IV.

Your Committee will now proceed to state from the information which has been laid before them what appears to have been the progressive increase, and to be the present amount of the paper circulation of this country, consisting primarily of the notes of the Bank of England not at present convertible into specie; and, in a secondary manner, of the notes of the country bankers which are convertible, at the option of the holder, into Bank of England paper. After having stated the amount of Bank of England paper, your Committee will explain the reasons which induce them to think that the numerical amount of that paper is not alone to be considered as decisive of the question as to its excess: and before stating the amount of country bank paper, so far as that can be′ascertained, your Committee will explain their reasons for thinking that the amount of the country bank circulation is limited by the amount of that of the Bank of England.

1. It appears from the accounts laid before the Committees upon the Bank affairs in 1797, that for several years previous to the year 1796, the average amount of bank notes in circulation was between 10,000,000l. and 11,000,000l., hardly ever falling below 9,000,000l., and not often exceeding to any great amount 11,000,000l.

The following abstract of the several accounts referred to your Committee, or ordered by your Committee from the Bank, will show the progressive increase of the notes from the year 1798 to the end of the last year.

Average amount of Bank of England Notes in circulation in each of the following years:

Taking from the accounts the last half of the year 1809, the average will be found higher than for the whole year, and amounts to 19,880,310.

The accounts in the Appendix give very detailed returns for the first four months of the present year, down to the 12th May, from which it will be found that the amount was then increasing, particularly in the smaller notes. The whole amount of bank notes in circulation, exclusive of 939,990l. of bank post bills, will be found on the average of the two returns for the 5th and 12th May last, to be 14,136,610l. in notes of 5l. and upwards, and 6,173,380l. in notes under 5l. making the sum of 20,309,990l. and, including the bank post bills, the sum of 21, 249,980l.

By far the most considerable part of this increase since 1798, it is to be observed, has been in the article of small notes, part of which must be considered as having been introduced to supply the place of the specie which was deficient at the period of the suspension of cash payments. It appears, however, that the first supply of small notes, which was thrown into circulation after that event, was very small in comparison of their present amount; a large augmentation of them appears to have taken place from the end of the year 1799 to that of the year 1802, and a very rapid increase has also taken place since the month of May in the last year to the present time; the augmentation of these small notes from 1st May, 1809, to the 5th of May, 1810, being from the sum of 4,509,470l. to the sum of 6,161,020l.

The notes of the Bank of England are principally issued in advances to government for the public service, and in advances to the merchants upon the discount of their bills.

Your Committee have had an account laid before them, of advances made by the Bank to government on land and malt, Exchequer Bills, and other securities, in every year since the suspension of cash payments; from which, as compared with the accounts laid before the Committees of 1797, and which were then carried back for twenty years, it will appear that the yearly advances of the Bank to government have upon an aver age, since the suspension, been considerably lower in amount than the average amount of advances prior to that event, and the amount of those advances in the last two years, though greater in amount than those of some years immediately preceding, is less than it was for any of the six years preceding the restriction of cash payments.

With respect to the amount of commercial discounts, your Committee did not think it proper to require from the Directors of the Bank a disclosure of their absolute amount, being a part of their private transactions as a commercial company, of which, without urgent reason, it did not seem right to demand a disclosure. The late Governor and Deputy Governor however, at the desire of your Committee, furnished a comparative scale, in progressive numbers, showing the increase of the amount of their discounts from the year 1790 to 1809, both inclusive. They made a request, with which your Committee have thought it proper to comply, that this document might not be made public; the Committee, therefore, have not placed it in the Appendix to the present report but have returned it to the Bank. Your Committee, however, have to state in general terms, that the amount of discounts has been progressively increasing since the year 1796; and that their amount in the last year (1809) bears a very high proportion to their largest amount in any year preceding 1797. Upon this particular subject, your Committee are only anxious to remark, that the largest amount of mercantile discounts by the Bank, if it could be considered by itself, ought never, in their judgment, to be regarded as any other than a great public benefit, and that it is only the excess of paper currency thereby issued, and kept out in circulation, which is to be considered as the evil.

