W(S^::^'i'^:^'SM: 
 
 THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 33e 
 BS'7 5
 
 UBRARY 
 
 OF THE 
 
 UNIVERSITY Of lUlNOIS
 
 PRACTICAL ^ 
 
 OBSERVATIONS 
 
 REPORT 
 
 BULLION-COMMITTEE, 
 
 By CHARLES BOSANQUET, Esq. 
 
 SECONl!) EDITION, CORRECTED, 
 
 WITH 
 
 A SUPPLEMENT. 
 
 LONDON : 
 
 PRINTED FOR J. M. RICHARDSON, 23, CORNHILL, 
 OPPOSITE THE ROYAL EXCHANGE. 
 
 J810.
 
 PREFACE. 
 
 XHAT my unaided and un- 
 sanctioned efforts to separate truth 
 from error, in the Report of the 
 Bullion-Committee, should be, in 
 every instance, successful, is in no 
 degree probable : I should, there- 
 fore, gladly have profited, on this 
 occasion, by the observations of 
 the public to correct the errors 
 into which I may have fallen.
 
 VI 
 
 The rapid sale of the first edition of 
 this work, and the urgent demand 
 which, I understand, prevails for a 
 second, deprive me, however, of 
 opportunity to collect the public 
 opinion : this second edition differs, 
 therefore, from the first only in 
 the correction of typographical 
 errors, and in the omissiqn or al- 
 teration of a few expressions liable 
 to misconstruction, which, writing 
 in the desultory form of notes, at 
 both ends of the kingdom, and 
 amidst varied occupations, escaped 
 my notice in the manuscript. A 
 note is added, to correct a trifling
 
 Vll 
 
 mis-statement respecting silver, in 
 page 34; but it has no effect on the 
 argument. 
 
 The only occurrence of any 
 importance to the subject of my 
 Observations, since they first went 
 tothepress,isthepublicationof Mr. 
 Huskison's masterly explanation of 
 the principles of the writers of the 
 Report, on the theory of money 
 and exchange, &c. in a pamphlet 
 entitled, '^ The Question stated and 
 examined." It bears so directly 
 on the point under discussion, and 
 is so generally read and referred to, 
 that it might seem like fear or affec-
 
 Yin 
 
 tation to pass it unnoticed ; I pro- 
 pose, therefore, to assign reasons^ 
 in a Supplement to this edition, 
 why, though I dissent from Mr. 
 Huskison's conclusions, I think it 
 unnecessary publicly to investigate 
 their accuracy. 
 
 Hampsteadf 
 December 3, 1810.
 
 PRACTICAL OBSERVATIONS, 
 
 ^c. ^c. <^c. 
 
 " REASONING on things by figures is the 
 way," says Sir William Davenant, " to come to 
 sure conclusions." — To reason in this mode, 
 exclusively, is the object of the present work. — • 
 The things to be reasoned upon are the opinions 
 of the Bullion-Committee ; and the figures to 
 be employed are chiefly those contained in the 
 Appendix to its Report. Abstract reasoning is 
 foreign to my purpose; my observations will 
 be founded wholly on facts, and these will be 
 introduced with such details only as are ne- 
 cessary to render their application intelligible 
 to those who have not the Report, with its Ap- 
 pendix, immediately before them.
 
 In the early part of 1809, the forelgii 
 exchanges experienced a rapid and unusual 
 depression ; at the same time, the price of 
 gold-buUion rose in an equal degree, — and the 
 variation, when at the highest, in October 
 and November, amounted to nearly 20 per 
 cent. 
 
 The public attention was drawn to this sub- 
 ject by a i^amphlet, pubHshed late in 1809* 
 (the substance of which had previously appeared 
 in the Morning Chronicle,) entitled, " The high 
 Price of Bullion a Proof of the Depreciation 
 of Bank-Notes." This pamphlet, by Mr. Ricar- 
 do, is \vholly theoretical, and, so far, unsatisfac- 
 tory ; — because the theories are not brought 
 to the test of experiment. Other publications 
 followed, on the same subject, but I particularly 
 allude to Mr. Ricardo's work, not only as hav- 
 ing been the immediate cause of the inquiry 
 which has since taken place, undet the autho- 
 rity of the house of commons, but as a syllabus of 
 the Report which has been presented by the Com- 
 mittee : and I refer, directly, also to a pamphlet 
 published by Mr. Mushett, of the Mint, be- 
 cause the tables annexed to it are essentially 
 useful to the inquiry, and are not found, at 
 least not in so convenient a shape, in the Ap- 
 pendix to the Report.
 
 At the commencement of the last session of 
 Parliament, a select Committee of the House 
 of Commons was appointed to " Inquire into 
 the cause of the high price of bullion, and to 
 take into consideration the state of the circu- 
 lating medium, and of the exchanges between 
 Great Britain and foreign parts." The Com- 
 mittee sat upwards of three months, anil, at the 
 latter end of the session, presented a Report, 
 with a copious Appendix of evidence and do- 
 cuments, which supplies, in great measure, 
 the deficiency complained of in Mr. Ricardo's 
 work. 
 
 A rigid inquiry into the accuracy of opinions 
 decisively pronounced by such high authority, 
 on a subject of vital importance to the national 
 interests, might, under any circumstances, be 
 justified; but there is more than usual cause 
 for inquiry in the present instance, because 
 the opinions of the Committee are altogether 
 at variance with those of the persons selected 
 for examination, and who must be presumed 
 to have been, at least in the judgement of tlie 
 Committee, most conversant with the subjects 
 brought before them ; there are, therefore, two 
 opposite opinions before Parliament, on the 
 influence, for instance, of the greater or less 
 amount of bank-notes in circulation, on the 
 course of exchange, and the price of bullion ;
 
 the one theoretical, forming the substance of the 
 Report, the other practical, and pervading the 
 Appendix. 
 
 Under these circumstances, what opinion 
 shall the public adopt? — what course is Parlia- 
 ment to hold ? " When a theorem is proposed 
 to a mathematician, the first thing he does with 
 it," says Paley, ** is to try it on a simple case ; 
 if it produce a false result he is sure there 
 must be some error in the demonstration."^ — 
 The public must proceed in this way with 
 the Report, and submit its theories to the 
 test of fact. 
 
 The question referred to the consideration of 
 the Committee, viz. the cause of the high 
 price of bullion, meets no direct answer in the 
 Report; — but the Committee has offered a va- 
 riety of opinions, and laid down several axioms, 
 (the truth of which I am presently to ascertain,) 
 from which they deduce the inference, that the 
 present high price of bullion and low rates of 
 exchange are caused by an excess in the a- 
 mount, and consequent depreciation inthevalue^ 
 of bank-notes. The nature of the argument, on 
 which this opinion is founded, cannot be more 
 concisely or satisfactorily stated than by di- 
 rect reference to the passages in the Report, 
 and the corresponding passages in the other publi- 
 cations I have named, applicable to this pa^t of
 
 the subject. Tliis notion was first suggested by 
 Mr. Ricardo, who states, " That Parliament, 
 by restricting the Bank from paying in specie, 
 have enabled the conductors of that concern 
 to increase or decrease, at pleasure, the quantity 
 and amount of their notes. (1st Ed. p. 23.) 
 Mr. Mushett says, " There can now exist no 
 possible obstacle to the increase of their notes 
 but what their own prudence suggests." (p. 41.) 
 And the Committee state, expressly, that " The 
 suspension of cash-payments has had the effect 
 of committing into the hands of the Directors 
 of the Bank of England, to be exercised by 
 their soje discretion, the important charge of 
 supplying the country with that quantity of 
 circulating medium, which is exactly propor- 
 tioned to the wants and occasions of the pubhc." 
 (Rep. p. 24.) 
 
 In the exercise of this power the Bank, it is 
 assumed, has not been sufficiently guarded ; 
 and the consequence is, according to Mr. Ri- 
 cardo, " That the paper-currency of this country 
 has long been, and now is, (Dec. 1, 1809,) at a 
 considerable discount, proceeding from a su- 
 perabundance of its quantity." Mr. IVIushett 
 says: "Since the Bank- Restriction-Bill took 
 place it has been genei^ally supposed, that the 
 excessive quantity of bank-notes in circulation 
 Jias caused a considerable depreciation in their
 
 Value :" (p. 40.) and the Committee has formed 
 an opinion " that there is, at present, an excess 
 in the present circulation of this country ;" and 
 ** that the excess is to be ascribed to the want 
 of a sufficient check and controul in the issues 
 of paper from the Bank of England." (p. 30.) 
 
 And as these writers agree in the fact of 
 excess, or superabundance, of the paper- cur- 
 rency of this country, so do they also concur 
 in the sign of its existence : " The sign of 
 this excess and depreciation has been a per- 
 manently unfavourable exchange," says Mr. 
 Mushett. " The exchange," in the opinion of 
 Mr. Ricardo, " will form a tolerably accurate 
 criterion, by which we may judge of the debase- 
 ment of the currency, proceeding either from a 
 clipped coinage or a depreciated paper-money ; 
 because, whilst paper can be exchanged for 
 undebased coin, the exchange can never be 
 more above, or more below, par than the ex- 
 penses of transporting the precious metals:" 
 (p. 18.) and the Committee report to the house 
 their " most clear opinion, that so long as the 
 suspension of cash-payments is permitted to 
 subsist, the price of Gold Bullion, and the gen^ 
 neral course of exchange with foreign coun- 
 tries, taken for any considerable period of time, 
 form the best general criterion from which any 
 inference can be drawn, as to the sufficiency
 
 or excess of paper-currency in circulation," (Rep. 
 page 21,) and this opinion appears to be founded 
 on the principle, which the Committee assumes 
 to be indisputable, " that the difference of ex- 
 change, resulting from the state of trade 
 and payments between two countries, is limited 
 by the expense of conveying and insuring the 
 precious metals from one country to the other." 
 
 (p. 11) 
 
 On these points there seems no difference 
 whatever in the three Treatises ; the coincidence 
 of opinion, and even of expression, is as close 
 as possible, and the Committee appears to speak 
 the common sentiment of those who consider 
 the paper-currency to be excessive, when they 
 sum up their previously-expressed opinions ia 
 these words : " 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 suilScient check 
 and controul on the issues of the paper of the 
 Bank of England, and originally to the sus- 
 pension of cash-payments, which removed the 
 natural and true controul." (page 30.) 
 
 My purpose is to ascertain the sufficiency of 
 the grounds on which these opinions are found-
 
 ed, — the truth in point of fact of the several 
 propositions laid down by the Committee. 
 
 1st. That the variations of the exchange with 
 foreign countries can never, for any considera- 
 ble time, exceed the expense of transporting 
 and insuring the precious metals from one coun- 
 try to the other. 
 
 2d. That the price of Gold Bullion can never 
 exceed the mint-price, unless the currency, 
 in which it is paid, is depreciated below the 
 value of gold. 
 
 3d. That, so far as any inference is to be 
 drawn from Custom-House returns of exports 
 and imports, the state of the exchanges ought 
 to be peculiarly favourable. 
 
 4th. That the Bank, during the restriction, 
 possesses exclusively the power of limiting the 
 circulation of bank-notes. 
 
 5th. That the circulation of country bank- 
 notes depends upon, and is proportionate to, 
 the issues from the Bank, 
 
 Lastly. That the paper- currency is now ex- 
 cessive, and depreciated in comparison with 
 gold, and that the high price of Bullion and low 
 rates of exchange are the consequences as 
 well as the sign of such depreciation. 
 
 Before I attempt to investigate the truth of 
 these propositions,, by reference to the docu-
 
 9 
 
 ments with which the Report has furnished 
 me, it may be convenient to ascertain what, 
 on a full admission of all the arguments and 
 reasonings of the Committee, is the extent of 
 the evil they point out, what the present state 
 of the national currency, as resulting from the 
 criterion established in the Report. 
 
 There is annexed to Mr. Mushett's pamphlet a 
 table, shewing, 1st, the rate of exchange with 
 Hambro' and Paris, for 50 years past, and how 
 much it has been, in each instance, above or 
 below par. 
 
 2d. The price of gold in London, and a com- 
 parison of this price with the English standard, 
 or mint price. 
 
 3d. The amount of bank-notes in circulation, 
 and the rate of their assumed depreciation, by 
 a comparison with the price of gold. 
 
 On reference to these tables it appears that, 
 for about two years antecedently to the suspension 
 of cash-payments, the exchange had been, in 
 some degree, unfavourable to England ; that, at 
 tlie immediate period of the suspension, and for 
 two years and a half succeeding that measure, 
 from Nov. 1796 to July 1799, the exchange 
 was very greatly in favour of England, and gold 
 at the mint-price. That, between the end of 
 1799 and 1802, the exchange was against Lon- 
 don and the price of gold considerably above
 
 10 
 
 the mint-price. That, from the end of 1802 
 to the end of 1 808, the exchanges were for six 
 years considerably in favour of Great Britain, 
 and the price of gold stationary, at 2| per cent, 
 above the ■ mint price. * Subsequently to 
 the end of 1808 the exchanges have fallen, 
 the price of gold has risen as before stated, and 
 these circumstances have led to the investigation 
 of the Committee. 
 
 It results from this reference, that, admit- 
 ting the criterion established by the Report, as 
 the test of an excess of paper, the grievance 
 complained of is of recent date, that it had na 
 existence for six years previously to 1809, and 
 that the circulation of bank-notes during this 
 period did not therefore exceed the natural 
 Avants of the public and was not excessive. 
 This inference appears undenia])le. I do not 
 mean to infer that 17 or 18 millions of bank- 
 notes then in circulation may not be too much, 
 under other circumstances ; but I conclude, that 
 Mr. Ricardo's opinion, that the paper-currency 
 had long been e.vcessive, when he wrote in 1 809, 
 was incorrect, and that Mr. ]Mushett had not 
 
 * It may be said, that even then the price of gold was above 
 the mint-price; but it appears by the questions of the Committee 
 and Mr, Goldsmid's evidence tliat the supply of gold was. 
 very small, and the price of o£'4- per oz. was fixed hy the Bank 
 •f England, whence " the demand exceeded all competition.""
 
 11 
 
 referred to his tables when he stated that the 
 sign of tliis excess has been a permanently un- 
 favourable exchange. 
 
 It results equally from this theory, that du- 
 ring the year I8O9, and subsequently, the circu- 
 lation of paper has been excessive, because both 
 the exchanges and price of bullion indicate 
 such excess. During a part of this period, 
 from July to Nov. I8O9, the loss on the ex» 
 change amounted to nearly 20 per cent. We 
 learn, however, fjom the Report, that, in the 
 spring of 1810, the exchanges experienced a 
 gradual improvement, that on Hamburgh rose 
 from 28, the lowest rate, to 31, that on Ams- 
 terdam from 30 to 33 : 5, that on Paris 
 from 19 : 6 to 21: 11. "The exchange on 
 Hamburgh appearing (as stated in the Report) 
 to be 9 per cent, that on Amsterdam 7 per 
 cent, and that on Paris 14 per cent, against 
 this country. " — These calculations do not ex- 
 actly agree with those of j\Ir. ^lushett ; admit- 
 ting, however, the correctness of the state- 
 ment by the Committee, a small proportion 
 only of the loss thus experienced on the 
 exchanges with the continent is to be ascribed, 
 according to the opinion of the Committee, to 
 the depreciation of our currency. 
 
 It is a principle laid down by the Committee, 
 and which they consider to have been long
 
 12 
 
 settled and understood, '^ That the difference 
 of exchange resulting from the state of 
 trade and payments between two countries is 
 limited by the expense of conveying and insuring 
 the precious metals from one country to the 
 other." It will be equally admitted that, in 
 the event of an unfavourable balance of pay- 
 ments, the depression of the exchange must ne- 
 cessarily attain this Bmit, before the balance 
 can be adjusted by the exportation of gold. 
 
 The Committee endeavoured to ascertain the 
 extent of this limit, that is the expense of send- 
 ing bnllion abroad, under present circum- 
 stances, and they come to the conclusion. 
 " that this expense in the last half of the last 
 year (1809) did not exceed 7 per cent. — and 
 they observe that an expense to this extent 
 does not afford an adequate explanation of a 
 fall in the exchanges so great as from 16 to 20 
 per cent, below par. " The increased cost," 
 they add, " of such remittance would explain, 
 at those moments when the risk was greatest, 
 a fall of something more than 7 per cent, 
 in the exchange with Hamburgh and Holland, 
 and a fall still greater perhaps in the exchange 
 with Paris; but the rest of the fall, which has 
 actually taken place, remains to be explained 
 in some other manner."
 
 13 
 
 The expense of sending gold abroad was 
 iu jio degree less in the spring cf 1810 than 
 in the autumn of 1 809 ; and it follows, there- 
 fore, that, according to the statements of the 
 committee, the loss on the Dutch exchange, 
 in the months of March and April last, was 
 exactly equal to the expense of sending gold 
 as a remittance ; on that on Hambrugh 2 per 
 cent, greater ; and that, on the exchange with 
 Paris, it was undefined, because the expense 
 of sending gold to Paris was not ascertained. 
 According to Mv. Mushett's calculations of the 
 par betv/een London and Paris, the loss on 
 the French exchange was 2 per cent, more 
 than the expense of sending gold to Holland : — ^ 
 As this was the state of things for some months 
 prior to the date of the Report, and at 
 the period when it was presented, it will, 
 perhaps, with some, be a subject of regret 
 that the passage referring to the extreme of 
 the lowest depression of the exchange was 
 pot expunged, as the event had proved it to 
 be one of those temporary effects which the 
 Committee had previously determined to disT 
 regard. 
 
 Whether, however, the difference, which re- 
 mains to be accounted for in some other manner 
 be 2 percent, or 1 1 per cent, it is not necessary 
 to travel out of the Report to assign a causo
 
 14 
 
 for it, without recurring to depreciation : — " Re- 
 ferring to the evidence of a continental merchant, 
 on whose opinion the Committee appears to 
 place much reliance, they state : — " That poli- 
 tical events, operating upon the state of trade, 
 may often have contributed as well to the 
 rise as to the fall of the exchange ; and, in 
 particular, that the first remarkable depression, 
 in 1809, is to he ascribed, as has been stated 
 in the evidence already quoted, to commercial 
 events, arising out of the occupation of the 
 north of Germany by the troops of the 
 French Emperor; the evil has been, that 
 the e:>cchange, when fallen, has not had the 
 full means of recovery, under the existing 
 system :" — these means are explained to be, 
 *' the clandestine transmission of guineas, which 
 improved it for the moment by serving as a 
 remittance." 
 
 Thus, then, it appears, that, on a full ad^ 
 mission of all the principles adopted by the 
 Committee, and of their appHcation to the 
 present case, the foreign exchanges were, at 
 the time when the Report was presented, 
 and for three months prior thereto, about 2 per 
 cent, below the natural limit of depression ; that 
 this excess was the emnant of a much greater 
 depression, occasioned by political events in 
 ^he preceding year, during a period in which
 
 16 
 
 the means of exporting English gold coin, at 
 the mint-price, in payment of debts, were 
 withheld. — When it is stated that, for 6 months 
 since the date of the Report, the exchanges 
 have continued at or about the same standard, 
 or rather higher, and that at present the loss 
 on the exchange is barely equal to the expense 
 and risk of transporting gold, it will probably be 
 thought that the question, as a practical question 
 of national importance, is altogether at rest. — 
 That there is no necessity, at least, for the 
 adoption of hasty remedies, even though the 
 correctness of the general reasoning of the 
 Committee should, on full inquiry, be conceded. 
 But I do not admit its correctness: I do not believe 
 that the fall of the exchange and the encreased 
 price of bullion indicate excess and consequent 
 depreciation of our paper-currency ; and I doubt 
 it, because the premises, on which this opinion 
 is founded, are unsound, and the conclusions 
 contrary to experience. 
 
 The basis of the argument of the Committee, 
 to the examination of which I now proceed, 
 is that which I have shortly stated in page 8 
 as the first proposition, viz. " that the difference 
 of exchange, resulting from the state of tradtt 
 and payments between two countries is limited
 
 16 
 
 by the expense of conveying and insuring the 
 precious metals from one country to the other ; 
 at least, that it cannot, for any considerable 
 time, exceed that limit :" (Rep. p. 11.) there- 
 fore, all excess of depression on the exchange, 
 beyond the expense of conveyance, is to be 
 attributed to depreciation of our currency. 
 This proposition is so fully admitted, and so 
 broadly stated, in each of the publications to 
 which I have alluded, that it is not even guarded 
 by the condition, that the country, by which 
 the balance of payments is due, shall possess 
 bullion or specie sufficient to liquidate it ; but, 
 boldly as .the principle is asserted, and strongly 
 as reason appears to sanction it, I insist that it is 
 not generally true, and that it is at variance with 
 fact. 
 
