LIB RARY OF THE U N 1 VLR_SITY Of ILLINOIS e>a75 y.l7 LETTER ADDRESSED TO THE RIGHT HON. ROBERT PEEL, 4-c. ^c. LATE CHAIRMAN OF THE COMMITTEE OF SECRECY, Appointed to consider of tlie State of the BANK OF ENGLAND, With Reference to the Expediency of the Kesumptiun of (tmft Pagmentg AT THE PERIOD FIXED BY LAW. BY SAMUEL TURNER, ESQ. F.R.S. LONDON PRINTED FOR THE AUTHOR, AND SOLD BY J. ASPERNE AND J. M. RICHARDSON, CORNHILL ; AND J. HATCHARD, 190, PICCADILLY. 1319. MARCHANT, Printer, Ingram-Court, London. TO THE RIGHT HON. ROBERT PEEL, &;c. 8sc. 8sc. London, 31sf May, 1819. Sir, Having been present in the House of Com- mons, during the Debate of Monday last, I had an opportunity of listening to the speech delivered by you, upon presenting to the con- sideration, and recommending to the adop- tion of the House, the Resolutions founded upon the Report of the Secret Committee appoint- ed to consider of the expediency of resum- ing Cash-payments, over which Committee you ha'd presided as Chairman. I hope I shall not be considered, either by you or by the country, a2 as taking an improper liberty, or infringing upon the privileges of Parliament, in commenting, as 1 purpose to do in this Letter, both on the Speech delivered by you, and on the Plan itself, which you recommended to the House in a manner con- ciliatory, certainly, to the feelings of all, and enforced with a degree of eloquence, and with a candid confession of former error, likely to make a deep impression, and calculated to carry the House and the country along with you in those reasonings, so ably and ingeniously deduced from the premises you had assumed. It requires far more ability than I can pretend to possess, effectually to counteract such an impression ; but, feeling as I do the grave importance of the sub- ject, as concerns the highest interests of this great and powerful country, and persuaded as I am that the deductions drawn by yourself and others are contrary not only to past experience but to sound theory, I cannot remain silent in such a moment as this ; and, not having the honour of a seat in Parliament, I feel called upon, as a citizen, and has having been for the last thirteen years one of the Directors of the Bank of Eng- land, whose conduct has been so severely arraign- ed, (although now out of the direction by rota- tion,) to submit to your candid consideration, and to that of the country, my view of the many important subjects connected with the present monetary system of this country, which you touched upon in your very able speech. I must premise, however, that in doing this I act for myself alone, and I beg that you will consider the sentiments I shall deliver as attaching to my- self, individually, and not to the Directors of the Bank of England, with whom, as a body, I have had no communication whatever upon this occasion. After this preface, I shall proceed to notice the general topics of your speech. — Of the importance of the subject itself it is quite impos- sible there should exist two opinions. It is felt in the House and out of the House, and it would be presumption in me to add one word to what was so eloquently and ably enforced by yourself on this head. The next point touched upon by you was personal to yourself; I hope I know how to appreciate that graceful confession of error which, proceeding, as 1 am sure it did, from an honest and sincere conviction of the truth of those new doctrines which voii then avowed, captivated the hearts, if it did not con- vince the understanding of your hearers. But the more I consider the real nature of this re- cantation, the more I must be allowed to doubt the judgment of that man who could easily change an opinion founded upon propositions so diametrically opposed to each other as those con- tained in the resolutions of the Chancellor of the Exchequer are to those contained in the resolu- tions proposed by the late lamented Mr. Horner, founded upon the Report of the Bullion-Com- mittee. Of Mr. Horner, I can only echo the praise so justly bestowed by you upon his me- mory. I had the honour of being slightly known to him, and it was impossible to know and not to respect his virtues and his talents, and almost to lament being conscientiously forced to differ from his doctrines. But to return to the matter of your speech. — You asserted that, until you went into the present Committee, you had not sufficiently considered the subject. What ! is it indeed true that upon a subject of that grave importance, in which the interests not only of this country but of the world at large are so deeply involved, that the learned Representative of the University of Ox- ford, who was for several years a member of the administration which opposed the resolutions of Mr. Horner, should not anxiously have inquired into the truth of those doctrines which be lent his powerfid aid to oppose ? Is it, indeed, true, that a man in the highly responsible situation of Secretary for Ireland, so vital a part of our empire, should not have formed, settled, and determinate opinions upon a subject difficult, it is true, but connected in the highest degree with the revenue and commercial prosperity of that part of the empire committed to his peculiar charge? I really could scarcely believe I heard correctly, when I listened to such an avowal; and the grace of the confession, which, in a private individual, would have disarmed hostility, was lost as it were in the distressing consideration that one who had taken so active a share in the administration of his country, should be forced to the painful acknowledgement that he had not sufficiently considered a subject^ the importance of which he was at that very moment enforcing. But this consideration, personal and important 8 as it is lo your character as a statesman, falls into minor importance when compared with the establishment of the truth or falsehood of that new doctrine to which you then, for the tirsttime, avowed yourself a convert, viz. to