VII. 1810. 15. Appointment of the Bullion CHAP. ing that it awakened the most gloomy presentiments in the minds of the Cabinet; and so doubtful were they of the result, that they were often on the point of abandoning the Peninsula, and ordering Wellington, with his whole home. In order to allay the public apprehension, army, Committee. and get to the bottom, if possible, of this mysterious affair, then very little understood, and even now, after half a century's additional experience, not nearly so generally appreciated as its vital importance deserves, Government consented to the appointment of a select committee to inquire into the subject, take evidence, and report. The committee was chosen with the utmost impartiality, and comprehended the leading men on both sides of the House; in particular Mr Horner, Mr Ricardo, Mr Tierney, Mr Ponsonby, Mr Canning, Mr Vansittart, Lord Castlereagh, Mr Lushington, and many others. They examined the Governor and Deputy-Governor of the Bank of England, and all the leading bankers and merchants in London, as to the facts of the case, and their opinion on the causes to which the present anomalous and alarming condition of the currency was owing. Mr Horner was the chairman, who drew up the report, which was a very able and closely argued pleading on the side of the majority. They spared no pains in the obtaining and sifting of evidence; and much was expected from the verdict of a body composed of men of such distinction, and whose judgment was based on so extensive and valuable a mass of evidence. Yet, strange to say, the committee thus constituted and enlightened, concluded with a report not only directly contrary to the most elementary principles of political economy, but recommending measures which, if carried into execution, would beyond all doubt have, at the most critical period of the contest, at once destroyed the power of Great Britain, and terminated the struggle in favour of France. Lord Castlereagh was in the minority, and strongly comxvii. ccii... bated the resolutions; and never did he render a more 1, 4, lxxxiii. Appendix. decisive service to his country than by successfully resisting their adoption by Parliament.1 June 8, 1810. 1 Parl. Deb. VII. 16. The committee began by stating what was undoubtedly CHAP. true, that during the whole of 1809 and the months which had elapsed of 1810, the price of gold had been 1810. £4, 9s. to £4, 12s. per ounce, instead of the standard Bullion ReMint price of £3, 17s. 104d., which corresponded to a port. guinea being worth 25s. or 26s. During the same period the exchanges with Hamburg and Amsterdam were depressed as low as from 16 to 20 per cent below par, and that on Paris still lower. "So extraordinary a rise," they added, "in the market price of gold in this country, coupled with so remarkable a depression of the exchanges with the Continent, very early, in the judgment of the committee, pointed to something in the domestic currency as the cause of both appearances. It will be found from the evidence that the high price of gold is ascribed by most of the witnesses entirely to an alleged scarcity of that article, arising out of the unusual demand for it on the Continent of Europe. This unusual demand for gold upon the Continent is described by some of them as being chiefly for the use of the French armies, though increased also by that state of alarm and failure of confidence which leads to the practice of hoarding. Your committee think that in the sound and natural state of the British currency, the foundation of which is gold, an increased demand for gold from other parts of the world, however great, and from whatever cause arising, can have no effect in producing here, for a considerable period of time, a material rise in the market price of gold. But before they proceed to explain the ground of that general opinion, they wish to state some other reasons which alone would have led them to doubt whether, in point of fact, such a demand for gold as is alleged has operated in the manner supposed. Mr Whitmore, indeed, the Governor of the Bank of England, stated that, in his opinion, it was the high price of gold abroad which had carried our gold coin out of the country, but he did not offer to your committee any proof of the high prices. The committee are of VII. CHAP. opinion that there is at present an excess in the paper circulation of this country, of which the most unequivocal 1810. symptom is the very high price of bullion, and next to that the low state of the foreign exchanges, and that this excess is to be ascribed to the want of a sufficient check and control in the issue of paper from the Bank of England, and originally to the suspension of cash payments, which removed the natural and true control. No safe, certain, and constantly adequate provision against an excess of paper currency, either occasional or permanent, can be found but in the convertibility of all such paper into specie. Your committee, however, are of opinion that the suspension of cash payments cannot be safely removed at an earlier period than two years from this date (June 10, 1810); but that an early provision should be made by Parliament for terminating, by the end of that period, the operation of the several statutes which have imposed and continued that restriction."1 1 Parl. Deb. xvii. Ap pendix, 203262. 