 It is stated, in the Report, from the evi- 
 dence before the Committee of 1797, that 
 the average expense, at that time, of con- 
 veying specie from London to Hamburgh, was 
 31 per cent, yet, on reference to the course of 
 exchange with Hamburgh, in Mr. Mushetfs 
 tables, it appears that, from the beginning of 
 1797 to the middle of 1799, the exchange 
 was continually in favour of Great Britain more 
 than twice the expense of conveying gold; — 
 and, for eighteen months of that time, 11 to 
 IS per cent, in our favoui, or from 7 to
 
 17 
 
 8 per cent, beyond such expense : nor does 
 this profit appear to have occasioned any 
 considerable importation of gold, which, dur- 
 ing this period, rose to the mint-price, although, 
 for several years before, it had, nominally at 
 least, been below it. 
 
 In the years 17^4 to 1768, prior to the recoin- 
 age, when the imperfect state of the coins occa- 
 sioned gold to be 2 to 3 per cent, above the mint- 
 price, the exchange with Paris was 8 to 9 per 
 cent, against London, — at the same time the 
 exchange with Hamburgh was, during the whole 
 period, i2 to 6 per cent, in favour of London ; 
 here appears, then, a profit of 12 to 14 per 
 cent, for the expense, in time of peace, of 
 paying the debt to Paris with gold from Ham- 
 burgh, which must have exceeded the fact by 
 at least 8 or 10 per cent, and it is worthy of 
 remark, that the average exchange with Ham- 
 burgh, for the years 1766 and 17^7, of 5 per 
 cent, in favour of London, added to 2 per 
 cent, the price of gold above the mint-price, 
 constituted a premium of 7 per cent, on the 
 importation of gold into England, or, deduct- 
 ing 1 J per cent, for expenses in time of peace, 
 a net profit of 5 per cent, yet the exchange 
 was not rectified thereby. Again, in 1775, 6, 
 and 7, after the recoinage, we find the exchange 
 
 D
 
 18 
 
 on Paris 5, 6, 7/ and 8, per cent, agamst London 
 in time of peace, when half the amount would 
 have conveyed gold to Paris, and one-fourth 
 have paid the debts of Paris at Amsterdam.— 
 In th€ years 1781, 2, and 3, being years of 
 war, the exchange was constantly from 7 to 
 9 per cent, in favour of Paris; and, during 
 this period, gold was the common circulation 
 of this country, and the Bank was compelled 
 to provide it for the public at the mint-price. — > 
 It has been already shewn how little effect 
 the precious metals produced towards equalising 
 the exchange with Hamburgh, during the years 
 1797 and 1798; and another instance may be 
 adduced in the years 1804 and 1805, when 
 the Paris exchange varied from 7 to 9 per cent, 
 in favour of London. 
 
 In every case here cited the fluctuations of 
 the exchanges greatly exceeded the expense 
 of conveying gold from one country to the 
 other, and to a murh gicater degree in most 
 of them than in the present instance; the 
 circumstances of the times were, it will readily 
 be admitted, more favourable to intercourse, 
 on those occasions, than they now are, and 
 the state of metallic circulation airbrded faci- 
 lities not now experienced here. Yet, under 
 all. these advantages, the principle assumed by 
 the Committee was not operative, and cannot
 
 19 
 
 thtirefore be admitted as a solid foundation- 
 fbr the superstructuie of excess and deprecia- 
 tion, attempted to be raised upon it. — If it 
 be said that probably, on these several occa- 
 sions, gold was proportionately dear on the 
 spot to which the exchange was unfavourable, 
 I admit the fact as probable, because I am' 
 without evidence respecting it ; but, if the 
 price of gold abroad enters necessarily into 
 the calculation of the "natural limit" of depres- 
 sion of the exchange, then the course of foreign 
 exchanges, rectified by the expense of sending 
 gold abroad, does not form a just criterion of 
 'the adequacy or excess ol our circulating 
 medium. --- 
 
 There appears also a defect in the application 
 of the principle to the particular case under 
 the consideration of the Committee. — 
 
 It is admitted in the Report " tliat the first 
 remarkable depression of the exchange, in ISO9, 
 is to be ascribed to commercial events, arising 
 out of the occupation of the north of Germany 
 by the troops of the French emperor." — (p. 16.) 
 If a depression equal to three times the cost 
 of sending gold be admitted as the effect of 
 any other cause than depreciation ut currency, 
 k can be considered as not ovcj turning the 
 principle of limitation, only by viewing the fall 
 in question as an ''occasional depression;" — ■
 
 20 
 
 but, if taken as an occasional depression only, 
 (as the event indeed proved,) how can H be 
 brought forward as evidence of an excess of 
 currency, the Committee having established 
 *' a considerable duration" as a necessary con- 
 dition to render the course of exchange a just 
 criterion ? 
 
 The circumstances I have stated, respecting 
 the exchanges on former occasions, were not 
 perhaps brought under the notice of the Comr 
 mittee; but they had two facts prominently 
 before them, bearing immediately upon the 
 question, of which they have taken no notice.-— 
 Mr. GrefFulhe offered this problem to the Com- 
 mittee; "During the depreciation of English 
 currency on the continent of Europe, a pre- 
 , mium was paid for it in America in hard dol- 
 lars." The balance of payments may be against 
 us w^ith one country, and in our favour with 
 another ; and, if the exchange is regulated by 
 this balance, it will exhibit corresponding ap- 
 pearances, particularly where those countries are 
 remote. But, if the currency be depreciated be^ 
 low the value of gold, it is so positively, not 
 relatively, and all exchanges must equally feci 
 the influence of the depreciation. 
 
 The other tact I learn from the paper 65, in 
 the Appendix to the Report; between January 
 1809 and May 1810, the Swedish exchange
 
 21 
 
 rose (against Sweden) 25 per cent, and was at 
 that date 24 per cent, in favour of London. — 
 What are the circumstances of Swedish ciir- 
 renpv? We collect them incidentally from the 
 examination of Mr. a continental mer- 
 chant ( p. 75 )^— " Have you ever known the 
 exchange to fall to the extent of 12 to 15 per 
 cent, in any part of Europe, in which it was 
 computed in coin, containing a fixed quantity 
 of gold or silver, or in paper, or bank-money, 
 exchanged at a fixed agio either for such gold 
 or silver, or for gold or silver bullion of definite 
 amount."— Ans. " Ko, never ; except in countries 
 where the export of their currency has been 
 effectually prohibited, sueh as Sweden ; I do not 
 recollect any other country where paper, resting 
 upon the foundation of coin, the latter is effec- 
 tually prohibited from being exported." — Q. How 
 is that prohibition made effectual in Sweden? 
 ** By the bank not issuing specie to any amount, 
 when the exchange is depreciated". — Sweden 
 was greatly indebted to England, for goods sent 
 thither for the supply of the continent and 
 north of Europe. — Gold could not be exported, 
 and therefore the premium on remittance by 
 bills was great ; this seems a very natural effect, 
 and one which will not surprjze any one ; yet 
 to account for an effect exactly similar, under 
 similar circumstances, we are required to ad- 
 mit that our paper-currency is depreciated,
 
 22 
 
 whilst the Americans were giving a premium 
 for it in hard dollars. It will be recollected 
 that the question now agitated is not whether 
 any inconvenience attends the substitution of pa- 
 per for geld, as the medium of circulation, but 
 whether that paper be now excessive in amount, 
 and depreciated in value. — As the result of the 
 facts I have adduced, I assume that from the 
 state of the foreign exchanges no such inference 
 can justly be drawn.* 
 
 * The terms favourable and unfavourable applied to the 
 exchange arc, perhaps, sufficiently understood, as indicating a 
 corresponding balance of trade and payments; but a favour- 
 able exchange is frequently a very unfavourable circumstance, 
 and vice versd. A British merchant sent goods to Sweden for 
 sale early in 1809 ; they were valued at 1000 rix dollars; the 
 exchange being at four rix dollars per pound sterling, they 
 would then have produced, by remittance, £ 250. They 
 were actually sold for 1000 rix dollars in the beginning of 
 1810; and, remitted for at the exchange of five, produced 
 £ 200. The funds for the bill were provided by a consign- 
 ment of goods from Sweden ; and England, therefore, recei- 
 ved goods worth <£ 200 in payment of the original export 
 instead of £230, which it would have received had the ex- 
 change not become so favourable. In a more familiar instance^ 
 England benefits by an unfavourable exchapge. When the 
 Dutch had large sums in our funds, the dividends were re- 
 mitted periodically, and a real or supposed demand for bills 
 on Holland, at those peiiods, occasioned a fall on the ex- 
 change. Thirty-three shillings Flemish, for instance, were 
 given in exchange for a pound sterling, instead of 345. The 
 exchange was, therefore, less in favour of London. Yet it Is
 
 23 
 
 The Committee considers, however, the ])rice 
 of gold as the most certain sign of excess and 
 depreciation. 
 
 " An ounce of standard gold- bullion will not 
 fetch more in our market than £3 : \7 : 'iO^, 
 unless £3 : \7 '■ lOj in our actual currency is 
 equivalent to less than an ounce of gold;" yet 
 gold-bullion does bear in London a higher price 
 than this standard or mint-price ; whence a de- 
 preciation of the paper is inferred, which Mr. 
 Mushett estimates to have amounted, in Sep- 
 tember, 1809, to £\3 :7 :0 per cent. Whilst 
 sanctioning this old, and in the abstract in- 
 controvertible, theory, and, as applying it to the 
 present case, the Committee do not appear to 
 have recollected, that, having admitted an ade- 
 quate cause for the fall of the exchange, from 
 commercial and political events, the increased 
 price of gold-bulHon to any extent, within the 
 equivalent of the depression, is only a conse- 
 quence ; and the documents in the Appendix 
 shew that the price of gold-bullion did not at 
 any period of the depression of the exchange 
 exceed the price which it was worth as a remit- 
 tance, compared with its value in foreign mar- 
 kets. From the calculations furnished by Mr. 
 
 evident that on every 33 pigs of lead, bloci<s of tin, or ouncrs 
 of gold, sent to Holland, to provide funds for payment of the 
 dividends, one pig, block, of cunco, was saved to this country.
 
 24 
 
 GrefFulhe to the Committee, (App&ndix 58,) 
 it appears, that^ in the spring of 1810, ah bQncfe 
 of gold, of English standard weight, was worth, 
 at Hamburgh, ^4 ; 17 : sterling, th6 price 
 being 101, and the exchange ^9s. At thife 
 time the extreme price of bullion, in London, 
 was £4 : 12 : 0, or 5| per cent, below th6 
 price at Hamburgh. At the same time the 
 price of gold, at Paris, exceeded its value her^ 
 by 81 per cent, and, at Amsterdam, by 7 per 
 cent, at the then current exchanges. The Ex- 
 pense of conveyance to Holland being then 
 about 7 per cent, gold would not then pay 
 for importation, neither would it be exported, 
 merely with a view to profit, though it would 
 be exported, and was in fact exported, in pre- 
 ference to bills in abundance of instances, \i^hich 
 might readily have been ascertained by the 
 Committee. On reference to the paper. No. 60, 
 in the Appendix to the Report, it appears, that, 
 in June, July, August, and September, 1809, 
 the price of gold, at Hamburgh, was 104f, 
 and the exchange 28*. if at 101, and 29*. there 
 was a profit on the export of gold from henc6 
 to Hamburgh of 51 per cent, it follows that 
 at 1041, and 28*. there was a profit of 12^ ; 
 or, deducting the expenses of conveyance, that 
 gold, if bought here at ^£4 : 12 : per ounce, 
 was a cheaper remittance by 5h per cent, than
 
 25 
 
 a bill at the current exchange. This same do- 
 cument, No. 60, shews also, that within twelve 
 months the price of gold at Hamburgh varied 
 from 100^ to 104|, the exchange with Great 
 Britain in both instances, and during the inter- 
 vening period of eight or nine months, being at 
 i28 s. We find the price of gold continuing, in 
 other instances, at 104, whilst the exchange 
 rose from Q.Ss. to 29^. H ^. even to 30*. Sd. 
 variations of 4 or 5 per cent, in the cost of 
 a remittance in gold, which remained nearly 
 stationary in its price here during the whole 
 period. These fluctuations seem to militate 
 against the intimacy of connexion which the 
 Committee assumes to exist between the course 
 of exchange and the price of gold, in places 
 where the currency is gold or convertible 
 into it. And the facts stated, respecting the 
 actual price of bullion in the foreign markets, 
 satisfactorily meet the observations of the Com- 
 mittee, implying that they discover no advance of 
 the price of gold in those markets analogous to 
 that which has obtained here. Refering to Mr. 
 Greffulhe's documents. No. 58, they observe, in- 
 deed, that it is important, " as it shews thai 
 " the actual prices of gold in the foreign mar- 
 kets are just so much lower than its market- 
 price here as the difference of exchange 
 amounts to." Mr. Greffulhe's obsdvations
 
 26 
 
 on this paper convey a different impression : 
 " One of the papers I have delivered in sliews 
 (he says) the foreign prices of gold reduced 
 into steding money at the present low rates 
 of exchange, afid the excess abore the market- 
 price here may he considered as about equal 
 to the charges of convej/ance,'' (page 3) ; nor 
 is this excess of price at Hamburgh merely re- 
 lative, and arising out of the exchange. It ap- 
 pears by the paper, 56, in the Appendix, that 
 the prices of gold at Hamburgh have, in the 
 two last years, risen considerabl}^ as the fol- 
 lowing extract shews " highest and lowest pri- 
 " ces of gold at Hamburgh, in the years 1806-7, 
 and 1808-9. 
 
 lowcit. highest. lowest, highest. 
 
 Al Ilamburjjb, 1805, 98 103 180S, 102 106' 
 
 1S07, 981 101| 1809, 10l| 104^" 
 
 The price of gold, at Hamburgh, was, therefore, 
 between three and four per cent, higher, on the 
 average of the years 1808 and 9, than in the 
 two years whicli preceded them. I observe, 
 also, that the fluctuations in the price of gold, 
 at Hamburgh, where, as the Report informs 
 us, " Silver is not only the measure of all ex- 
 changeable value, but is rendered an invariable 
 (or unvarying) measure," have, within a peiiod 
 of two years, ^mounted to no less than eight 
 per cent.
 
 27 
 
 But, it will be said, gold at Hamburgh is a 
 commodity ; here it is the standard of value ; 
 and an ounce of gold cannot sell for more than 
 an ounce of gold of equal quality, unless the 
 medium of payment is of less value than an ounce 
 of gold : and Mr. Mushett is of opinion, •' that 
 the price of gold can in reality, at no time, be 
 above its mint-price, and that its being so at 
 present in appearance is caused by the excessive 
 quantity of bank-notes in circulation." 
 
 This is the strons; hold of the theorists, and 
 I shall not attack it otherwise than by fact. — 
 The theory may, however, be correct, and its 
 application erroneous. 
 
 In the Report of the Committee, I find this 
 statement, page 4. " Upon referring, for a 
 course of years, to the tables, which are pub- 
 lished for the use of the merchants, such as 
 Lloyd's List and VVettenhalfs Course of Ex- 
 change, your Committee have found, that, from 
 the middle of the year 1773, when the refor- 
 mation of the coin took place, till about the mid- 
 dle of the year 1799, two years after the sus- 
 pension of cash-payments by the Bank, the 
 market-price of standard gold in bars remained 
 steadily uniform at the price of X'3 : 17 : 6, be- 
 ing, with the small allowance for loss by deten- 
 tion at the mint, equal to the mint-price of 
 ^3 : 17 : 10^, with the exception of one year,
 
 2B 
 
 from IVIay, 1783, to May, 1784, when it was 
 occasionally at ^3 : 18 : 0; during the same 
 period, it is to be observed, the price o^ Portu- 
 gal gold coin was occasionally as high as 
 ^4:2:0; and your Committee also observe, 
 that it was stated to the Lord's Committee, in 
 1797, by Mr. Abraham Newland, that the 
 Bank had been frequently obliged to buy gold 
 higher than the mint-price, and, upon one oc- 
 casion, gave as much for a small quantity, 
 which their agent procured in Portugal, as 
 «£ 4 : 8 : 0. But your Committee find, that 
 the price of standard gold, in bars, was never, 
 for any length of time, materially above the 
 mint-price during the whole period of twenty- 
 four years, which elapsed from the reformation 
 of the gold-coin to the suspension of the cash- 
 payments at the Bank." 
 
 I submit the whole passage to my readers, 
 that I may not risk misrepresenting its mean- 
 ing, which I profess not to understand. The 
 Committee cannot mean, that the value of stand- 
 ard gold in the market was only ^ 3 : 17: 1 0|, 
 or jC3 : 18 : 0, when the Portugal gold, from 
 which it was made, was worth ^4 : 2 : 0. To 
 me it appears evident, that the sentence re- 
 specting Bank purchases, beginning " during 
 the same period," and ending at " ^4 : 8 : 0," 
 was introduced after the Report was framed.
 
 29 
 
 and its operation on the statement not exactly 
 perceived. 
 
 It appears also to have escaped the notice of 
 the Committee, tliat, in 1795, tlie directors of 
 the Bank stated to Mr. Pitt, that the price of 
 gold was i^ 4 : S : and ^'4:4:0 per ounce ; 
 and that their guineas being to be purchased 
 at ^3 : 17 .' lOj pointed out clearly the ground 
 of the fears of the Bank of a continued demand 
 for them, (see Report of Lord's Committee 
 anno 1797.) 
 
 The fair inference from the information gain- 
 ed from Mr. Newland, and from the Bank di- 
 rectors, seems to be this : that, although it ap- 
 pears, by the printed lists, that, during the 
 whole period between the rccoinage and sus- 
 pension of cash-payments, standard gold never 
 exceeded the mint-price more than the differ- 
 ence between iJ3 : 17 : 10§ and i^S : 18 : 
 per ounce, yet that, in fact, the foreign gold 
 coin from which such standard gold was made 
 did sell for i^4 : 2 : and £4:4:0. That 
 the Bank was in the habit of paying these 
 prices, and, on one occasion, paid £4:8:0, 
 or 13 per cent, above the mint-price. During 
 this period bank-notes were at once convertible 
 into gold, and the coin was in the most per- 
 fect state. — The real question before us is, 
 not what was the price of that gold Mliich the
 
 30 
 
 Bank was compelled to deliver to the public on 
 demand at ^3 : 17 : lOj, but what was the 
 price at which gold could be elsewhere ob- 
 tained? £4:3:0. — £4< : 4 : 0, say the Bank 
 directors. Aye, ,£4:8:0, says ]\Ir. Newland. 
 An ounce of standard gold did then sell for 
 more than an ounce of standard gold. This, 
 says Mr. Mushett, is impossible. — *' /do not say 
 it is possible; I onl}^ say it is true." — 
 
 The Committee is not, however, quite so 
 peremptory ; they have discovered, that standard' 
 gold, in bullion, may be worth 5f per cent, more 
 than gold in British coin ; because the one, being 
 an exportable commodity, and the other not so, 
 may be worth 5 J per cent, more to him who has 
 occasion to send it abroad; and Mr. Goldsmid 
 had told them the fact was so. — This admission 
 is like the letting out of water; it is impossible 
 to foresee where it will run or where it will 
 stop. — Be it granted, that the rubbing of guineas 
 deteriorates English gold in coin, as compared 
 Avith gold in bars, I per cent. That the con- 
 science of the exporter, and the value of a 
 false oath, are correctly estimated by the Com- 
 mittee at 41 per cent, (page 6,) which two 
 circumstances account for the increased price 
 of 3 or 4 s. an ounce, which foreign gold bears 
 over that produced from British coin. What 
 occasions the difference in value ? — the demand
 
 31 
 
 for exportation. May not this demand inca:ease 
 in its proportion to the supply of exportable 
 gold ; may not consciences grow more tender, 
 as custom-house officers become more active? — 
 The principle being admitted, that foreign gold 
 has an extrinsic value beyond English gold, 
 how can the Committee limit its operation? and 
 say, " that the highest amount of the depres- 
 sion of the coin * which can take place when 
 the Bank pays in gold, is 5| per cent, (page 
 6, 7.) " The statement is erroneous as a fact, for 
 ^4:3:0 or i;,' 4:4:0 per ounce, which the 
 Bank paid for foreign gold in 1795, is, on aver- 
 age, an advance on the mint-price of 71 per 
 cent, and the extreme case of ^£4 : 8 : is an 
 advance of li2 or 13 per cent. But, granted 
 that the fact were as stated, English gold is 
 not now to be obtained (none being issued) at 
 the mint-price ; who can then pretend to limit 
 the value of gold as an exportable, or even as 
 a consumable, commodity ? Where is the point 
 of contact between English and foreign gold, 
 upon which the comparison of their respective 
 values shall be estaWishcd ? If the demand for 
 foreign gold was at any time very great, and 
 the melting and exportation of guineas, howe- 
 
 * This is a very singular expression to denote a liiu;h mar- 
 ket-price of bullion, and will point oiit to an attentive reader 
 how extremely theoretical the arguments of the Report arc.
 
 32 
 
 ver abundant, by any means effectually pre- 
 vented, foreign gold might double its price in 
 English gold, and yet the intrinsic value of 
 guineas remain undiminished. How far any 
 circumstances, in our present situations, run 
 parallel with this supposition will be seen here- 
 after. 
 
