the principles upon which they acted, were fundamently erroneous, and they had been in a great measure the cause of the continuance of the great disturbance in the monetary system.

72. The Report then gave some statistics regarding the quantity of notes in circulation at different periods since the restriction. However, they said that the actual numerical amount of notes in circulation at any given time was no criterion whatever, as to whether it was excessive or not. Different states of trade, and different extents of commercial operations, would require different amounts of notes. When public credit was good, a smaller amount would be required than when public alarm was felt, and people had recourse to hoarding. Moreover, the different methods of doing business, and economising the use of the currency, much influenced the amount which might be proper and necessary at any period. The improved methods of business, the policy of the Bank, the increased issues of country bankers, had all tended to diminish the quantity of Bank notes necessary for commerce. Consequently, the numerical amount alone was no criterion whatever; a surer test must be applied, and that sure criterion was only to be found in the state of the exchanges, and the price of gold bullion.

73. The experience of the crisis of 1793 had proved that an enlarged accommodation was the true remedy for the failure of confidence in country districts, such as the system of paper credit was occasionally exposed to. That it was true that the Bank had refused the enlarged accommodation in 1793. But the issue of Exchequer bills was exactly the same in principle, and the good effects that followed that issue proved the truth of the principle, that if the Bank had had the courage to extend its accommodation in 1797, instead of contracting it as they did, the catastrophe which followed might probably have been avoided. Some persons thought so at that time, and many of the directors, since the experience of 1797, were now quite satisfied that the course adopted by the Bank in that year increased the public distress, in which opinion the Committee fully concurred.

74. A very important distinction, however, was to be observed between a demand for gold for domestic purposes, sometimes great

and sudden, and caused by a temporary failure of confidence, and a drain arising from the unfavourable state of the foreign exchanges, that a judicious increase of accommodation was the proper remedy for the former phenomenon, but a diminution of its issues the correct course to adopt in the latter.

75. That the present issues were excessive, but that it was essential to the commercial interests of the country, and to the general fulfilment of mercantile engagements contracted during the too free issue of paper, that the reduction should be made gradually and with great caution and discretion. They then give some details of the great increase of country Bank notes, and the facilities of abuse and excessive issues afforded by the then state of the law respecting them.

76. Upon all those facts and reasonings, then, the general conclusions arrived at were: That at that time there was an excessive paper currency, of which the most unequivocal symptom was the very high price of gold bullion, and next to that the very depressed state of the foreign exchanges. That the excess was to be attributed to the removal of all control on the issues of the Bank of England by the suspension of cash payments. It was greatly to be regretted, therefore, that this Act, which at best was only intended to be temporary, had been continued as a permanent war measure. The enormous evils and injury to all classes of the community by the great derangement of the measure of value, were too notorious to be necessary to describe, and there was every prospect of their continuing and increasing: that the integrity and honour of Parliament imperatively required that an end should be put to this state of things at the earliest practicable moment.

77. That the continuance of this state of matters held out a temptation to Parliament, to have recourse to a depreciation. of the gold coin, by an alteration of the standard, which had been done by many Governments under similar circumstances, and which might be the easiest remedy to the evil. But it would be a great breach of public faith and of the primary duty of Government, to prefer the reduction of the coin down to the paper, rather than the restoration of the paper to the legal standard of the coin.

78. Some proposals had been made of remedying the evil, by a compulsory limitation of the amount of the Bank's advances or discounts, or of its profits or dividends. All these, however, were futile, because the necessary proportions never could be fixed, and even if it were so, might very much aggravate the inconveniences of a temporary pressure, and even if their efficacy could be made to appear, they would be most hurtful and improper interferences with the rights of commercial property.

79. The only true and proper remedy for all these evils was therefore, A RESUMPTION OF CASH PAYMENTS. That, however, was an operation of the greatest delicacy, and it must be left entirely to the discretion and prudence of the Bank to carry it into effect. Parliament should merely fix the time, and leave it to them to carry out the details. Under all the circumstances, a period of two years seemed to be not longer than necessary, and at the same time sufficient to enable them to prepare for it. The Committee finally concluded by recommending an Act to be passed to compel the resumption of cash payments in two years from that time.

