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country. In the next place, there was the natural dread on the part of all the holders of realised wealth of such a continued elevation of prices as might lessen the exchangeable value of their fortunes, and in some degree deprive them of their inheritances or the fruits of their toil. Thirdly, the whole persons engaged in manufactures—a large and increasing class—were impressed with the same ideas, from the experience which the opening of the harbours had afforded them, since the peace, of the great difference between the money wages of labour and prices of raw material on the Continent, where money was scarce, because its inhabitants were poor, and England, where it was plentiful, because they were rich, and the necessity of contracting the currency in order to lower prices, especially of raw material and labour, and enable them better to compete with their Continental rivals. The Whigs, as a party, naturally and unanimously adhered to the same opinion. They did so, because Mr Pitt and. Lord Castlereagh had supported the opposite system, on the principle of Mr Tierncy: "The business of the Opposition is to oppose everything, and turn out the Government." Lastly, the political economists, struck with the obvious dangers of great variations in prices, of which recent times had afforded so many examples, formed the same opinion, from an idea that, gold being the most precious of all metals, and the most in request in all countries and ages, no circulation could be considered as safe or lasting except such as was built upon that imperishable foundation. These circumstances, joined to the weight and abilities of Mr Huskisson, Mr Horner, and the Bullion Committee, who had recommended the resumption of cash payments, and of Mr Peel, who had recently embraced their views, and the general ignorance of the greater part of the community on the subject, produced that " chaos of unanimity " which, as already mentioned, led to the resolutions introducing it being adopted by the House of Commons without one dissenting voice.1

Chap. A chaos of unanimity, however, which confounds parx' ties, obliterates old impressions, and is followed by new

181a alliances, is seldom in the end attended by advantages; Danger of on the contrary, it is in general the herald of misfortune, entity "y As it arises from the judgment of men being obliterated aemttaiHc for a season, by the pressure of some common passion or apprehension, so it ends in their interests being confounded in one common disaster. The great danger of considering paper as the representative of gold and silver, not, when required, a substitute for them, consists in this, that it tends necessarily to multiply or diminish them both at the same time; a state of things of all others the most calamitous, and fraught with danger to the best interests of society. When gold and silver are plentiful abroad, and they flow in large quantities into this country, from its being the best market which the holders of those metals can find for them, they, of course, accumulate in large quantities in the banks, especially the Bank of England, which being obliged to take them at a fixed price, often above the market value, of course gets the largest proportion. It pays for this treasure with its own paper, which thus augments the circulation, already, perhaps, too plentiful from the affluence of the precious metals. Then prices rise, money becomes easy, credit expands, and enterprises often of the most absurd and dangerous kind are set on foot, and are generally for a brief period attended with great profit to the fortunate holders of shares. When a change arrives—as arrive it must, from this rapid increasing of the currency both in specie and paper at the same time, and the precious metals are as quickly withdrawn to other countries, probably to pay the importations which the preceding fever had brought into the country—the very reverse of all this takes place. The banks, finding their stock of treasure daily diminishing, take the alarm; discounts cease, credits are contracted; the greatest mercantile houses are unable to obtain even inconsiderable advances, and the nation is left with a vast Chap.

variety of speculations and undertakings on hand, with- .

out either funds or credit to bring them to a successful 1819issue.

The true system would be just the reverse. Proceeding on the principle that the great object is to equalise True the currency, and with it prices and speculation, it wouldtcm' enlarge the paper currency when the precious metals are withdrawn and credit is threatened with stoppage, and proportionally contract it when the precious metals return, and the currency is becoming adequate without any considerable addition to the paper. In this way, not only would the immense danger of the gold and paper being poured into the circulation at the same time be avoided, but a support would be given to credit, and an adequate supply of currency provided for the country when its precious metals are drained away, and a monetary crisis is at hand. A few millions, secured on Government credit, not convertible into casb, judiciously issued by Government commissioners when the exchanges are becoming unfavourable and money scarce, would at any time arrest the progress of the most dreadful monetary crisis that ever set in upon the country. That of 1793 was stopped by the issue of Exchequer bills; that of 1797 by suspending cash payments; that of 1825 was arrested, as will appear in the sequel, by the accidental discovery and issue of two millions of old bank-notes in the Bank of England, when their treasure was all but exhausted; that of 1847 was at once stopped by a mere letter of the Premier and Chancellor of the Exchequer, authorising the suspension of cash payments. The prospect even of a currency which was to be a substitute for gold, not a representative of it, at once arrested the panic, and saved the nation. Such an expedient, when intrusted to Government commissioners, and not to bankers or interested parties, is comparatively safe from abuse; and it would at once put an end to that fluctuation of prices and commer

