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adverse the exchange at Hamburg was then at par-that with Amsterdam adverse. Upon these grounds, he said, it was expedient to continue the restriction, until the progressive advance of our commerce would produce such a steady inclination of the exchange in our favour, as to render it safe to resume cash payments. That the scarcity of the last three years had made it necessary to export twenty millions of bullion in payment of corn, and until that came back cash payments could not be resumed. Mr. Fox said that such a mode of arguing went to establish it as a general axiom that, whenever the exchanges were adverse, cash payments of the Bank ought to be suspended; and then he touched the right point. "Perhaps, even, it might happen that the unfavourable turn of the exchange against this country might be owing to the very restriction on the Bank." And he said

"In 1772, or 1773, when there was a great quantity of bad money in the country, the course of exchange was then also much against us, but when, in the room of this adulterated money, good gold was substituted, the consequence was that the exchanges turned almost immediately in our favour. As long as our currency continued bad, the exchange was against us, so it is now, because paper is not much better than bad gold; as it is attended with the same inconveniences. May it not, therefore, be expected that, as in the former case, when our currency was ameliorated, the course of exchange turned in our favour, so also if the Bank now resumed its cash payments, the same favourable circumstances might attend the change?"

The trace of truth thus hit upon was not followed up; and, while the directors of the Bank alleged that they were perfectly able to resume cash payments, the Ministry enforced a continued restriction upon them, for political reasons, until six weeks after the beginning of the next Session of Parliament. In the Lords, Lord Pelham said that the idea of renewing the restriction at the present moment originated solely with the Government, who had had no communication with the Bank on the matter. The great truth doubtingly hinted at by Mr. Fox, was much more strongly and fully stated by Lord King and Lord Moira in the House of Lords. The Ministry complained that the importation of bullion was hanging fire; was it not plain that the reason was that its value in this country was depreciated by the plethora of

paper? and the true way to attract it was by diminishing the quantity of the paper, and so raising the value of the gold. The bill was carried without a division.

10. If the resumption of cash payments was unadvisable under the preceding circumstances, the untimely end of the short and feverish peace in 1803 rendered it still more impracticable, and, immediately upon the opening of the Session, a bill was brought in to continue the suspension. We find it stated that the hoarding of guineas had been going on to such an extent, that it was with the utmost difficulty that they could be procured for the common purposes of life. The Chancellor of the Exchequer talked of the baseness of such a practice, which was inconsistent with public spirit and the duty of a good citizen. Precisely the same language had been held by the revolutionary leaders in the tribune of the French Convention regarding assignats. The debate in the Lords produced some excellent speeches. Lord Grenville, who had been of the Cabinet who proposed the suspension originally, now gave very evident signs that his opinion was very much altered, and severely censured the attacks of the Chancellor of the Exchequer upon those who preferred to keep their guineas at home. Lord King now gave the clearest enunciation of the principles of a paper currency, which had before been rather feebly hinted at. He said

"The natural and only true limit of every paper currency was the power of compelling payment in specie, at the will of the holder. A paper currency, not convertible into specie, had no rule or standard except the discretion of the persons by whom it was issued. To determine the quantity of currency necessary for circulation was in all cases a difficult and delicate problem. A very strict attention to the price of bullion, and the state of the foreign exchanges, was alone capable of affording a just criterion by which the quantity could be truly ascertained. Without a perpetual reference to these tests it was impossible to maintain the full value of the currency. That the Bank directors had failed in the performance of this duty was evident, from the enormous increase in the quantity of their notes, and the great derangement which had taken place in the price of silver and the foreign exchanges since the period of the restriction. He said that the excessive quantity of Bank notes, by

raising the market price of silver above the Mint price, was one of the causes of the present scarcity of the silver coin."

11. The Act which restrained the Bank of England from paying in specie also enacted that country bankers should be liable to discharge their notes in Bank of England paper. Hence the very same rules applied to the issue of the country banks, where paper was converted into Bank of England notes, as formerly applied to the Bank paper when convertible into specie ; and the country Bank paper was based upon Bank of England paper, just in the same way as the latter had been based upon specie. So the Directors of the Bank not only controlled their own issues, but those of every other Bank in the country, and any excess of paper issued by them was immediately multiplied and propagated throughout the kingdom.

12. The facilities of communication with the metropolis, even in that age which we are now accustomed to consider as slow, as compared with our own, were sufficient to prevent the depreciation of a local currency in Great Britain, at least since 1765, when the Scotch notes were depreciated, on account of certain conditions they contained impeding their payment in gold on demand. But Ireland, from the distance of the sea passage, and the difficulty of access, might be considered as a foreign country, which resemblance was further promoted by its having a currency of its own, distinct from that of Great Britain. The Irish shilling in those days contained 13 pence, and as the pound, both English and Irish, was 240 pence, a slight calculation will shew that £100 English £108 6s. 8d. Irish. Hence the par of exchange between England and Ireland was called eight and one-third.

