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other time more. The quantity of cur- a smaller sum of money is required than rence required will vary in some degree formerly, to perform the same number with the extent of trade; and the of exchanges and amount of payants, increase of our trade, which has taken if the rate of prices had remained the place since the suspension, must have

It is material also to observe, occasioned some increase in the quan- that hoth the policy of the bank of Eng. tity of our currency. But the quantity and itself, and the competition of the of currency bears no fixed proportion country bank paper, have tended to to the quantity of commodities; and compress the paper of the bank of Cogany inferences proceeding upon such a laud, more and more, within Londoa supposition, would be entirely errone. and the adjacent district. All these cir0us. The effective currency of the cunstances must hive co-operated to country depends upon the quickness of render a smaller augmentation of bank circulation, and the number of ex- of England paper secessary to supply changes perforined in a given time, as the demands of our increased traite well as upon its numerical amount; than might otherwise have been reand all the circunstances, which bave quired; and shew how impossible it :$, a tendency to quicken or to retard the from the numerical amount alope of rate of circulation, render the same that paper, to pronounce whether it is amount of currency more or less ade- excessive or not: a nore sare criterion quate to the wants of trade. A much must be resorted to; and such a crite. sinaller amount is required in a high rion, your committee have already state of public credit, than when shewn, is only to be found in the siate alarms make individuals call to their of the exchanges, and the price of advances, and provide against accidents gold bullion. by hoarding, and in a period of com- The particular circumstances of mercial security and private confidence, the two years wich are so reiwark. than when mutual distrust discourages ahle in the recent history of our cir. pecuniary arrangements for any dis- culation, 1799 and 1797, throw great tant time. But, above all, the same light upon the principle which youc amount of currency will be more or committee have last stated. less adequate, in proportion to the In the year 1793 the distress was skill which the great money.dealers occasioned by a failure of confidence possess in managing and economizing in the country circulation, and a conthe use of the circulating medium. sequent pressure upon that of London. Your committee are of opinion, that the bank of England did not think the improvements which have taken it advisable to enlarge their issues to place of late years in this country, and meet this increased demand, and their particularly in the district of London, notes previously issued, circulating less with regard to the use and economy of freely' in consequence of the alarm money among bankers, and in the inode that prevailed, provedi insufficient for of adjusting commercial payments, the necessary payinents. In this cri. must have had a much greater effectsis, parliament applied a remedy, very than has hitherto been ascribed to similar, in its effect to an enlarge's them, in rendering the same sum ade- ment of the advances and issues of quate to a much greater abount of the bank, a load of exchcquer bills trade and payments than formerly. was authorized to be made to as many Some of those improvements will be mercantile persons giving good scfound detailed in ihe evidence: they curity, as should apply for them : and consist principaly in the increased nise the confidence which this measure of bankers drafis in the common pay- ditfased, as well as the increased means ments of Londoo; the contrivance of which it afforded of obtaining bank bringing all such drafts daily to a com• notes through the sale of the exche. mun' receptacle, where they are ba. quer bills, speedily relieved the disLanced against each other; the inter: tress botn of London and the country. mediate ageucy of bill-brokers ; and without offering an opinion upon the several other changes in the practice expediency of the particular in ude in of London bankers, are to the same whien this operation was eflected, effect, of repdering it unnecessary for your committee inink it an importthem to keep so large a deposit of on- aut illustrat.og of ine principle, that Dey as formerly. Within the London 20 enlarge scopro dation is the true district, it would certainly appear, that reinedy for that occasional failure of


confidence in the country districts, to bullion and a very unfavourable er. which our sysiem of paper credit is change, yet it is essential to the com. unavoidably exposed.

mercial interests of this country, and The circumstances which occurred to the general fulfilment of those in the beginning of the year 1797, mercantile engagements which a free were very similar to those of 1793; issue of paper may have occasioned, an alarm of invasion, a run upon the that the accustomed degree of accomcounlry banks for gold, the failure inodation to the merchants should not of some of them, and a run upon be suddenly and materially reduced ; the Bank of England, forming a cric and that if any general and serious sis like that of 1793, for which per- difficulty or apprehension on this subhaps an effectual remedy might have ject should arise, it may in the judge been provided, if the bank of England ment of your commitice, be counhad had courage to extend instead of teracted without danger, and with adrestricting ils acciimmodations and vantage to the public, by a liberality issues of notes. Some few persons, in the issue of bank of England pa. it appears from the report of the se- per, proportioned to the urgency of cret committec of the Lords, were of the particular occasion. Under such this opinion at the time; and the late ciren instances, it belongs to the bank governor avd deputy governor of the to take likewise into their own conbank stated to your committee, that sideration, how far it may be practithey and many of the directors, are cable, consistently with a due regard now satisfied, from the experience of to the immediate interests of the pub. the year 1797, that the diminution of lic sersice, rather to reduce their patheir notes in that eniergency increas- per by n (gradnal reduction of their ed the public distress ; an opinion in advances to government, than by too the correctness of which your com- suddenly abridging the discounts to mittee entirely concur.

