VII. 1810. CHAP. opinion that there is at present an excess in the paper circulation of this country, of which the most unequivocal 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 xvii. Ap 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. pendix, 203 262. 17. ter-resolutions. 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. 18. 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 ar along 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, 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 thus: 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. VII. 19. whose power in war and prosperity in peace mainly depend upon its public and private gold. It must be 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. "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. therefore, necessary for the purposes of justice, and for CHAP. the interests of the whole. The power of applying that VII. modification must rest with the Legislature, and the only 1811. question which can arise is, whether, at the moment the thing was done, an adequate necessity existed for a temporary suspension of the money system of the country. If so, Parliament is competent in this, as in all other instances, to provide for the public interest. Parliament did so provide in 1797; the necessity was of a description which admitted of no alternative; and it is of the very essence of the contract on which a circulation such as ours rests, that it should be subject to such a modification. I admit that, like the suspension of the Habeas Corpus Act, or the proclamation of martial law, it is a surrender for a time of the sound and legitimate regulations of our ordinary system; the object being, by such temporary surrender, to preserve the system itself from ultimate destruction. 20. When I speak of our circulation in a sound state, I mean a circulation composed of bank paper and coin in Continued. such proportions as will enable any man at pleasure to convert his notes into coin. I do not consider a circulation purely metallic or purely of notes, as of this description. The former is only the device of barbarous ages, and wholly incompatible with the wants of a commercial country such as this; and the latter is defective, because, however well administered, when not convertible into coin, it leads, from ignorance, misstatment, and public alarm, to distrust and discredit. I admit a mixed circulation, such as existed before the Bank Suspension Act, is the only sound and natural state of our currency. Yet the committee must perceive that even in that, its most perfect state, it must depend on the habits of the country and the state of foreign markets, in what proportions the coin will remain in the country, or what danger may attend its abstraction. If coin is little in demand-if debts are usually discharged in paper, except for the smaller CHAP. VII. 1811. 21. payments-if guineas are little sought after, unless when the credit of any particular paper is suspected, and even then the holders of it are more desirous of exchanging it for paper of undoubted security than for gold—it is plain the quantity of coin circulating within the country will be proportionally small. The various banking establishments will frame the scale of their cash balances upon the accustomed demand for guineas; less coin will exist in the hands of private individuals and although the Bank of England may, upon principles of provident caution, not allow their stock of guineas to be diminished, yet the collective coin of the whole system will be less; and in the same proportion will it be exposed to be affected either by those causes which may suddenly revive an internal demand for coin, or by those external influences which, by drawing away the precious metals first in the shape of bullion and next of coin illicitly exported, must have a tendency to create distrust in a system when the coin is not in such abundance as to bear any very considerable reduction. That such may be our situation, if the country flourishes and credit improves, may be inferred from observing the distinct character which the habits of the people in different parts of the island have given to the country before the Bank Restriction Act passed, and the marked preference shown to banknotes over coin in Scotland. Indeed, it is not a little remarkable that during the last twenty years, there has not been a single instance of a bank in Scotland proving ultimately insolvent. The Ayr Bank indeed failed; but its creditors were, in the end, all paid in full. case. "I regard the present measure, nevertheless, as only Continued. an exceptional measure intended to meet an exceptional Hitherto, the effects of the measure have been such as in every respect to justify its adoption. In all former wars, the country invariably declined in its commerce, in its revenue, and even in its industry, as the war continued. In this war, on the other hand, while |