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amount of foreign loans were contracted for; Prussia, Austria, and other continental States of lesser importance, were endeavouring to replace their depreciated paper by a metallic currency, and, as money was abundant in England, a very large portion of these loans was taken up here. The effect of this began to manifest itself in April, 1817, when the exchanges with Hamburg and Paris began to give way, and the market price of gold to rise. These phenomena increased gradually throughout 1818, until January, 1819, the price of gold was £4 3s., the exchange on Hamburg 33.8 and that on Paris 23:50. In July, 1817, the new gold coinage began to be issued from the Mint in large quantities. The consequence was a steady demand for gold set in upon the Bank, and, in pursuance of its notices, the sum of £6,756,000 was drawn out of it in gold. Just at this time the British Government reduced the rate of interest upon Exchequer bills. The much higher rate of interest offered by continental Governments caused a great demand for gold for exportation, and in the beginning of 1818 a very decided drain set in. The Bank directors, however, determined to set all the principles of the Bullion Report ostentatiously at defiance. While this great drain was going on, they increased their advances to Government from £20,000,000 to £28,000,000, and though they knew perfectly well that the demand of gold was for exportation, they took no measures whatever to reduce their issues for the purpose of checking the export. At the same time the issues of country banks had increased by two-thirds since 1816.

110. This demand for gold became more intense during 1818 and 1819, and it became evident that the Bank would soon be exhausted if legislative interference did not take place. Accordingly, on the 3rd February, 1819, both houses appointed Committees to inquire into the state of the Bank; and, on the 5th April, they reported that it was expedient to pass an Act immediately to restrain the Bank from paying cash in terms of its notices of 1816-17. An Act for that purpose was passed in two days' time. It was stated in the Report of the Commons that in the first six months of 1818, 125 millions of francs had been coined at the French mint, three-fourths of which had been derived from the gold coin of this country. The Act forbade the

Bank to make any payments in gold whatever, either for fractional sums under £5, or any of their notes, during that Session of Parliament. The Act, therefore, totally closed the Bank for payments in cash.

111. As we have given the names of the Committees of 1804 and 1810, we subjoin those of the Committees of both Houses in 1819. Those in the Commons were Lord Castlereagh, Mr. Vansittart, Mr. Tierney, Mr. Canning, Mr. Wellesley Pole, Mr. Lamb, Mr. F. Robinson, Mr. Grenfell, Mr. Huskisson, Mr. Abercromby, Mr. Banks, Sir James Mackintosh, Mr. Peel, Sir John Nicholl, Mr. Littleton, Mr. Wilson, Mr. Stuart Wortley, Mr. Manning, Mr. Frankland Lewis, Mr. Ashhurst, Sir John Newport. The Committee of the Lords were the Earl of Harrowby, Duke of Wellington, Marquis of Lansdowne, Duke of Montrose, Earl of Liverpool, Earl of St. Germains, Earl Bathurst, Viscount Sidmouth, Earl of Aberdeen, Earl Granville, Lord King, Lord Grenville, Lord Redesdale, Earl of Lauderdale.

112. The chief points of interest in these reports regarding our present subject are the opinions held by the witnesses respecting the great doctrines of the Bullion Report. The reports of neither House entered into the question of the theory of the currency, they were confined to recommending a certain course of action; but they examined a number of witnesses of the first eminence on the subject, and the result of their evidence is most extraordinary. It will be remembered that, both in 1804 and 1810, the immense preponderance of commercial testimony was entirely adverse to the doctrine that the issues of paper currency had any effect upon the exchanges, or the price of bullion, or should be regulated by them. Nevertheless, the reports of both Committees were entirely in the teeth of the mercantile evidence. The Bullion Report had now been before the country for nine years, and had caused more public discussion, both in Parliament and in the press, than almost any subject whatever; and it is perfectly manifest that if its principles were erroneous, the commercial world would only have been further strengthened in their opposition to them. But what was the result now? The overwhelming mass of commercial evidence was entirely in their favour. The current of mercantile opinion was now just as

strong on their side as it had formerly been against them. What could be more triumphant than this? What could be more splendid testimony to their accuracy and soundness than the fact that they had converted the immense hostile majority of the commercial world?

113. In order to give some idea of this remarkable change in opinion, we must make some extracts from the evidence of the witnesses.