But your Committee must not omit to state one very important principle, that the mere numerical return of the amount of bank notes out in circulation, cannot be considered as at all deciding the question whether such paper is or is not excessive. It is necessary to have recourse to other tests. The same amount of paper may at one time be less than enough, and at another time more. The quantity of currency required will vary in some degree with the extent of trade; and the increase of our trade, which has taken place since the suspension, must have occasioned some increase in the quantity of our currency. But the quantity of currency bears no fixed proportion to the quantity of commodities; and any inferences proceeding upon such a supposition would be entirely erroneous. The effective currency of the country depends upon the quickness of circulation, and the number of exchanges performed in a given time, as well as upon its numerical amount; and all the circumstances, which have a tendency to quicken or to retard the rate of circulation, render the same amount of currency more or less adequate to the wants of trade. A much smaller amount is required in a high state of public credit, than when alarms make individuals call in their advances, and provide against accidents by hoarding; and in a period of commercial security and private confidence, than when mutual distrust discourages pecuniary arrangements for any distant time. But, above all, the same amount of currency will be more or less adequate, in proportion to the skill which the great money-dealers possess in managing and economizing the use of the circulating medium. Your Committee are of opinion, that the improvements which have taken place of late years in this country, and particularly in the district of London, with regard to the use and economy of money among bankers, and in the mode of adjusting commercial payments, must have had a much greater effect than has hitherto been ascribed to them, in rendering the same sum adequate to a much greater amount of trade and payments than formerly. Some of those improvements will be found detailed in the evidence: they consist principally in the increased use of bankers' drafts in the common payments of London; the contrivance of bringing all such drafts daily to a common receptacle, where they are balanced against each other; the intermediate agency of bill-brokers; and several other changes in the practice of London bankers, are to the same effect, of rendering it unnecessary for them to keep so large a deposit of money as formerly. Within the London district, it would certainly appear, that a smaller sum of money is required than formerly, to perform the same number of exchanges and amount of payments, if the rate of prices had remained the same. It is material also to observe, that both the policy of the Bank of England itself, and the competition of the country bank paper have tended to compress the paper of the Bank of England, more and more, within London and the adjacent district. All these circumstances must have co-operated to render a smaller augmentation of Bank of England paper necessary to supply the demands of our increased trade than might otherwise have been required; and shew how impossible it is, from the numerical amount alone of that paper, to pronounce whether it is excessive or not: a more sure criterion must be resorted to; and such a criterion, your Committee have already shewn, is only to be found in the state of the exchanges, and the price of gold bullion.

The particular circumstances of the two years which are so remarkable in the recent history of our circulation, 1793 and 1797, throw great light upon the principle which your Committee have last stated.

In the year 1793, the distress was occasioned by a failure of confidence in the country circulation, and a consequent pressure upon that of London. The Bank of England did not think it advisable to enlarge their issues to meet this increased demand, and their notes, previously issued, circulating less freely in consequence of the alarm that prevailed, proved insufficient for the necessary payments. In this crisis, Parliament applied a remedy, very similar, in its effect, to an enlargement of the advances and issues of the bank; a loan of exchequer bills was authorized to be made to as many mercantile persons, giving good security, as should apply for them; and the confidence which this measure diffused, as well as the increased means which it afforded of obtaining bank notes through the sale of the exchequer bills, speedily relieved the distress both of London and of the country. Without offering an opinion upon the expediency of the particular mode in which this operation was effected, your Committee think it an important illustration of the principle, that an enlarged accommodation is the true remedy for that occasional failure of confidence in the country districts, to which our system of paper credit is unavoidably exposed.

The circumstances which occurred in the beginning of the year 1797, were very similar to those of 1793;—an alarm of invasion, a run upon the country banks for gold, the failure of some of them, and a run upon the Bank of England, forming a crisis like that of 1793, for which, perhaps, an effectual remedy might have been provided, if the Rank of England had had courage to extend instead of restricting its accommodations and issue of notes. Some few persons, it appears from the Report of the Secret Committee of the Lords, were of this opinion at the time; and the late Governor and Deputy Governor of the Bank stated to your Committee, that they, and many of the Directors, are now satisfied from the experience of the year 1797, that the diminution of their notes in that emergency increased the public distress: an opinion in the correctness of which your Committee entirely concur.

