each case the "promise to pay" and the "pint bottle" were only the outward sign of what the contents ought to be; in either case, it was the quantity of the substance, either of gold or wine, they actually did contain, that was their true value.

52. Those who maintained that the Bank note was not depreciated should also have maintained that the worn, the clipped, and degraded coin of William III. was not depreciated, when 6s. 3d. and 7s. only contained as much silver as 5s. 2d. ought to have done by law; so that 5s. 2d. was only equal in reality to 4s. 1d. of the legal standard currency.

53. It must be admitted, however, that there was one argument to show that there was no difference in transactions between specie and paper, for specie had totally disappeared from circulation; it had no existence. The Bank paper and tokens were the sole circulating medium of the country. When people found that they could get no more for their good golden guineas than for the depreciated Bank paper, they hoarded them; they either retained them locked up, or melted them down for exportation, the temptation to perjury being exactly 12s. per ounce. The explanation of these phenomena is very simple. When Bank notes were declared inconvertible, they took rank as a new substantive currency (being merely representative before), exactly like silver. Now, the relative value of gold and silver purely

depended upon their relative quantities, and when their relative values were fixed by law, if the legal value did not correspond to the market value, we have seen over and over again that the metal which was undervalued was driven out of circulation. So, also, when heavy and light coins circulated together, the heavy coins were driven out of circulation because the heavy coins were undervalued, and nobody would give 6 ounces of silver for what they might buy with 5 ounces. It was exactly the same with Bank notes. They could only preserve their relative value with gold by preserving certain relative proportions in their quantity; as soon as this quantity was exceeded, their relative value fell, and as their relative value to guineas was fixed by law, a change in their market value was followed by exactly the same consequences as a difference between the market and legal value of gold and silver. The guineas which were undervalued were driven out of circulation, as always has been done under similar circumstances, and as always will be done to the end of time. Nobody would give 5 dwts. 3 grns. of gold for what they could get for 4 dwts. 8 grns. Thus this iniquitous and ignorant law to force down the value of guineas, brought its own punishment with it: it destroyed their existence as a circulating medium; but then it became literally true that there was no difference between specie and paper; the power of making an invidious distinction between notes and gold was effectually cured,―solitudinem faciunt, pacem appellant; when the inhabitants were massacred, the Russians proclaimed—“l'ordre regne à Varsovie.”

54. With respect to the second issue joined between these parties, the principal places with which London had established exchanges were Amsterdam, Hamburg, and Paris, in all of which the currency was metallic. The Committee examined witnesses, who proved that the whole expenses of freight, insurance, war risk, and every other charge, varied from about 4 to 5 per cent., but beyond these there was a depression of 12 to 14 per cent., totally unaccountable for by any of these causes. If it were true that this difference arose from a demand for gold on the continent, it is quite evident that gold should equally have risen in the continental markets; but those who alleged this cause should have been prepared with a proof of their

assertions, which, however, they were totally unable to produce. On the contrary, it was proved that there was no alteration in the Mint price of gold in foreign places, and that the market price had experienced no rise at all in proportion to the rise in England.

55. While the English merchants so strenuously maintained that the rate of exchange was entirely due to the balance of payments being against England, and that the Bank paper was not depreciated, it may be as well to compare the opinions of a foreign merchant, who looked at the same circumstances from a different point of view. After stating the difficulty of ascertaining the exact par of exchange between London and Hamburg, from the fact of one currency being silver and the other gold, he considered that the rate of exchange might be considered as 15 per cent. against England.

"Has not a large quantity of circulating specie a powerful tendency to steady the course of exchange?"

"Yes, certainly, when its importation and exportation is not prohibited, and as forming the only basis that regulated the par of exchange."

"Is not, then, any country whose chief circulation is in paper, likely to experience great fluctuations in the course of exchange with other nations?"

"When that paper is not convertible into cash, it only represents, in my opinion, an ideal and not a real value, subject to public opinion, and, consequently, liable to the very great fluctuations which public opinions are subject to."