Mr. Dorrein, Governor of the Bank, said to the Lords' Committee, p. 31

"The advances of the Bank to Government upon Exchequer bills cannot be recalled at the pleasure of the Bank. But, when money is lent at short periods, the Bank has a control over an excess of circulation, so as to check any improper speculation, and the means of sending bullion out of the country; and thus the Bank would have an influence over the foreign exchanges."

"Are you, then, of opinion that the exchanges are affected by the increase or diminution of the number of Bank notes in circulation?"

"A scarcity of circulating medium, of whatever it may consist, will oblige merchants to draw in their funds from foreign countries, and the superabundance of it will send the precious metals out of the country."

"The consequences of a scarcity of money would be to force an export of merchandise and manufactures, which would render the exchanges favourable to this country."

(Before Commons' Committee, p. 32.)

"A lessened circulation will have an effect to render the exchange favourable?"

"Because it would force an export of merchandise, and an export of merchandise would bring money into the country." "You have said that a contraction of the issues would lower all prices. Are the Committee not to understand that it must lower the prices of gold and silver, as well as of all other commodities?"

"I apprehend it would."

"Assuming the course of foreign exchanges to be 5 per cent. against this country, would not the effect of a diminution in the

price of commodities, clearly, consequent on a diminution of issues, be to restore the exchanges to par?

"The effect would be to force an export, and thereby raise the exchange."

114. Mr. Pole, Deputy-Governor to the Bank, said to the Lords' Committee, p. 35—

"Whether the gold appearing to vanish, and going out of the country, does not proceed, in your judgment, from the unfavourable state of the exchanges?"


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

"Inasmuch as in that case the interest of money becomes so reduced in this country as to hold out a beneficial prospect to persons in sending their capital from this country, to be invested in foreign securities, where a larger interest is made, consequently, a debt is created from this country, payable to foreign countries."

(To Commons' Committee, p. 35.)

"Do you think a considerable reduction in the amount of your paper issues would affect the exchange?"

66 I do."

"Is the answer you have given with respect to the effect upon the exchange of a reduction of the issues of the Bank founded on observation and experience of particular cases, or the result of reasoning only?

"Entirely upon reasoning; and my reasons are, that I conceive it would compel persons to withdraw their capital from the continent to this country, on purpose to be able to support their own payments."

115. Mr. Haldimand, a director for ten years, but at that time out by rotation, said to the Lords' Committee, p. 40—

"Do you conceive that, by a considerable reduction on the part of the Bank of the amount of its issues, the Bank would be enabled to resume with safety its payments in cash?"

"Most decidedly."

"Are we to understand, then, that, in your judgment, the



effect of such a reduction of its issues would be to render the exchange favourable to this country?"

"I certainly have always considered the amount of the issues of the Bank of England to act as a powerful lever upon all our foreign exchanges, so as to regulate their rise and fall."

"I conceive the exchange to be affected by the aggregate amount of the issues of the country bank, and Bank of England paper."

"You have stated, on a former day, that you always considered the amount of issues of Bank notes to act as a powerful lever upon all foreign exchanges, so as to regulate their rise and fall; do you apply this to the price of gold?"

"I do."

"Do you ground this opinion upon reasoning, or upon what you have observed to take place?"

"I have grounded my opinion formerly upon reasoning, and my observation has since justified that opinion."

The witness produced a report of the Governor of the Bank of France, detailing a commercial crisis, and offering very strong and clear proof that an excess of paper circulation did affect both the exchanges and the price of bullion.

"It appearing from the accounts before us that the exchanges. were very nearly par in the month of September last, and afterwards became more unfavourable than they had been since 1815, to what do you ascribe the great depression which has taken place since that time?"

"It would be difficult to point out the particular circumstances independent of the great principle of the depreciation of our paper currency, which affect our exchanges from time to time. I believe that the investments in foreign stocks did for a moment produce part of that fall, but I should attribute a very small part of it to that cause, and fall back upon my principle of an excess of currency. I most certainly believe that, had the Bank at that moment been paying its notes in specie, the depression alluded to would not have taken place. I ground my opinion on what I observe to be passing between other countries with regard to their exchange operations. France has at this minute nearly twenty millions sterling to pay to foreign powers; and although three payments have been already made, and the whole are to be completed within 27 months, no sensible effect has

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