 The Committee hesitate, however, to admit 
 either a scarcity of gold or an unusual 
 demand for it, and, on these points, few direct 
 facts are to be found in the Appendix. Mr. 
 Goldsmid stated that his sales of gold in the 15 
 months preceeding his examination were grea- 
 ter than on an average of years ; that large quan- 
 tities had been purchased at the high price by 
 individb lis; that none, he believed, had been 
 received within that period from the continent 
 of Europe ; and that gold has been of late sent 
 to the Brazils, instead of coming from thence 
 as formerly through Lisbon. 
 
 It appears, by the returns from the bullion- 
 office at the Bank, Nos. 7 and 8, in the Appen- 
 dix to the Report, that the total amount of 
 gold Bullion imported and deposited in the 
 bullion-office in 1809 amounted in value to 
 
 only £6^20,2^5 
 
 That, during the same period, the 
 
 quantity of gold delivered out of 
 
 the bullion-office amounted in value to ^805,a68 
 
 of which only £592 was not exportable.
 
 33 
 
 The amount of the importation is therefore 
 such as, when compared with the amount of 
 exports and imports, and that of the circulating 
 medium, to justify the assumption of compara- 
 tive scarcity ; and tlie excess of deUvery beyond 
 the importation is suthcient evidence of unusual 
 demand. The pomt of view in which these 
 facts are important is that which places the 
 amount of gold imported or delivered, in line of 
 comparison with the amount of paper- curren- 
 cy, supposed to be depreciated on the evidence 
 of the encreased price of bullion. The advanct 
 of 12*. per oz. on the total quantity of gold de- 
 livered in one year, about 200,000 ounces, a- 
 mounts to 120 or 130,000/.; and this is assumed 
 as an unequivocal symptom of a depreciation of 
 12 or 13 per cent, on 30 or 40 millions of paper, 
 the probable amount of our paper-currency. — 
 Yet this account of gold, trifling as it is, ex- 
 ceeds, as My. Goldsmid states, the average sales 
 of preceding years. 
 
 In confirmation of their opinion, that the price 
 of gold has not been influenced by natural causes, 
 the Committee observe, •* that the rise in the mar- 
 ket-price of silver in this country, ii'/iich has 
 nearly corresponded to that of the market-price 
 of gold, cannot, in any degree, be ascribed to a 
 scarcity of silver: the importations of silver 
 have of late been unusually large." — This state- 
 ly
 
 34 
 
 ment is unpardonably erroneous ; for the fact 
 which refutes it had drawn the attention of the 
 Committee. 
 
 In Mr. Merle's evidence, I find it stated, 
 that silver is about 5 pence per ounce above the 
 coinage-price. 
 
 Question by the Committee. — -That is about p 
 per cent, is it not? — Ans'ccer. — I suppose therea* 
 bouts. Question. — How do you account for the 
 circumstance of gold being l6 per cent, above 
 its coinage- price, and silver only 9 per cent. — 
 ■** I cannot answer that question." Mr. Merle 
 says also, that he never recollects silver so low 
 as the standard price ; in fact it never has been 
 so low since the days of King WiUiam.* A very 
 low average, taken before the suspension, would 
 fix the price of standard silver at 5s. 3id. or 
 three halfpence above the mint-price: deduc- 
 ting this amount from the increased price 
 of 5d. per oz. there remains an advance on the 
 present occasion of 3^d. per oz. or 5| per cent.—? 
 whilst the advance on gold is stated at l6 per 
 
 * This statement is not Uteralli/ correct. Silver was as low 
 as. the mint-price, for a very short time, in 1799- A small 
 quantity was sent to the mint by an individual, and an Act of 
 Parliament was passed to prohibit its coinage, which recites the 
 fact. The East-India Company paid, in that year, S^d. above 
 the mint-price for standard silver, as appears by the document 
 (No. 13 in the Appendix.) The average price of silver, as I 
 have btate I it, agrees with Lord Uverpool's information.
 
 S5 
 
 cent. — The rise on the market-price of silver 
 has not, therefore, " nearly corresponded" with 
 the rise in the market price of gold, and the 
 ample supply, noticed by the Committee, has 
 had the natural effect of restraining the price ; 
 and the fact adds strength to the opinion, that 
 the price of gold has been augmented by its 
 scarcity. 
 
 I will refer my reader to one fact more on this 
 subject. The paper No. 1, in the Appendix, 
 shews the amount of gold exported for several 
 years past, so far as the Custom-House have 
 knowledge of it. — The account stands thus: 
 
 Year ending first February 
 1805 1S06 1807 1808 1809 1810 
 
 None 17,007 3,019 13,008 14,716 69,962 oz. 
 
 I have now submitted to my readers all the 
 facts and figures contained in the Report and 
 its Appendix, which appear to me to bear 
 directly on the propositions respecting the ex- 
 changes and price of bullion, on which the 
 Committee formed their opinion of the excess 
 and depreciation of our paper-currency. It 
 will not escape notice that, admitting their 
 theoretical accuracy, they involve exceptions 
 to the amount of 12 or 13 per cent, on the 
 admission of the Committee, when applied to 
 practice.
 
 36 
 
 But the accuracy of the theory is one ques- 
 tion, the correctness of its application is anr 
 other, and on this point die public may rea- 
 sonably entertain jealously, because the same 
 theory, in the hands of the ablest men this 
 country has known, has been once already er- 
 roneously "applied, and, by such application^ 
 has subjected the nation to disappointment and 
 inconvenience, under which we still labour, and 
 to an unprofitable expense of nearly three 
 millions sterling. — A theory brought forward 
 by Mr. Locke, as counsel to the chancellor 
 of the exchequer, and acted upon by Sir Issac 
 Newton, as warden of the mint, might challenge 
 the world for higher sanction. — Yet the recoinage 
 of silver, in the reign of King William, directed by 
 these great men, was made on erroneous prin- 
 ciples and failed in its object, Mr. Locke as- 
 sumed it as an incontrovertible principle that 
 "an ounce of silver, whether in coin oi' in 
 bullion, is and eternally will be of equal value 
 to any other ounce of silver, under what stamp 
 or denomination soever," and he inferred from 
 thence that, whenever the silver coins (then 
 grievously depreciated) were restored to their 
 due weight, the price of silver bullion would 
 fall to the mint-price. — At this time, silver 
 was the common money of account, as gold is 
 now ; and Mr Locke seems to have considered 
 that it was naturally or necessarily so. — Men
 
 57 
 
 of less powers but more practical information 
 foretold to Mr Locke the evils which would 
 follow from the unlimited adoption of his theory. 
 Sir Richard Temple, * endeavoured, in vain, 
 to point out the distinction between coin and 
 bullion, and to convince Mr. Locke that the 
 value of silver bullion was become greater than 
 the standard or mint-price. He was not listened 
 to; (he might perhaps have erred too much 
 on the other side, which numbers were ready- 
 to do, ) and the recoinage took place at the 
 old standard of 5s. 2d. per ounce. — As the 
 new money came out, it disappeared : between 
 seven and eight millions were coined, yet 
 little was found in circulation; and, within 
 17 years, Sir Issac Newton reported to the 
 treasury, that, "should silver become a little 
 scarcer, people would in a little time refuse 
 to make payments in silver without a pre- 
 mium,"! ^^^ standard being taken below 
 
 • See a tract in Lord Somers' collection, dated 1696, by 
 Sir Richard Temple. 
 
 t Earl of Liverpool's lelfer to the king. — As Lord Liver- 
 pool could not obtain, from the public offices, any account 
 of the expense of this recoinage, I refer those who take 
 an interest in such subjects to an official statement of the 
 public income and expenditure from the revolution to the 
 quarter-day following the death of King William, preserved 
 in Lord Soniers' collection, vol. 12, whence it appears that 
 the deficiency exclusive of the expense was .i2,il5,\iO.
 
 38 
 
 the value of bullion, the coins were melted 
 down as fast as they were issued. The 
 expense of this recoinage was between 
 £2,500,000 and i^Q, 600,000, and it would 
 probably cost as much more at present to 
 remedy the defect. It will probably therefore 
 be admitted as possible, that an incontrovertible 
 theory may, even in the hands of the ablest 
 men, be erroneously applied. 
 
 I will next call the attention of my readers 
 to that part of the Report which relates 
 to the balance of trade and payments : The 
 Committee is of opinion, that the favoura- 
 ble balances of the two former years ought 
 to render the exchanges in the present year 
 peculiarly favourable ; but, observing how en- 
 tirely the present depression of the eichange 
 with Europe is referred by rnany persons 
 (being indeed all those who were examined) 
 to the great excess of our imports above our 
 exports, they called for an account of the actual 
 value of those for the last five years; what 
 they called for they received ; but, by a most 
 unaccountable omission, they have never re- 
 ferred to it, and appear to have formed tneir 
 opinion upon documents altogether irrelevant 
 to the subject before them. 
 
 In the body of the Report, pages 12 and 
 13, are two statements of exports and imports 
 for five years preceding 1810; from tJie first
 
 39 
 
 of which it appears, that the balance of the 
 actual value of exports and imports to all 
 parts of the world in 1809 was i) 14, 834,000: 
 by the second, it is shewn that the balance 
 in favour of Great Britain on its trade, with 
 the continent of Europe alone, computed in 
 official value, for the year 1 809, was £ 1 4, 1 70,75 8, 
 to which latter statement the Committee adds 
 this observation. " The balances with Europe 
 alone, in favour of Great Britain, as exhibited 
 in this imperfect statement, are not far from 
 corresponding with the general and more ac- 
 curate balances before given. The favourable 
 balance of 1809, with Europe alone^ com- 
 puted according to the actual value, would 
 be much more considerable than the value of 
 the same year in the former general statement,"* 
 that is much more than ^14,834,000: we will 
 suppose, in even numbers, \5 millions. Now 
 this assertion involves an actual error of half 
 its object, for it appears, by the papers 75 
 and 76 in the Appendix, being accounts of offi- 
 cial and real values of exports and imports to the 
 continent of Europe, that the amount of the 
 actual value of exports in 1 809 was £^7, 109,337 
 of the imports 19,8^1,601 
 
 leaving the balance in favour only ^7,'^87,736 
 If the average of the two years 1 809 and 1810
 
 40 
 
 were taken, the balance would be jC6,Q00,O0O, 
 being a difference on the two years of 
 ^8,600,000 ; or, on the single year to which 
 the observation, though not the reasoning, 
 ©f the Committee was confined, of ^75^00,000, 
 but this is not by any means the extent to 
 which the impression conveyed by the ob- 
 servation of the Committee is erroneous. — 
 There is an omission of greater importance than 
 the error I have noticed.-^These Custom-Housc 
 documents are defective, the Committee ob- 
 serve, because they do not include any ac- 
 count of freight paid to foreigners, at this time 
 peculiarly large, or of the sums received from 
 them for the employment of British shipping. 
 They leave out of consideration interest on ca- 
 pital on either side ; the pecuniary transactions 
 between the governments of Great Britain and 
 Ireland; — contraband trade, and the imports 
 and export of bullion ; also the important ar- 
 ticles of bills drawn on government for naval, 
 militaiy, and other foreign, expenses. 
 
 A Committee, appointed to inquire, might 
 have been expected to endeavour at least 
 to ascertain the extent and operation on the 
 balance of these several items of exception ; 
 but they dism.iss the subject with a regret, 
 that there has been some difficulty and de- 
 lay in executing an order for the account of 
 the government bills. I have thought it right
 
 41 
 
 to be more inquisitive, and am enabled, from the 
 documents in the Appendix, and M'here these 
 are deficient fron accounts obtained from the 
 pubhc offices, to exhibit the following statement 
 of the foreign expenses of government. 
 Amount of bills drawn on the Trea- 
 sury, between Dec. 1808, and 
 Dec. 1809, (Army Extraordina- 
 . lies,) Appendix, 70, A 1 ... £ 4,162,190 
 Deduct bills drawn from the West 
 
 Indies, Africa, and America . . 903,366 
 
 Amount affecting the European ba- 
 lance £ 3,^258,824 
 
 The specie and bullion exported by 
 the paymasters-general amount- 
 ed, in 1808 and 1809, to upwards 
 of five millions, of which, in 
 1809, (Appendix, 79-) ..... 1,540,000 
 
 In addition to these sums, 
 and of the same nature, 
 are bills drawn on the 
 commissary-in-chief . £, 328,767 
 
 On the Pay-Olhce, (ordi- 
 nary of the army,) . . 1,793,778 
 
 On the Victualling-Of!ice 897,09J 
 
 On the Navy-Board . . . 672,820 
 
 On the Transport-Board . 295,705 
 
 On the Board of Ordnance 212,75.3 
 
 4,200,918 
 
 6
 
 42 
 
 The accounts I have ob- 
 tained do notdistinguish 
 European from other 
 services, admitting a de- 
 duction in equal pro- 
 portion to that on the 
 extraordinaries, which 
 is ascertained, about . . 900,000 
 
 Leaves the amount affecting the Eu- 
 ropean balance 3,30C^91S 
 
 In estimating the neutral freight, I 
 will suppose the amount paid by 
 foreigners to British ships, in 
 1809, equal to that paid by Great 
 Britain to neuti-als for corn,* wine, 
 and brandy, from France, and 
 for the intercourse between Heli- 
 goland and tine continent, and 
 confine the deduction to the neu- 
 tral freight in the Baltic trade 
 alone. I have sufficient grounds 
 for estimating this trade, in 1809, 
 " at 200,000 tons and upwards, 
 the rate of freight £, 20 per ton 
 and two- thirds rieiitral," hence 
 arises a debt of 2,G00,000 
 
 £ 1 0,699,732' 
 
 * Tlie importation of corn in six months exceeded 
 S00,000 quarters
 
 43 
 
 This sum exceeds by three millions tlic ba- 
 lance arising on British trade witli the conti- 
 nent in I8O9, supposing the whole amount of 
 our exports to have been paid for within the 
 year. Tliis, it appears^ by the evidence, was 
 not the fact. Nor can tlie deficiency have 
 been made good (according to tlie idea of tlie 
 Committee) by balances due from fonner years ; 
 for, by reference to the same documents, Nos. 
 75, 76, we learn that, in 1808, the balance in 
 our favour was only five millions, subject to 
 deductions of a like nature,* and that, in 1 807, 
 it was two millions against us, without refer- 
 ence to them, the real value of imports from 
 the continent of Europe having 
 
 been £ 17,442,755 
 
 and the value of exports, only . . 15,420,514 
 
 Balance against ns, £ 2,022,241 
 
 Nor does tlie prece<ling statement adequately 
 represent the amount of our foreign payments. 
 The pay of officers on foreign service and iu 
 g-arrisons is, for the most part, received by, and 
 drawn from, their respective agents. The money 
 transactions with Ireland arc not noticed, the first 
 feature of which is the loan of 3 millions, raised 
 
 • In 1808, the Treasury-bills for European services 
 
 amounted to .... : 1^ millions, 
 
 and tlie exportatiuns of specie by tlie paymasters 3^ djlto. 
 Tlicse two items alone absorbing Uie whole balance.
 
 44 
 
 in this country for the service of that, subject to 
 a deduction of about 2 millions for interest on 
 former loans, &c. ; neither is any deduction made 
 for that proportion of our exports, which being 
 the produce of foreign colonies in our possession 
 belong to residents abroad, or, if sold in England, 
 constitutes a debt to the Dane or Hollander. The 
 interest due to foreigners, for money in our funds, 
 is also left out of the account; and which, ac- 
 cording to the latest computation I have seen, 
 amounted to upwards of ^500,000 per annum; 
 but, taken as it stands, the result is, that from the 
 estimated favourable balance of fifteen milHons, 
 as assumed by the Committee, are to be deduct- 
 ed, first, the error in point of fact, £ 7,^00,000 
 and next, the account of the items 
 of foreign service, &c. on the prin- 
 ciples established in the Report . . 10,700,000 
 
 constituting a real difference affect- 
 ing the argument respecting the 
 course of exchange of £ 18,200,000 
 
 I need not solicit attention to the result of 
 this inquiry into the accuracy of the opinion 
 promulgated in the Report, viz. that the state of 
 the exchanges ought, during the present year, 
 to be peculiarly favourable, but I offer one ob- 
 servation to the serious consideration of the 
 public. 
 
 The usual cause of variations in the foreign
 
 45 
 
 exchanges and price of balllon being the fluc- 
 tuations in the balance of payments, due to or 
 by Great Britain, tlie real object of the ap- 
 pointment of the Committee was to ascertain 
 whether the same or any other cause operated 
 in the instance refcircd to them. The chief ob- 
 ject of investigation would naturally be, there- 
 fore, the actual state of trade and payments; 
 and the reader of the Report presumes, that the 
 facts stated, and the inferences drawn, are de- 
 duced from every procurable document, tending 
 to illustrate this leading point of inquiry. In- 
 stead of this, the Committee has, it appears, 
 supposed and assumed the fact on which the 
 whole question turns, without waiting for the 
 means of information, (for Mr. Irving's papers 
 75 and 76 are dated on 1st of June, and the 
 Report was presented on the 8th) or making use 
 of it when in their possession. 
 
 The Report states loosely, that this favourable 
 balance of 15 millions sliould be subjected to some 
 rectifications, without ascertaining what their 
 clFect would be ; and, owing to this haste, con- 
 veys to parliament this most erroneous impres- 
 sion, that our resources and means of foreign 
 expenditure arc still great ; instead of apprising 
 them of a fact which wouM, I apprehend, 
 have been new, and jjcrhaps not very accepta- 
 ble to the public, that, in 1807, the whole of 
 our foreign expenditure, whatever it was, was
 
 4(> 
 
 an addition to a debt to the continent of Europe? 
 of two millions sterling; tljat, in 1808, tlie total 
 «f the foreign expenditure for t lie ordrnaiy of 
 the army abroad, of Bills on the Navy, Victual- 
 Irngy Transport, and Ordriance, Boards, was a 
 debt incurred ; and that in the last year there 
 was a deficiency of 3 or 4 millions encreased by 
 wliatever proportion of 27 millions of exports 
 was; not paid for within the year. The e\'idence 
 of all this was before tlie Committee, or at its 
 command; had they tiiought fit to bring it for- 
 ■ward,, it is probable the public would have deem- 
 ed tlie ra.te of exchange and price of bullion 
 suJlicientlv accounted for, without enf^aj^inw ia 
 any veiy vehement controversy, respecting the 
 accuracy of the abstvrct theories, of the Report. 
 
 In proportion as our faith in the Report is 
 s-taggered, in proportion as we feel compelled to 
 receive with caution the opinions of the Com- 
 mittee, will those of tlie practical men rise in 
 estimation. In defiance of documents and oif 
 statements to Parliament on authority of vast 
 favourable balances, it was the declared opinioa 
 of every such man before the Committee, that 
 the balance of payments has been against us, 
 and so tlie fact has proved. 
 
 I trust it will not he thought that I treat 
 lightly, much less with any thing like disre- 
 spect, the arguments contained in the Report, 
 and the publications to which I have alluded.
 
 4? 
 
 I pass them by, because my sole object is to 
 adduce facts on which others may reason. It 
 would unquestionably be difficult to deny 
 the abstract tnxtli of many of tlie theories con- 
 tained in them ; but, if abstractedly true, they 
 are not always applicable. At a time when the 
 absence, at least, if not the scarcity of gold is 
 the ground of complaint, they reason on its 
 operation as a vis mediatrix, as if it still fb?ni- 
 ed the circulating medium, and was every 
 where attainable. They speak of increased 'ex- 
 portation from reduced prices as a general con- 
 sequence, wholly disregarding the opera;tion of 
 embargoes, non-intercourse enactments, licen- 
 ces, orders of council, and Milai Iccrees, in 
 tlie particular case. At a moment wh.cn v/e 
 were compelled to receive corn, even from our 
 eiiemy, without the slightest stipulation in fa- 
 vour of our own manufactures, and to pay neii- 
 tfals for bringing it, IMr. Pucardo tells us, that 
 tlie export of bullion and mercliandize, in |>ay- 
 ment of the corn we may import, resolves it- 
 self entircl}^ into a question of interest, and 
 \Jiat, if we give coin in exchange for goods, it 
 must be from choice, not necessity. Whilst 
 providing against famine, he tells us, that we 
 should not import more goods than we export, 
 unless we had a redun<hincy of currency : ^\'ri- 
 ting in the end of 180.9, Mr. Ricardo tninks 
 it necessary for IMr. Thornton to shew, (in sup-
 
 48 
 
 port of his opinioil, that a demand" for bullion, 
 and an increased price, might be occasioned by 
 an importation of corn,) " Why an unwilling- 
 ness should exist in the foreign country to re- 
 ceive our goods in exchange for their corn; 
 and, that if such an unwilHngness did exist, we 
 should consent to indulge it." — This equalising 
 system is a very just one, where it meets with 
 no external impediments; but, w^hen applied to 
 practice, it appears to me like the experiment 
 in vacuo, where all friction, all obstruction, 
 being removed, and the power of gravitation 
 alone allowed to operate, the guinea and the 
 feather descend with equal velocities. The fact 
 is undeniably true under the circumstances of 
 the experiment, but it is true only within the 
 limits of an exhausted receiver, and is, there- 
 fore, wholly inapplicable to any of the common 
 purposes of life. 
 
