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however, be misunderstood. We do tably be made: but how was that renot say that the mere restriction of turn to be effected? Of all the atcash payments affected the value of tempts to solve this difficult question, the paper currency of this country. that of Mr Ricardo was unquestionThis is neither consistent with prin- ably at once the soundest, the safest, ciple nor with fact. It is not con. and the most ingenious ; and, as this sistent with principle ; for had the plan, with some considerable modi. Bank confined their issues merely to fications which will be afterwards the quantity barely necessary to cir- stated, was recommended to “ the culate all the commodities in the favourable consideration of Parlia. country, the market price of gold ment,” by the Committees of both would have risen little or nothing a. Houses, and the substance of it embove the mint price, and no deprecia. bodied in a law, we shall give the tion of paper could therefore have outline in the author's own words : taken place. This is confirmed by “ To secure the public against any the financial events of 1814 and 1815, other variations in the value of the when the restoration of the par of ex- currency than those to which the change and the fall of the price of standard itself is subject, and at the bullion, even while the restriction same time to carry on the circulation was in full force, were produced by with a medium the least expensive, the Bank withdrawing froin circula. is to attain the most perfect state to tion between three and four millions which a currency can be brought, by of their notes. It is also inconsistent subjecting the Bank to the delivery with fact; for notes were not depre- of uncoined gold or silver, at the mint ciated till a considerable time subse- standard price, in exchange for their quent to the restriction, and till the notes, instead of the delivery of guiBank had taken advantage of that neas; by which means paper would event nearly to double the amount of never fall below the value of bullion the circulating medium.

without being followed by a reduc. But it must be obvious to the most tion of its quantity. To prevent the superficial thinker, that, after the a- rise of paper above the value of bul. mount of the circulating medium had lion, the Bank should be also obliged been increased, after prices had par- to give their paper in exchange for taken of the influence which that standard gold at the price of L.3, 175. event was calculated to produce, and per ounce. Not to give too much after property of all kinds had under trouble to the Bank, the quantity of gone the most material alterations in gold to be demanded in exchange value, the difficulties that opposed a for paper, at the mint price of return to the ancient standard were L.3:17: 104, or the quantity to be of the most formidable description. sold to the Bank at L.3, 175. should It was agreed on all hands that the never be less than twenty ounces. whole property in the kingdom could In other words, the Bank should be not be suffered to remain at the mercy obliged to purchase any quantity of of a Corporation of Bankers, and that gold that was offered them, not less a return to cash payments must inevi. than twenty ounces, at L.3, 175.* per

* The price L. 3, 175. here mentioned is of course an arbitrary price. There might be good reason, Mr Ricardo says, for fixing it either a little above or a little below. The price ought, however, to be so fixed as to make it the interest of the seller of gold, rather to sell it to the Bank ihan to carry it to the mint to be coined.

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ounce, and to sell any quantity at when demanded, in Bank of EngL.3:17:10} per ounce. While they land notes t." The leading princihave power of regulating the quan- ple of this plan, therefore, as the tity of their paper, there is no possi- Committee of the Lords observe, is ble inconvenience that could result to restore to the country, by the to them from such a regulation. speediest and safest means,

“ The most perfect liberty should tallic standard, as the regulator of be given, at the same time, to export its paper currency, by permitting the or import every description of bul. Bank to pay its notes in gold bullion lion. These transactions in bullion at the mint price, instead of gold would be very few in number, if the coin.Its advantages seem great Bank regulated their loans and issues and manifold. In the first place, it of paper by the criterion which I have would secure the country against so often mentioned, namely, the price sudden and destructive fluctuations of standard bullion, without attendo in the value of money. For should ing to the absolute quantity of paper the quantity of money in the market, in circulation.

