CHAP. XL

ON AN ACT TO REGULATE THE ISSUE OF BANK NOTES, AND FOR GIVING TO THE GOVERNOR AND COMPANY OF THE BANK OF ENGLAND CERTAIN PRIVILEGES

FOR A LIMITED PERIOD. (19 JULY, 1844.)

SIR ROBERT PEEL, on introducing the Bill, truly observes, p. 3.*: —

"I shall therefore proceed at once to call the attention of this Committee to a matter which enters into every transaction of which money forms a part. There is no contract, public or private, no engagement, national or individual, which is unaffected by it. The enterprises of commerce, the profits of trade, the arrangements made in all the domestic relations of society, the wages of labour, pecuniary transactions of the highest amount and of the lowest, the payment of the national debt, the provision for the national expenditure, the command which the coin of the smallest denomination has over the necessaries of life, are all affected by the decision to which we may come on that great question which I am about to submit to the consideration of the Committee."

He also adds what may not be so evident to others as to her Majesty's Government. P. 5.:

"They are of opinion that inquiry has been exhausted, that all the information which is essential to the formation of a satisfactory judgment has been collected, and that it is incumbent on the Ministers of the Crown to submit to the decision of Parliament the measures which in their opinion it may be fitting to adopt."

• Speeches of the Right Honourable Sir Robert Peel, Bart., on the Renewal of the Bank Charter, and the State of the Law

P. 8.:

"Now, the whole foundation of the proposal I am about to make rests upon the assumption that according to practice, according to law, according to the ancient monetary policy of this country, that which is implied by the word 'pound' is a certain definite quantity of gold with a mark upon it to determine its weight and fineness, and that the engagement to pay a pound means nothing, and can mean nothing else, than the promise to pay to the holder, when he demands it, that definite quantity of gold."

Sir Robert Peel then ridicules the definition of some writers.

P. 10.:

"The last definition of the standard of value which I shall quote is this: 'The standard is neither gold nor silver, but it is something set up in the imagination, to be regulated by public opinion.'

A definition nearly resembling that of the "macute" of the African, gravely advanced by so celebrated a writer as Montesquieu, and noticed in a former part of this treatise.

P. 16.:

"The precious metals are distributed among the various countries of the world in proportion to their respective necessities, by laws of certain though not very obvious operation, which, without our interference, will allot to our share all that we require. Some entertain the apprehension that we may be drained of all our gold in consequence of a demand for gold from foreign countries, either for the payment of their armies in time of war, or in consequence of sudden and unforeseen demand for foreign corn for our own internal consumption. It is supposed that gold, being an article in universal demand, and having at all times and in all places an ascertained value, is more subject to exportation than any thing else. But the export of gold, whether coin or bullion, is governed by precisely the same laws by which the export of any other article is governed. Gold will not leave this country, unless gold be dearer in some other country than it is in this. It will not leave this country, merely because it is gold, nor while there is any article of our produce or manufacture which can be exported in exchange for foreign produce with a more profitable return. gold coin be in any country the common medium of exchange ; or if the promissory notes, which perform in part the functions of gold coin, are at all times and under all circumstances of equal value with gold, and are instantly convertible into gold;

If

there are causes in operation which, without any interference on our part, will confine within known and just limits the extent to which gold can be exported. There may, no doubt, be temporary pressure from the export of gold, even when it is confined within those limits; but none for which you may not provide, none to which you would not be subject, in a higher degree probably, were any other standard of value adopted in preference to gold."

I think it not correct to say, that precisely the same laws govern the export of coin and bullion and that of other articles: other articles leave a profit and a loss which gold does not, and gold is neither dear nor cheap in this country. It has no price in this country.

It appears to me that gold does leave this country merely because it is gold; simply to pay debt, as coin leaves the pockets of individuals at home, simply to pay debt. It is exported to purchase foreign produce, when manufactures cannot be exported without leaving a loss. It is true that it would not be exported when manufactures or produce would leave a profit. It is the commodities which occasion the profit or loss, which are dearer or cheaper, not the gold.