 The three propositions, to which I have in the 
 preceding pages called the attention of the rea- 
 der, appear to have been brough-t forward by 
 the Committee, as well as by the authors on 
 whose theories the Report is founded, to Induce 
 the admission of the depreciation of the paper- 
 currency of this country as the necessary con- 
 sequence of the impossibility of accounting for 
 the depression of the exchanges and the in- 
 creased price of bullion in any other way; — - 
 they may be termed negative ai-guments. If,
 
 49 
 
 by what has been brought under the notice of 
 the reader, this dilemma is in any degree re- 
 moved, the positive arguments which remain to 
 be examined are relieved of a weight which 
 oppresses and restricts their free operation in 
 the Report of the Committee. 
 
 The Committee is of opinion, that the paper- 
 currency is issued to excess. This opinion is 
 founded on two minor propositions : 
 
 1st. That the Bank possesses the power of 
 adding to the amount of their notes in circu- 
 lation beyond the absolute demand for paper, as 
 a circulating medium. 
 
 2nd. That their issues regulate those of the 
 country banks, which are dependant upon and 
 proportionate thereto. 
 
 Previously to the year 1797, the affairs of 
 the Bank of England were veiled in mystery ; 
 the amount of their notes in circulation was not 
 even conjectured by the bestrinformed men ; 
 and it was deemed a sort of sacrilege to pry 
 into their secrets. At that period many lead- 
 ing facts were made known, and information 
 has since been annually communicated to Par- 
 liament of the extent of their issues; much ad- 
 ditional light was thrown on the nature of their 
 dealings, by the Finance Committee, in 1807; 
 and it might reasonably have been expected, 
 that all that could, with propriety, be made 
 
 H
 
 50 
 
 public would have been dei^eloped on th^ pre* 
 sent occasion. Such expectation, wherever it 
 was entertained, has been greatly disappointed ; 
 instead of ascertaining facts which the expe- 
 rience of the Governors and Directors who 
 were examined would have stamped with the 
 seal of authority, the Committee has, generally 
 speaking, called for opinions, and, where these 
 have proved adverse to the theory which it 
 was intended to establish, has been more occu- 
 pied in refuting them, and proving their ab- 
 surdity, than in ascertaining on what they were 
 founded. 
 
 In the examinations of the Directors of the 
 Bank, inserted in the Appendix, I find but two 
 facts of any importance bearing on the question 
 now under consideration, viz. the power of the 
 Bank to increase at pleasure the circulation of 
 their notes, — the one was wholly disregarded 
 and the other treated as absurd; — both occur 
 in answer to the question ; " What is the cri- 
 terion which enables the Bank to keep the issue 
 of bank-notes within the limit which the occa- 
 sion of the public requires, and to guard against 
 excess in the circulation of the country?"- — 
 This question occurs virtually more than once, 
 and the answer is this j 1st. The paper would 
 revert to us, if there were a redundancy in cir- 
 culation ; 2dly. By discounting only solid paper.
 
 51 
 
 given, as far as we can judge, for real transao- 
 tions. 
 
 It would have been highly interesting to 
 liave procured some practical illustration of 
 the first part of the answer, and it was indis- 
 pensibly necessary to a fight understand- 
 ing of the subject, to have obtained full ex- 
 planation of the latter. — To the former, the 
 Committee paid very little attention ; and they 
 appear to have held the latter extremely cheap ; 
 yet this latter criterion seems to be considered 
 as a sort of Bank axiom, and has a sanc- 
 tion which entitles it to more respect than it 
 has received. — To understand this subject 
 aright, it is requisite to analyse, in some de- 
 gree, the circumstances attending the circu- 
 culation of bank-paper. Mr. Ricardo has 
 assimilated the Bank of England, during 
 the restriction, so far as relates to the effects 
 of its issues, to a gold-mine, the produce 
 of which, being thrown into circulation, in 
 addition to a circulating medium already suf- 
 ficient, is an excess; and has the acknow- 
 ledged effect of depreciating the value of the 
 existing medium, or, in other words, of raising 
 the prices of commodities for which it is 
 usually exchanged. — But Mr. Ricardo has 
 not stated, what is essential to the compari- 
 $ion, whij it is that the discovery of a goid-
 
 52 
 
 mine would produce this effect. It would pro- 
 duce it, because the proprietors would issue 
 it, fbr whatever services, without any engage- 
 ment, to give an equal value for it again to 
 the holders, or any wish, or any means, 
 of calling back and annihilating that which 
 they have issued. By degrees, as the issues 
 increase they exceed the wants of circula- 
 tion ; gold produces no benefit to the holder 
 as gold; he cannot eat it, nor clothe himself 
 with it; to render it useful, he must ex- 
 change it either for such things as are im- 
 mediately useful, or for such as produce re- 
 venue. The demand and consequently the 
 prices of commodities and real properties, 
 measured in gold, increases ; and will continue 
 to increase so long as the mine continues to 
 produce. And this effect will equally follow 
 whether, under the circumstances I have 
 supposed, the issue be gold from a mine 
 or paper from a government-bank. All this 
 I distinctly admit ; but, in all this statement, 
 there is not one point of analogy to the 
 issues of the Bank of England. 
 
 The principle on which the Bank issues its 
 notes is that of loan. Every note is issued 
 at the requisition of some part}^, who be- 
 comes indebted to the Bank for its amount, 
 and givTs security to return this note, or an-
 
 53 
 
 other of equal value, at a fixed and not re- 
 mote period, paying an interest, proportion- 
 ed to the time allowed. " The notes of the 
 Bank of England," the Committee observes, 
 " are principally issued in advances to govern- 
 ment for " the public service," (anticipations 
 of the taxes and instalments of loans, to be 
 repaid by the pubhc,) " and in advances to the 
 merchants upon the discount of their bills.' 
 
 It is a consequence of this mode of issue that 
 it costs something, namely the interest on the 
 the money borrowed, to take a note out of the 
 Bank. No note is isued in payment of any ser- 
 vice, moral or physical, constituting the conside- 
 ration for it, and there is therefore no analogy be- 
 tween the circumstances of the issues from a gold 
 mine and those from the Bank of England. In 
 the case of an excessive issue of gold beyond 
 the wants of circulation, the excess is brought 
 to market to be made productive, it grows cheap, 
 and commodities grow dear. In the case of 
 an excess of bank-))aper the remedy is more 
 simple : the " surplus," says the late Governor of 
 the Bank, " would revert to us by a diminished 
 application for discounts and advances on go- 
 vernment-securities." Ihis part of the subject 
 requires illustration, because it cannot be very 
 generally understood by those who must ulti- 
 mately decide on the merits of the Report.
 
 54 
 
 The Committee have entered into some detail 
 in the Report, and have annexed some documents 
 in the Appendix, to illustrate the practice which 
 obtains in the transaction of business by the 
 London bankers, and in the money-circulation of 
 the metropolis, but their observations afford 
 a very inadequate view of the subject, and the 
 whole of page 23 must be taken as evidence 
 that, by those who drew the Report, the subject 
 was not perfectly understood. 
 
 By the practice of London, strengthened by 
 a resolution of the Bank of England, not to 
 discount any bill unless payable at the house of 
 a regular banker, all the commercial payments 
 of the metropolis, as well as those of the coun- 
 try transacted in London, are made through the 
 agency of a banker. In 19 cases out of 20, 
 where the payment is not to a revenue-board, 
 the business is transacted between two bankers, 
 one on the part of the debtor, the other on the 
 part of the creditor. — It is become an establish- 
 ed practice between bankers not to call upon each 
 other for these payments before 4 o'clock ; and 
 then mutually to write off or exchange the res- 
 pective charge which each has upon the other,aml 
 to pay the difference only; by which contri- 
 vance, so great an economy of bank-notes is ef- 
 fected, that an average of ^1220,000 of notes 
 is found sufficient, according jto the pvidencjS of
 
 55 
 
 |he inspector of the clearing-house, to settle the 
 balance of daily transactions to the amount of 
 ^4.700,000. Owing to this circumstance the 
 bankers have been enabled to lower, very consi- 
 derably, their stock of notes, and to place the 
 same productively in bills and others securities. 
 This comparatively unprepared state to answer 
 unforeseen demands has led to other improve- 
 ments in banking. A great proportion of ban- 
 kers have now accounts open with the Bank, 
 where, if they take care to hold a sufficiency of 
 good bills, they can always get money at one 
 day's notice ; and, as a still farther accommoda- 
 tion, accredited brokers now hourly walk Lom- 
 bard-stieet, take the supeifluous cash of one 
 banker, and lend it to another, in any sums, for 
 any time, a week, a day, or for an indefinite pe- 
 riod, to be repaid when called for ; nay, so nicely 
 is the scale now adjusted, that a loan of bank- 
 notes before 3 o'clock, repayable by draft at the 
 clearing at four, is no uncommon or unimportant 
 accommodation to the most opulent parties in 
 the money-market. 
 
 From this statement it is evident that the 
 banking-houses in London are like so many cis- 
 terns, disposed on each side of the street, be- 
 tween which pipes of communication are intro- 
 duced, the overplus of one will presently find
 
 56 
 
 its Way into the next, and whilst one is defici^ri| 
 none will overflow. 
 
 The Bank has of late become a party to 
 a very important arrangement to economise 
 bank-notes. The daily demand of the Bank on 
 the bankers for the amount of bills accepted 
 and payable at their several houses is of course 
 considerable, and used to be made at an early 
 period of the day, before the notes were issued 
 for bills discounted on the same day, and with- 
 out any previous information to the bankers of 
 what the amount charged on them might be, 
 and of which they had no means of judging. 
 The Bank has, for some time past, notified 
 the extent of the demand in the early part of 
 the day, and taken the amount at four o'clock ; 
 receiving in payment any draft on the Bank 
 for discount, or otherwise, which the bankers 
 may happen to hold, instead of bank-notes. 
 Every endeavour, it may fairly be inferred, 
 therefore, is used to economise bank-notes, and 
 restrict the circulation ; by the bankers, for the 
 purpose of increasing their profits, which depend 
 on the proportion of their deposits which they 
 can turn into quick stock ; and by the Bank, 
 with a view to the public accommodation, or to 
 save an unprofitable issue of bank-notes. Still, 
 it may be said, if the Bank gives way to the
 
 57 
 
 applications for discount, whicli may be as un- 
 limited as the spirit of adventure, bank-notes 
 may be multiplied ad infinitum, at the will of 
 the Directors. The Bank Directors say other- 
 wise, " If we issue too many notes, the excess 
 will return upon us." 
 
 There exists in the commercial world that de- 
 gree of disinclination to discount at the Bank 
 which leads every man to recur to his banker 
 for assistance before he sends his paper to the 
 Bank ; and on the other hand a banker does not 
 allow a respectable customer to go to the Bank 
 for accommodation, whilst he can with any 
 convenience furnish it himself. This is, in some 
 measure, matter of feeling on both sides ; and 
 not only so : for the Bank advances money on 
 bills of a particular description only, and is un- 
 deviating in its adherence to rules, and even to 
 forms; neither does it take bills as a security 
 for money to be repaid at the will of the bor- 
 rower, as bankers do ; but assumes the pro- 
 perty in the bills, deducting discount for the 
 whole term unexpired ; so that a party wanting 
 money for a week must pay two months iii- 
 terest for it, if he have no bills at shorter date 
 to offer. 
 
 I have already shewn with what degree of 
 rapidity money finds its level amongst the 
 bankers in London, and it results, therefore, as 
 I
 
 uS 
 
 a general inference, that, whilst there is money 
 unemployed and to sjDarein the city, discounters 
 of the first class will not present themselves 
 at the Bank; this statement Y/ill lead, I 
 apprehend, to an explanation of the an- 
 swer of the Directors to the inquiry of the 
 Committee as to any rule hy which they 
 regulate their issues of notes so as to prevent 
 excess. So long as the amount of notes in the 
 hands^ of the public is not more than the par- 
 ties holding them are willing to retain in their 
 hands unemployed, for the purpose of making 
 their daily payments, there is obviously no ex- 
 cess of that description wdiich influences the 
 price of commodities. When the amount goes 
 beyond this, the surpkis instantly fastens on the 
 best bills and most eligible governmicnt-securi- 
 ties, chiefly on the first ; and the effect even of 
 a very small surplus will, w^hilst it continues, be 
 surprisingly great. If it fall into the hands of 
 any discounter who has occasion to pay nioney 
 to the revenue-boards or to the Bank, the notes 
 are cancelled, and the excess removed. If other- 
 wise, the same sum of ^50,000 may pass suc^ 
 cessively through the hands of every banker in 
 Lombard-street, and absorb in its passage all the 
 best bills in the market, to an unlimited amount; 
 for if A. a merchant, borrow it of B. a banker, 
 he immediately pays it away to C. who deposits
 
 59 
 
 it without loss of time (indeed, as I before ob- 
 served, lie never withdraws it) with the same 
 or other bankers ; but, however often this trans- 
 action takes place during the day, it makes no 
 real reduction in the supposed excess of notes, 
 which will be as superabundant after the last 
 discount it has effected as before the first. But 
 t!ie case will be speedily altered, the demand 
 for discounts at the Bank is diminished on the 
 morrow, to the extent of the multiplied accom- 
 modation afforded by the excess, whilst its call 
 on the public for the payment of discounted 
 bills falling due is undiminished. 
 
 The redundancy of notes reverts, therefore, 
 (and in more than a due proportion, which ac- 
 counts for some of the effects frequently ex- 
 perienced,) to the Bank, more being paid. in than 
 are taken out, and the amount in circulation is 
 diminished. 
 
 The recurrence of a demand for notes by the 
 first class of discounters (those which the di- 
 rectors distinguish as solid paper for real trans- 
 actions) will indicate at once the abatement of 
 the excess ; and it does appear to me that the 
 criterion, or rule, which tlie directors have stated 
 is a sufficient one. 
 
 The effectual and rapid operation of this con troul 
 over the Bank issues receives satisfactory illustra- 
 tion by reference to the amount of bank-notes in 
 circulation at the periods immediately preceding;
 
 60 
 
 and following the issue of dividends, the in- 
 creased circulation arising from an issue on each of 
 these occasions of upwards of five millions being 
 within very few days hardly perceivable. 
 
 In April 1809, for instance, im- 
 mediately preceding the payment of 
 dividends, the amount of notes of 
 jC5 and upwards was ^13,000,000 
 
 Subsecpently to the 1 1 th an issue 
 took place of four millions, yet on 
 the 7th of May the amount in cir- 
 culation was only 13,100,000 
 
 On the 7th of July, after the quar- 
 terly payment had been made to 
 the Bank, and when the circulation 
 was at its lowest ebb, the amount 
 of notes above j05 was 12,800,000 
 
 And of the issue of seven millions 
 between the 1 1th and the end of the 
 month, no evidence appeared on the 
 7th of August beyond a circula- 
 tion of 13,100,000 
 
 How much earlier the effect was produced 
 the paper in the Appendix to the Report does not 
 in these instances shew, but the more detailed 
 accounts No. 38, 39, and 40, enable me to 
 state that in January, 1810, the large issue made 
 on the 9th and subsequent day had lost its ef- 
 fect by the 22d, on which day the circulation 
 was reduced below the average of December ;
 
 61 
 
 on this occasion, tlie speedy I'cduction may be 
 considered, perhaps, as promoted by the partial 
 redemption of the loan in the hands of tlie Bank 
 at that period. But in April no such cause 
 operated, yet it appears that by the 2 1st of April 
 the circulation was within ^100,000 of the 
 amount on the 31st of March, altliough in the 
 intervening period nearl}^ four millions had beeq 
 issued for dividends on the public funds. 
 
 In the year ending Jan. 1810, the interest on 
 the public funds, exclusive of the proportion 
 received by the commissioners for reducing the 
 debt, amounted to about 26 milHons, or, de- 
 ducting the property-tax, to 23j millions; which 
 was issued to the public quarterly, in the pro- 
 portions of 74 millions in Jan. and July, and 4j 
 miUions nearly in April and October.* 
 
 It is observable that, although the January and 
 July dividends exceed by three millions those of 
 the other quarters, there is no perceivable dif- 
 ference in the period within which the circula- 
 tion is reduced to the average amount. 
 
 The efficiency of the controul which the pub- 
 lic holds over the issues of the Bank is in some 
 
 * It appears by the account No. 4, in the Appeidix to the 
 second report of the Finance Comniiltee of 1807, that the 
 amount of dividends due is generally issued within about 
 c£'500,000, before the end of the month in which it is pay- 
 able.
 
 63 
 
 measure govenie'd by the amount of discounted 
 bills in the hands of the Bank, compared with 
 the amount of advances to government on se-- 
 curities payable at more remote or less certain 
 periods, and the total amount of notes. The 
 two latter amounts we know, the former is not 
 distinctly before the public, but the Committee 
 has stated, from a comnmnication made in con- 
 fidence, that, whilst the advances to govern- 
 ment for the tjp'o last years are less than they 
 were for any of the six years before the restric- 
 tion, the amount of bills discounted in the last 
 year bears a very high proportion to their largest 
 amount in any year preceding 1797; without 
 going into calculation it will readily be allowed 
 that the amount of these bills, this demand on 
 the public, far exceeds any possible or supposed 
 excess ; and, if there be any where a superabund- 
 ance of notes, it is therefore very easy to re- 
 duce it. 
 
 I have entered into the preceding detail for 
 the purpose of shewing the practical operation 
 T)f the rule by which, as the directors have stated, 
 the bank regulates its issues so as to avoid ex- 
 cess. I think it will be satisfactory to my prac- 
 tical readers. By those of a more speculative 
 cast the theories of the Report will still be pre- 
 ferred, but for such I have a more cogent ar- 
 giuncnt in store, and one to which they wiU
 
 hardly demur; — "whether the rule in question be 
 really the governing principle 'of the Bank, or 
 whether it was thrown before the Committee 
 with any malicious intent, I dare not decide, 
 but the fact certainly is, that the axiom, oi rule 
 of conduct, on which the Committee has been 
 pleased to heap contempt and ridicule, respect- 
 ing which they have declared that the doctrine 
 is fallacious, andiieads to dangerous results, was 
 promulgated by, and is founded on, the autho- 
 rity of Dr. Adam Smith, and was proposed to 
 the Committee nearly in his own words. I 
 quote the passage from the second chapter of the 
 second book of the Wealth of Nations. 
 
 " What a bank can with propriety advance to a 
 merchant or undertaker of any kind is not either 
 the whole capital with which he trades, or even 
 any considerable part of that capital, but that 
 part of it only which he would otherwise be 
 obliged to keep by him unemployed, and iu 
 ready money, for answering occasional demands. 
 If the paper which the Bank advances never 
 exceeds this value, it can never exceed the 
 value of the gold and silver which would 
 necessarily circulate in the country if there 
 were 710 paper-currency, it can never exceed 
 the quantity which the circulation of the 
 country can easily absorb and employ." Tme ; 
 but how shall we ascertain when it exceeds 
 this value. " jyhcn a bank discounts to a
 
 64 
 
 merchant a real bill of eixharigc, draxtm by a 
 real creditor upon a real debtor, which, as soon 
 as it becomes ducy is really paid by that debtor, 
 it only advances to him a part of the value which 
 he xvould othertvise be obliged to keep by him 
 unemployed and in ready money for answering 
 occasional demands.'' Consequently its advances 
 will not exceed the quantity which the circula- 
 tion of the country can easily absorb and em- 
 ploy. 
 
 That the C|)mmittee Inay he right and Dr. 
 Smith wrong is very possible ; I am not theorist 
 enough to decide between them; but the whole 
 weight of Adam Smith's authority lies on the 
 passage, and must be raised before the theory 
 contained in it can be overturned. It is brought 
 forward by him expressly as a rule for the con- 
 duct of banks, and he adds, " little expense can 
 ever be necessaiy for replenishing the coffers of 
 such a bank. (Ed. 1796. vol. 1, page 455.) 
 
