been produced upon its exchanges with other countries equally paying their notes in specie, such as Holland and Hamburg; nor does it appear that any inconvenient diminution has yet taken, or is contemplated to take, place in the metallic currency of that country. My opinion is, that a very small portion of this large payment will be made in specie or bullion. When a certain amount of the circulating medium has left France, the remainder will rise in value, and goods fall in price, when, consequently, it will become more advantageous to France to remit the remainder in its produce and manufactures from time to time."

(Before Commons' Committee.)

"I look upon this forced reduction of the issues of the Bank of England as necessary in order to restore the rest of the paper in circulation to its ancient value in gold, and the exchanges to par. I have no hesitation in stating it to be my decided opinion, that the exchanges would be restored to par immediately the Bank resumed its payments. I think the depressed state of the exchanges arises entirely from the excessive issue of Bank of England notes. I have never heard of any country not paying its paper in specie on demand where such paper has not been depreciated."

"You are understood to say, it is your opinion that the foreign exchanges and the price of gold are principally affected by the amount of issues of paper currency?"

"That is my opinion."

"What reason have you for believing that the circulation for the last half-year bore a greater proportion to the supply required for the purposes of trade than the circulation of the last half-year of 1817?"

"Because the paper was more depreciated at one time than at the other; or, in other words, because the market price of gold was higher at the former than at the latter period."

"Do you consider the price of gold to be the chief criterion by which to judge of the excessive issue of Bank notes?"

"I do."

"I happened to be in Paris in October last, when the Bank of France reduced its issues upon discounts very considerably and suddenly. The issues of the Bank of France upon discounts at that period were 130 millions of francs, which was more than

double the highest amount that was ever previously known. This step on the part of the directors of the Bank of France was occasioned by the following circumstances. The metallic currency was leaving the country in all directions, owing, in all probability, to some trifling degree to the over-issue of paper, partly to some large financial operations in Russia, and partly to the enormous payments that France had engaged to make to foreign powers, which amounted to nearly 20 millions sterling. The Paris bankers, therefore, anticipating a great demand for bills upon all foreign countries, were remitting specie to meet the drafts which they intended to negotiate to the agents of all those foreign powers, with a small advantage upon their remittance. The sudden diminution, however, of the discounts of the Bank, caused the exchange to turn in favour of France, and immediately paralyzed all these operations; the metallic currency made a retrograde movement, and was restored to Paris and to those parts where the greatest distress had been felt."

"You have stated that you attribute the present high price of gold above the Mint price, and the unfavourable state of the exchange, to the excessive issues of the Bank of England, influencing thereby the general paper circulation of the country; have you any other reason for deeming the issues of the Bank of England to be excessive, except that indication which you collect from the price of gold and the state of the exchange?"

"I never saw these effects produced by any other cause in any country in the world."

"Is the Committee to understand your opinion to be, that a high price of gold and an unfavourable state of the exchange ought, in the discretion of the Bank of England, to lead to a reduction of their issues until that high price of gold or unfavourable state of exchange is reduced, if not to par, to that price above par which amounts to the expense of transfer of the precious metals from one country to the other."

"I am decidedly of that opinion."

"Is the Committee to understand you to be of opinion that that is the true criterion for the Bank to look to, whether the Bank be open or shut?"

"It is, in my conception, the only criterion."

"I consider the same doctrine to hold good in the case of war as well as of peace."

"You are of opinion that the partial openings of the Bank failed in effect, because the Bank did not simultaneously contract their paper issues, and not because a partial opening would in no case have any effect whatever?"

"In my view of the subject, a partial opening will always fail unless the whole currency of the country be previously reduced in amount, so as to restore it to the standard of the metallic currency thus partially issued."

"Of that restoration, you are understood to admit no other test than the favourableness of exchange and the reduction of the price of gold to the Mint price?"

"I know of no other test."

"If we reduce the amount of our paper circulation sufficiently the precious metals would flow into the country from every direction-no Act of Parliament could stop the current."

"I should consider it a breach of contract for the Government of this country to alter the Mint price of gold."

