CHAPTER X.

FROM THE ACT FOR THE RESUMPTION OF CASH PAYMENTS IN 1819 TO THE BANK ACT OF 1844.

1. The great Act for the preservation of the national good faith, the restoration of the measure of value, was accomplished amidst universal applause; but, unfortunately, it had no sooner become law, than an unusually severe and long-continued disturbance in the ordinary proportions of supply and demand in a great variety of productions took place. The violent fluctuations in prices, which necessarily followed this great derangement caused much public distress, and afforded an opportunity for the antagonists of the Act of 1819 to acquire such strength as to induce the Government to tamper with the Act, before it came into full effect.

2. The utter prostration of all the great producing interests of the country in 1815-16, had caused such severe distress as to diminish the consuming powers of the people to an enormous extent. The importations of the great articles of consumption in 1816 were, in most cases, not half what they had been in 1814. In 1817, when the general prosperity was reviving, the shortness of the supply caused a very general and rapid rise in prices of all commodities. The inevitable consequence followed, speculation began to revive again, and was much fostered in 1818 by an expected dearth of provisions. A long-continued drought from May to September, was supposed to have destroyed the greater part of the crops, and, as imported produce was unusually low, the prices of all sorts of farming produce rose to an extravagant height. Enormous importations of wheat, added to the home crop, which turned out considerably better than was expected, caused rather a reduction in the price of that, but all other sorts of farming produce mounted up to a great height, barley being at 63s. 6d., oats at 35s., beans at 76s., and peas at

708., in December, 1818. The high prices thus held out in this country, caused importations on a scale of enormous magnitude, at the close 1818. After deducting the quantities re-exported the imports of colonial and foreign produce were more than double what they were in 1816. Mr. Tooke well remarks that before any great turn in the prices of commodities, there is usually a pause of more or less duration, before it finally declares itself, like the slack water at the turn of the tide. There is a period during which sales are difficult or impracticable, when the prices are at a maximum, the buyer refuses to submit to them; and when they are at a minimum, the seller refuses to submit to them. A struggle of this nature prevailed through the autumn and winter of 1818-19, and just as the Act for the restoration of cash payments passed, the fall in prices was decidedly in progress.1

3. The usual consequences followed these extravagant importations. Importers, trusting to the prices of 1817, had given orders to the growers, based upon these prices, and, when the crops came to be brought to market, the price had given way. Failures, accordingly, were numerous in 1819, both in England and in America, the necessary consequence of a transition from high prices, caused by scarcity, to low prices, arising from excess of supply. Towards the autumn of that year commercial credit had revived. The great importations of wheat in 1818, somewhat reduced the price in 1819, but it stood at 75s. in August, and the average for the whole year was 72s. This price continued, with a few fluctuations, till August, 1820, and at that time, wheat was still at 72s. A decided and unanswerable proof that the discussions in Parliament, and the Act for the resumption of cash payments, had no effect at all on the price of corn. Although the Bank was permitted to pay its notes in gold, at the rate of £4 1s. per ounce, yet they were actually at par, as the market price of gold fell to £3 17s. 104d. in August, 1819, and continued at that rate till June, 1822, when it fell to £3 17s. 6d. And, in fact, it must be remembered, that for a great part of 1816-17, the note had been within a few pence of par, and had not varied more than about 5 per cent. from par since that time.

The whole of Mr. Tooke's observations on this great crisis are perfectly invaluable, and must be read at length by every one who wishes to form a fair judgment on the subject.-Vol. II., pp. 60-116.

4. The spring of 1820 had been unpropitious, and vegetation backward, until the 18th of June, when some warm and very brilliant weather occurred just at the critical period of the blooming of the wheat. In July, some wet weather excited fears for the crop, and the prices advanced to 72s., but the weather became very fine in the beginning of August, and thenceforth continued most propitious during the ripening and gathering of the harvest. The result was a harvest of most extraordinary abundance, and of excellent quality. And even its unprecedented exuberance did not become fully known till two or three years afterwards, when it was not yet exhausted. The best authorities calculated that the quantity of the crop of 1820 was one third above the average. In July, 1821, wheat had fallen to 51s. from 72s. in August, 1819. May, June, and July, 1821, were cold and wet, and the harvest very late; wheat rose to 62s. in September, but the quantity produced was extremely large, and the quality very bad. In consequence of the enormous unexhausted stock of 1820, wheat fell to 50s. at the end of 1821, and to 42s. in August, 1822. The harvest of 1822 was remarkably good both in quantity and quality, and was got in early, long before the preceding crops had been consumed. In addition to this, the importations from Ireland were on an unprecedented scale. In 1817 corn was obliged to be exported to Ireland; in 1820 and 1821 Ireland exported to England upwards of 4,000,000 quarters of grain of all sorts. The natural and inevitable consequence of this was an immense and ruinous fall in the prices of all agricultural produce. Wheat fell to 38s. at the end of 1822.