It appears to your Committee, that the experience of the Bank of England in the years 1793 and 1797, contrasted with the facts which have been stated in the present report, suggests a distinction most important to be kept in view, between that demand upon the Bank for gold for the supply of the domestic channels of circulation, sometimes a very great and sudden one, which is occasioned by a temporary failure of confidence, and that drain upon the Bank for gold which grows out of an unfavourable state of the foreign exchanges. The former, while the Bank maintains its high credit, seems likely to be best relieved by a judicious increase of accommodation to the country; the latter, so long as the Bank does not pay in specie, ought to suggest to the Directors a question, whether their issues may not be already too abundant.

Your Committee have much satisfaction in thinking that the Directors are perfectly aware that they may err by a too scanty supply in a period of stagnant credit. And your Committee are clearly of opinion, that although it ought to be the general policy of the Bank Directors to diminish their paper in the event of the long continuance of a high price of bullion and a very unfavourable exchange, yet it is essential to the commercial interests of this country, and to the general fulfilment of those mercantile engagements which a free issue of paper may have occasioned, that the accustomed degree of accommodation to the merchants should not be suddenly and materially reduced; and that if any general and serious difficulty or apprehension on this subject should arise, it may, in the judgment of your Committee, be counteracted without danger, and with advantage to the public, by a liberality in the issue of Bank of England paper proportioned to the urgency of the particular occasion. Under such circumstances, it belongs to the Bank to take likewise into their own consideration, how far it may be practicable, consistently with a due regard to the immediate interests of the public service, rather to reduce their paper by a gradual reduction of their advances to government, than by too suddenly abridging the discounts to the merchants.

2. Before your Committee proceed to detail what they have collected with respect to the amount of country bank paper, they must observe, that so long as the cash payments of the Bank are suspended, the whole paper of the country bankers is a superstructure raised upon the foundation of the paper of the Bank of England. The same check, which the convertibility into specie, under a better system, provides against the excess of any part of the paper circulation is, during the present system, provided against an excess of country bank paper, by its convertibility into Bank of England paper. If an excess of paper be issued in a country district, while the London circulation does not exceed its due proportion, there will be a local rise of prices in that country district, but prices in London will remain as before. Those who have the country paper in their hands will prefer buying in London where things are cheaper, and will therefore return that country paper upon the banker who issued it, and will demand from him Bank of England notes or bills upon London; and thus, the excess of country paper being continually returned upon the issuers for Bank of England paper, the quantity of the latter necessarily and effectually limits the quantity of the former. This is illustrated by the account which has been already given of the excess, and subsequent limitation, of the paper of the Scotch banks, about the year 1763. If the Bank of England paper itself should at any time, during the suspension of cash payments, be issued to excess, a corresponding excess may be issued of country Bank paper which will not be checked; the foundation being enlarged, the superstructure admits of a proportionate extension. And thus, under such a system, the excess of Bank of England paper will produce its effect upon prices not merely in the ratio of its own increase, but in a much higher proportion.

It has not been in the power of your Committee to obtain such information as might enable them to state, with anything like accuracy, the amount of country bank paper in circulation. But they are led to infer from all the evidence they have been able to procure on this subject, not only that a great number of new country banks has been established within these last two years, but also that the amount of issues of those which are of an older standing has in general been very considerably increased: whilst on the other hand, the high slate of mercantile and public credit, the proportionate facility of converting at short notice all public and commercial securities into Bank of England paper, joined to the preference generally given within the limits of its own circulation to the paper of a well-established country bank over that of the Bank of England, have probably not rendered it necessary for them to keep any large permanent deposits of Bank of England paper in their hands. And it seems reasonable to believe that the total amount of the unproductive stock of all the country banks, consisting of specie and Bank of England paper, is much less, at this period, under a circulation vastly increased in extent, than it was before the restriction of 1797. The temptation to establish country banks, and issue promissory notes, has therefore greatly increased. Some conjecture as to the probable total amount of those issues, or at least as to their recent increase, may be formed, as your Committee conceive, from the amount of the duties paid for stamps on the reissuable notes of country banks in Great Britain. The total amount of these duties for the year ended on the 10th of October, 1808, appears to have been 60,522l. 15s. 3d., and for the year ended on the 10th of October, 1809, 175,129l. 17s. 7d. It must, however, be observed, that on the 10th of October, 1808, these duties experienced an augmentation somewhat exceeding one-third; and that some regulations were made, imposing limitations with respect to the reissue of all notes not exceeding 2l. 2s., the effect of which has been to produce a much more than ordinary demand for stamps or notes of this denomination within the year 1809. Owing to this circumstance, it appears impossible to ascertain what may have been the real increase in the circulation of the notes, not exceeding 2l. 2s., within the last year; but with respect to the notes of a higher value, no alteration having been made in the law as to their reissue, the following comparison affords the best statement that can be collected from the documents before the Committee, of the addition made in the year 1809, to the number of those notes.

