price being always measured in our paper currency; do you know whether, during the same period, any such variation, or any variation, in the price of gold, took place in France, or in any other continental country?"

"It appears to me that in France there can be no variation in the price of the metal, which is the standard of the currency, and, with respect to the variations in the other metal, which is not the standard of the currency, it must at all times be confined to the variations which take place in the relative value of the two metals generally in Europe."

"If then it should appear that during the period referred to no variation whatever has taken place in the price of gold in Paris, would you infer from that circumstance that the variation in the price of gold between April, 1815, and April, 1816, arose from the variation in the value of paper, and not of gold?"

"Every fall in the price of the standard metal is immediately corrected in France, by a reduction of the amount of the circulation; if no similar reduction takes place under the same circumstances in our circulation there must necessarily be a redundancy, and an excess of the market above the Mint price of gold; IN A SOUND STATE OF THE CURRENCY THE VALUE OF GOLD MAY VARY BUT ITS PRICE CANNOT."

"The variation you alluded to in your answer to a former question is what you meant by the depreciation of the paper in your answer to a question before put to you?"

"From whatever cause may arise the difference in the value between paper and gold (and I have enumerated several), I always call the paper depreciated when the market price exceeds the Mint price of gold."

"Do you consider the difference between the market and Mint price of gold to be the criterion of the depreciation of Bank notes?"

"Strictly so."

"Do you not consider that coin or bullion are distinguishable from Bank notes in this important respect, that the coin or bullion, being the medium of universal exchange, operates in the nature of a bill of exchange, whereas the Bank note does not possess this quality; must not, therefore, the value of the coin or bullion follow the rate of the exchange, whilst the Bank note cannot be influenced by such an operation?"

"Certainly; a Bank note not payable in specie is confined to our circulation, and cannot make a foreign payment; a Bank note payable in specie is the same thing as coin or bullion."

"May not this distinguishing quality between the Bank note and the bullion explain the difference of value, without its following that the Bank note is depreciated for any purpose of measuring the value of commodities within this country?"

"No, I think it cannot; the term depreciation, I conceive, does not mean a mere diminution in value, but it means a diminished relative value on a comparison with something which is a standard. And, therefore, I think it quite possible that a Bank note may be depreciated, although it should rise in value, if it did not rise in value in a degree equal to the standard, by which only its depreciation is measured."

"You have stated an opinion, that the contraction of issues of paper would at all times restore the price of gold to the Mint price, and render the exchange favourable to the country; supposing the balance of payments of the country to be against us, in what manner would you have them paid?"

"It appears to me that a reduction in the amount of currency may always restore the price of bullion to the Mint price; but I have not said that that will always restore the exchange to par."

122. Mr. Alexander Baring, afterwards Lord Ashburton. Lords' Committee, p. 10

"Is it your opinion that the exchanges and the price of gold are affected by the increase or diminution of the circulation of the notes of the Bank of England?'

"I can have no doubt of it whatever; I have always considered the price of bullion and the rates of exchange, which, for this purpose, are the same things, dependent on the paper circulation, and liable to be regulated by its contraction or expansion. I do not mean to say that the foreign exchanges, or the price of bullion, would vary always in proportion to any alteration in the amount of the paper of the Bank of England, or even of the paper of the country at large, because there are various circumstances which, at different times, vary the amount of the circulating medium required for the use of every country; and sometimes, for instance, twenty-five millions of Bank paper

may be too much, when, at another period, thirty millions may be too little. It is the great defect of a paper currency that it cannot adapt itself to this change of circumstances.”

"Are you of opinion that the loans which have been contracted for in foreign States, particularly in France, since the peace, have had an unfavourable effect upon the exchanges of this country?"

"The circulation of the country being in its present state, payments abroad, from whatever cause arising, must have an effect upon the exchange."

"What do you mean by the present state of the circulation of the country?"

"I mean that if the circulation were in its former state of payment in specie, that no payments abroad would bring the exchanges materially below their par; but with a paper which has no regulator of its value, it is undoubtedly liable to depreciation by foreign payments, as has been amply proved in the course of the last war."

