however, be misunderstood. We do not say that the mere restriction of cash payments affected the value of the paper currency of this country. This is neither consistent with principle nor with fact. It is not consistent with principle; for had the Bank confined their issues merely to the quantity barely necessary to circulate all the commodities in the country, the market price of gold would have risen little or nothing above the mint price, and no depreciation of paper could therefore have taken place. This is confirmed by the financial events of 1814 and 1815, when the restoration of the par of exchange and the fall of the price of bullion, even while the restriction was in full force, were produced by the Bank withdrawing from circula tion between three and four millions of their notes. It is also inconsistent with fact; for notes were not depreciated till a considerable time subsequent to the restriction, and till the Bank had taken advantage of that event nearly to double the amount of the circulating medium.

But it must be obvious to the most superficial thinker, that, after the amount of the circulating medium had been increased, after prices had partaken of the influence which that event was calculated to produce, and after property of all kinds had under gone the most material alterations in value, the difficulties that opposed a return to the ancient standard were of the most formidable description. It was agreed on all hands that the whole property in the kingdom could not be suffered to remain at the mercy of a Corporation of Bankers, and that a return to cash payments must inevi

tably be made: but how was that return to be effected? Of all the attempts to solve this difficult question, that of Mr Ricardo was unquestionably at once the soundest, the safest, and the most ingenious; and, as this plan, with some considerable modifications which will be afterwards stated, was recommended to "the favourable consideration of Parliament," by the Committees of both Houses, and the substance of it embodied in a law, we shall give the outline in the author's own words : "To secure the public against any other variations in the value of the currency than those to which the standard itself is subject, and at the same time to carry on the circulation with a medium the least expensive, is to attain the most perfect state to which a currency can be brought, by subjecting the Bank to the delivery of uncoined gold or silver, at the mint standard price, in exchange for their notes, instead of the delivery of guineas; by which means paper would never fall below the value of bullion without being followed by a reduction of its quantity. To prevent the rise of paper above the value of bullion, the Bank should be also obliged to give their paper in exchange for standard gold at the price of L.3, 17s. per ounce. Not to give too much trouble to the Bank, the quantity of gold to be demanded in exchange for paper, at the mint price of L.3:17: 104, or the quantity to be sold to the Bank at L.3, 17s. should never be less than twenty ounces. In other words, the Bank should be obliged to purchase any quantity of gold that was offered them, not less than twenty ounces, at L.3, 17s.* per

ounce, and to sell any quantity at L.3:17: 10 per ounce. While they have power of regulating the quantity of their paper, there is no possible inconvenience that could result to them from such a regulation. "The most perfect liberty should be given, at the same time, to export or import every description of bullion. These transactions in bullion would be very few in number, if the Bank regulated their loans and issues of paper by the criterion which I have so often mentioned, namely, the price of standard bullion, without attending to the absolute quantity of paper in circulation.

"The object I have in view would be in a great measure attained, if the Bank were obliged to deliver uncoined bullion in exchange for their notes at the mint price and standard; though they were not under the necessity of purchasing any quantity of bullion offered them at the prices to be fixed, particularly if the mint were to continue open to the public for the coinage of money for that regulation is merely suggested to prevent the value of money from varying from the value of bullion, more than the trifling difference between the prices at which the Bank should buy and sell, and which would be an approximation to that uniformity in its value which is acknowledged to be so desirable." And a little after Mr Ricardo adds: "If the plan now proposed, of paying Bank notes in bullion, be adopted, it would be necessary either to extend the same privilege to Country Banks, or to make Bank notes a legal tender; in which latter case there could be no alteration in the law respecting Country Banks, as they would be required, precisely as they now are, to pay their notes,

when demanded, in Bank of England notes t." The leading principle of this plan, therefore, as the Committee of the Lords observe, is to restore to the country, by the speediest and safest means, 66 a metallic standard, as the regulator of its paper currency, by permitting the Bank to pay its notes in gold bullion at the mint price, instead of gold coin." Its advantages seem great and manifold. In the first place, it would secure the country against sudden and destructive fluctuations in the value of money. For should the quantity of money in the market, as compared with that of other countries, become redundant, and notes be depreciated, there would be an instant run on the Bank for specie for exportation, which would speedily compel them to limit their issues, and thus restore the par between bullion and paper currency. The variations between gold and paper would never amount to any thing considerable, while the public could demand bullion in exchange for paper, and while this self-regulating system continued in operation to preserve the equilibrium. If again the Bank capriciously limited the quantity of paper, it would rise in value, while gold would fall to the same extent : but in that case gold would be carried to the mint to be coined into guineas or sovereigns; and when thus thrown into the mass of circulation, would speedily restore its value, and make it again conform to the standard. In the second place, a currency convertible into uncoined gold or bullion of a certain weight and fineness might be regulated, and the par of value maintained between paper and the precious metals, without necessitating the Bank to keep unproductive in their coffers

+ Ibid. p. 31.

its notes in gold bullion duly assayed and stamped in his Majesty's Mint if demanded, in sums of not less than the value of sixty ounces, at the price of L. 4, 1s. per ounce of standard bullion; that on the 1st of November 1820, or at such other period as may be fixed, the price shall be reduced to L. 3: 19:6, unless the Bank shall have previously reduced it to that rate; it being always understood that the price, when once lowered, shall not again be raised by the Bank; and that on the 1st of May 1821, the Bank shall pay its notes, if demanded, in gold bullion, in sums of not less than the value of thirty ounces, at the price of L. 3:17:10 per ounce of standard bullion.