as compared with that of other coun“ The object I have in view would tries, become redundant, and notes be in a great measure attained, if the be depreciated, there would be an Bank were obliged to deliver uncoin- instant run on the Bank for specie ed bullion in exchange for their notes for exportation, which would speediat the mint price and standard; ly compel them to limit their issues, though they were not under the ne- and thus restore the par between bulcessity of purchasing any quantity of lion and paper currency. The variabullion offered them at the prices to tions between gold and paper would be fixed, particularly if the mint were never amount to any thing consider. to continue open to the public for the able, while the public could demand coinage of money: for that regula- bullion in exchange for paper, and tion is merely suggested to prevent while this self-regulating system conthe value of money from varying from tinued in operation to preserve the the value of bullion, more than the equilibrium. If again the Bank catrifling difference between the prices priciously limited the quantity of paat which the Bank should buy and per, it would rise in value, while gold sell, and which would be an approxi. would fall to the same extent: but in mation to that uniformity in its value that case gold would be carried to the which is acknowledged to be so desir- mint to be coined into guineas or soable •.” And a little after Mr Ricar. vereigns; and when thus thrown into do adds: “If the plan now proposed, the mass of circulation, would speediof paying Bank notes in bullion, bely restore its value, and make it again adopied, it would be necessary either conform to the standard. In the se. to extend the same privilege to Coun. cond place, a currencyconvertible into try Banks, or to make Bank notes a uncoined gold or bullion of a certain legal tender ; in which latter case weight and fineness might be regulathere could be no alteration in the ted, and the par of value maintained law respecting Country Banks, as between paper and the precious methey would be required, precisely tals, without necessitating the Bank as they now are, to pay their notes, to keep unproductive in their coffers

• Economical and Secure Currency, p. 25.

+ Ibid. p. 31.

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the same quantity of bullion as to draw bullion from the Bank unless would be necessary were their notes in exchange for Bank notes, no deexchangeable into coin at the option mand could be made on the Bank to of the holders; and the Bank would any extent without occasioning such never be liable to any embarrassment a diminution of the quantity of Bank whatever, excepting when a general paper in circulation as would tend panic seized the country, as in 1797; to raise its value, and to render it against which event, as Mr Ricardo no longer profitable to exchange it has well remarked, the Bank have for bullion. In the last place, the no securityon any system ;" but, resumption of bullion payments is even in that case, from the nature indispensably necessary as a preliof the plan, the run could neither minary to restore the par of value be so vexacious while it lasted, nor between gold and paper, before it productive of such pernicious con- would either be politic or safe to resequences. For, from the equili. sume payments in cash. It is one brium which must previously have of the advantages of bullion payexisted between notes and bullion, ments that they can commence at it is improbable, or rather almost im- any period, and whatever may be the possible, that the price of gold could existing market price of gold; and, have varied so much as to afford a as the Lords' Committee remarked, profit on exportation ; and therefore, “ Successive periods may be afterwhen the first impulse subsided, wards fixed, at which the rate of things would speedily regain their bullion payments may be gradually natural level. In the third place, as lowered," until the market price of “ the amount of notes in circulation gold should finally be brought down depends in no degree on the amount to coincide with the mint price. of capital possessed by the issuers of To realise these important objects, notes, but on the amount required the Committee accordingly recomfor the circulation of the country, mended the adoption of the followwhich is regulated by the value of ing scale or gradation for the regu. the standard, the amount of pay. lation of the Bank of England in ments, and the economy practised carrying into effect a measure which in effecting them *,” the converti- promised to be productive of the bility of Bank notes into bullion, is most salutary effects to every class the only principle by which the a

in the country: mount of money in circulation can “1. That provision should be be so regulated as to be equivalent, made by Parliament for a repayment and neither more nor less than equi. of the debt of Government to the valent, to the quantity of commodi. Bank to a considerable amount, and ties to be circulated, and to the busi- that a part of that repayment should ness for which a currency is essen- take place some time antecedent to tially adapted. This is the only sure the first period which may be fixed and unfailing defence against that for the commencement of bullion greatest of all evils, a depreciated cur- payments by the Bank. rency,

and is a demonstrable conse- * 2. That from and after the 1st quence of the system proposed by Mr of December 1819, or at latest the Ricardo. In the fourth place, as it 1st February 1820, the Bank of would be impossible for any person England should be required to pay

Economical and Secure Currency, p. 89.

its potes in gold bullion duly assay- in the present situation of the couned and stamped in his Majesty's try. The motion with which he Mint if demanded, in sums of not less should conclude would be for a comthan the value of sixty ounces, at mittee to inquire into the effects prothe price of L. 4, 1s. per ounce of duced on the exchanges with foreign standard bullion; that on the 1st of countries, and on the state of the cir. November 1820, or at such other pe- culating medium, by the restriction riod as may be fixed, the price shall on payments in cash by the Bank of be reduced to L. 3:19:6, unless England, with a view that they might the Bank shall have previously re- report whether any and what reasons duced it to that rate; it being always exist for continuing that restriction understood that the price, when beyond the period at present fixed once lowered, shall not again be by law. The preamble of the last raised by the Bank; and that on the bill upon this subject stated, that vaIst of May 1821, the Bank shall pay rious unforeseen circumstances renits notes, if demanded, in gold bul. dered the continuance of the restric. lion, in sums of not less than the value tion necessary; and the nation had of thirty ounces, at the price of been lately informed, that the issue L. 3:17:10} per ounce of standard of specie should be again postponed bullion.