"Is there not an agio (or premium) at Hamburg, for banco above the current money?"

"Not according to my ideas; but, on the contrary; it is the different current coins that bear an inferior value to the Bank money, and which vary daily, every thing there being valued according to Bank money, or a certain weight of fine silver."

"What is the extent to which you conceive that the exchange is capable of falling in any country in Europe at the present time, supposing it to be computed in coin of a definite value, or in something convertible into a definite quantity of gold or silver bullion?"

"The charge of transporting it, together with an adequate profit in proportion to the risk the transmitting such specie is liable to, would be the extent of the fluctuation."

The witness stated that the whole of these causes put together might amount to 5 or 6 per cent.

"Do you then conceive that such a fall of our exchange as has exceeded the sum necessary to compensate for the expense of transporting gold or silver, in the last 15 months, must be referred to the circumstance of the existence of a paper currency not convertible into specie?"

"Yes, certainly.”

"Do you conceive, then, that out of the 15 or 20 per cent. which the English exchange has fallen in the last 15 months, the large portion of from 10 to 12, or 13 per cent. may be referable to the circumstance of our paper currency not being convertible to cash?"

"I am clearly of that opinion."

"Do you then consider our paper as depreciated 10 to 13 per cent. in consequence of its non-convertibility into cash?”

"As I value everything by bullion, I conceive the paper currency of this country to be depreciated to the full extent of the 15 or 20 per cent., or rather the difference in this country between the price of bullion and the rate by which the coin is issued from the Mint."

"Do you conceive the balance of trade with the continent of Europe to be now for or against this country?"

"I conceive it to be considerably in favour of this country, though not to the extent as generally stated in figures; those figures, representing, in my mind, only about 80 per cent. of their nominal value."

56. With respect to the third issue between the parties, nothing can be clearer than that a diminution in the quantity of paper in circulation must have enhanced its value relatively to all other commodities, including gold; and as the market price of gold was determined solely with reference to the price paid for it in Bank paper, and not in guineas, it is evident that a reduction of the quantity of paper must have reduced the price of gold when expressed in paper, and brought the real value of the note nearer to its nominal value; and, by thus raising the value of the whole

currency, it must necessarily have raised the foreign exchanges to par, if the diminution was carried to a sufficient extent, and so would have brought gold back again into circulation.

57. The fourth issue between these parties contains a perfectly new theory of the paper currency, which had previously been announced by the directors of the Bank of Ireland. As this may be considered as one of the most famous theories of currency, we think it will be advantageous to defer the discussion of it till the chapter in which we shall consider several theories of the subject together. It is sufficient to say here that the Bullion Report especially condemns it.

58. The above may be considered as the chief points agitated before the Committee, which are material to our subject. We may now give a short abstract of the arguments and recommendations of the Report. It begins by stating the existing difference between the market and the Mint price of gold. The former being about £4 10s., being 15 per cent. above the latter. The same difference prevailed in the price of silver. The foreign exchanges had also begun to be extremely unfavourable to England in 1808, and had become more so during 1809, at that time the exchange with Hamburg was 9 per cent. below par; with Amsterdam 7 per cent. below par; and with Paris 14 per cent. below par. So extraordinary a rise in the market price of gold above the Mint price, coupled with the extraordinary depression of the foreign exchanges, had early convinced the Committee that the cause of them was to be found in the state of our domestic currency. But upon both those points they had been anxious to collect the opinions of merchants.

59. Most of the witnesses attributed the high price of gold entirely to an alleged scarcity, arising from the unusual continental demand for it, but it was proved that at Hamburg during the preceding year when the price rose so high in this country, the fluctuations had never exceeded 3 or 4 per cent. At Hamburg the price of gold was expressed in silver like any other commodity, and the Committee considered the change in the market and Mint price of gold at Hamburg and Amsterdam in the last few years, to shew that a change had taken place in