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the resolutions of his honourable had done, attempting to palliate or friend, who, in spite of the casual explain the numerous blunders which errors which had crept into them, had crept into the resolutions of the was fully entitled, not merely to the honourable Baronet. Lord Palmer. gratitude of the house, but also to ston also spoke at some length in exthe gratitude of the whole country. planation, going over the grounds he

Mr F. Douglas and Mr C. Hut- had previously stated; and after a chioson followed on the same side, few words from Sir G. Cockburn, the and generally urged the same topics resolutions were put and negatived as Mr Calcraft and Colonel Davies without a division.

CHAPTER IV.

RESUMPTION OF CASH PAYMENTS.

Introductory remarks.-Bank Restriction Act of 1797.-Effects of that measure.-General Principles.- Necessity of returning to a convertible currency: -Safe method for effecting that object.Mr Tierney's Motion on the Bank Restriction, as it affected foreign exchanges and the state of the circulating medium.-Bill for restraining the Bank from paying in specie notes under L.5.- Opinion of the Bank Directors on the Reports of the Secret Committees of the two Houses of Parliament.– Debate

in the Lords on the Report of the Secret Committee.- Lord Lauderdale's Resolutions negatived.- Debate on the Report of the Committee of the Commons.Bill for regulating Cash Payments brought in by Mr Peel.- Lord Lauderdale's motion for obtaining the opinion of the Judges on the subjects of legal tender and standard of value, - Cash Payments Bill carried through both Houses of Parliament.

That the original Bank Restriction must have been speedily productive Act was a measure of indispensable of the most disastrous consequences. necessity at the time, can only be Hence, on the 3d of May 1797, the doubted by those who are either Restriction Act was passed, for the blinded by theory, or ignorant of the purpose of confirming and continucircumstances of the country when ing the restriction contained in the it was had recourse to. False a- Minute of Council of the 26th of Felarms excited by the enemies of Go- bruary preceding. This restriction, vernment, at that period both nu- originally limited to a very short merous and daring, had spread like period, was continued from time wildfire among all classes of the com- to time by subsequent acts, till munity. The instability of the Go- the 28th of May 1818, when an vernment, and the concomitant in act

was passed, by which, after solvency of the Bank of England, reciting in the preamble, “ that were loudly and pertinaciously as- it was highly desirable that the serted. Those having a pecuniary in- Bank of England should return as terest in the permanent credit of any soon as possible to the payment of concern are naturally timid, credu- its notes in cash, and that unforelous, and suspicious. Holders of notes seen circumstances had occurred and Bank securities caught the panic since the passing of the last of the which it had been the object of evil preceding acts, (on the 21st of and designing men to propagate ; March 1816,) which rendered it expeand the consequence was a run up. dient that the restriction should be on the Bank for cash, which, had it further continued, and that another not been checked by the prompt and period should be fixed for the termiopportune interference of Mr Pitt, nation thereof," the restriction was further continued till the 5th of July rose as high as 25, 26, and even 27 1819.

Of the “ unforeseen circum- shillings. A gradual accommodation stances" here alluded to, the most in the price of commodities to the important was the apprehension of depreciated state of the currency soon the effect of further foreign loans took place. They rose in nominal (particularly those of France) upon price; the real price still continuing the exchanges, and the market price affected, in some degree, by the same of gold.

causes as formerly; in some instances The effects of this measure up. falling, and in others rising, in pro. on property of all kinds could not portion to the quantity produced, as fail to be in the highest degree impor measured by the demand. Now, it is tant, as it enabled the Bank, no long- obvious that this state of things must er checked by the convertibility of have continued, -that prices must their paper into cash, to increase have varied in proportion to the isthe amount of their notes in circula. sues of the Bank, -and that there tion beyond all former precedent. was absolutely no limit to the depre

In the first instance, however, the ciation, which must eventually have effects of this enormous augmentation taken place, had the Bank' been of the currency were in the highest suffered to augment, at pleasure, degree salutary. Not only did a great- an inconvertible currency, and had er number of individuals become pos- all the property of the country been sessed of capital, but the quantities in thus placed at their mercy. But this the hands of individuals was likewise was not all. The depreciation, which increased. The wages of labour con- had already taken place, had in some sequently rose as the demand for it measure affected the whole frame and improved; commerce received a constitution of society. Annuitants, fresh and powerful impulse; enter. mortgagees, the public creditor, and prise assumed new activity and vi- the Government in the taxes, had gour. Agriculture felt equally the respectively sustained losses to the influence of the change that had ta- amount of the actual depreciation, keo place in the circulating medium. and which were liable to be increased Prices improved, rents increased, in amount as that depreciation proand inferior soils were brought into ceeded in its course. Hence the cultivation : and this state of things greater part of the community, as well was favoured by the circumstances as the Government, were sufferers by of the war, the extraordinary de- this measure; while the principal mands which it necessarily created, gainers by it were the Bank, whose and the monopoly which, to a certain profits were necessarily enormous, extent, we enjoyed of the com- and unaccompanied by any risk,—and merce of the world. But it was im- the landlords, whose rents had been possible this state of things could al. raised beyond all former precedent, ways endure. The abundance of and to an amount much greater than money, like that of any other commo- the amount of the difference between dity, necessarily depreciated its va- the market and mint price of gold, lue, and caused gold to disappear from which was of course the measure of the market. Bank notes accordingly the depreciation. became depreciated, or, what amounts The return of peace rendered it to the same thing, gold rose in no- absolutely imperative that something minal value ; so that a guinea, for should be done to check this evil, which a twenty shillings note and a which, though it had been foreseen, shilling continued the legal tender, could only be remedied by a return

VOL. XII, PART I.

