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vent its being sold under this value. On the Continent, there was, of course, no law to restrain the sale of Bank of England notes at their market price; and in Rotterdam, Hamburgh and other places, they were accordingly sold, after the conclusion of

in 1814, at 13s., 14s., and 15s. The unfavourable state of our foreign exchange, during all this period, affords additional evidence of the depreciation of the currency at home. It is almost unnecessary to explain, that the par of exchange is fixed on a comparison of the intrinsic value of the currencies exchanged; and that, upon this principle, in fixing the rate of exchange between Hamburgh and this country, 34 Hamburgh schillings are computed to be equal to a British pound Sterling. But if the Hamburgh currency should, by any accident, lose one-half of its intrinsic value, 34 Hamburgh schillings would no longer be equal to a British pound Sterling: The exchange with Britain would turn against Hamburgh in proportion to the loss of value which its currency had experienced; and it would of course be necessary, in remitting from Hamburgh to Britain, to pay 68 Hamburgh schillings for every British pound. Applying these principles to the British currency, we find that as the price of bullion rose, or, in other words, as bank notes decreased in value, all our foreign exchanges become proportionally unfavourable,-only, however, when remittances were made by means of paper. In that case, when the notes of the Bank of England were exchanged against the pure currencies of Paris, or of Hamburgh, it was necessary to pay a premium of about 20 per cent. on the sum remitted. But when bullion was exchanged against those currencies, the premium on the sum remitted was reduced to between 5 and 8 per cent.,—which premium, therefore, expresses the real amount of the exchange against this country: For if, when the paper currency of the Bank of England is exchanged against the pure currencies of the Continent, a premium of 20 per cent. must be paid in addition to the sum remitted ; and if, when bullion is exchanged, the premium is reduced to 5 or 8 per cent., to what can this difference be imputed but to the inferior value of the paper? Holding this fact, therefore, to be conclusive as to the depreciation of the paper, the only question that remains to be considered, is--the cause of that depreciation.

It has already been stated, that the value of all commodities depends on the relation which subsists between the demand and the supply; and when a commodity either rises or falls in value, it necessarily follows, that something must have occurred to alter that relation. No other possible cause, indeed, can be imagined for a variation in the value of any commodity. The fall in the value of bank notes cannot therefore be traced to any other intelligible cause, than to an increased supply of the commodity; and we find, accordingly, that, subsequent to the Restriction law, and during the period when paper was falling in value, the circulation of the Bank was rapidly increasing ; so that, at last, it fluctuated between 25 and 30 millions. It is hardly necessary to add, that so long as bank notes are convertible into specie at the will of the holders, they cannot be multiplied beyond the demands of trade, so as to lose their value; because, as soon as this begins to be perceived, the surplus is immediately returned upon the bank for specie. A bank, however, which has the privilege of refusing specie, is closed against any return of its depreciated notes; and its circulation may, in these circumstances, be increased without any restriction.

After the general peace was concluded at Paris in 1814, the notes of the Bank of England, judging by the usual tests,--the price of bullion, and the

state of the exchange, --began to rise rapidly in their value. Towards the end of that year, the price of gold had fallen to 4l. 5s. per ounce, though it afterwards rose to 41. 10s.; and the exchange with Hamburgh had improved in proportion. During this period, however, the circulation of the Bank of England had rather been increased than diminished; so that the increased' value of bank notes could not have been the consequence of a diminished supply. No other cause can there fore be assigned for it, but an increased demand. The commerce of this country, contracted, for several years before, by violence and war, within the narrow circle of its own territory, was suddenly released from its restraints - the intercourse with the Continent of Europe was now opened, British produce was exported in great quantities :-- And may not this sudden extension of commerce have opened new channels for the circulation of Bank of England notes? We know that they were at that time current, to a certain extent, in Holland, Hamburgh, Paris, and other parts of the Continent, where they had not been seen for years before;—and may not this extended circulation have been the cause of their increased value?

This state of things was, however, suddenly changed by the landing of Bonaparte from Elba, which spread consternation throughout Europe, and gave a sudden shock to the commercial relations of this country with the Continent. All violence, or the dread of violence, is most particularly adverse to the extension of paper credit; and if the return of peace and confin dence had the effect of extending the circulation of Bank of England notes, the terrors, real or imaginary, connected with the return of Bonaparte, must have had the opposite effect, of contracting it within its former limits. Soon after he entered Paris, accordingly, the price of gold began to rise ; and, in the course of the months of April and May 1815, it was as high as 51. 6s, per ounce. Since the conclusion of the war, it has fallen so low as 4l. 2s. per ounce, which is about 8s. lower than its price during the preceding short interval of peace. The cause of this rise in the value of bank notes, as indicated by the falling value of bullion, must be chiefly ascribed to the restoration of our established relations with the Continent. Other causes, however, seem to have had their share in producing this effect. The universal distress which has prevailed in the country since the termination of the war,--the frequent bankruptcies, both among the landed and commercial classes, and the general failure of credit, has naturally induced all the country banks to lessen their accommodations to their customers, and by this means greatly to diminish the circulation of their notes. No calculation can possibly be made of the quantity of paper thus withdrawn from circulation, But when it is considered, that, for these six months past, all the different banks in this country, amounting, in number, to between 800 and 900, have been acting upon the same systein of diminishing their issues, it can hardly be doubted, that a very great reduction has taken place in the currency of the country;--and this, of itself, even though the Bank of England may not have diminished its circulation, would be quite sufficient to restore paper to its former standard.