"Were you at Paris at the time of the great crisis of the Bank of Paris?"

"I was; and I believe the information contained in the Governor's report to the proprietors in January last, as to the effect of the reduction of their issues upon foreign exchanges, and upon the amount of bullion in their vaults, to be correctly stated. The effect of the reduction in their discounts upon the exchanges, and upon their bullion, seems to me singularly applicable to the present question. Their bullion was reduced, by imprudent issues, from 117 millions of francs to 34 millions of francs, and has returned, by more prudent and cautious measures, to 100 millions of francs, at which it stood ten days ago."

"Are we to understand, then, that, in your judgment, considerable importations of grain in years of unfavourable harvests would have an unfavourable effect upon the exchange?"

"I think it would in any country having a circulation of paper, not payable on demand, and where there are no means of contracting its amount, so as to perform for the circulation the same office which a sound circulation of specie would do for itself."

"Would it have the same, or any, effect in a country where the circulation was partly of specie and partly of paper, convertible into specie, as before the Bank restriction?"

"I think that no demand, however pressing, and of whatever nature, would make such a fall in the exchanges as would exceed the expense of the transport of coin, combined with the risk of the violation of the law, so long as a law exists against exporting the coin. This opinion, founded, as it is, upon the principle of circulation, is amply confirmed by the uniform experience of this country before the restriction of cash payments, and of every other country with which I have been acquainted. This principle has been put, perhaps, more severely to the test within the last two years in France than in any other instance. France having had a large payment to make abroad, beyond the apparent means of her commerce, and without any equivalent return, and these payments having produced no derangement whatever of the eirculation of that country."

123. Mr. John Ward, general merchant, with much experience in money operations. Commons' Committee, p. 239

"Is it your opinion that the rate of foreign exchanges, and the market price of gold, are affected by an increase or diminution in the amount of Bank paper?"

"Certainly."

"Do you think it would be in the power of the Bank, by a reduction in the amount of their paper issues, to restore a favourable rate of exchange, and to reduce the market price of gold to the Mint price?"

"That is my opinion."

"Are you of opinion that, under the restriction of cash payments, the excess of the market price above the Mint price of gold is an indication of the paper currency being depreciated, during the restriction of cash payments?"

"Is the amount of that excess of the market above the Mint price of gold the measure of that depreciation in your opinion?" "It is."

"You have stated that you consider the paper of the Bank of England to have been depreciated by excessive issue; during how long a period do you consider that depreciation to have existed?"

"I cannot distinctly state for how long a period unless I could compare it with the value of gold."

"About how long?"

"So long as the price of gold bullion has been above the Mint price."

124. The above extracts, which are only a portion of the evidence given by the great majority of the witnesses, are sufficient to shew the extraordinary change which had taken place in the opinion of the commercial world since the Report of the Bullion Committee, with respect to the great question of the connection between the paper currency, the price of bullion, and the foreign exchanges. The old opinions had scarcely a voice in their favour; even Mr. Harman, who had on all previous occasions been the stoutest antagonist of the principles of the Bullion Report, was considerably shaken in his opinion. Notwithstanding, however, that the governor and deputy-governor, and several other directors of the Bank, had given in their adherence to these doctrines, the majority of the court still persisted in the old opinions; and, on the occasion of some questions having been sent for their consideration by the Committee of the House of Commons, took the opportunity of recording publicly their disapproval of the doctrines which were now in the ascendant. On the 25th March they resolved

"That this court cannot refrain from adverting to an opinion, strongly insisted upon by some, that the Bank had only to reduce its issues to obtain a favourable turn in the exchanges, and a consequent influx of the precious metals; the court conceives it to be its duty to declare that it is unable to discover any solid foundation for such a sentiment."

125. The Report of the Lords' Committee contented itself with recording the opinions of the different witnesses upon the great question so long agitated, it pronounced no judgment of its own upon the soundness of the different views. It, however, was very decided in the recommendation to return to the ancient metallic standard as speedily as could be done, with a due regard to the interests of commerce. The Committee of the Commons expressed their opinion that, when the exchanges became unfavourable, and the market price of gold rose above the Mint price, the only mode in which the Bank could have