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"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


the relative value of the two metals all over the world. having fallen in its relative value to gold all over the world, gold has appeared to rise in price in those markets where silver is the legal measure, and silver to fall in those markets where gold is the legal measure.

60. With respect to the demand on the continent causing the rise in the market price, the same effect ought to have been observed in former wars if that had been the case. But it had not been so during the seven years' war, and in the American war there had been no want of bullion in the country. The two most remarkable times when the market price had exceeded the Mint price, were in King William's reign, when the silver coin was very much below the standard, and in the beginning of George III.'s reign, when the gold coin was in a very degraded state. In both cases the reformation of the coinage had effectually lowered the market to the Mint price, and since 1773, when the gold coinage was reformed, till 1797, the market price had never materially risen above the Mint price; even in 1796 and 1797, when there was such a scarcity of gold, on account of the demand of country bankers to meet the run upon them. The Committee, moreover, totally disbelieved the fact of the alleged scarcity of gold, and witnesses had proved that there was no difficulty at all in getting any quantity of it, by those who chose to pay the price of it, and that the changes which had lately taken place in commercial matters, had caused immense quantities both of gold and silver to be imported into this country. There was, therefore, not only no evidence of the alleged scarcity, but, on the contrary, the evidence proved the opposite fact.

61. But even, had there been a scarcity, the idea that the market price could rise above the Mint price, arose from a misconception. That gold was in this country the measure of all exchangeable value both by custom and law. That commodities. were said to be dear or cheap, according as they exchanged for more or less gold; but that a given quantity of gold could never exchange for a greater or less quantity of gold of the same standard fineness, except by a very small quantity, which was the measure of the convenience of having it in coin rather than

in bullion, or the reverse. An ounce of standard gold, then, could never fetch more in the market than £3 17s. 101⁄2d., unless £3 17s. 101d. in our currency contained less than an ounce of gold. That if gold became exceedingly scarce it would become more valuable, compared to other commodities, whose prices would consequently fall, while the money price of gold must necessarily remain unaltered, but that was not the case at present, the prices of all commodities had risen, and the price of gold had also risen, which facts could only be accounted for by the state of the currency.

62. The report, then, explains the circumstances which might cause a difference between the market and the Mint price of gold, the deterioration of the coinage, the delay in having bullion coined, the obstruction to exportation,-these two latter causes amounted to about 5 per cent. None of these causes existed at Hamburg with respect to silver. The currency was a regular fixed weight of silver, of standard fineness, and no obstruction was offered to the utmost freedom of exportation. And in England, the variation had never exceeded 5 per cent., while the Bank paid in gold, and the coin was of full weight.

63. Since the suspension of cash payments, however, gold, in a manner, had ceased to be the measure of value, nor was there any other standard of prices than that circulating medium, issued partly by the Bank of England, and secondly, by the country banks, the variations in value of which were only proportionate to their quantity. That it was highly desirable that the value of this circulating medium should be brought to a conformity with its real and legal standard, gold bullion.

64. If the gold coin of the country were to become much lessened in weight, or debased in the standard, the market price would evidently rise in like proportion above the Mint price; for the Mint price is the sum in coin, which is equivalent in value to a given quantity, say an ounce, of the metal in bullion, and if the intrinsic value of that sum in coin be lessened, it is equivalent to a less quantity of bullion than before. The same effects would follow, if a paper currency, no longer convertible into gold, were issued in excess. For that excess, not being

exportable to other countries, or convertible into specie, remains in the channel of circulation, and is gradually absorbed by the increasing prices of all commodities, which will rise exactly in the same manner as they rose when the great increase of the precious metals took place. Consequently, the prices of all commodities, bullion included, must rise, and, if this fall in the value of the currency of one country takes place without a corresponding fall in the value of neighbouring countries, their currencies will no longer retain the same relative value, and, consequently, the exchanges will fall to the disadvantage of that particular country. Such must be the effects in any country of an excessive quantity of currency which is not exportable, and which is not convertible into coin which is exportable.

65. The difference of exchange between any two places, arising from the state of trade, and payments between them, could never permanently exceed the expense of conveying and insuring the precious metals from one to the other. The position was so plainly true, and agreed upon by all practical authorities, both commercial and political, as to be perfectly indisputable. That in time of war the risk would, of course, be increased; but, taking into consideration all these circumstances, the entire expenses of sending bullion to Holland did not exceed 7 per cent., and to Paris a little more; these causes might, therefore, depress the exchange to that extent, but no lower. But the depression had lately amounted to nearly 20 per cent. ; consequently, after exhausting all these causes of depression, there remained a large residual depression to be accounted for; and that RESIDUAL DEPRESSION COULD ONLY BE ACCOUNTED FOR AND WAS OWING TO THE DEPRECIATED STATE OF THE DOMESTIC CURRENCY.

66. The great general result, then, of all these foregoing principles and facts was, that in the then artificial state of the currency, it was a point of the greatest importance to watch the foreign exchanges and the market price of gold bullion, and the Committee were anxious to know if the Directors of the Bank of England regarded the matter in the same light, and whether the great disturbance in the price of gold and the foreign exchanges, during the last year, had made them suspect that the

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