 In the course of the examination of the 
 Bank Directors by the Committee, it appear- 
 ed that they do not refer to the state of 
 the exchanges and price of bullion as a 
 rule by which to regulate their advances, 
 conceiving " that there is no connexion be- 
 tween the exchanges and the amount of Bank 
 circulation." That this is also a great prac- 
 tical error, the Committee infers from the ex-
 
 6S 
 
 perience of all nations, where a paper- currency 
 has been in use, and they advert briefly to th« 
 effects produced on the exchanges by the 
 paper-currencies of North America, of France, 
 of Portugal, and Austria, jj'hey observe, hovvr 
 ever, that ^' excess and want of confidence 
 have usually combined to depreciate the paper- 
 currency of foreign countries ; but, as want 
 of confidence has no place in our situation 
 at present, they adduce examples of the 
 other sort, in which the depneciation was 
 produced by excess alone." As the anecdotes 
 are stated, it would certainly appear that the 
 paper was in the adduced instances excessive, 
 and yet the fact most assuredly is, that in 
 neither case was excess the cause of the de- 
 preciation, and the assumption directly con- 
 tradicts the obvious meaning of the docu- 
 ments referred to. The first instance pur- 
 ports to be cited from Adam Smith, and 
 refers to the latter part of the 2d chap, of the 2d 
 book of the Wealth of Nations. — It is thus given 
 in the Report, (page 17.) "In Scotland, about 
 the end of the seven years war, banking was 
 carried to a very great excess, and, by a prac- 
 tice of inserting in their promissory notes 
 an optional clause of paying at sight or 6 
 months after sight witii interest, the conver- 
 tibility of such notes into specie at the will 
 
 K
 
 66 
 
 of the holders was», in effect, suspended. These 
 notes accordingly became depreciated, in com- 
 parison with specie ; and while the abuse lasted 
 the exchange between London and Dumfries, 
 for example, wasi iometimes 4 per cent, against 
 Dumfries, while the exchange between London 
 and Carlisle, which is not 30 miles distant 
 from Dumfries, was at par. The Edinburgh 
 hanks, when any of their paper was brought in 
 to be exchanged for bills on London, were 
 accustomed to extend or contract the date 
 of the bills they gave, according to the state 
 of exchange, diminishing in this manner the 
 value of their bills, nearly in the same degree 
 in which the excessive issue had caused their 
 paper to he depreciated. This excess of 
 paper was at last removed by granting bills 
 on London at a fixed date," &c. 
 
 That the depreciation might be thus re- 
 medied is natural enough ; but it is not an 
 equally obvious remedy for excess. — The 
 fact is, that in the original passage in the 
 Wealth of Nations there is not one word 
 about excess ; and Dr. Smith assigns a dif- 
 ferent cause and also a different remedy for 
 the depreciation. — Speaking of the optional 
 clause, he says " the promissory notes of 
 those banking companies constituted, at that 
 tiine, the far greater part of the currency
 
 67 
 
 of Scotland, which this uncertainty of pay- 
 ment degraded below the value of gold and 
 silver money;" he states the fact respecting 
 the difference of exchange between Dumfries 
 and Carlisle, and adds : " but at Carlisle bills were 
 paid in gold and silver, whereas at Dumfries they 
 were paid in Scotch bank-notes, a?id the un^ 
 certainty of getting those bank-notes exchanged 
 for gold and silver coin had thus degraded 
 them below the value of that coin : The act 
 of parliament which suppressed 10 and 5 
 shilling notes suppressed likewise tliis op- 
 tional clause, and thereby restored the ex- 
 change between England and Scotland to 
 its natural state." 
 
 Aoain the Committee refer to two tracts 
 in Lord Somers' collection, one by Mr. God- 
 frey, one of the original directors of the 
 Bank, the other by Dr. Drake, published in 
 1699; — as authority for the statement, " that, 
 within a short period after the establishment 
 of the Bank, (during the financial distresses 
 in the reign of King William,) the effects of a 
 depreciation of the coin, by wear and clipping, 
 was coupled with the effects ofan excessive issue 
 of paper, and that, by the liberality of their 
 loans," ( to government and to individuals, ) 
 " the quantity of the notes of the Bank became 
 excessive, their relative value was depreciated, 
 and they fell to a discount of J 7 per cent.
 
 6ft 
 
 and the exchange with Holland, which had 
 Leen before a little affected by the remittances 
 for ihe army, sank as low as 25 per cent, 
 below par. At length the true remedies 
 were resorted to, first by a new coinage of 
 sflver, &c. and, secondly, by taking out of 
 -circulation the excess of bank-notes ; this 
 operation appears to have been effected veiy 
 judiciously. Parliament consented to enlarge 
 the Capita:l-stock of the Bank, but annexed 
 a condition, directing that a certain propor- 
 tion of the new subscriptions should be made 
 good in bank-notes. In proportion to the 
 value of bank-notes sunk in this manner the 
 value of those which remained in circula- 
 tion began to rise ; in a short time the notes 
 were at par, and the foreign exchanges near- 
 ly so':" 
 
 I have referred attentively to both these 
 tracts, and have endeavoured fully to compre- 
 hend their meaning as well as their language, 
 and am unable to extract one syllable from 
 either of them, to countenance the idea of 
 excessive circulation in the instance referred to 
 as the cause of depreciation of the notes, or of 
 the reduction of the rates of exchange, al- 
 though the fact of depreciation is distinctly sta- 
 ted. — Mr. Godfrey's tract is important to the 
 present purpose only as it shew s that the ad- 
 vances of 'the Bank were made, at that time.
 
 69 
 
 on principles so different from those which for 
 a century past have governed its conduct as lo 
 preclude all comparison or analogy. The Bank 
 advanced money on real securities ; mortgages 
 and pledges of commodities not perishable ; 
 they also allowed an interest of 3 per cent, on 
 their notes in circulation. But Mr. Godfrey 
 mentions neither excess nor depreciation. 
 
 The important parts of the statement are 
 taken from Dr. Drake ; but I cannot con- 
 cur in the paraphrase of the Committee : he 
 speaks of the deteriorated state of the coin, 
 and of the difficulties which had attend- 
 ed the recoinage just then completed. He 
 states that the notes of the Bank had been at a 
 discount of 20 per cent, and the government- 
 tallies at a discount of 40, 50, and 60, per 
 cent, and that Parliament had provided a re- 
 medy, 1st, by a new coinage of silver, and, 2dly, 
 by authorising the Bank to augment its capital 
 on condition that the subscriptions should be 
 naade 4 in tallies and J in bank-notes. The sub- 
 scription amounted to one million, and Parliament 
 assigned funds for interest thereon at 8 per cent. 
 to be raised by a tax on salt. By this measure 
 XboO,000 of tallies were taken out of the mar- 
 ket, and £200,000 of bank-notes also ; but 
 the condition of the subscription referred obvi- 
 ously to the obligation to take 4- tallies ; which
 
 70 
 
 hung as a weight on the exchequer, and which 
 it could tiot discharge ; be this as it may, Par- 
 liament had certainly no idea that bank-notes 
 were excessive in the sense of the Committee; 
 for Dr. Drake says, that, as a remedy for!the 
 scarcity of money, Parliament issued 2 millions 
 of exchequer-bills as low as £,5 and <:£lO each, 
 " which answered the necessities of commerce 
 among the meaner people for the common con- 
 veniences of life," and, " these bills passed in 
 payment as so many counters, which the peo- 
 ple were well enough satisfied to receive, be- 
 cause they knew the exchequer would receive 
 them again as so much ready money." — Can it 
 be assumed under these circumstances that the 
 depreciation of bank-notes was occasioned by 
 their excess as a medium of circulation ? — Dr. 
 Drake certainly says, " the value of ^200,000 
 of bank-notes having been sunk by the new 
 subscriptions, the rest, as it was reasonable to 
 believe they would, began presently to rise in 
 worth," and this expression might seem to 
 countenance the statement of the Committee, 
 but Dr. Drake's opinion, supposing he intend- 
 ed to distinguish between excess and discredit, 
 is of less weight than his facts, and he states 
 «'that no other way could have been found out 
 to have retrieved their sinking credit ;" " that 
 Parliament took into consideration by what
 
 71 
 
 means they might restore the credit of the bank 
 of England, which was then at a low* ebb," and 
 I know not where the Committee lias met with 
 the information (tiie correctness of which I do 
 not mean to impeach) that the Bank Stock 
 was at a premium, whilst the notes were at a 
 discount. An adequate cause of the deprecia- 
 tion of their paper might easil}' be discovered, 
 without supposing it excessive. — 1st. Bank- 
 notes were payable in silver, then a legal ten- 
 der and the usual medium of payment, which 
 was so depreciated by clipping, that SO^. were 
 given in exchange for a guinea : moreover, du- 
 ring the recoinage, the Bank " thought proper," 
 as Dr. Smith expresses it, " to discontinue the I 
 payment of their notes, which necessarily oc- I 
 casioned their discredit;" and the Bank had 
 not only lent their whole capital to govern- 
 ment, (then in such difficulties, that Dr. Drake 
 observes, unless a remedy had been found for 
 the loss of credit, the new government could 
 not have continued much longer,) but held 
 tallies (then at a discount of 40, JO, and 60, 
 per cent.) to an amount excecthng that of 
 their notes outstanding, and had even borrow- 
 ed money in Holland, as appears by the ac- 
 count presented by them to the House of Com- 
 
 * See Dr. Drake's tract, entitled " a short History of the last 
 Parliament," in vol. 8. of Lord Soniers' CoUcctionj page 164. 
 
 \^^
 
 mc s, on the 4th of Dec. I6p6, which I find 
 transcribed in Mr. Fairraan's brief, and appa-o 
 rently accurate, account o. the British Funds. 
 The account is thus stated : 
 
 To sealed bills outstanding . ^893,800 
 
 To notes for running-cash . 764,196 10 
 
 To money borrowed in Holland 300,000 
 To interest due on Bank-bills 
 
 outstanding 17,876 
 
 £1,975,872 10 O 
 
 The assets to answer this debt were : 
 
 B}^ tallies on several parlia- 
 mentary securities .... ^^l, 784, 576 16 
 
 By half a year's deficiency 
 on the fund of ^100,000 
 per annum 50,000 
 
 By cash, pawns, mortgages, 
 
 3cc 266,610 16 
 
 Total credits . . . 2,101,187 12 
 Total debt .... 1,975,872 10 
 
 Balance in favour of the Bank ^125,315 2 
 
 Mr. Fairman observes, but does not state 
 his authority, that, when the " new coinage 
 was completed, Bank-stock, from hdng consi-
 
 73 
 
 dtrably under par, got up to 112." — It will be 
 recollected that these two cases are cited, in 
 the Report, as instances in which the depre- 
 ciation of the paper-currency and ' consequent 
 depression of the exchange were produced by 
 excess alone :* that viewed in this light they 
 " appear to the Committee to afford much 
 instruction on the subject of their inquiry;" 
 and 1 have not therefore thought it altogether 
 unimportant to ascertain the nature and extent 
 of the instruction to be derived from them. 
 
 The next proposition to be examined is that 
 which relates to the country banks ; that the 
 Bank, by its issues, ' regulates the amount of 
 country- bank paper also. The practical im- 
 portance of this question would not be great 
 if it were admitted, which I cannot assume, 
 that the public demand controuls the issue of 
 bank-notes, for then it necessarily controuls, on 
 the principle of the Committee, the circulation 
 of the country banks also. The paragraph in 
 the Report in which this proposition is brought 
 forward in page 28 runs in these words : 
 
 The Committee " observe that so Ions: as the 
 
 * The famous Mr. Law, who wrote in 17'^'0, ninety yeai-s 
 nearer ihe transaction, observes, " I do not know how their 
 notes came to be at a discount, whether from the circumstances 
 of the nation or their own ill matiagement." 
 L
 
 74 
 
 cash -payments of the Bank are suspended the 
 whole paper of the country bankers is a super- 
 structure, raised on tlie foundation of the 
 paper of the Bank of England. The same 
 check which the convertibihty 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 pa- 
 per be issued in a country district, whilst the 
 London circulation does not exceed its due 
 proportion, there will be a local rise in prices 
 in the country district, but prices in London 
 will remain as before. Those who have the 
 country paper 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 of him Bank-of- 
 England notes or bills upon London ; and 
 thus, the excess of paper being returned upon 
 the issuers for Bank-of-England paper, the 
 quantity of the latter necessarily and effectaal- 
 ly limits the quantity of the former. This is 
 illustrated by the account which lias been 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 corres- 
 ponding excess of country-bank paper may be 
 issued, which will not be cliecked : the founda- 
 tion being enlarged the superstructure admits a 
 proportionate extension : and thus, under such 
 a system, the excess of Bank paper will pro- 
 duce its effect upon prices not merely in the 
 ratio of its own increase, but in a much higher 
 proportion." The nature and limits of my ob- 
 servations forbid m}' engaging in a controversy 
 with this formidably metaphysical paragraph. 
 I offer it to my readers as a specimen of the 
 happy facility with which foundations are laid 
 without possessing tlie soil, and superstructures 
 er,ected on it without ascertaining its solidit3\ 
 
 The Committee has not defined the sense in 
 which they use the term excess of currency, I 
 therefore suppose it to be used in the Report 
 in the sense in which it is used by Dr. Sn.ith, 
 as denoting a quantity greater than the circu- 
 lation of the country can easily absorb or em- 
 ploy. Excess being assumed in the country 
 paper, London notes or bills upon London will, 
 it is said, be demanded in exchange; and thus 
 the excess of country paper being continually 
 returned upon the issuers, — what loMowsr that 
 the country paper is kept within the point of 
 excess? not at all; " tluit the quantity of the 
 latter necessarily and effectually limits the
 
 76 
 
 quantity of the former." Does this follow as a 
 consequence? admitting the accuracy of the 
 reasoning, under the supposition that the 
 country notes were actually paid in Bank-notes, 
 it does not apply, under the admission that they 
 are paid by bills on London, since, as we have 
 already shewn, the payment of these has very 
 little reference to bank-notes. — Again: "If 
 the Bank-of- England paper itself should at any 
 time be issued to excess, a corresponding ex- 
 cess may be issued of country- bank paper, 
 which will not be checked. — The foundation 
 heing enlarged, the superstructure admits of a 
 proportionate extension:" this is not surely a | 
 legitimate inference. The country notes, if issued 
 to excess, will be brought back to be exchanged 
 for London notes; but it does not follow that 
 the country-bank paper, if issued to excess, will 
 iiot be checked, because there is already more 
 Bank paper in circulation than the country can 
 absorb and employ. Admitting for the mo- 
 ment the theory about local prices and districts, 
 which some of my readers will, I doubt, think 
 a very wild one, it is not applicable to the 
 case of an excess of Bank-notes occasioning 
 an additional issue of country notes. The 
 Keport supposes a case, that an excess of paper 
 is issued in a country district, and draws an 
 inference from it different, perhaps, from that
 
 77 
 
 which is obvious ; but the question before us is 
 the effect on country rotes of an increase, be 
 it excess, of London notes. I will therefore 
 repeat the argument of the Committee, chang- 
 ing town for country, and see what result it 
 produces. 
 
 If an excess of paper be issued in the Lon- 
 don district, while the country circulation does 
 v/^ not exceed its due proportion, there will be a 
 local rise in prices in the London district ; — 
 those who have the London paper will prefer 
 buying in the country, where things are cheap- 
 er, and will therefore return that paper upon 
 the Bank, who issued it, and will demand — 
 "what? Country-bank notes from the Bank ; that 
 cannot be : of the country banker in exchange for 
 Bank-notes ; equally improbable : and yet, unless 
 it comes to this, how will the superstructure of 
 country notes be enlarged in proportion to 
 the extention of the foundation ? If things 
 are cheaper in Liverpool than in London I 
 shall prefer buying there, and if I have too 
 many Bank-notes, I shall (in theory at least) 
 send them to Liverpool in payment ; where, till 
 they are got rid of and returned to London, 
 they may restrict, but can never augn^ent by 
 one shilling, the circulation of the Liverpool 
 banks. 
 
 The Committee has assumed as an axiom
 
 78 
 
 that country-bank paper is a superstructure rai- 
 sed on the foundation of tlie paper of the 
 Bank of England. But where do they leara 
 this? They learned fromMr. Stuckey, a conside- 
 rable and experienced banker in Somersetsliire, 
 that his houses regulate their issu shy the assets 
 they have in London to pay them, consisting 
 of stock, exchequer- bills, and other con- 
 vertible securities, without much reference 
 to the quantity of Bank-of-England notes 
 ' or specie which they have, although they 
 always keep a quantity of both to pay occa- 
 sional demands, — That it is unquestionably 
 his interest, as a banker, to check the cir- 
 culation of bank-notes, and to remit to Lon- 
 don such as he receives beyond the amount 
 which he retains as a deposit. That he ima- 
 gines, if Bank-of-England notes were with- 
 drawn from the parts where they now cir- 
 culate, as from the county of Lancaster, 
 where they form the chief circulation, their 
 places would be immediately filled up by 
 the notes of the country banks. — What is 
 there in this evidence to sanction the opinion, 
 that bank-notes either generate or limit coun- 
 try notes? — But, adds the Report, this principle, 
 viz. *'that the quantity of bank-notes neces- 
 sarily and effectually hmits the quantity of 
 country notes, is illustrated by the account
 
 79 
 
 M'hich lias been given of the excess and sub- 
 sequent limitation of the paper of the Scotch 
 banks, in the year 1763:'' — The illustration 
 runs thus: "this excess of paper was at last 
 removed, by granting bills on London, at a 
 fixed date, for the payment of which excess 
 of paper it was necessary in the first ijistance 
 to provide large pecuniary funds in the hands of 
 their London correspondent sT This illustration 
 affords no assistance to the theory it is intro- 
 duced to support, because it depends on a . 
 fact, and the fact relied on is altogether un- 
 founded. Did the Committee really suppose 
 that a Scotch bank, or any other bank, when 
 giving a bill at 40 days date, on London, in 
 payment of its notes, actually deposits, in the 
 first instance, Bank-notes in the hands of its 
 London correspondents ; and farther, that the 
 banker having possession of them holds them 
 specially appropriated to the discharge of the 
 bills for which they are to provide ? that they 
 could mean this is impossible, yet, if the fact 
 be not so the illustration is wholly inapplicable 
 to the case. In confirmation of the opinion re- 
 specting the dependance of country on town 
 paper, the Committee has adduced a fact and 
 figures which it is necessary to examine, be- 
 cause they afford a remarkable instance of the 
 bias with which evidence ib brought forward ia
 
 80 
 
 favour of what Mr. Locke terms an *' espou-- 
 sed proposition." 
 
 Referring to documents received from the 
 Stamp-office, the Report states, that, in 180p, 
 the number of stamps on notes reissuable, in 
 the classes between ^2:2 and ^20 alone, 
 indicate, on an average calculation, an increased 
 issue of notes, to the amount of ^3,095,340 
 beyond that of 1808, whence they infer an 
 increased circulation to that extent. The state- 
 ment is given thus : — " Number of country- 
 bank notes exceeding ^2:2, each stamped in 
 the years ending the 10th Oct. 1808, and 10th 
 Oct. 1805 : 
 
 180S 1809 
 
 Exceeding<£2:2&notexceeclingc£'5:5 666,071 922,073 
 Exceeding o^" 5 : 5 & not exceeding <^20 198,473 380,006 
 
 Averaging the first class at £ 5, and the second 
 at £ 10, the stated result is produced. Con- 
 sidering the authority from whence the state- 
 ment proceeds, there is not, I am persuaded, one 
 reader in a hundred who has doubted its fairness 
 or the justness of itsappHcation; yet ami bound 
 to impeach both. Extracting from the docu- 
 ments from the Stamp-office a similar compara- 
 tive statement for the years 1805, 1806, and 
 1809, it will stand thus :
 
 81 
 
 1805 1806 1809 
 
 Exceeding £0. : 2 and not 
 
 exceeding £5 : 5 823,-t60 832,940 922,073 
 Exceeding £5 : 5 and not 
 
 exceeding i^20 . 302,600 323,100 380,006 
 
 Adopting the calculation of the Committee, it 
 will be found tliat the increased circulation in 
 1809, beyond thatof 1806, is £512,000 in three 
 years, instead of £3,095,000 in a single year; 
 and this is the fair mode of comparison; for the 
 Report states that these notes are re-issuable for 
 three years: those issued in IS06are, therefore, 
 renewed in 1809, as those of 1805 arc in 1808. 
 The aggregate issue of the two years 1808 and 
 1809 is less than that of 1805 and 1806 by 
 1 15,477 stamps, equal to ^775,000. Had the 
 statement been a fair and correct one, it 
 would yet have been inapphcable to the case. 
 Antecedently to June, 1809, "o increase had 
 taken place in the amount of bank-notes 
 beyond the circulation of 1808; yet it appears, 
 by the return from the Stamp-Office, No. 53, 
 that the increased demand for stamps alluded to 
 by the Committee took place in the latter end 
 of] 808 and beginning of IS09, and that, as the 
 issue of bank-notes increased between July 
 I8O9, and May 1810, the issue of stamps for 
 country notes materially diminished.
 
