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Short review of the Bullion Report of 1810, showing in what respects the facts and arguments relied upon in the foregoing receive support or contradiction therefrom.
The Report of the Bullion Committee of 1810 being very much looked up to as an authority by the public, I think it may be interesting to point out in what particulars it confirms and wherein it may be opposed to the facts and arguments I have relied upon in the foregoing. It is well known that the conclusion arrived at by the Committee was a recommendation to return, as soon as practicable, to specie payments, but I am not without hopes to make it appear that the facts and principles brought forward by them will support a different conclusion, and be in favour of the permanent adoption of an inconvertible paper which I advocate.
In the fulfilment of this undertaking, I have to observe, in the first place, that in page 4 of the Report it is distinctly asserted, that notwithstanding the large exports of gold, and the high price to which it had advanced, there was in fact no scarcity whatever of bullion, and that whoever chose to pay the price for it could readily obtain it in any quantity.
This decidedly supports my assertion that there would be no danger whatever of any want of gold being felt in case an inconvertible currency should be again adopted. It also appears that for two years after the Bank Suspension Act, viz. until over-issue began to take place, the price of standard gold in bars did not rise above the Mint price of £3 178. 10£d. though payable in inconvertible paper, which thereby proves that an inconvertible paper may be kept on a par with the gold standard as I have also asserted, (39).
2ndly. Page 7, the Report states, under the regulations adopted at Hamburgh, silver becomes an invariable measure of value except in so far as the value of silver itself varies with the varying supply of that precious metal from the mines, and the same is said of gold bullion from the same cause.
This in like manner fully supports what I have stated, (17 and 26), as to the changeable value of the precious metals.
3dly. Page 8, the Report states that an excessive quantity of circulating medium in a country which has adopted a currency not exportable into other countries, or not convertible at will into a coin which is exportable, must produce an unfavourable exchange ; and again, page 10, the Report states the same thing will arise “ from the excess of a paper currency not convertible into specie.”
In both these cases, the unfavourable exchange being expressly ascribed to the excess of the inconvertible currency, is tantamount to the assertion, that if it had not been in excess that effect would not have been produced,
and the exchanges would not have been thereby affected, which is precisely the same doctrine I have attempted to prove, (39).
4thly. The Report states, page 11, that the difference of exchange between two countries can never long exceed the cost of transporting the precious metals from one to the other; and page 4 states, that whilst large exportations of bullion were making to the Continent, importations were at same time coming in from South America and West Indies.
This completely upholds the doctrines advocated by me, (55).
5thly. The Report says, page 13, that an unfavourable exchange corrects itself by inducing an additional export of goods.
This also is precisely the same fact which I have relied upon, (45); and page 14, the definition of the par of exchange is exactly in accordance with that I have given.
6thly. The Report states, pages 17 and 18, that the notes of the Bank of England upon one occasion became depreciated by over-issue, so that a guinea was worth 30s., and the exchange with Holland fell to 25 per cent. under par, but that by correcting the over-issue everything was set right.
This is completely a case in point to prove that I state truly all the evils of the Bank Restriction Act were brought on by over-issue, and that by guarding against it all would go right, (52 and 53); and at page 16, the Report states the reduction of paper to be the proper corrective; page 19, the Report gives a similar example taken from the Bank of Ireland, and page 20 directly charges the directors of the Bank of England with bringing on all the peculiar difficulties of the time from their own misconduct; same page shows that a drain for gold may take place from other causes as well as over-issue, but a denial of discount must equally follow, and all the evils attendant on it.
There cannot possibly be a stronger confirmation than all this affords to the principle I lay down as the basis of the entire theory I advocate, namely, that the evils suffered from the Bank Restriction Act did not arise from the nature or use of an inconvertible paper currency, but from its abuse and mismanagement in the hands of interested persons intrusted with the most injudicious and dangerous powers.
7thly. In page 20 the Report also states that by the contraction of the paper issues the Bank directors not only raise the value of notes but also the value of gold along with it, which fully supports my assertion that the fluctuation in the value of money caused by the appreciation of the standard had been as great, if not greater, than the depreciation by over-issue, of which Mr. H. Palmer's admission of the fall of prices thereby produced is a sufficient
8thly. It would be easy to go on multiplying examples of the strict coincidence which exists between the principles I have advocated and those inculcated by the Bullion Report, but I shall only allude to one more instance which may be said to decide the entire question,- I allude to page 24, where the Report expressly asserts, in allusion to the duty of regulating the currency, which had been imposed upon the directors, “ The most detailed knowledge of the actual trade of the country, combined with the most profound science in all the principles of money and circulation, would not enable any man, or any set of men, to adjust and keep
always adjusted the right proportion of circulating medium in a country to the wants of trade.” This plainly points out the absolute necessity for a self-adjusting currency, which is the precise thing advocated in the foregoing.
Having thus given a number of confirmations taken from the Bullion Report to establish the principles I have advocated, I now come to the only instance in which the Committee dissent from one important principle I contend for, namely, that it is utterly impossible to over-issue any currency, whether convertible or inconvertible, provided the issue is limited to the discount of commercial bills of a given time to run and at a given rate of interest.
This principle will be seen argued, (58 and 39), in a manner which I trust will put it out of doubt, but it is not surprising the Committee should have fallen into this error, seeing that an actual over-issue had taken place although those who argued the case against them could not see it, which therefore appeared to be a practical confutation of their own assertions. But this contradiction between the fact and the theory of the directors is easily explained. The directors did not confine themselves in their issues to the limits they argued upon, but issued their notes not only in the discount of mercantile paper, without any strict limit as to time, but also issued notes in the purchases of government and other securities, and in loans and advances to the State which the directors never allude to, but assert that they did not force out any of their notes, although the practice of loans to government and dealings in the funds was precisely the very mode in which to force them out.
In proof of wbich see the recapitulation of the management of the directors in the 17th page of the Report, which is quite conclusive on this subject. But besides the natural