80. Such, we trust, is a fair analysis of this famous Report, which has acquired a celebrity probably exceeding any report that has ever been presented to Parliament. It contains the eternal and immutable principles which must regulate every paper currency which makes any attempt to conform to the value of the gold it represents, and if any legislation on paper currency be considered necessary, it must endeavour to enforce the practical application of the principles of this Report, and just in so far as it deviates from or contravenes them, so it will be found to thwart and contravene the eternal principles of Political Economy. All legislation, then, on the currency should have as its object merely to provide the best machinery for ensuring the practical application of these principles. The general principles laid down in this Report are as complete a matter of demonstration as any in Euclid; the method of treating the subject is as scientific as any of the great discoveries in natural philosophy, which have excited the admiration of the world, nor could it fail to carry conviction to any one of ordinary intelligence who was capable of understanding the force of the arguments.

No

sooner, however, was it published than it was assailed by a whole multitude of pamphleteers, whose obscure memory it is not worth while to revive now. The interests affected by the Report were too deep and extensive for it not to be attacked by every species of ridicule and acrimonious controversy. We must now advert to its reception and treatment in the House of Commons.

81. The report was presented by Mr. Horner on the 9th June, 1810, but was not formally taken into consideration till the 6th May, 1811. It was the joint composition of Mr. Horner, Mr. Huskisson, and Mr. Henry Thornton. The debate was opened by Mr. Horner, who addressed the House for upwards of three hours in a speech which obtained the admiration of all who heard it. It is unnecessary to go over that speech here, because its line of argument has already been anticipated. He ended by moving a series of sixteen resolutions. The first seven related to the legal standard of value in this country, with reference to which all contracts were made in this country. 8. That the promissory notes of the Bank were stipulations to pay on demand the number of pounds sterling specified upon them. 9. That when Parliament passed the Restriction Act it had no intention that the value of these notes should be altered. 10. That, nevertheless, they had for a considerable time been below their legal value, (11) which was caused by the excessive issues of them, both by the Bank of England and the country banks. 12, 13. That the extraordinary depression of the foreign exchanges was in great part owing to the depreciation of the currency of this country, relatively to that of other countries. 14. That during the suspension, the Directors of the Bank ought to regulate their issues by the price of bullion and the foreign exchanges. 15. That the only method of preserving the paper currency at its proper value was to make it payable on demand in the legal coin of the realm. 16. That cash payments ought to be resumed at the period of two years from that time.

82. Mr. Rose replied to Mr. Horner-" He said that he could shew that there was no depreciation of Bank paper from excessive issue, and that the Report was more full of errors and misstatements than any that had ever been made to Parliament. He was convinced that the issue of Bank notes could have no

effect on the price of gold, or on the foreign exchanges. He denied that the increased price of commodities was in any way to be attributed to the increase of Bank paper. The report of the Committee was directly in opposition to the opinions of all the witnesses examined, except two. All "experience" was against the "reasonings" of the Report. He produced a table shewing the number of bank notes in circulation at different periods, and the market price of bullion and the exchange with Hamburg, to shew that there was no connection whatever between them. However, the Committee had themselves most pointedly remarked that the numerical amount of notes alone was no test of their depreciation. The enormous payments which England made to the continent during the last two years were quite sufficient to account for the fall in the exchange. That the rise in the prices of all commodities on the continent had been equally great in countries where there was no paper currency as here. He went into arguments at great length to disprove the idea that the issue of Bank notes had any effect on the price of gold or the exchanges.

83. Mr. Henry Thornton stated that the great question at issue between the Bullion Committee and the Bank was, whether its issues should be regulated by the price of gold and the foreign exchanges, and if its excessive issues produced any effect upon them. Mr. Thornton argued at great length in support of the principles of the Report, and cited the case of the Bank of France in 1805 as a remarkable confirmation of the truth of its principles. The French Government, having occasion for a loan, applied to the merchants for it, such a transaction being contrary to the rules of the Bank. The merchants proceeded to fabricate among themselves bills to the requisite amount, which they discounted at the Bank, which thus ultimately became the real lender. There was, in consequence, an enormous increase of the Bank paper, a great demand for specie. The Bank had to bring back specie from the provinces at a great loss-at length it stopped payment. Bank notes fell to a discount of 10 or 12 per cent., and the foreign exchanges fell 10 per cent. But the Bank reduced its paper, and in three months resumed payment without difficulty, and the foreign exchanges were rectified. Mr. Thornton also quoted several other cases of other countries