Number of Country Bank Notes exceeding 2l. 2s. each, stamped in the years ended the 10th of October, 1808, and 10th of October, 1809, respectively:

Assuming that the notes in the first two of these classes, were all issued for the lowest denomination to which the duties respectively attach, and such as are most commonly met with in the circulation of country paper, viz., notes of 5l. and 10l. [although in the second class there is a considerable number of 20l. and even omitting altogether from the comparison the notes of the three last classes, the issue of which your Committee understands is in fact confined to the chartered banks of Scot land, the result would be, that, exclusive of any increase in the number of notes under 2l. 2s. the amount of country bank paper stamped in the year ended the 10th of October, 1809, has exceeded that of the year ended on the 10th of October, 1808, in the sum of 3,095,340l. Your Committee can form no positive conjecture as to the amount of country bank paper cancelled and withdrawn from circulation in the course of the last year. But considering that it is the interest and practice of the country bankers to use the same notes as long as possible; that, as the law now stands, there is no limitation of time to the reissuing of those not exceeding 2l. 2s.; and that all above that amount are reissuable for three years from the date of their first issuing; it appears difficult to suppose that the amount of notes above 2l. 2s. cancelled in 1809, could be equal to the whole amount stamped in 1808: but even upon that supposition, there would still be an increase for 1809 in the notes of 5l. and 10l. alone, to the amount above specified of 3,095,340l. to which must be added an increase within the same period of Bank of England notes to the amount of about 1,500,000l. making in the year 1809, an addition in the whole of between four and five millions to the circulation of Great Britain alone, deducting only the gold which may have been withdrawn in the course of that year from actual circulation, which cannot have been very considerable, and also making an allowance for some increase in the amount of such country paper, as, though stamped, may not be in actual circulation. This increase in the general paper currency in last year, even after these deductions, would probably be little short of the amount which in almost any one year, since the discovery of America, has been added to the circulating coin of the whole of Europe. Although, as your Committee has already had occasion to observe, no certain conclusion can be drawn from the numerical amount of paper in circulation, considered abstractedly from all other circumstances, either as to such paper being in excess, or still less as to the proportion of such excess; yet they must remark, that the fact of any very great and rapid increase in that amount when coupled and attended with all the indications of a depreciated circulation, does afford the strongest confirmatory evidence, that from the want of some adequate check, the issues of such paper have not been restrained within their proper limits.

Your Committee cannot quit this part of the subject without further observing, that the addition of between four and five millions sterling to the paper circulation of this country, has doubtless been made at a very small expense to the parties issuing it, only about 100,000l. having been paid thereupon in stamps to the revenue, and probably for the reasons already stated, no corresponding deposits of gold or Bank of England notes being deemed by the country banks necessary to support their additional issues. These parties, therefore, it may be fairly stated, have been enabled under the protection of the law, which virtually secures them against such demands, to create within the last year or fifteen months, at a very trifling expense, and in a manner almost free from all present risk to their respective credits as dealers in paper money, issues of that article to the amount of several millions, operating, in the first instance and in their hands, as capital for their own benefit, and when used as such by them, falling into and in succession mixing itself with the mass of circulation of which the value in exchange for all other commodities is gradually lowered in proportion as that mass is augmented. If your Committee could be of opinion that the wisdom of Parliament would not be directed to apply a proper remedy to a state of things so unnatural, and teeming, if not corrected in time, with ultimate consequences, so prejudicial to the public welfare, they would not hesitate to declare an opinion, that some mode ought to be derived of enabling the state to participate much more largely in the profits accruing from the present system; but as this is by no means the policy they wish to recommend, they will conclude their observations on this part of the subject, by observing that in proportion as they most fully agree with Dr. Adam Smith and all the most able writers and statesmen of this country, in considering a paper circulation constantly convertible into specie, as one of the greatest practical improvements which can be made in the political and domestic economy of any state; and in viewing the establishment of the country banks issuing such paper as a most valuable and essential branch of that improvement in this kingdom; in the same proportion is your Committee anxious to revert as speedily as possible to the former practice and state of things in this respect: convinced on the one hand, that anything like a permanent and systematic departure from that practice must ultimately lead to results, which among other attendant calamities, would be destructive of the system itself; and on the other, that such an event would be the more to be deprecated, as it is only in a country like this, where good faith, both public and private, is held so high, and where, under the happy union of liberty and law, property and the securities of every description by which it is represented, are equally protected against the encroachments of power and the violence of popular commotion, that the advantages of this system, unaccompanied with any of its dangers, can be permanently enjoyed, and carried to their fullest extent.