 82 
 
 Number of stamps of the classes before stated 
 issued ill the following quarters : — 
 
 In the quarter ending 5tli Jan. ISO9 465,071 
 
 5th April 324,008 
 
 5th July 371,960 
 
 Total issues of 3 quarters 1,1^1,039 
 
 Between July 1809 and May 1810, 
 the amount of hank-notes increased 
 from 18 to 21 millions, the issue of 
 stamps for country notes (of the 
 same classes) was 
 
 lu the quarter ending Oct. 1809 221,719 
 Jan. 1810 284,658 
 April 262,365 
 
 768,742 
 
 Issue, less in the 3 last quarters 392,297 
 
 Which would imply a reduction in the country 
 circulation, so far as the evidence of the stamps 
 goes, of ^2,600,000 during the period in which 
 the Bank circulation was increased very nearly 
 to the same amount : — had this fact been no- 
 ticed by the Committee, it might, perhaps, 
 have led them to inquire whether the Bank 
 Directors could trace their increased issue to 
 any cause connected with a dimunition of coun- 
 try bank-notes.* 
 
 * Mr. Ricardo isalso of opiaipn that tlie Bank of England
 
 8^3* 
 
 Whatever opinion be entertained on these- 
 points, however the questions respecting the 
 powers of the Bank be disposed of, still the 
 opinion of the Committee, that, in point of fact, 
 the paper-circulation of tlie country is exces- 
 sive, stands as the prominent feature of the Re- 
 port. As the fact is not apparent at least, 
 (I mean that there is more paper than the 
 country can easily absorb and employ,) the onus 
 probandi seems to lie on the Committee, but 
 they have thrown it altogether off their should- 
 ers, they have brought forward neither evi- 
 dence nor documents in support of the opinion, 
 
 is the great regulator of country-bank paper, " when they in» 
 crease or decrease the amount of their paper, the country 
 banks do the same," And he grounds this opinion on the 
 theory of prices tending to equalize the circulating medium in 
 districts having free intercourse. It is foreign to my purpose 
 to enter into an argument on this subject; but it appears to 
 mo, that ]Mr. Ricardo was bound to shew that some physical 
 impossibility obstructs the increase of bank-notes al the ex- 
 pense of country notes, and vice versa, before he assumes that 
 an increase of bank-notes must produce an increase of country 
 notes : he seems to consider it probable that the endeavours of 
 country bankers to displace bank-notes lias been successful, 
 in which case the proportion between t'>wn and country iiotcs 
 has varied without any such fluctuation, in the price of com- 
 modities has formed the basis of his argument. On the other 
 liand, any introJuction of baidc-notcs to supply tlic pluce of 
 <liscreditcd country notes, as recently in the West of England, 
 augments the positive amount of the former, whilst that of lh« 
 latter is positively diminished.
 
 84 
 
 and they distinctly admit that the high price 
 of bullion and the low state of the continental 
 exchanges are the most unequivocal symptoms 
 of excess they have to adduce. 
 
 They have, indeed, added materially to the 
 difficulties of the inquiry, for they state (what 
 is probably true) that the mere numerical 
 amount of bank-notes in circulation is no evi- 
 dence of inadequacy or excess, as the same 
 amount may bear a ver}' different proportion 
 to the necessities of compierce under different 
 circumstances of trade and payments, and that 
 the quantity of currency bears no fixed propor- 
 tion to the price of commodities ; they take 
 also to themselves the benefit of any argument 
 to be drawn from the economy introduced 
 an the use of bank-notes, which they think 
 must have produced a greater effect than has 
 been ascribed to it, in lessening the quantity 
 of bank-notes necessary to the circulation. It 
 is therefore needless to dwell on the fact of an 
 exchange 6 to 8 per cent, in our favour in I8O4 
 and 5, with a circulation of X' 18, 300,000 of 
 Bank-notes, (Finance Committee, I8O7, App. 8.) 
 or to shew that, in the end of 1808 and begin- 
 ning of 1809, it turned against Great Bri- 
 tain, with a circulation less by one million; to 
 point out an improvement of 10 percent, on the 
 exchanges, with a continually- increasing circu-
 
 85 
 
 lation, between Nov. 1809 and May 1810; or 
 to recur to the state of the exchanges and price 
 of bullion in 1800, when they were nearly as 
 unfavourable, with a circulation of 15 or 16 mil- 
 lions, as in 1810 with a circulation of 21 millions. 
 The circumstances of the internal circulation, 
 it will be said may have been such in 1804 and 5, 
 that a greater amount was not then an excess, 
 although in I8O9 a smaller amount was found 
 to be so. But it becomes then a fit subject of 
 inquiry, wljether circumstances so varying, and 
 so greatly operative, whatever they be, may 
 not also produce a direct effect on the course 
 of exchange and price of bullion. With respect 
 to the contrivances to economise bank-notes, it 
 should be observed that the London clearing- 
 house, the great feature of this economy, has 
 existed, as appears by the evidence of the in- 
 spector, 35 years, and its operation was long 
 anterior, therefore, to the restriction-bill, and 
 the increased issue of bank-notes. 
 
 But these are not the only difficulties attending 
 
 a comparison of the amount of bank-notes with 
 
 their object- Mr. Ricardo states, " that the cir- 
 
 MJulation can never be overful," (page 40,) mean- 
 
 v/ ling thereby, as I apprehend, (for in this in- 
 
 / stance Mr. Ricardo's language is not quite so 
 
 I clear and perspicuous as it usually is,) that, as
 
 the nominal price of commodities rises in pro- 
 portion to any increase of currency, the cur- 
 rency, though of greater numerical amount, will 
 not hear a higher proportion to the value of the 
 commodities ; and although there is an obvious 
 depreciation there is no excess. If this inter- 
 pretation be adopted it will be nearly useless 
 to search for, and inquire after, excess of pa- 
 per as a fact; we must be content to admit 
 proof of its existence from its effects, and our 
 attention must be directed to ascertain depre- 
 ciation, or an increased price of commodities, 
 solely arising out of, and occasioned by, the 
 increased amount of the circulating medium. 
 
 There is a passage, however, in the Wealth 
 of Nations, which introduces a mode of com- 
 paring the amount of currency with its object, 
 not noticed by the Committee. 
 
 *' A prince," says Dr. Smith, *' who should 
 enact that a certain proportion of his taxes 
 should be paid in a paper-money of any kind, 
 might thereby give a certain value to this pa- 
 per-money, even though the time of its final 
 discharge and redemption should depend alto- 
 gether on the will of the prince. If the Bank 
 which issued this paper M^ere careful to keep the 
 quantity of it always somewhat belo^V what 
 could easily be employed in this manner, the 
 demand for it might be such as to make it even
 
 87 
 
 bear a premium, or sell for somewhat more iu 
 the market than the quantity of gx)ld and sil- 
 ver for which it was issued." The principle 
 being admitted, on theauthority of this eminent 
 writer, it remains to be shewn how fi\r the con- 
 ditions are, in our case, fullilled. 
 
 The enactment is ample: not only the 
 whole amount of the taxes of Great Britain 
 are payable in bank-notes into the Bank of 
 England, but even the economy heretofore 
 spoken of in mercantile transactions has in 
 this instance no place. The revenue-boards 
 take no drafts, orders, nor commutations, of 
 any kind, nor does the Bank aiford in the re- 
 ceipts of the revenue any of the facilities to 
 which it has become a party in its dealings 
 with bankers, even on the most pressing emer- 
 gency; and bank-notes do, therefore, actually, 
 (as Dr. Smith supposed they might,) in many 
 cases bear a positive premium : I mean at those 
 periods previously to the issue of dividends, 
 when the receivers-general or their agents, 
 being bound to make their payments within a 
 given day to the Bank, are content to accept a 
 less price for funds or exchequer-bills, if paid 
 for in notes immediately, than if paid for on 
 the next or any following day, or even by 
 draft payable in the afternoon of the same day. 
 This difference, not unfrequently 3 or 4 times 
 the value of the interest of the money, is ^
 
 88 
 
 positive premium for bank-notes, since it 
 would not be given for a consideration of any 
 other kind ; the acceptances of the first mer- 
 chants or bankers, East-India bonds, coimtry- 
 bank notes, will not obtain it : nothing procures 
 it, but that precise commodity, money or bank- 
 notes, which alone answers the purpose of ma- 
 king the payment required. And if the law 
 required that the taxes should be paid exclu- 
 sively in notes, there is no question but Bank- 
 notes would bear the same premium, on these 
 occasions, against money also; — for it is their 
 scarcity, at these moments, which gives rise to 
 it. Nor, if we refer to figures, shall we be 
 surprised at this effect, or that Bank-notes 
 should, at particular periods, be scarce and 
 insufficient in amount for the public accommo- 
 dation. 
 
 ■^■■-- £ 
 Antecedently to the commencement 
 of the war in 1793 the total 
 amount of the permanent taxes, 
 on an average of four years, (2d 
 Report of the Finance Commit- 
 tee, 1797,) was 13,800,000 
 
 Add the real amount of the annual 
 
 grant of land and malt 2, 55 8, (XX) 
 
 Total payments to the revenue 
 
 in one year 16,358,000
 
 89 
 
 At this period the amount of Bank- 
 notes in circulation, on an ave- 
 rage of four years, to 1793, (Rep. 
 Appendix, 49,) M'as 11,200,000 
 
 And the amount of gold coin, be- 
 yond that now in circulation, ta- 
 ken at the amount of £, 1 and 
 ^2 notes since issued, being e- 
 qual to one-tenth part of the gold 
 coinage between 1760 and 1797 6,100,000* 
 
 The total amount of currency, 
 
 in 1793, being, therefore . 17,300,000 
 
 and equal in amount to, or rather exceeding, 
 , the payments to the revenue in the course of 
 one year. At this period the exchanges were 
 much in our favour, gold below the mint- 
 price, and bread at l^d. the quartern loaf 
 
 £ 
 
 The net amount of the public re- 
 venue paid into the Bank of En- 
 gland, for the year ending 5th 
 Jan. 1810, was 62,129,781 
 
 Add amount of loan, including 
 3 millions for Ireland, the pay- 
 
 • It seems probable that this sum is less than ^ of the amount 
 of gold circulating in 1793- — See Supplement.
 
 90 
 
 ments for which are made to the 
 Bank in the same manner as 
 the taxes 14,674,668 
 
 Total payment as per account 
 dehvered to ParHament on 
 24 March last 76,803,449 
 
 At the period of the greatest depression of the 
 exchange, in the autumn of 1809, the amount 
 of Bank-notes, including tliose of ^ 1 and 
 j£, 2 and Bank post bills, did not exceed 20 
 millions. The increased amount of currency 
 beyond that of 1793 was therefore 3 millions, 
 and thiC increased amount of payments to 
 government alone above 60 .„ai-iillions. The 
 currency being now little moie than one- 
 fourth of the amount of these payments; 
 whereas, btffore the M'ar, it exceeded it ; when 
 there was no ground of complaint against the 
 rate of exchange, the price of bullion, or that 
 of commodities. At present, the total amount 
 of Bank-notes in circulation, throughout the 
 kingdom, is cancelled between 3 and 4 times 
 in each year, in payments to the revenue; and 
 every reader must form his own opinion, whe- 
 ther, under such circumstances, the amount 
 is greater than " can be easily employed in 
 this manner," according to the idea of facility
 
 91 
 
 Mliich Dr. Smith entertained when he nsed thfe 
 expression.'^ 
 
 It is not equally easy to form an estimate of 
 the commercial circulation at the two periods; 
 and, if it were formed, the observations of the 
 Committee would preclude any appUcatian of 
 it. But, it is not altogether an unimportant 
 fact that, since the restriction, the increase in 
 the amount ot" Bank post-bills, a species of 
 note not seen in London, and used chiefly for 
 the purpose of making remittances to the 
 country, is nearly in proportion to the increase 
 of notes generally. When the amount of Bank- 
 notes was 10 to 11 millions, the Bank post-bills 
 outstanding amounted to £5 or 000,000: now 
 that Bank-notes liavc increased to 20 or 21 mil- 
 lions, the post bills have amounted to one mil- 
 lion, which I consider as evidence of increased 
 internal circulation in the same proportion. . 
 
 It was nu)re within the power of the Com- 
 mittee to have investigated the question of de- 
 preciation ; it was fully within their power, at 
 least, to have ascertained in what sense, and 
 
 * Having occasion, in the course of the last year, to trace 
 the payment at the Bank of a note of .€1000, I collected, 
 from the mode of search aiul the observations tiiarie, tbat it 
 ATould be an unusual case if a note of this d^spr^ption had 
 ii^t returned wiihin a month from the period of its issi^e.
 
 92 
 
 to what extent, they mean to impute the in- 
 creased price of commodities to the paper-cir- 
 culation, when they intimate, that the cause of 
 the increased price of all commodities is to be 
 found in the state of the currency of the coun- 
 try ; and, that the Bank is responsible for the 
 effect on prices not merely in the ratio of its 
 own excess of paper, but in that of the excess 
 of country-bank paper also. But nothing is 
 done in the Report towards either of these ob- 
 jects, and its language has an obvious tendency 
 to sanction the popular notion, that the in- 
 creased price of commodities is evidence of a 
 depreciation of currency. 
 
 There are two obvious and practical causes 
 of the augmentation of prices in Great Britain, 
 since the date of the restriction-bill, the effects 
 of which should have been accurately ascer- 
 tained, before a cause not obvious, wholly 
 speculative, and against the hasty adoption of 
 which the best authorities have cautioned us, 
 was assigned in the Report, 
 
 The causes to which I allude are, the alter- 
 ed state of the corn-trade, and the scarcity 
 arising out of it in 1800 and 1801 : 
 
 And the increase of taxes since the com- 
 mencement of the war in 1793. 
 
 From the year 1790, Great Britain has cea- 
 sed to produce corn enough for its own con-
 
 93 
 
 sumption; and has annually imported large 
 supplies. At the end of 17.99, there was no 
 stock on hand, and, during the deficient har- 
 vests of 1800 and ISOI, the importations were 
 greatly inadequate to supply the loss. The 
 scarcity and consequent measures of those years 
 are yet fresh in our recollection ; seventeen 
 acts of parliament passed with reference to this 
 suhject in the last six weeks of 1800. Bounties 
 were granted, and every substitute adopted, yet 
 the average price of wheat for the tico years, 
 throughoutEngland and Wales,was 109*. to 1 10*, 
 and bread rose to 18 J. and even to QQ^jd. the 
 quartern loaf. It became necessary to advance 
 the wages of all descriptions of labour, and 
 these, as well as the pay of the army and navy, 
 were raised to the stanflard of the current pri- 
 ces. Although the price of grain subsequently 
 fell, the wages of labour did not experience a 
 reduction; and they remain at present nearly 
 at the standard to which they were advanced 
 about the years 1800 and 1801. — If the price 
 of labour be now, as it is generally understood 
 to be, fully adequate to the present high price 
 of provisions and commodities, the excess, 
 during the abatement of price, in the years 
 succeeding ISOl, from an average of 110*. to 
 an average of 67*. in 1802, 75s. 76*. and 79*. 
 in 1805, ISOG, and I8O7, has operated as
 
 94 
 
 a cause, instead of being the effect, of high 
 pfTces, and has defeated the endeavours of Parlia- 
 ment so to apply the taxation as not to affect 
 the wap;es of labour, and has produced the 
 same effect which a direct tax on labour would 
 have occasioned. It is, perhaps, impossible to 
 ascertain in what degree the prices of commo- 
 dities generally have been affected by this ex- 
 traordinary advance of the wages of labour, 
 -but it apj)ears from the communications made 
 to the Board of Agriculture, that the advance 
 of wages to labourers in husbandry, between 
 17190, when export ceased, and 1804, amount- 
 ed to S7 per cent, on the jmces of 17.90. 
 
 There are readier means of ascertaining the 
 effects of increased taxation. Jn 17.93, as I 
 before stated, the net revenue amounted to 
 about sixteen millions ; but it is the gross re- 
 Avenue which the subject pays, and we 'may, 
 therefore, call it, at that time, seventeen mil- 
 lions. 
 
 The gross revenue of one year, to January, 
 1810, amounted to ^70,240,226, as appears by 
 the account delivered to Parliament, on the 24th 
 of March, being an addition to the charge on 
 the land, the labour, the revenue, and expen- 
 diture, of British subjects, since 1793, of 
 i: 53,2^40,000. 
 
 According to every principle of political eco-
 
 95 
 
 uoniy, a taxon land, labcnir, or industry, is a 
 tax on tiic produce of eacli, as fully, if not so 
 directly, as tlie taxes levied on f:;()ods at the 
 Custom-house or Excise- office, and, tliereforc, 
 this sum of iifty-tlnee nfilHcnis must be, and 
 now is, added to the aggregate price of com- 
 modities in Great Britain, beyond their price 
 in 1793, excej)t in so far as tlie direct and per- 
 sonal taxes fall on those who, living on fixed 
 incomes, have not the means, by the increased 
 price of their labour, increased profits, or in- 
 creased rents, to relieve themselves of the bur- 
 then. The direct taxes amount to about one- 
 fourth of the whole, and the proportion of 
 these, which falls on certain incomes, does not 
 aflect the price of commodities, [i^ certain in- 
 comes he taken at an amount equal to the in- 
 terest on the lunds, (not meaning thereby, 
 tbat a large proportion of stock-holders do not 
 indemnify themselves elsewhere, as proj)rietors 
 of land, merchants, traders, and manufacturers, 
 but to allow a sum a(lc(juate also to tiie an- 
 nuities on land, salaiics of office, 8cc.) a pro- 
 portion equal to one-sixth of a fourth of the 
 general taxation may be consitlercd as posi- 
 tively taken out of the pockets of those who 
 pay it. To obviate objection, let it be admit- 
 ted that Toth instead of ^Ith is so taken. The 
 remainder, about 47 to 48,000,00f , is an an).ual
 
 96 
 
 augmentation to the price of commodities ui 
 Great Britain. Novr, the aggregate price of these 
 commodities cannot exceed the total income, 
 or revenue, by means of which they are consu- 
 med, which, from the best judgement that can 
 be formed of it froni parhamentary documents, 
 does not exceed 140,000,000, so that, of the 
 present price of commodities, one-third taken 
 on average, (some more, some less, according 
 as they are more or less immediately affected 
 by taxation,) must be considered as represent- 
 ing the taxes imposed since 1793; and one- 
 third of the present price is, of course, equal 
 to half the price of 1793. 
 
 If any doubt should be entertained, whether 
 landholders, for instance, have really been able 
 to indemnify themselves to this extent, and to 
 raise an additional income equal to such % 
 amount of taxation, I may at once refer to satis- 
 factory documents in proof of it. In the Re- 
 port of the Commissioners of Naval Inquiry, 
 on Greenwich Hospital, is a statement of the 
 rents of the Derwentwater estates, now pos- 
 sessed by the Hospital, shewing an increase, be- 
 tueen the years 1790 and 1805, from ^^^ 1 8, 300 
 to ^24,700, being one-fourth of the present 
 rents ; but the last four years, in which very 
 considerable additions have been made to the 
 rents, are not included. The average increase
 
 97 
 
 of rent on arable land, thoughout tlie king- 
 dom, between 1790 and 1803, as returned to 
 the Board of Agriculture, was £, 40 per cent, 
 on the rents of 1790, or £l^ per cent, on 
 those of 1803, to which returns the same 
 observation respecting the period not included 
 will apply. 
 
 To what rise in the price of commodities does 
 the Committee allude which is not justified by 
 the multiplied operation of an increased public 
 demand on the produce of the land and labour 
 of the country, to the extent which has here 
 been stated ? The price of corn has fluctuated 
 so much since the supply has, under the incon- 
 veniences of war, depended on importation, 
 that it is become, except on very long as'crages, 
 an unfit standard of comparison : as early as 
 1795 and 179^, I find the quartern loaf, for 
 m^^y months together, at \5d. and, as late as 
 1807, the average of the year not exceeding 
 lid. and W^d. — in the course of a single 
 year, and even in succeeding months, varia- 
 tions in price, on the average of the kingdom, 
 of i. and even J of the value of the commo- 
 dity. The average price of wheat for the 
 year 1800 was 112^. 8</. and, for the year 1802, 
 67s. 7 d. — such fluctuations have obvious re- 
 ference to supply and demand, and can in no 
 degree be referred to corresponding variations, 
 o
 
 98 
 
 either in the cost of the article or the niediurit 
 of payment.* Meat has fluctuated less in price 
 than corn : the increase of price appears to have 
 been progressive, from about 7 d. to \0d. per lb. 
 but has not exceeded the proportion resulting 
 from the natural effect of taxation. 
 
 The metals which are the produce of British 
 soil, of which the supply is always equal to the 
 demand, might perhaps form a better standard 
 of comparison : but, in this commercial coun- 
 try, it is difficult to fix on any commodity, 
 which is not affected by the circumstances of 
 war or peace, as in the case of timber or hemp ; 
 comparative scarcity or superabundance, as 
 tallow and coffee ; want of demand, as in the 
 case of East-India goods ; or want of supply, 
 
 * I liave extracted from the Gazette the weekly prices of 
 grain in the five yearS preceding the restriction, from 179^ 
 to 179<5, and the five last years, from 1806 to 1810 inclusive, 
 both periods including grdat fluctuations of price, but neither 
 the extremes of the years 1 800 and 1 801. 
 
 Wheat. Barley. Oats. 
 
 s. (1. s. d. *. d. 
 
 The average of the last five years is, 87 2, 43 30 6 
 
 A deduction of these prices of i. 29 14 4 10 2 
 
 would leave 58 2 28 8 20 4 
 
 The average of 1792 to 17 96 is 57 6 34 20 6 
 
 but I do not think that any fair inference can be drawn from 
 the result, because, throughout the whole period, the prices 
 have been regulated more by importation than any interniil 
 circumstances.
 
