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magnitude was going forward, it is for the supporters of CHAP. the opposite system to explain.

“This fall of prices must have been produced by one of 1822. two causes : either the quantity of all commodities has continued. increased, or the quantity of all money has diminished. One of these must of necessity have occurred, for the proportion is altered. Are we to believe that great changes have suddenly taken place in the productive powers of nature, or the resources of art, so as to account for this sudden and universal fall of prices? Is it likely that production in all branches of industry, agricultural and manufacturing, would go on for three years constantly increasing in the face of a constantly diminishing price ? The thing is evidently out of the question. It is the quantity of money that must have been reduced. That this has really been the case is sufficiently proved by authentic documents, which show distinctly where the deficiency is to be found. “The circulation of the country rests entirely upon that

138. of the Bank of England ; and its notes in circulation, Continued. immediately preceding the Act of 1819, and the fall of prices, were, at an average, from twenty-nine to thirty millions. That was the amount in circulation for the last half of 1817 and first of 1818. If we take the circulation in the middle of each quarter, which Mr Harman states is the fairest mode of striking the average, it will appear that the diminution of the circulation has been nearly a third.* Nothing can be more regular, gradual, and uni

* AMOUNT IN CIRCULATION OF ALL NOTES.
August 16, 1817, . £30,100,000 | May 1819, .
November 13, . 29,400,000 August „ . .
February 1818, . 28,700,000 November,
May » . .

28,000,000 February 1820,
August „ . 26,600,000 May
November ,, . . 26,000,000 August , . .
February 1819, . 25,600,000 | November , . .

Amount of £5 Notes and upwards.
November 1817, . £19,600,000 | November 1820,
, 1818,

16,900,000 .. 1821. . , 1819, . 15,100,000 | May 1822,

23,900,000 26,000,000 24,000,000 24,000,000 23,900,000 24,400,000 23,400,000

15,300,000 14,800,000 14,600,000

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CHAP. form than the contraction of the currency immediately

– preceding and accompanying the great reduction in the 1822.

rate of prices. It was altogether a forced and systematic contraction. It did not take place in consequence of the fall of prices; it preceded it. It worked silently but unceasingly through every branch of industry, till it had reduced them all to the same miserably low level. It was not effected by means of any lessened demand for banknotes ; on the contrary, it took place in the midst of a constantly increasing demand for them, when population was rapidly augmenting, general peace prevailed, and the growing commerce and transactions of men were daily rendering more necessary an enlargement of the circulating medium by which they were to be carried on. The requisitions made to the Bank by the mercantile community were less at the time of its greatest circulation, in the last half of 1817, than they had been at any subsequent period when the circulation has been so fearfully contracted. The Bank is now under greater advances to merchants with a circulation of only £23,000,000 than it was when its circulation was £30,000,000. The reduction in the circulation, therefore, has taken place in consequence of no decline in the demands of the mercantile community, but solely and entirely from the forced but yet regular and persevering measures of the Bank directors to reduce its circulation, first in preparation for, and next in consequence of, the Cash Payments Bill of 1819.

“ The reduction of prices has been in a much greater 139. Continued. proportion than the contraction of the currency. The

bank-notes have been diminished by about a fourth, but prices of every article have fallen a half. This is a very important fact, for it indicates how powerfully—much more so than could have been expected—a reduction in the amount of the currency affects prices, and through them the resources of all the producing classes in the community. The same is observable in regard to grain, or meat, or any other article in universal and daily use : a failure of the

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crop to the extent of a fourth or fifth doubles prices, and CHAP. often more. It is not difficult to discover the cause of this anomaly. The bank-notes do work far beyond their 1822. amount in value : they conduct and turn over the whole transactions of the country. The payment of taxes and dividends, and all the innumerable transactions between man and man, are done by their means. A diminution of their number, by lessening credit and the means of purchase or speculation over the whole community, affects prices far more extensively than the nominal amount of this diminution, for it affects the power of buying among all the persons through whose hands the notes pass in their circulation through the community.