What the causes are which operate to confine the exportation of gold within known and just limits are not stated; nor what are those known and just limits.

Gold coin is in England "the common medium of exchange;" and "promissory notes perform in part the functions of gold coin;" but can it be said that they are "at all times, and under all circumstances, of equal value with gold," while gold can be exported for the payment of debt, or in lieu of commodities, which promissory notes cannot? Can it be said that at all times, and under all circumstances, promissory notes are instantly convertible into gold, while obstacles are thrown in the way of converting them into gold by diminishing the amount of notes in circulation, and rendering necessary the circulation of these notes in the home market, from which they cannot be spared

the Bank Bill seems to be to make these promissory notes as valuable in the foreign market, where they will not circulate, as they are in the home market, where they are exchangeable for gold coin. The object seems to be to make the promissory note as valuable for exportation as gold, and to substitute it for gold; not directly, which cannot be done, but indirectly, to make the promissory notes exchange for something in the home market which shall be equivalent or better than gold in the foreign market. The gold will only be worth its weight of gold in the foreign market, but if manufactures and produce can be lowered in price in the home market, so as to exchange for more gold in the foreign market than the gold paid for the purchase; if they can be lowered so as to leave a profit on the commodities exported in lieu of gold; then, indeed, gold will not be exported, not because there is an equivalency between gold and paper in the home market, but because there is more than an equivalency between the pound's worth of manufactures in the foreign market and the gold pound in the foreign market. It is a substitution of manufactures and produce for gold to be exported, or an exchange of bank notes for manufactures which shall be more than equal in value to the gold pound abroad.

If we cannot export the paper pound, yet if by contraction of the circulation, raising the rate of interest and a shock to credit, we make the paper pound at home worth more than equal to the gold pound abroad; and if we can make the world believe that all this pressure is necessary to restore the equilibrium between paper and gold in the home market, or that it is necessary and useful in order to rectify the exchanges, we succeed in establishing a great fallacy; and people are deluded into an acquiescence with injustice to the manufacturer, and merchant, and agriculturist. The pressure is to make the paper pound equal, or more than equal, in value to the metallic pound in the foreign market, not in the home

market, where the promissory note was always as valuable as the sovereign.

We have "equivalency" in the promissory note relatively to the sovereign in the home market, but not in the foreign market, and the confusion and distress and pressure arise from the operation of endeavouring to make the promissory note an article of merchandise like gold, of making it an "equivalent" for gold for purposes of exportation; and as it is impossible to make the promissory note merchandise in the foreign market, we force, by the law of private interest, an exchange of it for merchandise in the home market; and that merchandise, sold at ruinous prices, is the substitute for gold in the foreign markets; and then we boast of having rectified the exchanges or stopped the exportation of gold, and restored the equivalency between promissory notes and gold.

Sir R. Peel, p. 21.:

"It is contended by some, that if you were to dispense with coin altogether, to adopt the principle of Mr. Ricardo's plan, and make Bank notes not convertible into gold at the will of the holder, excepting when presented to the amount of a very considerable sum (300l. or 400l., for instance), and then convertible into bullion and not coin, you would provide a security against the effects of a panic connected with political causes, causing a sudden demand for gold. I very much doubt the policy of taking such precautions against such a contingency, and consider that the most effectual measure for promoting permanent confidence in the paper circulation of the country, is to require that the gold coin shall be in general use for small payments, and that the promissory note shall be of equal value with the coin which it professes to represent."

The objection to Mr. Ricardo's plan is, that it would not only banish coin from the circulation, but it would be a breach of promise, as expressed in the note, and the difficulty of procuring gold for the notes by the generality of holders would depreciate their value. It would be also preventing the great mercantile republic from procuring less sums than 300l. or 400l. for the purposes of foreign trade, which