5. The accumulation of treasure became so rapid in the vaults of the Bank in 1820, that early in 1821 the directors felt themselves in a position to resume cash payments, and an Act was passed to permit them to do so on the 1st May, 1821, instead of in 1823. By this time the Government had repaid £10,000,000 of the debt it owed to the Bank, which all the witnesses agreed was a necessary preliminary to enable the directors to contract their own issues. The Statute 1821, c. 26, enacted that the Bank might resume payments in gold coin on the 21st May, 1821. That persons offered to be paid in coin should not have the right to demand ingots. That if the Bank did not offer to pay in coin, the right to demand ingots should continue. The last impedi

ments to the export of bullion were swept away. The Bank was bound to exchange their larger notes for any one who demanded it, for £1 notes or gold coin, but they had the option of payment in gold or notes.

6. The extravagant height to which the combined effects of an unusual and long-continued scarcity and the greatly depreciated currency, in which payments were made in 1811 and 1812, had produced the most extravagant speculations in farming. Barren wastes were reclaimed at an enormous expense, which never could have been repaid, except by maintaining corn at famine prices. Rents and debts had advanced in a similar proportion, and all classes of agriculturists, farmers, and landlords, had adjusted their expenditure according to the new scale of prices which they expected would endure. Family settlements and encumbrances were calculated on the same basis. Immediately after the peace, the great fall in the price of all sorts of agricultural produce, both from greater abundance and the destruction of the rotten country paper currency, threatened all persons connected with the "landed interest" with general ruin, and, after a considerable struggle, the Corn Bill of 1815 was passed, the intended and expected effect of which was to prevent wheat ever falling below 80s. a quarter. The "landed interest calculated that, with the "cost of production" of which they considered " "rent as a necessary element, wheat could not be grown with a profit at less than 80s. a quarter, and the intention of that Act was to secure that price to agriculturists. Buoyed up with delusive hopes, and firmly believing that the Act had for ever nailed up wheat to 80s. a quarter, the farmers received a fresh stimulus to speculation, and vast sums were laid out in further extending the cultivation of barren wastes. However, the circumstances we have already detailed disappointed all these calculations, and wheat stood at 38s. at the end of 1822 in defiance of the Act which said it ought to be at 80s.

7. The advocates of a national bankruptcy had been in such a small minority in 1819, that they scarcely uttered a word in Parliament, much less attempted a division. When the distress caused by the fall in prices began to pinch some classes in the country, they began to gather strength again, and commenced

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H

an attack on the Currency Law on April 9, 1821. This attack proved a complete failure, being rejected by a majority of 141 to 27. As prices continued to fall during that year, the distress continued to increase, and early in 1822, a Committee of the House of Commons was appointed to report upon the subject. They presented their report on the 1st of April; but it did not contain a word imputing the low state of prices to anything connected with the currency. They attributed it to the unprecedented abundance of agricultural produce, and proposed plans for affording the farmers and others relief by temporary advances of Exchequer bills, until the glut in the market had diminished. They recommended that the limit of 80s. should be reduced to 70s., as 80s. represented a higher value at that time than in 1815. In the debate that followed, the first symptoms were manifested of the determination to make an onslaught on the Currency Act of 1819. But Lord Londonderry ridiculed the idea that the currency had anything to do with the question, and said Members had only wasted precious time in bringing it forward. But he declared that he entered his most solemn protest against the purpose of these Members to induce Parliament to commit the most flagrant deviation from sound policy and common honesty-a breach of faith towards the public creditor. Could a British House of Commons sanction such a measure, it would relieve no class of the community; but it would overwhelm all classes with ruin. Were it possible for them to be dishonest and base enough to listen to a project of national bankruptcy, the result must be most calamitous. If a Parliament could be found so degenerate, and a people so destitute of honour and common honesty, as not to start at the idea of such an abandonment of principle, the most sordid calculation would forbid the adoption of such a measure.

8. The £1 note issues of the country bankers in England had been suppressed by Statute 1777, c. 30; but in 1797 they were again permitted, and, by various Acts of Parliament, this permission was continued till two years after the resumption of cash payments by the Bank of England. By the operation of these several Acts, they must have been withdrawn in 1825. The distress, however, which was attributed by so numerous and