 99 
 
 as those from Italy and the Levant. Then, 
 again, speculation intervenes, and raises ex- 
 orbitantly the price of m'ooI, the bubble bursts, 
 and wool is an unsaleable commodity. A bad 
 harvest occasions a large demand for sugar at 
 home; a friendly disposition in Sweden carries 
 all the surplus abroad. A good harvest closes 
 the distillery against sugar ; French iniluence 
 shuts the Swedish ports against us, and sugar 
 lias no price. The price of wheat depends on 
 intercourse with America ; the distillery influen- 
 ces barley ; the value of oats is regulated by im- 
 portation from Holland. How, in this chaos, 
 the Committee can discov-er the depreciation of 
 our currency in the price of commodities I 
 know not ; yet, says the Report, " the prices 
 of all commodities have risen, and gold appears 
 to have risen in its price only in common with 
 them. If this common effect is to be ascribed 
 to one and the same cause, that cause can only be 
 found in the state of the currency of this coun- 
 try.'' On this most extraordinary passage I shall 
 only observe " that your if is a great peace- 
 maker." 
 
 It is not possible to follow the subject of re- 
 lative prices to any satisfactory point, without 
 engaging in a very protracted investigation 
 and a multitude of figures, which I wish to 
 avoid ; enough has been adduced to shew that
 
 100 
 
 an increase in the prices of commodities of nearly 
 one-haif on those current in 1793 is naturally 
 accounted for, without assuming a deprecia- 
 tion of currency, and that, unless a pair of shoes, 
 a hat, or a coat, which would, in 1793, have 
 cost 8 s. a, guinea, and 3 guineas, cost now 
 more than IQs. S\ s. 6d. and four guineas and 
 a half, the increase of price is not greater than 
 may be naturally accounted for, from the effecj; 
 of increased taxation. 
 
 Should any persons be disposed to pursue the 
 inquiry farther, they will recollect that the ef-: 
 feet on prices produced by taxation is exclusive 
 of, and independent upon, such increase as may 
 be occasioned by circumstances specially af- 
 fecting particular commodities ; as great scarci- 
 ty compared with the demand, restraints impo- 
 sed on introduction or exportation, or heavy 
 direct duties, as in the case of Wine, Spirits, or 
 Sugar. In adducing taxation as the cause of 
 an increased price of commodities I am not 
 certainly introducing any novel principle, but 
 the more men of every rank have felt the 
 necessity of augmenting their incomes, the more 
 attention has been paid to obtain such increased 
 income from land, the more operative has the 
 principle become ; and it does not appear that 
 the Committee have allowed sufficiently, if at 
 all, for its effect.
 
 101 
 
 I shall only add a few observations on the 
 recommendation of the Committee to Parlia- 
 ment, as the result of their inquiry. 
 
 This repommendation is conveyed in the 
 shape of opinion, " Tiiat the system of the 
 circulating medium of this country ought to 
 be brought back with as much speed as is com- 
 patible with a wise and necessary caution to 
 the original principle of cash-payments, at the 
 option of the holder of Bank-paper." ** Ac- 
 cording to the best judgement the Committee 
 has been able to form, no sufficient remedy for 
 the present or security for the future can be 
 pointed out, except the repeal of the law 
 Avhich suspends the cash-payments of the Bank 
 of England." And the Committee " suggest 
 that the restriction of cash-payments cannot 
 safely be removed at an earlier period than two 
 years from the present time, as it would be 
 hazardous to conipel the Bank to pay in six 
 months, should peace be concluded within that 
 period, and would be found wholly impracti- 
 cable." The Committee are, therefore, of 
 opinion, " that, even if peace should intervene, 
 two years should be given to the Bank for resu- 
 ming its payments ; but that, even if the war 
 should be prolonged, cash-payments should 
 be resumed by the end of that period. ' 
 Persuaded as I am that both the rate of ex-
 
 102 
 
 change and price of gold are controuled at 
 present by the foreign e vpenses of government, 
 operating upon a small favourable balance, I 
 cannot of course anticipate any difficulty in 
 the resumption of cash -payments by the Bank, 
 when those expenses shall have ceased. Nor, 
 supposing them to continue, can I contemplate 
 greater facility in resuming them at the expira- 
 tion of two years than is now experienced. 
 The Committee can hardly expect any increa- 
 sed activity in our manufactures from a reduc- 
 tion of the accommodation they have experien- 
 ced; or an increased exportation to the conti- 
 nent as the effect of reduced prices ; (presu- 
 ming, as the Committee seem disposed to do, 
 that such reduction is just and practicable ;) 
 because we see already that a profit of 3 and 
 even 400 per cent, on colonial produce, on 
 coffee particularly, the article most wanted in 
 France, and most superabundant here, is not 
 a lever powerful enough to obtain for it an in- 
 troduction. Our imports consist, for the most 
 part, of articles with which we cannot dis- 
 pense, without abandoning altogether the con- 
 test in which M^e are engaged. If our imports 
 are not diminished, our exports increased, or 
 our foreign payments lessened, I do not see 
 how the utmost stretch of inconvenience which, 
 l)y reducing the circulation, the nation may be
 
 103 
 
 Jnade to suffer, will improve the exchange or 
 lower the price of gokl. I could point out 
 effects of a very different nature, which Mill 
 unquestionably result from it. On former oc- 
 casions, mercantile distresses improved the ex- 
 change, by inducing the merchants to draw 
 bills on their correspondents abroad to raise 
 money, which they M'ould provide for by ex- 
 ports, even at a loss. But even this wretched 
 shift cannot now be practised ; there is no mar- 
 ket on which bills are current to which goods 
 can be sent. 
 
 /Whilst offering their suggestions to Parlia- 
 ment no doubt the Committee had distinctly 
 in view 
 
 The evils and inconveniences which they 
 propose to remedy ; 
 
 The mode in which the remedy will be pro- 
 duced by the adoption of the recommenda- 
 tion ; 
 
 And the consequences with which that a- 
 doption will be attended. 
 
 These points are not, however, brought promi- 
 nently forward in the Report, and we are left lO 
 discover, as we can, what the measure is intend- 
 ed to effect, and how it is to be effected. 
 ** A return to the ordinary system of bank- 
 ing" can alone, say the Committee, " ef- 
 fectually restore general confidence in the
 
 104 
 
 value 6f the circulating medium of tlie king-* 
 dom ;"' — *'tlie serious expectation of this event 
 must enforce a preparatory reduction of the 
 quantity of paper;" — "and the anticipation 
 of the time when the Bank will be constrained 
 to open, may also be expected to contribute 
 to the improvement of the foreign exchanges," 
 which, the Committee informs u*, ** they have 
 abundantly shewn the Bank to have the 
 power of controuling." — On these intima- 
 tions of the objects of the Committee it ii 
 obvious to remark, that the restoration of 
 confidence is a work of supererogation : the 
 Report had previously informed us that "want 
 of confidence has no place in our present 
 situation." — The Committee have admitted 
 that the fall of the exchange was occasioned 
 by political circumstances, operating on the 
 commerce of the country, yet they anticipate 
 its improvement from modifications of our 
 currency. They say nothing about the price 
 of bullion, which is expected, doubtless, to 
 return when the Bank shall have sufficiently 
 controuled the exchange; although "Mr. 
 Locke and many other writers have clearly 
 / I demonstrated, that the coins of any country 
 can only be retained within it when the ge- 
 neral balance of trade and payments is not 
 unfavourable," (Lord Liverpool's letter to the 
 
 <]
 
 105 
 
 King, page 109,) and these effects are all to be 
 produced by a reduction in the quantity of pa- 
 per, although no attempt has been made to 
 shew from whence any superfluity can be with- 
 drawn. *'The rate of wages of common country 
 labour adapts itself more slowly to the changes 
 which happen in the value of money than 
 the price of any other labour or commodity; 
 and the pay of some classes of public servants, 
 if once raised, in consequence of a depreciation 
 of money, cannot so conveniently be reduced 
 again," such is the opinion of the Committee. 
 Yet, in the midst of war, when those classes 
 are numerous, when that labour is scarce, 
 and the wages of both have adapted them- 
 selves very fully to the present value of com- 
 modities, the Committee recommend a forced 
 reduction in the price of the produce of land 
 and labour, from whence those wages are to 
 be defrayed. That this is the intended effect 
 of the reduction of Bank-paper will be 
 readily understood and admitted by those 
 who have attentively considered the princi- 
 ples of circulation laid down by the Committee. 
 Let it be remembered also that the taxes are 
 for the most part fixed, not proportional, rates ; 
 they, too, as well as the wages of labour, are 
 adapted to the existing value of commodities, 
 or rather the value of these has adapted itself 
 p
 
 106 
 
 to the rate of taxation. Nor is this reduction 
 intended to be a trifling one: the Committee 
 observe, that, in the present state of our cir- 
 culation, to compel the Bank to pay specie in 
 six months would be most hazardous, and 
 would bj found wholly impracticable. " In 
 effecting so important a change, some diffi- 
 culties n.ust be encountered and some contin- 
 gent dangers to the Bank must be carefully 
 guarded against;" and, therefore, time is to be 
 given to the directors to feel their way, and 
 tread back their steps slowly, by a gradual re- 
 duction of their paper, which, on the princi- 
 ple of the Committee, will produce a four- 
 fold reduction in the countrj^-bank paper also : 
 the effect on the agricultural and commercial 
 interests of the country of such a curtailment 
 of the usual means of circulation I pretend not 
 to define.* 
 
 * ISIany persons may feel disposed to coincide with the Com- 
 mittee in their wish to reduce the amount of ^circulating paper, 
 under the idea that the accommodation afforded by it to merchants 
 and farmers tends to encourage speculation and enhance prices; 
 this objeciion obtains no sanction from the Report ; for the Com- 
 mittee is of opinion " that the largest amount of mercantile dis- 
 counts by the Bank, if it could be considered by itself, ought 
 never 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." 
 
 I very much wish the Commit^tee had not stamped with its 
 authority a doctrine which requires far more consideration 
 than thry have bestowed upon it. Were the speculations in, and
 
 107 
 
 Suppose by any means, as the effect of these 
 measures, gold to return generally into circula- 
 tion, what should we gain ? We adopt an in- 
 strument of circulation most costly iu place of 
 one which costs nothing ; being greatly in debt 
 and little to pay withal, we wish to play at agri- 
 culture and commerce with gold counters, when 
 paper ones answer our purpose to the full as 
 well ; and expend in the purchase of them a large 
 portion of the produce of our soil and labour, 
 the whole of which we find already inadequate 
 to defray our foreign expenditure. 
 
 But this part of the subject is fully treated 
 by Sir John Sinclair, and is out of the line of 
 my practical observations. 
 
 My object has been to ascertain the sound- 
 ness of the ground on which the Committee 
 has founded its arguments ; and, on a reperusal 
 of the preceding pages, I appear to myself to 
 have proved three things : 
 
 1st. That the propositions stated by the Com- 
 mittee, as the basis of their argument, are not 
 generally true, and do not therefore form a 
 solid foundation for the abstract reasoning of 
 the Report : 
 
 consequent increased price of, tallow and wool in the last year 
 maintained by increased circulation or by mercantile discounts 
 to individual!) ? Must we admit that, if 3 millions mow lent to 
 government were repaid and lent out again to such spscuiatcrs, 
 it must necessarily prove a great public bcuefii ?
 
 108 
 
 2d. That the facts, where any are brought 
 forward in support or illustration of the ar- 
 gument, are erroneously stated ; and, when 
 corrected, lead to opposite conclusions : 
 
 3d. That the effects we witness are sufficiently 
 accounted for, by obvious and ordinary causes, 
 and not necessarily referable to such as are 
 speculative and undefined. And it occurs, as a 
 general observation, that the Report does not 
 convey the substance of the information ac- 
 quired by the Committee, but has been framed 
 under the influence of a judgement very early 
 formed (see Rep. page 2. ) on the subject re- 
 ferred to them, which, embracing in the objects 
 offered to their consideration those points only 
 which accorded with the intended references, 
 would almost lead to the belief, that the Report 
 had emanated from the school of those econo- 
 mists, of whom Mr. Playfair speaks, ^' who, 
 not very attentive to facts, have established 
 ino^enious theories, and attempted to reduce 
 every thing to a system, on which they rea- 
 soned till they became enthusiasts, incapable of 
 appreciating any thing that did not conform to 
 the theories they had laid down." — Pref. 12th 
 edit. Wealth of Nations.
 
 SUPPLEMENTARY OBSERVATIONS, 
 
 4-c. . 
 
 1 HAVE been repeatedly asked, whether, as the 
 result of the preceding Observations, I mean to 
 impeach the truth of the principles respecting 
 the theory of money and foreign exchange esta- 
 blished by the Committee, and more fully ex- 
 plained and enlarged upon by Mr. Huskisson ? 
 
 I will answer the question as directly as its 
 circumstances admit. — But I desire to preface 
 my answer by the remark, (which may perhaps 
 remove the object of the question,) that the im- 
 portance of what, in the preceding pages, I have 
 offered to the public, would be in no degree 
 lessened even by an unreserved admission of the 
 accuracy of the principles assumed. 
 
 The Committee have, in their Report, brought 
 forward a case, offered an opinion, and stated the 
 grounds on which the opinion is formed. Ex- 
 clusively of the errors which I have pointed out 
 Q
 
 114 
 
 In the case itself, which, being rectified, leave, 
 as I think, no case, I have conclusively shewn, 
 that the facts assumed by the Committee, and 
 on which their opinion is grounded, are mis- 
 stated; that they were misinformed on all those 
 points from which they inferred that the ex- 
 isting effects could not be ascribed to ordinary 
 causes. When it is shewn, as is now acknow- 
 ledged by Mr, Huskisson, that, " up to a late 
 period, the foreign exchanges were not unfavour- 
 able, and the market-price cf gold not materially 
 above the mint-price ;" when I prove, that, for 
 several months prior to the date of the Report, 
 the exchanges were little, if anything, below the 
 natural limit of depression assigned by the Com- 
 mittee, it may at least be doubted whether a 
 permanently unfavourable exchange, and a fall of 
 16 to 20 per cent, form the case to be argued. 
 When I point out an error of 18 millions in the 
 statement of the balance of trade and payments 
 on which the Committee formed their opinion 
 as to what ought to be the state of the exchange, 
 it would be uncandid to consider the Com.mittee 
 as bound by that opinion : When I adduce, from 
 the Appendix to the Report, evidence of a con- 
 siderable reduction of country-paper, it cannot 
 be necessary to discuss the merits of an argument 
 founded on the presumption that it has enor- 
 mously increased : When, by a reference to dates,
 
 115 
 
 it is proved, that the increased issue of country- 
 paper, to which tlie Report alludes, preceded 
 that from the Bank, by which the Committee 
 supposed it to be occasioned ; and when it also 
 appears, that, as the Bank-issue increased, the 
 country-issue diminished ; the Committee would 
 hardly wish to be considered as holding to the 
 opinion that the quantity of the former necessarily 
 regulates the amount of the latter. 
 
 My " Practical Observations" form, therefore, 
 preliminary considerations to any discussion of 
 principles j they affect the integrity of the Report, 
 as applied to the particular case ; the facts must 
 be established before they can be reasoned upon ; 
 and the question respecting the accuracy or 
 fallacy of the opinions and reasonings of the 
 Committee, as set forth in the Report, and as 
 most ably and ingeniously explained and illus- 
 trated by Mr. Huskisson, is deprived of its interest, 
 as directly applied to the state of our currency; 
 and the fact is not necessarily admitted or denied 
 by me. 
 
 . I do not, therefore, feel it necessary to take up 
 the gauntlet, which Mr. Huskisson has thrown 
 down, and to offer him " either an admission of 
 the principles which he states, or a clear and 
 explicit exposition of nny own." It will be time 
 enough to do this when facts are agreed upon, 
 when we clcarlv understa:id the case to which
 
 116 
 
 the reasonings are to be applied j but if, by 
 the " fair and equal footing" on which those 
 persons who publicly attack the Repo t of the 
 Committee are summoned to meet Mr. Huskisson, 
 it is meant that I should lay down the arms 
 which are familiar to me, and adopt those he 
 uses, in which I am unpracticed, and which are 
 too weighty for my hands, I shall, under any cir- 
 cumstances, decline the meeting. I consider 
 myself at liberty to attack the Report, wherever 
 I find it vulnerable ; I will choose my owm ground, 
 fight at my own time, and use weapons of my own 
 selection. — Whilst, to pursue the metaphor a little 
 farther, Mr. Huskisson has drawn fbrth,in support 
 of the Committee, his truly formidable powers, 
 and disposed them with the judgement and fore- 
 sight of an experienced commander, I, like an 
 active partisan, have traversed his position, and 
 have occupied and destroyed the magazines and 
 supplies on which he was encouraged to depend. 
 I therefore contemplate with admiration, but 
 without fear, the extent of his line, the skill of 
 his disposition, and the precision of his manoeuvre : 
 he may march from depreciation to excess, from 
 excess to depreciation j he may advance single- 
 handed into the field, or form a junction with the 
 Committee ; he may send forward the Report to 
 clear his front, or place it in his rear as a reserve; 
 he may unfurl the banners of system, and be
 
 117 
 
 hailed its invincible defender; yet the sinews of 
 his warfare are withdrawn, and the fate which 
 awaits the Report *' can neither be averted nor 
 delayed." 
 
 For the satisfaction, however, of those who 
 may think that I refuse my i^ssent to propositions 
 which are indisputable, and that I therefore at- 
 tempt to prove too much, I will endeavour to 
 shew how far I assent to, and how far I dissent 
 from, the principles of the Report. I admit 
 them, as stated by Mr. Huskisson, so far as they 
 consist with experience and accord with the 
 opinions of the most approved writers on political 
 economy ; but in some cases 1 refuse my assent 
 to them, because not so sanctioned; in others, I 
 concur in the principle, but do not admit the just- 
 ness of its application : and I dissent from the 
 general conclusion of the Committee, on a special 
 ground, which I will state. — When, for instance, 
 j\Ir. Huskisson assumes, '*as a proposition beyond 
 the reach of controveri,y," that, if one part of the 
 currency of a country (provided such currency 
 be made either directly or virtually legal tender, 
 according to its denomination) be depreciated, the 
 whole of that currency, whether paper or coin, 
 must he equally depreciated." ^Preface, ; . vij.) I 
 refuse my assent to a propos.ti in, not altogether 
 unimportant to Mr. I luskisson's general ^irgumcnt, 
 because it is at variance iciih e.ipcrience.
 
 118 
 
 _^The extraordinary depreciation of the silver 
 coin, in the reign of King William, did not de- 
 preciate the gold : on the contrary, the guinea, 
 worth 21 perfect shillings, passed currently (as 
 noticed in the Report) for 20s, yet silver was 
 not only legal tender, but formed the standard of 
 value, and circulated in the proportion of 7 or 8 
 \o 4 to the amount of gold. 
 
 Again, when it is assumed, in the w^ords of Mr. 
 Huskisson, " That if the quantity of gold, in a 
 country whose currency consists of gold, should 
 be increased in any given proportion, the quantity 
 of other articles, and the demand for them re- 
 maining the same, the value of any given com- 
 modity, measured in the coin of that country, 
 would be increased in the same proportion," I 
 must risk being classed amongst persons " entirely 
 at variance with the first principles of political 
 economy," by rejecting this proposition as con- 
 trary to auUiorUi), 
 
 Adam Smith treats as a " popular notion" the 
 opinion,*' that as the quantity of precious metals 
 naturally increases with the increase of wealth, so 
 their value diminishes as their quantity increases;" 
 and he " endeavoured to shew," and was there- 
 fore of Oj)inion, *' that the increase in the quan- 
 tity of the precious metals, which arises, in any 
 country, from an increase of wealth, has no ten- 
 dency to diminish their value."— Book 1. cap. xi.
 
 119 
 
 This principle is not, therefore, sanctioned by the 
 opinion of the most approved authority, unless 
 allowance be made for the increase of wealth j' 
 of which Mr. Ricardo seems to have been aware. 
 (Page 2, 1st edit.) 
 
 In other cases, where the principle is just, I 
 may hesitate at the application. The truth of 
 Mr. Iluskisson's 5 or 6 statements, in pages 12 
 and 13, (2d edit.) respecting the value of a pound 
 of gold, in gold and in paper, may safely be ad- 
 mitted, without admitting the inference that the 
 paper is depreciated in proportion to the differ- 
 ence. The inference may be denied, on the ar- 
 gument offered by Mr. Huskisson, "That gold 
 is not the basis of our currency at present." This 
 he considers as a proposition which no man who 
 ever looked at the subject will attempt to main- 
 tain 3 yet I find it maintained by many who have 
 considered the subject very attentively, and it 
 derives considerable sanction from the Report 
 itself. — " It may indeed be doubted," the Com- 
 mittee observe, *' whether, since the new system 
 of the Bank-of-England payments has been fully 
 established, gold has, in truth, continued to be 
 our measure of value." — (P^ige 7.) Applying to 
 this subject the most approved theories, I incline 
 to the belief that it has not. 
 