“In addition to this, there are a great many payments which do not fall with a diminution on the circulating Continued. medium of the community. The great and burdensome charges of the nation remain the same, however much the currency may be contracted and prices fall. The taxes, the interest of mortgages and bonds, jointures to widows, provisions to children, poor-rates, life insurances, and the like, undergo no diminution. Nay, there are several articles of consumption, as salt, tea, malt, sugar, and some others of equal importance, in which the tax bears so great a proportion to the price of the article, that its price cannot fall in any perceptible degree from a diminution in the demand. These heavy fixed burdens, and extensive articles of consumption, require the same amount of bank-notes for their discharge or payment under a reduced as amidst a plentiful circulation. Thus the whole effects of the reduction in the circulating medium are run into, and act upon, the sale of those articles of commerce in which a reduction of price is practicable ; and as they are not half the entire expenditure of the nation, the effect upon them is proportionally greater. It is like a man with a fixed income, say £1000 a-year, who is burdened with fixed payments to the extent of £600, being deprived of one-half of the remainder, or VOL. II.

2 K

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CHAP. £200. Though that reduction is only of a fifth of his

entire income, it will draw after it a reduction of that 1822.

part of his expenditure over which he has a control to the extent of a half; and if he does not draw in to that amount, he will very soon become bankrupt.

“The repayment of the Bank advances by Government 141. Continued. has been the measure on which this reduction in the quan

tity of money, and the consequent increase in its value, was founded. Since 1817, no less than £15,000,000 has been repaid to the Bank by Government. When the Bank got these repayments, they did not re-issue them again, as they had been accustomed to do in former days, but they retained them in their coffers, and thereby withdrew them from circulation. These proceedings have produced a regular progressive reduction of prices, irrespective altogether of any excess in the production. If the Bank were to advance again this £15,000,000, or any considerable part of it, to Government, and were enabled to do so by the necessary alteration in the Act of 1819, the effect would be an immediate return to the scale of prices which existed in 1818 and during the war.

“ Such is the evil under which we are now labourConcluded. ing, and which will suffer no abatement so long as the

causes which produced it continue in operation. We have been occupied with changes in our pecuniary system, and it is precisely since they were commenced that our difficulties have been experienced. To enhance the value of money, to raise the price of gold, we have lowered that of all other commodities, while at the same time we have left the great payments of the nation raised from the sale of these commodities ! Strange, indeed, would it be if such a system was not to have produced the general and long-continued distress which we see around us. The reduction effected in the amount of money in circulation has been nearly one-half of that employed in supporting agricultural, commercial, and manufacturing industry. Hence these classes are unable

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ommons.

. to obtain much more than half the return they obtained CHAP.

for their industry before the alteration took place, and _ yet all their great money engagements remain the same! 1822. This is the origin of that state of things which in its result leaves the landowner without rent, the merchant,

lan i Parl. Deb. without profit, the labourer without employment or wages, vii. 898,

925, 966, which revolutionises property, and disorganises all the 100%. different relations and interests of society.”1 Dr Arnold said that Sir Robert Peel “would yield

143. to pressure on everything except the currency.It is Repeated not surprising it was so; for determination to adhere on Ministers in that one point necessarily drew after it concession on the House of every other. The distress produced by the general fall of all prices 50 per cent had become such among the producing classes, that no combination of the leaders of the opposite parties, and no efforts on the part of Ministers, were able any longer to avert its effects. It was in the loud and fierce demand for a reduction of taxation that the public voice, in the House of Commons, first made itself heard in an unmistakable manner. Several ominous divisions, presaging total defeat in the event of any further resistance to the demands of the country in this particular, took place in the early period of the session. A motion by Mr Calcraft, for the progressive diminution of the salt-tax, by taking off a third in each of the next three years, was only thrown out by a majority of four, the numbers being 169 to 165. This near Feb. 28. approach to a defeat was the more remarkable, that Lord Londonderry and the Chancellor of the Exchequer had loudly declared that this tax was essential to the maintenance of the Sinking Fund, and that its repeal would be the signal for the entire abandonment of that fund.

March 1. This doubtful conflict was soon followed by decided defeats. On the very next day, on a motion made by Sir vi. 861, 881,

ull, vii. John Osborne, for a reduction of two of the junior lords 312;'Ann.

Reg. 1822, of the Admiralty, Ministers were left in a minority of 1933 54, the numbers being 182 to 128.2 This was soon after

2 Parl. Deb.

3.

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