"3. That a weekly account of the average amount of notes in circulation during the preceding week shall be transmitted to the Privy Council; and a quarterly account of the average amount of notes in circulation during the preceding quarter shall be published in the London Gazette.

4. That for two years, from and after the 1st of May 1821, the Bank shall pay its notes in gold bullion only at the Mint price; and that whenever Parliament shall think proper to require the Bank to pay its notes in coin, notice thereof shall be given to the Bank one year beforehand, such notice not to be given before the 1st of May 1822."

How far this plan was afterwards adopted by Parliament will be seen at large in the sequel of this chap

ter.

The first proceeding relative to the Bank restriction, took place on the 2d of February, when Mr Tierney rose, in his place in the House of Commons, and said, That the subject on which he had to claim the attention of the House was one which all agreed was of the highest importance

He

in the present situation of the country. The motion with which he should conclude would be for a committee to inquire into the effects produced on the exchanges with foreign countries, and on the state of the circulating medium, by the restriction on payments in cash by the Bank of England, with a view that they might report whether any and what reasons exist for continuing that restriction beyond the period at present fixed by law. The preamble of the last bill upon this subject stated, that various unforeseen circumstances rendered the continuance of the restriction necessary; and the nation had been lately informed, that the issue of specie should be again postponed until the 20th of March 1820. did not think that any thing new could be adduced to alter the opinions he had already formed on the subject of foreign exchanges and a circulating medium; and he hoped that he could say as much, or nearly as much, for two right honourable gentlemen opposite, (Messrs Canning and Huskisson,) to whom the country was highly indebted for their labours upon this subject. For his own part, he was ready frankly to avow now, what he had always asserted, that the principles laid down by the Bullion Committee, of which the late Mr Horner had been chairman, constituted his creed, and he had yet seen and heard nothing to lead him to forsake it. He would say further, that it was a matter of great satisfaction to him to find how rapid a progress truth had been making from day to day upon this subject. The question was no longer a question of exchanges, on the transmission of gold from one country to another, or on the dangers to which the Bank might be exposed: the only real point for decision was, whether the old circulation ought or ought

not to be restored within those limits to which legitimate circulation was formerly confined in this kingdom. They had been taught to believe that the very existence of the empire depended upon no diminution being made in the present amount of the circulating medium. This was a doctrine which he (Mr Tierney) heard with no surprise, because it was a doctrine which had been foretold, not only by himself, but by much wiser men. The House had been warned over and over again not to proceed in such a destructive system: it had been told, that if the restriction were prolonged, in time it would be impossible, without great hazard, to return to the point from whence it had started; and it now turned out, by the confession of all, that the habits of the patient had been so vitiated that he had not strength to bear the only remedy for his disorder. In 1817, the country was beginning to escape from a situation of great distress: the amount of paper in circulation had been diminished from various causes, and the right honourable gentleman had come down to Parliament with a smile of triumph, and told the House that every thing was now restored to the very condition in which he had long hoped to see it; that it would be soon found that the revenue was increasing; that stocks were rising, public confidence flourishing, and that he had no doubt in a very short time that he should so reduce the interest of money as to be able to pay off the five per cents., the four per cents., and he might even reach the three per cents. When every body was looking for the realization of these gay promises, three or four months afterwards down came a number of returns from the Bank that explained the whole mystery; the secret of the triumph of the Chancellor

of the Exchequer was exposed at once; for it appeared, that the Bank had been increasing its issues, that country banks had been following its example, and that, in truth, the state of prosperity was nothing more than an increased paper currency. In the beginning of 1817, the three per cents. were at 63 or 64, and by the mere operation of paper they were raised, in the course of only eight months, to 84. The Bank returns proved the truth of what he had stated; for in those eight months there had been a most extravagant issue of notes, and yet it was at that time, and with the knowledge of this circumstance, that the Chancellor of the Exchequer came down to Parliament and boasted that he should immediately proceed to pay off the five per cents. Had it been done? No: and as an honest man he should grieve to see it accomplished, if it were to be done by an increased and forced circulation of paper. If it were effected by the honest results of individual credit, the case would be totally different; but to force stocks to a high price by the issue of notes, and then to pay off the five per cents., would be nothing less than deliberately committing a fraud upon the holders. He should not go into the learning of the subject, or discuss any of the abstruse questions arising out of it, partly because he should be followed by those who were much bet ter informed upon them, and partly because they had now much less bearing upon the subject: the point in dispute was now quite of a different nature. To meet these difficulties, and to endeavour to overcome them, the most obvious and most rational course was the appointment of a committee. He did not wish to inquire merely into the state of the Bank, but into the effects produced by the operation of the various laws