Upon a review of all the facts and reasonings, which have been submitted to the consideration of your Committee in the course of their inquiry, they have formed an opinion, which they submit to the House:—That there is at present an excess in the paper circulation of this country, of which the most unequivocal symptom is the very high price of bullion, and next to that, the low state of the continental exchanges; that this excess is to be ascribed to the want of a sufficient check and control in the issues of paper from the Bank of England; and originally to the suspension of cash payments, which removed the natural and true control. For upon a general view of the subject, your Committee are of opinion, that no safe, certain, and constantly adequate provision against an excess of paper currency, either occasional or permanent, can be found, except in the convertibility of all such paper into specie. Your Committee cannot, therefore, but see reason to regret, that the suspension of cash payments, which, in the most favourable light in which it can be viewed, was only a temporary measure, has been continued so long; and particularly, that by the manner in which the present continuing act is framed, the character should have been given to it of a permanent war measure.

Your Committee conceive that it would be superfluous to point out, in detail, the disadvantages which must result to the country, from any such general excess of currency as lowers its relative value. The effect of such an augmentation of prices upon all money transactions for time; the unavoidable injury suffered by annuitants, and by creditors of every description, both private and public; the unintended advantage gained by government and all other debtors; are consequences too obvious to require proof, and too repugnant to justice to be left without remedy. By far the most important portion of this effect it appears to your Committee to be that which is communicated to the wages of common country labor, the rate of which, it is well known, adapts itself more slowly to the changes which happen in the value of money, than the price of any other species of labor or commodity. And it is enough for your Committee to aliude to some classes of the public servants, whose pay, if once raised in consequence of a depreciation of money, cannot so conveniently be reduced again to its former rate, even after money shall have recovered its value. The future progress of these inconveniences and evils, if not checked, must at no great distance of time work a practical conviction upon the minds of all those who may still doubt their existence; but even if their progressive increase were less probable than it appears to your Committee, they cannot help expressing an opinion, that the integrity and honor of Parliament are concerned, not to authorize longer than is required by imperious necessity, the continuance in this great commercial country of a system of circulation, in which that natural check or control is absent which maintains the value of money, and by the permanency of that common standard of value, secures the substantial justice and faith of moneyed contracts and obligations between man and man.

Your Committee moreover beg leave to advert to the temptation to resort to a depreciation even of the value of the gold coin by an alteration of the standard, to which Parliament itself might be subjected by a great and long-continued excess of paper. This has been the resource of many governments under such circumstances, and is the obvious and most easy remedy to the evil in question. But it is unnecessary to dwell on the breach of public faith and dereliction of a primary duty of government, which would manifestly be implied in preferring the reduction of the coin down to the standard of the paper, to the restoration of the paper to the legal standard of the coin.

Your Committee therefore, having very anxiously and deliberately considered this subject, report it to the House as their opinion, that the system of the circulating medium of this country ought to be brought back, with as much speed as is compatible with a wise and necessary caution, to the original principle of cash payments at the option of the holder of Bank paper.

Your Committee have under stood that remedies, or palliatives, of a different nature, have been projected; such as, a compulsory limitation of the amount of Bank advances and discounts, during the continuance of the suspension; or, a compulsory limitation during the same period, of the late of Bank profits and dividends, by carrying the surplus of profits above that rate to the public account. But, in the judgment of your Committee, such indirect schemes, for palliating the possible evils resulting from the suspension of cash payments, would prove wholly inadequate for that purpose, because the necessary proportion could never be adjusted, and if once fixed, might aggravate very much the inconveniences of a temporary pressure; and even if their efficacy could be made to appear, they would be objectionable as a most hurtful and improper interference with the rights of commercial property.