 According to the opinion of all writers on the 
 theory of money, two metals cannot, at the same
 
 1^0 
 
 time, form the standard measure of the value of 
 other things. Mr. Locke observes, *' That two 
 metals, as gold and silver, cannot be the measure 
 of commerce both together in any country." ]\ir. 
 Harris, in his essay on money and coins, adopts 
 and explains Mr. Locke's principle — " But silver 
 and gold, with respect to one another, are, like 
 commodities, variable in their value, according as 
 the plenty of either mRy be increased or dimi- 
 nished : it is therefore impossible that both these 
 metals can be a standard measure of the value of 
 other things at the same time." With these 
 writers agrees Sir W. Petty. Lord Liverpool shews 
 that their opinion coincides with the evidence of 
 facts ar.d the clearest deductions of reason, and 
 concludes, as ** a certain and incontrovertible prin- 
 ciple, that coins, which are to be the principal 
 measure of property, can be made but of one 
 metal only." — (Earl of Liverpool's Letter to the 
 King, page 114 ) This is so clear as to require 
 no illustration. If one be chosen as the standard 
 of value, the other is a commodity, and its value 
 is affected by those causes which usually affect 
 the price of commodities. 
 
 Gold has, for a century past, been the standard 
 to which, in England, all price has been refer- 
 red ; and, as Mr. Huskisson states, ''The law of 
 England, before the year 1707, distinctly secured 
 to every man that he should not be compelled
 
 121 
 
 to take, in satisfaction for a legal debt, for every 
 guinea of that debt, less than 5 dwts. 8grs. of 
 gold of standard fineness ; and, as distinctly, that 
 he should not be obliged to receive, as the re- 
 presentative of a guinea, or a guinea^s worth, any 
 article or thing which would not purchase or 
 procure that quantity of gold." This is indis- 
 putable ; but it cannot be said that the fact is so 
 since 1797. At that period, the legislature of 
 the country saw fit to determine, that the pro- 
 missory notes of the Bank of England should be, 
 virtually, satisfaction for a legal debt, and be 
 taken in payment of taxes to the government, 
 and of interest to the public creditor : they are, 
 therefore, unquestionably become the measure 
 of commerce, and the money of account ; and 
 if, as has been shewn, two metals cannot, at one 
 time, form this measure, neither, I think, can 
 either of them, when the law has authorised an- 
 other. ]\Ir. Locke's principle, argued upon by 
 Mr. Ricardo, the Committee, and INfr. Iluskisson, 
 that an ounce of gold is, and ever must be, of the 
 same value as another ounce of gold of the same 
 fineness, is abstractly true ; but it is not justly 
 applied as an argument to prove depreciation of 
 currency, unless the currency in which it is paid 
 is gold also. That the gold contained in a guinea 
 is now of more value tlian i^th parts of a two- 
 pound note is perfectly clear j but if goJd be
 
 122 
 
 not, any more than silver, the standard of value, 
 there is nothing extraordinary in this. In the 
 ten years preceding 1793, the price of silver, in 
 dollars, varied 19 per cent, and in a single year 
 13 per cent. — (See Lord Liverpool's Letter, 
 and the authority.) Silver was then a commodity : 
 if gold be now considered so, there is nothing 
 surprising in its present value, for the price of 
 gold, as a commodity, in 1795, when the Bank 
 paid £4^ : 8 per ounce for it, was nearly as high 
 as in 1809. Whether this state of our currency 
 be a convenient one ; how near it approaches to 
 paper-currency, under restrictions which limit its 
 amount to the wants of circulation, without re- 
 ference to those of Government ; or what degree 
 of resemblance it bears, in practice, to the Bank- 
 money of Hamburgh or Amsterdam ; are ques- 
 tions distinct from that under consideration. If 
 gold be not the standard of value, its increased 
 price, beyond the standard or mint-price, does 
 not necessarily prove depreciation in that which 
 forms the currency ; and, as I think, with the 
 Committee, that there is ground for doubt and 
 hesitation at least, in this respect, I consider the 
 proposition respecting the price of gold, on which 
 so much reliance is placed, as one of those in 
 which, though I admit the principle, I hesitate 
 at the application. 
 
 If a pound-note be the denomination, it will,.
 
 123 
 
 of course, be asked what is the standai'd ? The 
 question is not easy of solution. But, consider- 
 ing the high proportion which the dealings 
 between government and the pubhc bear to 
 the general circulation, it is probable the stand- 
 ard may be found in those transactions ; and 
 it seems not more difficult to imagine that the 
 standard value of a one-pound note may be the 
 interest of ^33 : 6 : 8 3 per cent, stock, than 
 that such standard has reference to a metal, of 
 which none remains in circulation, and of which 
 the annual supply, even as a commodity, does 
 not amount to one-twentieth part of the foreign 
 expenses of Government in one year. 
 
 Again, I admit, unquestionably as a principle, 
 that excess produces depreciation, be the 
 commodity what it may ; but I cannot there- 
 fore admit the existence of depreciation, unless 
 1 have evidence of excess. 1 may also admit 
 depreciation to prove excess ; but then depre- 
 ciation must be shewn ; and in neither case is 
 such evidence adduced. On the subject of 
 the excess of circulating medium, too much 
 is generally assumed and admitted. It seems 
 to be commonly supposed, that, of late years, 
 the amount has very much increased; which is
 
 more a subject of doubt than I was aware of. 
 By com pari vig Si.r William DavenaiU's estimate 
 of the goUl Qpw, in I696, with the ascertained 
 amount of; the silver recoined, it appears, in- 
 deed, that the specie in circulationj at the latter 
 end of King William's reign, was onlyj between 
 31. and 12 millions; to which the Bank-notes,. 
 ^1,500,000, being added, ma,ke a total of about 
 33 millions, exclusive of the .Goldsmith's notes, 
 much spoken of in the Memoirs of the, timesj 
 but, in 1774, after the recoinage of gold, the 
 amount of gold, in circulation is estimated, on 
 very suffieient grounds, by Lord Liverpool, ^o 
 have amounted to i^25,447»000. If, at that 
 period, the Bank-notes in circulation be taken 
 at only 8 millions, -the currency will have 
 amounted to 83 millions and upwards, exclu- 
 sive of country bank-paper. Between 1774 and 
 1193, the coinage o^ foreign gold amounted^ 
 on average, to 1 million peir'aanum; and Lord 
 Liverpool was inclined to estimate the gold 
 currency at 30 millions, so late as 1 805. I see 
 reason not to admit this opinion to the full exr 
 tent ; and I do not estimate the gold currency in 
 1793 beyond that of 1774 — namely, 25 millions. 
 The Bank-notes then in circulation being 11 
 millions, on average, the currency, exclusive of 
 country-notes, was 36 millions.
 
 V25 
 
 At present, the Bank-paper forms the leading 
 article ot" - - 21 millions 
 
 I can hardly estimate at anything the 
 gold cpin now in circulation ; but, 
 to obviate cavil, it may be suj^j^osed 2 millions 
 
 To render the present circulation 
 equal to ihatot" i 793, we must there- 
 fore estimate the increase on the 
 issue of country bank-paper at 13 millions 
 
 36 millions 
 
 I think it not difiicult to ascertain nearly the 
 amount of country-paper ; and, on my calcu- 
 lation, 13 millions form about lialf of it:* — the 
 
 * I form the calculation on the supposition, that cvxry stamp 
 issued foi-iji note above £2 :2 circulates the full time allowed by 
 law, namely, three years. 
 
 That every note of lesser denon^ination, for which n stamp is 
 issued, remains out four years, which 1 i^na^!ine exceeds the trutii. 
 
 The number of stamps issued for the higher classes, in three 
 succe;-bivc years, indicates, therefore, the greatest number of notes 
 which can by possibility be in crrculatioa; and I adopt the esti- 
 mate of the Committee of £5 for the notes between £2 :2 and 
 ^.5 : 5, and of <£lO for the notes bttwcen c£'5 ; 5 ana <£20. 
 
 The total issue of stamps for notes of Xl and £Q, for the number 
 of years which they may be supposed to circulate, indicates the 
 amount of tlicse classes ; and in the (kiunmiutiwn of each note in 
 these classes there can be no error. 
 
 The issue of stamps for notes thus taken, at £5 and £\0, for 
 three years, ending October, ISO?, amount in number to 2,13.9,470 
 for ihe former, and 76".0,fToo for the latter; but, as applied to the 
 present purpose, it is titter to take the throe years to October, 1 SOp.
 
 126 
 
 question then remains, Whether, since 1793, the 
 country banks have more than doubled their 
 issues? If they have not, the circulation of 1809 
 did not exceed that of 17.93, and the increased 
 wants of circulation, from the increase of wealth 
 and the increased price of commodities, has been 
 met by the economy in the use of money, so 
 much insisted upon in the Report. Mr. Thomp- 
 son,, a member of the Committee, has offered an 
 opinion, that the paper circulated in the north of 
 England did not, in the beginning of 1810, ex- 
 ceed by more than one-fourth that circulated be- 
 fore the alarm of 1796. If his estimate be gene- 
 rally correct, the medium of circulation is now 
 
 Wirhin this period, the issue for the class 
 
 of £5 notes is - - ^2,042,344 or 10,21 1,420 
 
 And for the class oi £\0 notes 722,479 7,224,790 
 
 For the reasons assigned by theCommittee 
 
 the last year cannot be taken into the 
 
 amount for the notes of £l and of 2. 
 In the four years ending October, 1808, 
 
 the issue of stamps for notes of =£l is 9,754,400 9,754,400 
 And for the notes of £2 - 237,200 474,400 
 
 Makingthe total of stamped country-paper in existence 27,665,01,0 
 A considerable deduction must, of course, be made for 
 that proportion at all times in the hands of the pro- 
 prietors, not in circulation, which, estimated at one- 
 tenth, or about - - , 2,665,010 
 
 Leaves a real circulation of country-notes of .£25,000,000 
 
 It deserves notice, that, including the year 1807, in both calcu- 
 lations, for the notes of 0^5 and o£'l0, the cifculatioBof the three 
 years to October, 1807, exceeds that of the three years ending 
 Octobo;", 1809, in these classes alone, by o£'957,000.
 
 127 
 
 less than before the restriction-bili took place. — 
 {Repo?^t, page 1 15. J No calculation to establish 
 excess has yet been adduced sufficiently autlien- 
 tic to invalidate the result of this statement; 
 and the prima facie evidence is therefore against 
 the theory of excess. 
 
 Nor is any endeavour used to ascertain de- 
 preciation. Mr. Huskisson notices, indeed, in a 
 note, an increased produce of the duty on sales 
 by auction, in 1 809, of 30 per cent, beyond 
 that of 1807, ** although certainly, in the last 
 year, (1809,) there was," Mr. Huskisson ob- 
 serves, '* no pressure in the country to force 
 property into the market." There are those 
 who differ from Mr. Huskison in this opinion; 
 and the value of this item of evidence is exactly 
 proportioned to the degree in which it is more 
 probable that property, land in particular, should 
 have increased in value 30 per cent, in two years, 
 against the evidence of our senses, than that the 
 quantity brought to sale should have increased, 
 contrary to Mr. Huskisson's opinion. 
 
 The preceding instances, in which the princi- 
 ples, stated by Mr. Huskisson as the ground of 
 his argument, arc at variance either with expe- 
 rience or with authority, or in which their ap- 
 plication is arbitrary and unsanctioned, are se- 
 lected from a considerably extended minute of 
 objections which occurred to me on the peru- 
 sal of his pamphlet, because they sufficiently
 
 ^ 128 
 
 4?x plain and justify, without leading into much 
 detail, my hesitation to deny or admit gene- 
 ally the principles and propositions set forth by 
 Mr. Huskisson, in illustration of the Report: they 
 justify, also, my suspicion of the correctness of 
 a theorist who has so fa.r forgotten the dicta of 
 authority as tauntingly to ask the practical men : 
 " Under what class of theorists, or order of po- 
 liticians, they would have ranged any man, who, 
 before the year 1797, should have ventured to 
 recommend, as a safe system, the prirrciples on 
 which the Bank now professes to regulate its 
 practice," and who was not aw^are, that the 
 system of the Bank is the system of Adam Smith, 
 and that their principle of conduct was stated 
 to the Committee in the words of his printed 
 vohimes. See Mr. Huskisson's note, page 30, 
 and page 63, of preceding observations. 
 
 I will now offer the special grouad on which 
 I dissent from the general conclusion of the Com- 
 mittee, that the present state of the exchanges 
 and price of bullion is attributable to the depre- 
 ciation of paper ; and why I rather refer those 
 effects to the state of trade and payments. 
 
 It is essential to the establishment of an hy- 
 pothesis, that it account not only for the phe- 
 nomena which it is framed to explain, but 
 for all others under apparently similar cir* 
 cumstanccs ; if Keplers law of planetary 
 motion, " that the squares of the times of the
 
 129 
 
 fevoliitions are to each other as the cubes of 
 the axes" had not been found equaMy apphca- 
 ble to the Georgium Sidus, which h? never 
 saw, as to those planets from whose motion he 
 deduced the proposition, it might have been 
 considered an interesting fact, or an ingenious 
 hypothesis, but it could not have been received 
 as an universal principle or a fundamental law. 
 Thus although the existing circumstances of our 
 exchange may be accounted for on the principle 
 of excess of currency, (adn:itting it to exist,) 
 yet this is not therefore to be assumed as the 
 cause, unless similar phenomena on other occa- 
 sions can be i-eferred to the same principle. 
 
 It appears to me impossible to explain all 
 the phenomena connected with this case on 
 the principles of the Committee and very easy 
 to do so on those which I adopt. 
 
 /The low exchange and high price of bullion, 
 being supposed attributable to excess of cur- 
 rency, producing depreciation and an increased 
 price of commodities, I propose the following 
 problems for solution, taken from the state of 
 exchange and including the whole period from 
 1790 to the present time. 
 
 1st. The fall of the exchange, from an ave- 
 rage of 6 percent, in favour, from 1790 to 1795, 
 to 3 per cent, below par, in 1795 and 6, with an 
 equal circulation of 1 1 millions of Bank-paper, 
 , convertible into specie on demand, and the ad- 
 J vance of the exchange to 1 1 per cent, above par, 
 
 i
 
 130 
 
 on average in 1797 and 1798, the circulation being 
 increased to 13 millions and not so convertible. 
 
 2d. 1 he fall of the Exchange to 6 per cent, 
 below par, and gold 9 per cent, above the mint 
 price in 1800 and 1801, the Bank circulation 
 rather above 15 millions, and the advance to 
 3 percent, abo/e par, on average of 6 years, from 
 1803 to 1808, and gold nearly at the mint-price, 
 v^^ith an augmented circulation of 17 to 18 millions* 
 
 Sd. The fall of the exchange, from 5 percent, 
 above par, in July, 1808, to 10 per cent, below 
 par, in June, 1809, the Bank circulation being 
 the same in both instances. 
 
 4th. The gradually increasing price of commo- 
 dities, during the American war, when the circu- 
 lation was gold, and during the 6 years from 1803 
 to 1808, when the exchange was in favour. 
 
 I am unable to solve these problems, on the 
 principles of the Report, without admitting such 
 a variety of exceptions as is destructive to them. 
 They are solved by reference to the actual cir- 
 cumstances of one branch of our trade, with an 
 accuracy of which I was not aware, until I had 
 brought into one point of viev/ the facts con- 
 tained in the following table. 
 
 This table contains in one column the price of 
 wheat in England and Wales, for every year since 
 1790, extracted from the Appendix to the Report, 
 No. 7 1 : and, in the two other columns, indications 
 of the variations of the exchanges, as favourable 
 or unfavourable, from Mr. }vlushett's Tables.
 
 131 
 
 Wheat 
 
 per Quarter. 
 
 Exchange in 
 favour. 
 
 Exchange 
 below par. 
 
 1750 
 
 bZ 
 
 2. . . . 
 
 -V 
 
 
 1791 
 
 47 
 
 
 
 ^Exchange 5 or 6 
 
 
 J 792 
 
 42 
 
 11 
 
 f per cent, in la- 
 
 ■ 
 
 1793 
 
 48 
 
 11 
 
 / vour till the 
 
 
 1794 
 
 51 
 
 8 
 
 ^vpring of 1795. 
 
 
 1795 
 
 74 
 
 2 
 
 
 J Belowpartilllat- 
 
 1796 
 
 77 
 
 1 
 
 
 ) terendof 1796. 
 
 nm 
 
 52, 
 
 1.... 
 
 ^Greatly in favour 
 
 
 1798 
 
 50 
 
 3 
 
 Vtill the Autumn 
 
 
 1799 
 
 67 
 
 6 
 
 ) of 1799. 
 
 
 1800 
 
 113 
 
 7 
 
 
 ^ 5 or 6 per cent.be- 
 
 1801 
 
 118 
 
 3 
 
 
 Vlow par until the 
 
 1802 
 
 67 
 
 5 
 
 
 ^middloof 1802. 
 
 1803 
 
 56 
 
 6*"* 
 
 1 In favour, with 
 
 
 1804 
 
 60 
 
 1 
 
 Ahe exception of 
 
 
 1805 
 
 87 
 
 10.... 
 
 a few months be- 
 
 /- From 5 per cent. 
 
 1806 
 
 79 
 
 
 
 j tween the harvest 
 
 -J above to 2 per 
 * cent, below par. 
 
 1807 
 
 73 
 
 3 
 
 >of 1805 and sum- 
 
 
 1808 
 
 79 
 
 0.... 
 
 Jmer of 1806. 
 
 
 1809 
 
 95 
 
 7 
 
 
 ■X Below par from 
 
 1810 about 105 
 
 0.... 
 
 
 3 November, 1808.
 
 132 
 
 It is evident, from the bare inspection of this 
 table, that the fluctuations in the exchange have 
 exactly conformed to those in the price of 
 wheat, and consequently to the importation, 
 the extent of which has been regulated by the 
 price. I infer that although the demand for Bri- 
 tish commodities abroad has been found adequate 
 to meet the foreign expenses of government when 
 the price of bread-corn is moderate, it is unequal 
 to that object, when a sudden and urgent call 
 for large supplies of corn is super-added ; and my 
 opinion is strengthened that the present state of 
 the exchange is an effect of the foreign expenses 
 of government, operating upon a small favourable 
 balance of trade, according to the common accep- 
 tation of the expression. The three first pro- 
 blems which have reference to the exchange are 
 thus fairly resolved j the 4th meets its answer in 
 the ordinary effects of progressive taxation, and 
 increasing wealth. 
 
 Now it is a rule, in philosophising, laid 
 down by Sir Isaac Newton, and adopted by 
 his followers, not to admit more causes than ex- 
 plain the phaenoraena, and to refer effects of 
 the same kind to the same causes. The "esta- 
 blished causes solve adequately all the problems, 
 and I am not prepared, therefore, to admit the 
 new one. 
 
 Rejecting, consequently, the cause assigned 
 by the Committee and Mr. H. for the disease
 
 133 
 
 under which the exchange labours, I am not 
 careful to analyze the remedies suggested, which 
 I deem also the less necessary because here again 
 Mr. Huskisson, and, therefore, I suppose, the 
 the Committee, has proceeded under an evident 
 mistake. — In recommending the resumption of 
 cash-payments (which would gratify me person- 
 ally more, perhaps, than most others) they were 
 impressed, it seems, with the belief *' that, as the 
 Bank soon after the restriction bought and im- 
 ported a very considerable supply of gold, and 
 has since issued very little, that it is, therefore, 
 actually possessed of a very large stock of 
 gold." It appears to have escaped Mr. Huskis- 
 son's recollection that, as early as Jan. 1799, the 
 Bank gave notice to the speaker of the House of 
 Commons of their intention to pay in specie all 
 fractional sums under jOo, and all notes under 
 jOoy dated prior to July, 1798 : — and it is shewn 
 by the Appendix to the Report, that, since the 
 period of restriction, they have coined, at the 
 mint, 9 millions of gold, and stamped above 1 
 million sterling value of dollars, the whole of 
 which, and a still larger sum, has been issued to 
 the public, (a fact which places some of the 
 points under dicussion in a new light) ; and my 
 opinion therefore is, that, at present, the Bank pos- 
 sess but a moderate stock of the precious metals. 
 If thev ically possess a large one, i»r only to 
 the extent of 6 or 7 millions, the best use they
 
 134 
 
 can make of it is, as I think, to call In all the 
 notes under £5y and not re-is3ue any of this 
 description ; the continuance of gold in circula- 
 tion depends much more on the denomination 
 than on the amount of notes; this is an acknow- 
 ledged principle. But, be this as it may, the 
 Committee gave their opinion under an errone- 
 ous impression, and might probably alter it were 
 the case again before them. 
 
 I will not lengthen these observations : my 
 object is to shew that no man, who reads with 
 attention, and, in any degree, understands the 
 subject, can undertake directly to answer the 
 question, whether he admit the principles of 
 the Report : much is true, much appears to be 
 erroneous ; abstract truth is mixed with practical 
 error ; and it is, 1 think, a needless task to en- 
 deavour to separate them until it is shewn that 
 the admission by the Committee, (page 13,) 
 *' That if the supply of bills drawn abroad, either 
 by the agents of government or individuals, is 
 disproportionate to the demand, the price of 
 them in foreign money falls, until it is so low as 
 to invite purchasers," does not, under the cor- 
 rected statement of our trade, which I " have 
 exhibited, sufficiently explain and accoupt for 
 effects we witness. 
 
 TH£ END. 
 
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