the merchants. It appears to your committee, that

2. Before your committee proceed the experience of the bank of Eny- to detail what they have collecies with land, in the years 1793 and 1797, con- respect to the amount of country trasted with the facts wbich have bank paper, they must observe, that been stated in the present report, sug- so long as the cash payments of the gests a distinction inost important to bank are suspended, the whole paper be kept in view, between that de- of the country bankers is a superstrucmand upon the bank for gold for the ture raised upon the foundation of the supply of the domestic channels of paper of the bank of England. The circulation, sometimes a very great game check, which the convertibility and sudden one, which is occasioned into specie, under a better system by a temporary failure of confidence, provides against the excess of any part and that drain upon the bank for of the paper circulation, is, during the gold which grows out of an unfavour- present system, provided against an esable state of the foreign exchanges. cess of country bank paper, by its conThe former, while the bank maintains vertibility into bank of England paper. its high credit, seems likely to be best If an excess of paper be issued in a relieved by a judicious increase of ac- country district, while the London cir. commodation to the country; the lat. culation does not exceed its due pro. ter, so long as the bauk does not pay portion, there will be a local rise of in specie, ought to suggest to the dis prices in that country district, but prirectors a question, whether their is. ces in London will remain as before. sues may not be already too abuu. Those wbo have the country paper in dant.

their hands will prefer buying in LonYour committee have much sa. don where things are cheaper, and will isfaction in thinking, that the direc. therefore return that country paper tors are perfectly aware that they open the bapher who issued it, and will may err by a tvo scanty supply in a demand froin biin bauk o England rotos period of stagnant credit. And your or bills upon Lwodun; and thus, the committee are clearly of opinion, that excess of country paper being coatialthough it ought to be the general nually returned upon the issuers for policy of the bank directors to dimi- bank of England paper, the quantity uish their paper in the event of the of the latter uecessarily and effecteally long continuance of a high price of limits tbe quantity of the former. This

is illustrated by the account which has been bank paper which will not be checked ; the already given of the excess, and sub- foundation being enlarged, the superstrucsequent limitation, of the paper of the ture admits of a proportionate extension). Scotch banks, about the year 1763. If And thus, under such a system, the excess the bank of England paper itself should at of bank of England paper will produce its any time, during the suspeusion of cash effect upon prices not merely in the ratio payments, be issued to excess, a

of its own increase, but in a much higher sponding excess inay be issued of country proportion.

Number of country bank notes exceeding 21. 93. cach, stamped in the years

ended the 10th of October 1808, and 10th of October 1809, respectively.




No. 666,071. 199,473.

Exceeding 21. 2s. and not exceeding 51. 5s.
Exceeding 5l. 5s. and not exceeding 201.
Exceeding 201, and not exceeding 301.
Exceedling 301. and not exceeding 501.
Exceeding 501. and not exceeding 1001.

No. 922,073. 380,006. 2,425.

674. 2,611.

Assuming that the notes in the two first · actual circulation, which cannot have been of these classes were all issued for the lowest very considerable, and also making an aldenomination to which the duties respec- lowance for some increase in the amount of tively attach, and such as are most com- such country paper, as, though stamped monly met with in the circulation of country may not be in actual circulation. This inpaper, viz. notes of 51. and 101. (although crease in the general paper currency in in the second class there is a considerable last year, even after these deductions, number of 201.] and even omitting altoge- would probably be little short of the ther from the comparison the notes of the amount which in almost any one year, since three last classes, the issue of which your the discovery of America, bas been added coinmittee understands is in fact confined - to the circulating coin of the whole of to the chartered banks of Scotland, the Europe. Although, as your committee result would be, that, exclusive of any has already had occasion to observe, no increase in the number of notes under 21. certain conclusion can be drawn from the 25. the amount of country bank paper numerical amount of paper in circulation, stamped in the year ended the 10th of Oc- considered abstractedly from all other cir: tober 1809, has exceeded that of the year cumstances, either as to such paper being ended on the 10th of October 1808, in the in excess, or still less as to the proportion sum of 3,095,340. Your committee can of such excess ; yet they must remark, that forin i positive conjecture as to the amount - the fact of any very great and rapid inof country bank paper cancelled and with. crease in that ainount, when conpled and drawn from circulation in the course of the attended with all the indications of a delast year. But considering that it is the preciated circulation, does afford the interese and practiee of the country bankers strongest confirmatory evidence, that, to use the same notes as long as possible; from the want of soine adequate check, the that, -s the law noir stands, there is no li- issues of such paper have not been restrainmitat.os of time to the re-issuing of those ed within their proper limits. not exceeding 21. 2s. ; and that all above Your committee cannot quit this part of that acount are re-issuable for three years the sabject without further obserying, that frorn the date of their first issning; it ap- the addition of between four and five milpears difficolt to suppose that the amount lions sterling to the paper circulation of of notes above 21. 2$ cancelled in 1809, Kis country, bas doubtless been made at ould be equal to the whole amount stainp. a very small expence to the parties issuing