According to the best judgment your Committee has been enabled to form, no sufficient remedy for the present, or security for the future, can be pointed out, except the repeal of the law which suspends the cash payments of the Bank of England.

In effecting so important a change, your Committee are of opinion that some difficulties must be encountered, and that there are some contingent dangers to the Bank, against which it ought most carefully, and strongly to be guarded. But all those may be effectually provided for, by entrusting to the discretion of the Bank itself the charge of conducting and completing the operation, and by allowing to the Bank so ample a period of time for conducting it, as will be more than sufficient to effect its completion. To the discretion, experience, and integrity of the Directors of the Bank, your Committee believe that Parliament may safely entrust the charge of effecting that which Parliament may in its wisdom determine upon as necessary to be effected; and that the Directors of that great institution, far from making themselves a party with those who have a temporary interest in spreading alarm, will take a much longer view of the permanent interests of the Bank, as indissolubly blended with those of the public. The particular mode of gradually effecting the resumption of cash payments ought therefore, in the opinion of your Committee, to be left in a great measure to the discretion of the Bank, and Parliament ought to do little more than to fix definitely the time at which cash payments are to become, as before, compulsory. The period allowed ought to be ample, in order that the Bank Directors may feel their way, and that, having a constant watch upon the varying circumstances that ought to guide them, and availing themselves only of favourable circumstances, they may tread back their steps slowly, and may preserve both the course of their own affairs as a company, and that of public and commercial credit, not only safe, but unembarrassed.

With this view, your Committee would suggest, that the restriction on cash payments cannot safely be removed at an earlier period than two years from the present time; but your Committee are of opinion, that early provision ought to be made by Parliament for terminating, by the end of that period, the operation of the several statutes which have imposed and continued that restriction.

In suggesting this period of two years, your Committee have not overlooked the circumstance, that, as the law stands at present, the Bank would be compelled to pay in cash at the end of six months after the ratification of a definitive treaty of peace; so that if peace were to be concluded within that period, the recommendation of your Committee might seem to have the effect of postponing, instead of accelerating the resumption of payments. But your Committee are of opinion, that if peace were immediately to be ratified, in the present state of our circulation, it would be most hazardous to compel the Bank to pay cash in six months, and would be found wholly impracticable. Indeed, the restoration of peace, by opening new fields of commercial enterprise, would multiply instead of abridging the demands upon the Bank for discount, and would render it peculiarly distressing to the commercial world if the Bank were suddenly and materally to restrict their issues. Your Committee are therefore of opinion, that even if peace should intervene, two years should be given to the Bank for resuming its payments; but that even if the war should be prolonged, cash payments should be resumed by the end of that period.

Your Committee have not been indifferent to the consideration of the possible occurrence of political circumstances, which may be thought hereafter to furnish an argument in favor of some prolongation of the proposed period of resuming cash payments, or even in favor of a new law for their temporary restriction after the Bank shall have opened. They are, however, far from anticipating a necessity, even in any case, of returning to the present system. But if occasion for a new measure of restriction could be supposed at any time to arise, it can in no degree be grounded, as your Committee think, on any state of the foreign exchanges (which they trust that they have abundantly shown the Bank itself to have the general power of controlling), but on a political state of things producing, or likely very soon to produce, an alarm at home, leading to so in definite a demand for cash for domestic uses as it must be impossible for any banking establishment to provide against. A return to the ordinary system of banking is, on the very ground of the late extravagant fall of the exchanges and high price of gold, peculiarly requisite. That alone can effectually restore general confidence in the value of the circulating medium of the kingdom; and the serious expectation of this event must enforce a preparatory reduction of the quantity of paper, and all other measures which accord with the true principles of banking. The anticipation of the time when the Bank will be constrained to open, may also be expected to contribute to the improvement of the exchanges; whereas a postponement of this era, so indefinite as that of six months after the termination of the war, and especially in the event of an exchange continuing to fall (which more and more would generally be perceived to arise from an excess of paper, and a consequent depreciation of it), may lead, under an unfavourable state of public affairs, to such a failure of confidence (and especially among foreigners), in the determination of Parliament to enforce a return to the professed standard of the measure of payments, as may serve to precipitate the further fall of the exchanges, and lead to consequences at once the most discreditable and disastrous.