13. Although there was no run upon the Bank of Ireland, and the exchange with England was favourable, and bullion was flowing in, the Bank of Ireland was directed by Parliament to suspend its payments in cash at the same time as the Bank of England, and an Act was passed by the Irish Parliament containing analogous provisions to the English Act.

14. Ever since the year 1794 the exchange at Dublin on London had been uniformly in favour of Dublin, standing usually

about £7 10s. In the first three months of 1797, it rose so high as £6 14s. 9d. ; in the second three months it rose to £6 7s. 2d. ; and in the third period of three months, it attained the very great height of £5 18s. 10d.; the highest it stood at on any day being £5 10s. From that period it began steadily to decline, and it continued to fall progressively through each year, until in January, 1804, it reached the extraordinary depression of £18. No guineas were to be had for Bank of Ireland notes, except at a premium of 2s. 4d. or 2s. 6d. This enormous depression was noticed by Lord Archibald Hamilton, on the 13th February, 1804, in the debate on the Irish Bank Restriction Bill. He stated that, when the restriction Act passed, the issues of the Bank of Ireland were £600,000, whereas now they were £2,700,000. He said that between Dublin and Belfast, though not more than 100 miles apart, there was a difference in the exchange of 10 per cent., and that in the exchange with London it was sometimes as much as 20 per cent. against Dublin. That gold coin rose in value just in proportion as paper was depreciated.

15. This great disorganisation of the monetary business between the two countries at length excited the serious attention of Parliament, and, on the motion of Mr. Foster, a Committee was appointed "to inquire into the cause of the present high rate of exchange between Great Britain and Ireland, and the state of the currency in the latter kingdom." The Committee consisted of Mr. Foster, Lord A. Hamilton, Lord Henry Petty, Lord Folkestone, Mr. Pitt, Mr. Fox, Mr. Grey, Mr. Rose, Mr. Canning, Sir W. Pulteney, Sir J. Newport, Mr. J. C. Beresford, Mr. Sheridan, and Mr. Brogden.

16. The circumstances which gave rise to the appointment of this Committee and its report, are deserving of great attention, as they are the first regular investigation by Parliament into the theory of the paper currency, and they were the antetype of what afterwards occurred in England, and gave rise to the appointment of the Bullion Committee.

17. The Bank of Ireland sent two of its Directors to be examined as witnesses, Mr. Colville and Mr. D'Olier. Mr. Colville stated that the issues of the Bank notes at the time of

the restriction were between £600,000 and £700,000, but they were now about £3,000,000; and when asked the motives for such an extraordinary increase, said that the exchange became extremely adverse about two years after the restriction, the money of the country was carried out of it, for the purpose of paying the balances of remittances, and, consequently, as the medium of gold decreased, it became necessary to supply its place with paper. He said that, after the restriction, it was necessary to supply notes for the payments that would have been made in guineas, and this amount he placed at £1,200,000. He admitted that before the restriction, whenever there was a drain of gold from the Bank, they were in the habit of diminishing its issues to strengthen themselves against the continuance of the drain. That whenever the exchange was unfavourable, the necessity for self-preservation compelled them to reduce their issues, and that this limitation was for the purpose of lessening the drain of guineas. But he said that it was generally thought that the extension of paper in Ireland was the cause of the high exchange, but, in his opinion, it was directly the reverse, inasmuch as far as the circulation of paper has supplied the circulating medium, it enabled the gold which before stood in its place to be exported out of the country, and so far was a clear and decided cause of preventing the exchange getting to a higher pitch; and he said that it must appear that his opinion was that the circulation of Bank paper in Ireland was in no shape the cause of the high exchange. He said that he clearly and decidedly considered the sole cause of the high rate of exchange to be that Ireland owed a great deal more money than she could pay. He considered the true criterion of such balance of debt to be the state of exchange between Dublin and London, and London and Dublin. That when the exchange was considerably above par it was said to be against Ireland, and in that case certainly at that time Ireland owes more money than she is able to pay. Mr. Colville repeated these opinions several times: more often than it is necessary to quote. When pressed with the question whether the rates of exchange might be influenced by the value of the medium in which the balance of debts was paid, as, for instance, if it were paid in degraded or adulterated coin, he admitted that it might be so with respect to coin, but he denied that such views in any way applied to Bank of Ireland paper. Mr. D'Olier coincided with these

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