in rsos; but even upon that supposi it, only about 100,0001. baving been paid tion, there would still be an increase for thereupon in stamps to the revenue, and 1809 in the notes of 51. and 10l. alone, to probably for the reasons already stated, no the amonnt above specified of 3,09543401, corresponding deposits of gold or Bank of :3 which must be added an increase within England notes being deemed by the cuunhe same period of Bank of England totes try banks necessary to support their addio the atmount of about 1,500,0001., mak. tional issues. These parties therefore, it ing in the year 1909, an addition in the may be fairly stated, have been enabled whole of between four atid five millions to under the protection of the law, which virhe circulation of Great Britain alone, de tually secures them agaiust auch demands, {12cting only the gold which may hate been to create within the last year or fifteen withdrawn in the course of that year from months, at a very trifling expence, and in MONTHLY MAG. No. 208.

4 2


a manner almost free from all present risk the very high price of bullion, and rest 10 10 their respective credits as dealers in p1. that, the low state of the continental ex: per money, issues of that article to the changes; that this excess is to be ascribed amount of several millions, operating, in to the want of a sufficient check and conthe first instance and in their hands, as trol in the issues of paper from the bank capital for their own benefit, and when used of England ; and originally, to the suspenas such by them, falling into and it suc- sion of cash payments, which removed the cession mixug itsclf with the mass of cir- natural and true control. For upon a geculation of which the value in exchange neral view of the subject, your committee for all other conmodities is gradually low- are of opinion, that no safe, certain and ered in proportii n as that mass is aug- constantly adequate provision against an meuter. If your committee could be of excess of paper currency, either occasional opinion that the wisdom of parliameut or permanent, can be found, except in the would not be directed to apply' a proper convertibility of all such paper into specie. remedy to a stite of things so unnatural, Your committee cannot, therefore, but see and teeming, if not corrected in time, with reason to regret, that the suspension of cash ultima e consequences so prejudicial to the payments, wbich, in the most favourable public welfare, they wou'd not hesitate to fight in which it can be viewed, was only a declare an opinion, that some mode ought temporary measure, has been continued $9 to be derived of enabling the state to par- long; and particularly, that by the manticipate inuch more largely in the profits ner in which the present continuing act is accruing from the present system ; but as framed, the character should have been this is by no means the policy they wish to given to it of a permanent war measure. recommend, they will conclude their ob. Your committee conceive that it would servations on this part of the subject, hy be superduous to point, out in detail, the observing, that in proportion as they most disadvantages which must result to the fully agree with Dr. Adam Smith and all country, from any such general excess of the most able writers and statesmen of this currency as lowers its relative value. country, in considering a paper circulation The effect of such an augmentation of constantly convertible into specie, as one prices upon all money transactions for of the greatest practical improvements time; the unavoidable injury suffered by which can be made in the political and do- apnuitants, and by creditors of every demestic economy of any state ; and in view. scription, both private and public; the ing the establishment of the country banks uniutended advantage gained by governissuing such paper as a most valuable and ment and all other debtors; are coi seessential branchof that improvenient in this quences too obvious to require proof, and kingdom; in the same proportion, is your too repugnant to justice to be left with committee anxious to revert, as speedily out remedy. By far the most important as possible, t, the former practice and state portion of this effect appears to your of things in this respect: convinced on the committee to be that which is communione hand, that any thing like a permanent cated to the wages of common country and systematic departure from that prac. labour, the rate of which, it is well known, tice must ultimately lead to results, which adapts itself more slowly to the changes among other attendant calamities, would which happen iu the vaiue of money, than be destructive of the system itself ; and the price of any other species of labour or on the other, that such an event would be cominodity. And it is enough fur your the more to be deprecated, as it is only in committee to allude to some classes of the a country like this, where good faith, both public servants, whose pay, if ouce raised public and private, is held so bigti

, and in consequence of a depreciation of money, where, under the happy union of liberty cannot so convenienuly be reduced again ta *and law, property and the securities of its former rate, even after money shall every description by which it is represented have recovered its value. The futnre pru. are equally protected against the encroach- gress of these inconveniencies and evils, if ments of power and the violence of popular not checked, m:ist at no great distance of commotion, that the advantages of this time, work a practical conviction upon the system, unaccompanied with any of its minds of all those who may still doubt dangers, can be permanently enjoyed, and their existence; but even if their progresCarried to their fullest extent.