Although the details of the best mode of returning to cash payments ought to be left to the discretion of the Bank of England, as already stated, certain provisions would be necessary, under the authority of Parliament, both for the convenience of the Bank itself, and for the security of the other banking establishments in this country and in Ireland.

Your Committee conceive it may be convenient for the Bank to be permitted to issue notes under the value of 5l. for some little time after it had resumed payments in specie.

It will be convenient, also, for the chartered Banks of Ireland and Scotland, and all the country banks, that they should not be compelled to pay in specie until some time after the resumption of payments in cash, by the Bank of England; but that they should continue for a short period upon their present footing, of being liable to pay their own notes on demand, in Bank of England paper.

See p. 250.

In 1635 musket bullets were used for change at a farthing apiece, legal tender for sums under 13d.

For this, and many other citations from the Colonial Records, I am indebted to Felt's Mass. Currency.

In 1873 the United States coined a “trade dollar” with the purpose of getting a share of the China banking and exchange business. The project was in every way fallacious, but the dollars were made worth $1.03 in gold and, coming into circulation in Nevada, were clipped.

“Bank,” as the word was used before the Revolutionary War, meant only a batch of paper money, issued either by the government or a corporation. The impression seems to have remained popular, that the essential idea of a bank is the issuing of notes. Gouge, accepting this definition, assailed all “ banking.” The notes issued in banks, or masses as loans, were pure paper money, and may be distinguished from the Treasury notes issued for the current expenses of government.

The great philosopher was not unbiassed in his judgment. He printed the bills, having written a pamphlet in favor of them, and he says, “ It was a very profitable job and a great help to me.” Looking back upon it later, he argues that it was a good thing, “ though I now think there are limits beyond which the quantity may be hurtful.”— Works, II. 254.

Potter, R. I. Paper Money in Phillips' Colon. and Contin. Parency, I. 100.

There are hints that it had made issues.

See Potter l. c., and Arnold's Rhode Island.

Phillips' Colon. and Continent. Paper Money. Vol 1.

Albany, 1866, page 21.

Political Essays. Philadelphia, 1791.

Phillips: Colonial and Continental Paper Currency, II. 175.

Webster l. c. 175, note.

Sketch of the finances of the United States. 1796.

Extracts are given in the appendix to Raguet's Currency and Banking Philadelphia, 1840.

See Chapter II. p. 283.

See Chapter II. p. 302.

See table, p. 123.

Since 1844 the Bank is obliged by law to give its notes at £3 17s. 9d for all bullion offered, reducing the difference between coin and bullion.

Ernest Seyd: Suggestions in Reference to the Metallic Currency of the United States of America. London, 1871 (for private circulation). The best book on the general subject is the same author's Ballion and Foreign Exchanges. London, 1868.

See page 302.

Branches counted separately.

See page 253.

Finance Report, 1872, p. 374.

Gitbart's “Banking”; Macleod's Dictionary, art. “ Banking in England”; Tooke's “Prices,” Vol. II.

Wilkes, Wilde, and Wiggins, celebrated at the time as “the three W's.”

Macleod. I have not met with mention of this elsewhere.

See page 250.

There is a very erroneous opinion prevalent, that the English government allows the Bank of England to suspend in a crisis. There is nevel any question of the kind. The run on the Bank in a panic is not for gold, but for notes, that is, for discounts. If, however, there is an export of gold at the time, the notes are taken to the issue department and gold demanded According to the charter, the Bank can circulate only fifteen millions in notes on government security, and for all other notes it must have gold, sovereign for sovereign. If, therefore, there is a drain on its bullion, it must contract, or keep all notes handed in for gold. This heightens the panic. The action of the government is to recommend the Bank to disregard the clause governing circulation. It promises to ask Parliament for indemnity. The Bank then discounts freely for solvent parties, but at high rates. This always kills the panic as panic. The crisis runs its course. Erroneous assertions have been made to the effect that the whole crisis comes to an end. This is not the case. Also that the Bank never has to avail itself of the permission. This also is an error. In 1847 and 1866 there was no over-issue. Prices fell, the exchanges turned, gold came in, and the trouble died out in two or three days, but in 1857 the bank issued £900,000 more than the law would have allowed. They were retired again within a week. Evidently when a bank has over thirty million pounds' circulation, of which fifteen millions are secured on government debt, and the rest by coin, then,£900,000 over-issue cannot affect its credit. It has a reserve strength which it can put forth in a panic.

