the relative value of the two metals all over the world. Silver 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 £3 178. 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 51⁄2 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

currency was excessive. The directors, however, totally repudiated those notions and ideas; they maintained that their issues and the foreign exchanges and price of gold had no connection whatever with each other, and that, in making their issues, they never paid the slightest regard to either one or the other, and that no modification of their paper currency would influence either the price of gold or the foreign exchanges.

67. The report then proceeds to disprove the opinions of the Bank by historical references. They quoted the cases of the derangement of the Scotch currency in 1763, of the Irish currency in 1804, both of which are fully detailed in this work, they then quoted the case of the Bank of England in 1696-7, which has been described with much minuteness in the preceding chapter, where the extract from this report has already been quoted and commented upon. But, though we have been obliged to point out the grievous chronological errors with which it abounds, it is remarkable that the correction of these errors does not in any way weaken or contradict the arguments of the Bullion Report; on the contrary, the true state of the case materially strengthens and adds force to all the principles of the Report.

68. In former times, a high price of bullion, and an adverse state of the exchanges, had compelled the Directors of the Bank to reduce their issues, to counteract the drain of guineas, and preserve their own safety. They, perhaps, did not understand the principles of the case better than the Directors of the then time, but they felt the practical inconvenience, and were obliged instinctively to obey its impulse, which circumstance imposed a practical limit upon their issues. But, since the restriction, they did not feel the inconvenience, and that check had been removed; nevertheless, it was the clear and decided opinion of the committee, that the Bank ought to continue to regulate their issues by the market price of bullion and the foreign exchanges, in the same manner as they had been obliged to do before the suspension, and that the high price of gold bullion, and the depression of the foreign exchanges beyond the limits before described, were to be ascribed to the neglect of the due limitation of the paper currency.

69. Since the checks above described had been removed, the Committee were anxious to know upon what principles the directors had regulated their issues. The Directors and some of the merchants shewed a great anxiety to state a doctrine, of whose truth they were thoroughly convinced, that there could be no possible excess in the issue of Bank of England paper, so long as the advances in which it is issued consist of the discount of mercantile bills of undoubted solidity, arising out of real commercial transactions, and payable at short and fixed periods. These were the principles which then governed the Bank, and what they said indicated the only true limit that need be imposed on their issues. Nevertheless, the Report says such a doctrine is wholly erroneous in principle, and pregnant with dangerous consequences. The Report then proceeds to shew the fallacy of this theory of paper currency, which, as we have already observed, we shall reserve for future consideration, along with several other theories upon the subject.

70. The limitation of the rate of interest by law to 5 per cent. produced injurious effects, by fanning a spirit of speculation, and making more extensive demands for discounts. Consequently,

the Directors themselves had been obliged frequently to limit their advances, and did not act up to their own principles, which they considered sound and safe, and, consequently, they had no distinct or certain rule to guide them.

71. The suspension of cash payments had thrown into the hands of the Directors of the Bank the important charge of supplying the circulating medium of the country at their sole. discretion. That the most complete knowledge of the state of trade, combined with the most profound science in all the principles of money and currency, could not enable any set of men always to adjust the circulating medium properly to the trade of the country. That the precious metals were the only natural adjusters of these things, which could not be replaced by any human wisdom or skill. That the Directors of the Bank had exercised the new and extraordinary discretionary powers entrusted to them, with great integrity and regard to the public interests, according to their conception of it, and with more forbearance than might have been expected; but, unfortunately,