This witness entered into numerous details in support of his opinions, which would be too long to insert here.

116. Mr. William Ward, a Bank director, a cambist, and Mediterranean merchant. Lords' Committee, p. 60—

"You have stated that a reduction of four millions in the amount of Bank notes in circulation would probably produce a favourable turn in the exchanges; do you found such an opinion upon reasoning, or upon having observed, as a cambist, that the diminution or increase in the numerical amount of Bank notes has usually produced corresponding effects upon the exchanges, and the price of gold in this country, since the Bank restriction?"

"I ground my opinion upon reasoning; I do not rely upon. the numerical amount of Bank notes exclusively."

"Can we confidently depend upon the effect of a reduction of Bank notes towards producing a favourable exchange?"

"I would rely upon it in an exchange transaction where my own interest was at stake."

(To the Commons Committee, p. 73.)

"To what extent do you conceive the rate of exchange and the price of gold are affected by the issue of Bank notes?"

"I conceive they are affected to a very considerable extent, directly or indirectly."

"Supposing the other causes which affect the exchange to operate equally at two different periods, do you think the price of gold, and the rate of exchange, would be the criterion by which you might judge the adequate or excessive issue of Bank notes?"

"Yes, I do."

"Under a system of cash payments, do you believe that the market price of gold will ever be permanently above the Mint price, or the rate of our foreign exchanges more below par than would amount to the expense of the transmission of gold from this country to the Continent?"

"No; the market price would not exceed the Mint price permanently."

"Then, would the Bank ever have occasion to pay more than the Mint price for the gold they purchase?"

"I conceive they would not have to pay more."

117. Mr. Samuel Thornton, Bank director for thirty-nine years. Commons' Committee, p. 85—

"In regulating the amount of their issues, by what principle is the conduct of the Bank of England guided?"

"I have always considered it my duty to consider the amount of the notes out, and what could be the cause for a call for an increase. I also felt it my duty to look at the state of the foreign exchanges, and the price of bullion."

"Have the goodness to state your reason for thinking it desirable to take into the account the rate of exchange, and the price of bullion, in regulating the amount of the issues?"

"It must be obvious that if there were an excess of Bank notes beyond what was required by the trade of the country, the price of bullion would thereby be raised; and I am ready to admit that it would have the same effect upon the exchanges."

118. Mr. John Irving, of the firm of Reid, Irving, and Co. Commons' Committee, p. 94

66

Putting out of consideration the embarrassment of trade, which might be occasioned by a limitation of the issues of the

Bank, do you think it is in the power of the Bank, by such limitation, to restore a favourable rate of exchange, and to reduce the price of gold?"

"I am of that opinion."

"Could such fluctuations take place if we possessed a metallic currency, as the measure of our exchange with foreign countries?"

"Certainly not."

119. Mr. Holland, a partner of Baring, Brothers, and Co., Commons' Committee, p. 114—

"In what degree do you consider that the foreign exchanges are affected by the increase or diminution of Bank of England paper?"

"I certainly consider that the foreign exchanges are affected by the increase of Bank of England paper."

"Do you think a considerable reduction of the amount of Bank of England paper would have the effect of restoring the exchange in favour of this country, and of preventing any very considerable depression?'

"That is my opinion."

"As you consider there would be no great fluctuation in the price of gold, supposing the circulation of this country to consist of coin, or paper convertible into coin, to what do you attribute the present fluctuations?"

"The quantity of paper in the market is greater than the market can bear. If it is thought desirable to reduce the price of gold to £3 17s. 10 d., I conceive that that can only be done by a reduction of the paper."

"You have stated that action and re-action will bring exchanges round, and bring gold to its level; if that is the case, in what way can you account for the circumstance that the coin has, from the beginning of his present Majesty's reign, constantly found its way out of the country, and not found any re-action to bring it back again ?”

"If the market price of gold is higher than the Mint price, it is impossible to keep it in the country."

"Would you not think one of the circumstances that would render the exchanges unfavourable to this country, and raise the price of gold above the Mint price, to be an unfavourable state