H

to payments in cash or bullion. No tion from variation is not attainable ; longer enjoying the monopoly of the but every plan which promotes an apcommerce of the world, and not only proximation to this desirable object, our manufacturers, but our agricul. by diminishing the causes which disturists being exposed to the conse- turb uniformity of value in the stanquences of foreign competition, it was dard, is an improvement of the highclear that the system of an inconver- est order, and ought unquestionbly tible paper currency could no longer to be adopted. While the precious be persevered in, without entailing metals continue the standard of our indiscriminate ruin upon all classes currency, money can undergo no of the community, for the purpose other variations than such as are inof enriching of a single overgrown cidental to these metals ; but as these Corporation, which had thriven by variations are, from a number of the very means which pressed so causes, comparatively rare, and as hard on the other branches of the gold and silver have been found to community. It is perfectly obvious, maintain a steadiness in value for

pefrom the preamble to the act of the riods of some duration, they have, 28th of May 1818, that Parliament saw for that reason, been fixed

upon, by the necessity of this return; and the most countries, as the standard by measures we are about to record were which the value of other commodities the natural consequences of that fore- is to be measured and determined. seen necessity, and led to the consum- A perfect currency, therefore, is mation wbich, by almost all classes of that which is at once invariable and politicians, had been so devoutly wish- economical; and in proportion as ed for. But, before proceeding to the currency of any country apour task, it may be necessary to make proaches to, or recedes from this a few observations more in detail, limit, it is more or less perfect. But, both as to the nature of money as a in comparing a paper and a gold measure of value, and also as to the currency, it is obvious that different plan for a safe, resumption of pay. principles must be employed in dements in bullion, proposed by Mr Ri- termining their relative importance, cardo, and afterwards in substance a- as well as that a paper currency posdopted by Parliament, in consequence sesses some peculiar advantages of the recommendation of the diffe. which do not belong to a currency rent committees to whom the subject composed exclusively of the preciwas referred for inquiry and con. ous metals. The value of gold desideration. We would here particu. pends almost entirely upon the quanlarly refer to the able and luminous tity of labour necessary to be expendReport of the Secret, Committee of ed before it can be brought to the the Lords (given in the Appendix,) market ; in other words, upon the cost in which the reader will find embo- of production. The value of paper, died a mass of the most valuable employed as currency, can be in po and authentic information on this degree affected by this principle, most important subject.

but must depend, either upon its It is a maxim in political economy, convertibility into the precious methat the standard of value should be tals at the option of the holder, or rendered as little subject to variation the relation which it bears in amount as possible.

That which measures to the quantity of productions of the value of other commodities should every kind which are to be circulaitself possess the greatest possible uni- ted by it. If more paper be issued formity of value. Absolute exemp- than is necessary for this purpose, it must fall in value, or become de. had been raised, and the run which preciated. The market price of gold took place on the Bank, we have will exceed the mint price, and pro- already expressed our opinion; nor visions will rise. If, on the other can we agree with Mr Ricardo, that hand, less be issued, it will rise in had the Bank continued paying in value, and be accompanied with re- cash the panic would probably have sults exactly the reverse of the for- subsided before their coin had been mer. Hence, therefore, the conver- exhausted. At the period in questibility of paper into the precious tion, the Bank had about 11 millions metals contributes no otherwise to of notes in circulation, and only maintain its value at par than as it about 5 millions in cash and bullion. tends to restrict the quantity issued Now, it is extremely probable that, to the amount which is barely neces. during the operation of this panic, sary to circulate the whole mass of in the creation of which the enecommodities, for which a common mies of Government were mainly medium of exchange is required. instrumental, at least one-half of “ Amongst the advantages of a paper their notes must have been presentover a metallic circulation," saysed for payment. But if, after they Mr Ricardo *, “ may be reckoned had paid away their five millions in as not the least, the facility with cash and bullion, one single note had which it may be altered in quantity, been presented, the Bank must have as the wants of commerce and tem- been instantly declared insolvent. porary circumstances may require, Would it not have been little short enabling the desirable object, of of madness to risk such a consekeeping money at an uniform value, quence? And would not the Governto be, as far as it is otherwise practi- ment, who knew well that specie was cable, securely and cheaply attain. demanded for exportation, have haed.” But the very circumstance zarded its very existence, had not which constitutes the great advan- strong measures been instantly retage of a paper currency, the facility sorted to, in order to save this great with which it can at any time be establishment, so indissolubly conincreased or diminished, renders it nected with the public interest, from necessary that some check should threatened bankruptcy and ruin ? be imposed to prevent its too sud- But, be this as it may, it is plain, den, or improper increase or diminu- from what has been already said, that tion. Before the passing of the Re- the removal of the natural check on striction Act in May 1797, this the superabundance of paper issues check consisted in the convertibility left the quantity, and consequently of paper into the standard coin, at the value of money, entirely at the the option of the holder; but by mercy of the Bank, whose profits the passing of that act this check were thereby increased in a double was removed. The Bank of England proportion; first, by their being no were no longer compelled to pay longer compelled to keep in their their notes in specie, and the holders coffers a quantity of unproductive cash of country bank notes could only and bullion to meet demands for the demand in exchange for them those payment of their notes in specie; and, of the Bank of England. On the secondly, by the profits arising from Restriction Act, as a measure of increased issues, to which they had cessity, created by the panic which thus every temptation. Let us not,

ne.

Proposals for an Economical and Secure Currency, p. 8.

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