until the 20th of March 1820. He “ 3. That a weekly account of the did not think that any thing new average amount of notes in circula- could be adduced to alter the opition during the preceding week shall nions he had already formed on the be transmitted to the Privy Council; subject of foreign exchanges and a and a quarterly account of the ave. circulating medium; and he hoped rage amount of notes in circulation that he could say as much, or nearly during the preceding quarter shall as much, for two right honourable be published in the London Gazette. gentlemen opposite, (Messrs Canning

“4. That for two years, from and and Huskisson,) to whom the counafter the 1st of May 1821, the Bank try was highly indebted for their lashall pay its notes in gold bullion bours upon this subject. For his own only at the Mint price; and that part, he was ready frankly to avow whenever Parliament shall think now, what he had always asserted, proper to require the Bank to pay that the principles laid down by the its notes in coin, notice thereof shall Bullion Committee, of which the late be given to the Bank one year be. Mr Horner had been chairman, conforehand, such notice not to be given stituted his creed, and he had yet before the 1st of May 1822.” seen and heard nothing to lead him

How far this plan was afterwards to forsake it. He would say further, adopted by Parliament will be seen that it was a matter of great satisfacat large in the sequel of this chap- tion to him to find how rapid a ter.

progress truth had been making from The first proceeding relative to the day to day upon this subject. The Bank restriction, took place on the question was no longer a ques. 2d of February, when Mr Tierney tion of exchanges, on the transmisrose, in his place in the House of sion of gold from one country to an. Commons, and said, That the subject other, or on the dangers to which the on which he had to claim the atien- Bank might be exposed: the only tion of the House was one which all real point for decision was, whether agreed was of the highest importance the old circulation ought or ought.

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not to be restored within those limits of the Exchequer was exposed at to which legitimate circulation was once; for it appeared, that the Bank formerly confined in this kingdom. had been increasing its issues, that They had been taught to believe that country banks had been following its the very existence of the empire de- example, and that, in truth, the state pended upon no dir.inution being of prosperity was nothing more than made in the present amount of the an increased paper currency. In the circulating medium. This was a beginning of 1817, the three per doctrine which he (Mr Tierney) cents. were at 63 or 64, and by the heard with no surprise, because it mere operation of paper they were was a doctrine which had been fore- raised, 'in the course of only eight told, not only by himself, but by months, to 84. The Bank returns much wiser men. The House had proved the truth of what he had stabeen warned over and over again not ted; for in those eight months there to proceed in such a destructive sys- had been a most extravagant issue of tem: it had been told, that if the re- notes, and yet it was at that time, striction were prolonged, in time it and with the knowledge of this cirwould be impossible, without great cumstance, that the Chancellor of hazard, to return to the point from the Exchequer came down to Parliawhence it had started ; and it now ment and boasted that he should imturned out, by the confession of all, mediately proceed to pay off the five that the habits of the patient had per cents. Had it been done? No: been so vitiated that he had not and as an honest man he should strength to bear the only remedy for grieve to see it accomplished, if it his disorder. In 1817, the country were to be done by an increased and was beginning to escape from a si. forced circulation of paper. If it tuation of great distress : the amount were effected by the honest results of of paper in circulation had been di- individual credit, the case would be minished from various causes, and the totally different; but to force stocks right honourable gentleman had come to a high price by the issue of notes, down to Parliament with a smile of and then to pay off the five per cents., triumph, and told the House that would be nothing less than delibeevery thing was now restored to the rately committing a fraud upon the very condition in which he had long holders. He should not go into the hoped to see it; that it would be learning of the subject, or discuss any soon found that the revenue was in. of the abstruse questions arising out creasing ; that stocks were rising, of it, partly because he should be fol. public confidence flourishing, and lowed by those who were much bet. that he had no doubt in a very short ter informed upon them, and partly time that he should so reduce the because they had now much less interest of money as to be able to pay bearing upon the subject : the point off the five per cents., the four per in dispute was now quite of a diffecents., and he might even reach the rent nature. To meet these difficulthree per cents. When every body ties, and to endeavour to overcome was looking for the realization of them, the most obvious and most rathese gay promises, three or four tional course was the appointment of months afterwards down came a num- a committee. He did not wish to inber of returns from the Bank that ex. quire merely into the state of the plained the whole mystery; the se- Bank, but into the effects produced crct of the triumph of the Chancellor by the operation of the various laws

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