Chap. cial crises, which have been the constant bane of the counx' try for the last thirty years.*

1819- In addition to these dangers with which the resumpPecaliar tion of cash payments and the establishment of a paper tuheTMhich currency—the representative, not the substitute for gold, tfoVrf^iT and therefore dependent on the retention of the precious wiTttend- metalsmust always be attended, there were peculiar cired- cumstances which rendered it eminently hazardous, and its effects disastrous, at the time it was adopted by the English government. The annual supply of the precious metals for the use of the globe, which, as already mentioned, had been on an average, before 1810, ten millions sterling, had sunk, from the effects of the revolution in ■Ante,c.i. South America, to little more than two millions.1 The sgreat paper currency guaranteed by all the allied powers, issued so plentifully during 1813 and 1814, and which had circulated as cash from the banks of the Rhine to the wall of China, had been drawn in, in conformity with the Convention of London of 30th September 1813; and the Continent had never yet recovered from the contrac

* Adam Smith clearly saw the advantages of an inconvertible paper currency issued on such principles, and on such safeguards against abuse. "The government of Pennsylvania," says he, "without amassing any treasure, invented a method of lending, not money,indeed, but what is equivalent to money, to its subjects. By advancing to private people at interest, and upon land security to double the value, paper bills of credit, to be redeemed fifteen years after their date, and in the mean time made transferable from hand to hand like bank-notes, and declared by act of Parliament to be a legal tender in all payments by one inhabitant of the province to another, it raised a moderate revenue, which wont a considerable way towards defraying the expenses of that orderly and frugal government. The success of an expedient of this kind must depend on three circumstances: first, upon the demand for some other instrument of commerce besides gold and silver money, or upon the demand for such a quantity of consumable stock as could not be had without tending abroad the greater fart of tluir gold or silcer money in order to purchase it; secondly, upon the good credit of the government which makes use of the expedient; thirdly, upon the moderation with which it it used, the whole value of tho paper bills of credit never exceeding that of the gold and silver money which would have been necessary for carrying on their circulation, had there been no paper bills of credit . The same expedient was upon difforont occasions adopted by several other American States; but from want of this moderation, it produced in tho greater part of them much disorder and inconvotion of credit and shortcoming of specie consequent on Chap. its disappearance, and on the cessation of the vast expen

diture of the war. The loans on the Continent, in the 1819years following its termination, had been so immense, that they had ruinously contracted the circulation, and destroyed credit. The fall of prices in consequence, and from the good harvest of 1818, had been as great in Germany after the peace as in Great Britain, and the cabinets of Vienna, Berlin, and St Petersburg, were as much straitened for money in the beginning of 1819 as the vi. § 7i,.c' French government.1 *

In addition to this, the strain on the money market at Paris, in the close of 1818 and commencement of 1819, strain on had been so dreadful that a monetary crisis of the utmost mark""1 severity had set in there, which had rendered it a matter ["menw of absolute necessity, as already mentioned, for the French ^cmugovernment to solicit, and the allied cabinets to grant, a nont-' prolongation of the term for payment of the immense sums they were required to pay, by the treaty of Aix-laChapelle, as the price of the evacuation of their territory,

nience."—Wealth of Nations, book v. chap. 2. This is tho true principle which should regulate the issue of inconvertible paper, its main use serving as a substitute for gold and silver, not as a representative of it, to bo used chiefly whore the precious metals are drawn away, and never exceeding the amount of them which would hare been required to conduct and facilitate its real transactions. The moderation of Pennsylvania was a prototypo of the wisdom of the English ; the extravagance of the other American colonies, of the madness of France in the use of this powerful agent for good or for evil during tho subsequent revolutionary war.

* Fall or Prices Of Wheat On The Cohtinent From 1817 To 1819.

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March 1817. September 1819.

Vienna, . . . lHs. OJ. 19s. 6d.

Munich,
Norway,

Venice, . . . 99s. 6d. 29s. id.

Lisbon, . . . 117s. Od. 54s. 2d.

Fiume, . . . 88s. lid. 29s. 9d.

Udine, . . . 99s. 6d. 31s. 7d.

Tho bad harvest of 1816 was the cause of the high prices in 1817, but tho prodigious fall in 1819 was due mainly to the pressure on the money market. —Toore On Prices, ii. 93, 94, and authorities thcro queted.

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