sive increase were less probable tban it Upon a review of all the facts and rea- appears to your committee, they cannot sonings which have been submitted to the help expressing an opinion, that the inconsideration of your cominittce in the tegrity and bonour of parliament are con *course of their enquiry, they bare formed ceraed, not to authorise, longer than is an opinion, which they submit to the required by inperious necessity, the corhouse :-that there is at present an excess tinuance in this great commercial country in the paper circulation of this country, of of a system of circulation, in which that which the most unequivocal symptom is natural check or control is absent which

maintaras maintaias the value of money, and, by bank, against which it oight most care. the permanency of that common standard fully and strongly to be guarded. But all of value, secures the substantial justice those may be effectually provided fur, hy and faith of muonied contracts and obliga- entrusting to the discretion of the bank tious between man and man.

itself the charge of conducting and com. Your committee moreover beg leave to pleting the operation, and by allowing to advert to the templation to resoit to a the bank so ample a period of time for depreciation even of the value of the gold conducting it, as will be more than suffici. coin by an alteration of the standard, t. ent to effect its completion. To the dis. which parliament itself might be subjected cret'on, experience, and integrity of the by a great and long continued excess of directors of the bank, your committee bepaper. This has been the resource of lieve that parliament may safely eutriist mary governments under such circum- the charge of eflecting that which parliaslances, and is the obvious and most easy ment may in its wisdum determine upo'ı remedy to the evil in question. But it is as necessary to be effected; and that the unneces-ary to dwell on the breach of pub- directors of that great institution, far froin lic faith and dereliction of a primary duty makin; theinselves a party with those who of governtent, which woulil manifestly be bare å temporary interest in spreading implied in preferring the reduction of the alarm, wiil tike a much longer view of the coin down to the standard of the paper, to permanent interests of the bank, as in. the restoration of the paper to the legal dissolubly blended with those of the public. standard of the coin.

The particular mode of gradually effecting Your committee, therefore, having very the resumption of cash payments ought anxiously and deliberately considered this therefore, in the opinion of your comsubject, report it to the house as their millee, to be left in a great measure to opinion, that the system of the circulating the discretion of the bank, and parliament meuium of this country onght to be brought ought to do little more than to fix, deback, with as much speed as is compa- finitively, the time at wh ch cash pay. tible with a wise and necessary caution, ments are to become as before compul. to the original principle of cash pas- sony. The period allowed ought to be inents at the op'ion of the holder of bank ample, in order that the bank directors paper.

may feel their way, and that, having a Your cen.mittee have understood that constant watch upon the varying circum. remedies, or palliatives, of a different na. stances that ought io guide them, and tare, have been projected ; such as, a availing themselves only of favourable cire compulsory limitation of the amount of cumstances, they may tread back their bank advances and discounts, during the steps slowly, and way preseive both the continuance of the suspension; or, a com- course of their own affairs as a company, pulsory limitation during the same period, and that of public and commercial credit, of the rate of bank profits and dividends, not only safe but unembarrassed. by canying the sorplus of profits above With this view, your committee would that rate to the public account. But, in suggest, that the restriction on cash paya tlre, judgment of your committee, such ments cannot safely be removed at an indirect schemes, for palliating the possible earlier period that two years from the preevils resulting from the suspension of cash sent time; but your committee are of payments, would prove wholly inadequate opinion, that carly provision ought to be for that purpose, because the necessary inade hy parliament fur terminating, by proportion couid never be adjusted, and the end of that period, the operation of the if once fixed, might aggravate very much several statutes which have impused and the inconveniencies of a temporary pressure; continued that restriction. and even if their efficacy could be made In suggesting ibis period of two years, to appear, they would be objectionable, your committer: bave not overlooked the as a most hurtful and improper interfer- circumstance, that, as the law stands at ence with the rights of commercial pro- present, the bank would be compelled to perty.

pay in cash at the end of six months after According to the best judgment your the ratification of a detinitive treaty of committee has been enabled io form, no peace; so that if peace were to be con. suffirient remedy for the present, or secu- cluded within that period, the recommen. rity for the future, can be pointed out, dation of your committee might seem to except the repeal of the law which sus- have the effect of postponing, instead of pends the cash payments of the bank of accelerating the resumption of payments. England.

But your comm'ttee are of opinion, that in effecting so important a change, if peace were immediately to be ratified, your committee are of opinion that some in the present state of our circulation, it difficulties must be encountered, and that would be most hazardous to compel the there are some contingent dangers to the bank to pay cash in six months, and


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