Such is the only hypothesis which we have been able to frame on this difficult subject; and we embrace it the more readily, because we know of no other which is at all consistent with unquestionable facts. The common theory on the opposite side, is, that the high price of bullion, and the unfavourable state of the exchange, was occasioned solely by the great foreign expenditure, for which it was necessary to provide during the war ;that there was no depreciation of the currency ;-and that tho high price of bullion, followed by the fall of the exchange, was, owing to a local rise in its value, confined to this country. This theory undoubtedly derives considerable plausibility from the fall in the price of bullion, and the improvement of the exchange which followed the cessation of the war expenditure abroadfrom the opposite effects which took place on the landing of Bonaparte in France--and from the restoration of the currency nearly to par, with a corresponding improvement of the exchange, after the conclusion of this last war. In considering these facts, we will confess, that at first we were inclined to believe, that they did indicate a local rise in the price of bullion; but as soon as we began to reason upon this principle, we found the subject beset on every side with difficulties and inconsistencies, which multiplied upon us the further we pror ceeded.

I. A local rise in the value of bullion, confined to this country, would no doubt account for a greater quantity of banknotes being required here, where the rise had taken place, to purchase the same quantity of bullion. But it will not account for bank-notes being exchanged in Rotterdam, Hamburgh, and other places, where, according to this theory, bullion had not risen in price, for 13s., 14s., and 15s. This fact we hold to be quite conclusive as to the depreciation of paper; for if Bank of England notes had not experienced a loss of value, why should they have been sold, where bullion had not risen, for 14s. and 15s.?

II. A local rise in the price of bullion, confined to this country, and continuing for years at the rate of 20, 30, and even 40 per cent, is itself a phenomenon which it would be very difficult to explain. The price of a commodity can hardly continue for any length of time higher in one country than in another, unless either its exportation or importation be prohibited ; and, even in this case, the irresistible attraction of a higher price is frequently found to render nugatory the strictest regulations. The exportation of the precious metals from Spain and Portugal was formerly prohibited, under all the terrors of a severe police. But experience proved, that no greater quantity of those metals could, by the greatest vigilance, be confined within these countries, than was found necessary for their internal circulation. So great was the temptation of a better market, that the gold or silver which was not wanted at home, was, in spite of all impediments, forced abroad, where it could be laid out to greater advantage. If then, in this case, it was found impracticable to produce, by all the violence of artificial restraints, a local degradation in the value of the precious metals, it is difficult to believe that a local rise in their value could have taken place in Britain, and could have even continued for years, though they might have been all the while freely imported from those countries, in which the supply was more abundant. If gold had been 20 or 40 per cent. dearer in this than in any other country; if it could have been laid out to so much greater advantage in the purchase of British produce,--it is contrary to every known principle to suppose, that we should have continued so long unsupplied with this necessary commodity.

III. In comparing, by means of the exchange, the bullion of this country with that of other countries, we find, at the time when its price in bank-paper was so high, that its real value, so far from being higher, was lower in Britain than on the Continent. It was stated in evidence before the Committee of the House of Cominons, by different merchants and bankers, that at the time when bullion was selling at 5l. 10s. per ounce in bank paper, a pound of it, paid to a banker in London, would not have pro


cured a bill on Hamburgh for the same quantity, without the addition of a premium at the rate of 57 per cent. A pound of bullion in Hamburgh was, therefore, more valuable than a pound of bullion in London; for, if it had been more valuable in this country than on the Continent, who, in that case, would have paid a premium for transferring it from the better to the worse market?

IV. It does not very clearly appear, how the great foreign expenditure of this country should have raised so enormously the value of specie, since it was not with specie that it could have been discharged. The foreign expenses incurred in Portugal and Spain, were of course for the maintenance of the armies acting in that quarter. They amounted, according to the accounts laid before the House of CommonsIn 1808,

L. 2,903,540 1809,

2,450,956 1810,

6,066,021 1811,

8,906,700 1812,2

31,767,794 1813,

1814, to about 13,000,000 Now, supposing that all these sums had been remitted to the army in specie, the money must have been instantly reexported for a supply of arms, warlike stores, provisions, clothing, and such other articles as armies generally want. In place of remitting specie, therefore, it appears to be the simpler process, to supply the army at once with such articles as it may require; and we find, accordingly, that this was the plan adopted ; and that, of the great expenditure for which this country had to provide in Portugal and Spain, a very small portion was discharged by remittances of specie. According to accounts laid before Parliament, the following appears to have been the amount of the sums remitted in that form. In 1808,

L.2,861,339 1809,

461,926 1810,

697,675 1811,

748,053 1812,

3,284,435 1813, Several subsidies were, besides, granted during the years 1813 and 1814, to such of the Continental powers as were at war with France; but it does not appear that any great proportion of these loans was paid in specie. Of the sum of 5,000,000l. voted to our European allies, not more than 300,000l. was sent in specie. The remainder was partly discharged by drafts on the Treasury from abroad, which would be finally settled by an ex


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