In a sketch of the life of James G. King in the Merchants' Magazine for January, 1854, it is said that he negotiated this loan from the Bank of England to enable the American banks to resume; and the object was the ultimate advantage from setting American business once more in operation.

Condy Raguet, Currency and Banking.

Gilbart, “ Banking,” 218.

Macleod.

Quoted by Benton.

Page 123.

Hunt's Magazine, July, 1844. The returns were probably incomplete.

See p. 263.

See page 55.

The text of it is McCulloch's Dict., Art, “ Funds.”

He said that the amount was not greater in 1853 than in 1829.

Merch. Mag.: December, 1854.

See p. 292.

Financial History of the War.

See the extracts from the debate of 1819, especially Lord Grenville’s speech, p. 296.

See Chapter III.

Preface to the last edition of the “ English Constitution.”

Finance Report, 1872.

Spaulding.

The annual aggregate clearings from 1853 to 1862 averaged 5,000,000,000. In 1863 they were 14,000,000,000 and rose steadily. This is introduced only as a general indication of the increase of transactions.

See the Diagram at the end of this Chapter.

See p. 23.

P. 280.

Page 253.

The eager demand for bullion in England is shown by an incident mentioned by Chevalier. The French Treasury, by transactions with its agents in 1806, came into possession of drafts of the Spanish Government on bullion in Mexico, but since the battle of Trafalgar England controlled the sea, and France could not bring over the metal. A Dutch bank negotiated a transaction between the belligerents by which the French Treasury realized its drafts, and an English frigate brought the treasure to England.

On account of the interest attaching to this document and its historical and scientific importance, it is given in full in the Appendix. In the notes on the report the subordinate points in which it is regarded as erroneous or questionable are noticed.

Harriet Martineau's Hist of Eng. I. 294.

The reader who is curious to pursue this analogy is referred to Cobbett's Register, vols. 18 and 19. Cobbett's Paper vs. Gold goes over the whole subject of paper money in detail. The quotations from contemporaneous literature, the letters from persons who dissented from his views, and the allusions to current events, combine to form a picture of the times which is in striking analogy with all which we now see and experience.

The English quote exchanges by the amount of the foreign currency which £1 will pay. This is not without exception, any more than our own custom of quoting dollars and cents required to pay a unit of the foreign currency, but it is the prevailing usage. High and low are therefore used in an inverted application in the two countries. Low exchange in this usage tends to an exportation of bullion.

The appearance of the “middle-man” ought to be noticed.

Martineau's History of England, I. 329.

Republished from the “Financier” of October 25th, 1873.

See note on page 267.

This is the point on which Tooke differed from the Bullion Committee. Mr. Horner, in his speech, assumed that grain was a general measure of value, as between different periods, a notion now abandoned, and the same opinion underlies this passage. Grain was dear, but, as Tooko shows, many other things were “oppressively cheap.” Macleod's comment is, that they would have been much cheaper but for the depreciated currency, and that the Committee ought to have relied entirely upon the gold premium to prove their point. He also desires to have it remembered that “excess” of currency is a relative term, and that it must be understood to mean excess relatively to the wants of commerce at the time in question,—a limitation which is to be understood as of course. (See p. 221.)

See a short account of the Bank by Mr. Godfrey, one of the original Directors; and a Short History of the Last Parliament, 1699, by Dr. Drake; both in Lord Somers' Collection of Tracts.

Macleod (Dict, of P. E. I. 303) takes exception to this statement, and in the form in which it stands, it is liable to be misunderstood. The history of American currency shows how much nominal convertibility may differ from actual convertibility, but notes cannot fall to 17 per cent. discount, while the Bank offers to pay on demand. The Bank stopped payment in May, 1696, and then its notes fell to the discount named.