17. ter-resolu tions. Such were the views of a majority of the committee, Mr Vansit- including Mr Horner, who was its chairman, and drew up tart's coun- the report, Mr Huskisson, Mr Lushington, Mr Tierney, Mr Ponsonby, and the whole Whig party. Mr Canning also concurred in the report, with the exception of that part of it which recommended the termination of the bank restriction within two years, which he thought should be deferred till the termination of the war. On the other hand, Mr Vansittart proposed certain resolutions in the committee, which, although rejected by the committee, were afterwards brought forward in the House of Commons, and came on for debate in May 1811. In that debate Lord Castlereagh took a very prominent part in support of Mr Vansittart's resolutions, and as they form the ground-work on which his argument was rested, the material part of them will be found in the note below.* *The resolutions of Mr Vansittart were as follows: I. That the unfavourable state of the exchanges, and the high price of bullion, do not appear, in any of the instances referred to, to have been produced VII. .1811. Lord Castlereagh said: "It is essential to the best CHAP. interests of the empire that this question should not only be decided speedily, but that it should be decided upon considerations so ample in all their bearings, that the Lord Castlejudgment of the House may finally take the public mind reagh's aralong with it. For nothing can be so fatally injurious as to against the have a question of this sort kept in suspense in a country port. by restrictions upon cash payments by the Bank of England, or by any excess in the issue of bank-notes; inasmuch as all these instances, except the last, occurred previous to any restriction on cash payments, and because the price of bullion has frequently been highest, and the exchanges most unfavourable, when the issues of bank-notes were the least. II. That during seventy-eight years, ending with 1st January 1796, and previous to the restriction, the price of standard gold was under the Mint price twenty-eight years, and above the Mint price forty-nine years. In the three last years of the American war, the price of gold was £4, 2s. 6d. per ounce, although the bank-notes in circulation were reduced during the same period from £9,160,000 to £5,995,000. III. That, in consequence of the extraordinary violence and rigour with which the war against this country has been conducted by the French Government, the ordinary trade of this country has been greatly deranged, and an export of the precious metals, which alone would be taken on the Continent in exchange, substituted for the export of our manufactures. That in addition to this, the naval and military expenditure of the United Kingdom in foreign parts has been very great during the last three years, especially in Spain; and that the price of grain has been higher, and the importation larger, during that time than at any period since the scarcity of 1801. IV. That the amount of currency necessary for carrying on the transactions of the country must bear a proportion to its trade, income, and expenditure; and that the average value of the exports and imports, income and expenditure, and bank-notes of Great Britain, for three years before 1797, stood thus: Imports and exports, average of three years, Revenue, including loans, Expenditure, Bank-notes, Coined in reign of George III., £48,752,000 37,169,000 42,855,000 10,782,000 57,274,617 V. That the same averages on three years ending 5th January 1811 stood 18. gument Bullion Re VI. That the situation of the kingdom, in respect to its political and commercial relations with foreign countries, is sufficient, without any changes in the internal value of its currency, to account for the unfavourable state of the exchanges and the high price of bullion. VII. That although it is important that the restriction on payments in cash CHAP. whose power in war and prosperity in peace mainly depend upon its public and private gold. It must be 1811. conceded that the non-convertibility of the bank-note into cash upon demand is an abandonment for the time of the standard coin as the medium of our payment, although bank-notes were not at first a legal tender. They were merely declared inconvertible. True, the gold coin did not for long disappear; the Government merely left bank-notes to work their own way in circulation, and the experience of fourteen years has not furnished a single instance of payment in coin being insisted on when notes were tendered. Guineas were circulated in considerable numbers at par with bank-notes; and if they have latterly in a great measure disappeared or risen greatly in price, the cause is to be found in the extraordinary crisis of our commerce with the Continent, together with the magnitude of our military expenditure abroad, giving a new and excessive value to the precious metals, of universal circulation, as compared to bank-notes, which of course would pass only in this country. 19. "It is obvious that the law, which declares the standContinued. ard coin the only legal tender on the part of the Bank of England in discharge of their notes, proceeded upon the supposition of a natural state of things. It never could have been intended, under extraordinary circumstances, to enforce impossibilities; and the rights of persons under that law must be considered as circumscribed, as everything else is, by the limits of possibility. It cannot be the right of a portion of the community, by being the first to press forward for payment, to obtain a benefit which cannot be partaken of by others similarly entitled, but more distant. A modification of the right becomes, should be removed as soon as the political and commercial relations of the country shall render it compatible with the public interest, it would be highly inexpedient and dangerous to fix a definite period for the removal of the restriction on cash payments prior to the time already fixed by 44 George III. cap. 1, or six months after a general peace.-Parliamentary Debates, xix. 70-74. |