the doctrine laid down by the Bullion-Committee. It is, to use the language of Mr. Huskisson, in his pamphlet, entitled " The Question," " by the estar " blishment of sound, and the detection of false " principles, upon points of general interest and " leading importance in political economy, that " the greatest benefits are secured to nations, or " the greatest calamities averted from them." So long, therefore, as Parliament did seem, from its conduct and its resolutions, to detect those false principles upon which, in my opinion, that report is founded, I felt so repugnant to intrude my own views of the subject upon public notice, that I have hitherto remained silent. But now, when the principles of the Bullion Committee are avowed by you, sanctioned by his Majesty's Government, and recognised by Parliament, I feel that it would be a dereliction of that duty which every man owes to his coun- 9 try, were I any longer to refrain from expressing, thus publicly, those principles upon which I am compelled to differ from those who have sup- ported the Bullion-question, and to expose those errors into which I think they have fallen. This brings me to the next topic of your speech, the restoration of the old metallic standard of value : and the difficulty to you seemed at once got over, when you stated that the House had only to de- termine that this standard should be restored, by adopting those resolutions you had laid on the table. That it was true a trifling deviation would be allowed for two years ; but then the old stan- dard would be effectually restored : and you then conmiented upon the evidence of an individual, who held that the pound sterling was the real standard of value, and had been so for 800 years ; and you stated tliat Mr. Locke, after elu- cidating the subject of identity, dispelling all the erroneous views with respect to innate ideas, and endeavouring to penetrate even the proper- ties of eternity, could not, with all his powers of reasoning and subtlety of disquisition, suc- ceed in defining what he meant by an abstract pound. That, on this point, this distinguished 10 man was evidently misled himself, and, of course, misled his readers ; and that the fact was, the only intelligible idea was in a certain quantity of metal of a determinate quality and fineness. Now it appears to me, that the difficul- ty of understanding this subject consists in not sufficiently distinguishing between a natural and an artificial state of society. That, unless we alter our weights and measures, a pound of gold must ever continue a pound of gold, will not admit of question ; and of course it follows, that a Sovereign, or a pound sterling as it is called, must consist, when coined at the Mint, of ^.^.^^ of a pound of gold. But the question is, whether •this really is or is not the real standard or mea- sure of value, whenever we have, as we had prior to 1797, a convertible paper currency ; and whether it is possible to exist as a standard or measure of value in that highly artificial state, arising from excessive taxation, in which we are now unhappily placed. To examine this subject fairly, it will be necessary to advert to first prin- ciples ; and, above all, not to confound possibility under qualified circumstances with practicability under all. From very early stages of society, the precious metals have constituted the medium or representatives of value, and the price of any given commodity has been measured by certain relative portions of one or both of the precious metals ; \vhich price has been regulated accord- ing to the quantity existing of such precious metals in circulation, together with the facility or rapidity with which it has been possible for them to change hands. This position I am sure you will not deny, for it is that of every writer on the nature of money, — the doctrine of the Bullionists themselves. And it is equally clear that in this stage of society the sum of commo- dities to be exchanged must accommodate itself, if I may be allowed such an expression, to the quantity of the metals circulated, and the power of circulation ; so that if the commodities are abundant, a larger portion will be given for an ounce of gold than would be were they scarce. Supposing, therefore, goods to increase, and metals to remain stationary, that which at one time sold for an ounce of gold, or, in other words, commanded an ounce of gold, would, at another time, only sell for half an ounce or a quarter of an ounce, exactly according to the 12 quantity of metal and circulating power as com- pared with the whole quantity of commodities. If this is true, and you, and those to whose doctrines you have now become a convert, will not deny that it is so, then you must go along with me in the following algebraic statement. — Call the value of the commodities of any country exchanged in a given portion of time, as a year, a : call the quantity of the precious metals circulating in that country, b : and call the circulating power, or the number of times that b changes hands within that given portion of time, c. Then a=bc'^ that is, the sum of commodities exchanged, is equal to the whole quantity of circulating medium multiplied by the number of times it changes hands, and conse- quently, If a = b c b== - c a ^= T Instead of applying this to any particular country, apply it to the whole civilized world, and call the whole value of interchanged commo- dities of the world fl ; call the whole of the precious metals, employed in circulation, b : and call the circulating power, carried to the utmost limit that 13 human ingenuity can devise, c. Then, I say, that the natural price of a will be b c, and that any given portion of a, say y> will be equal to J-, and that ~ will be the natural or real price of -^, measured by the true metallic standard ; or, in other words, that -^ will be represented by such a part of the circulating Gold and Silver money of the world, as the whole of the commodities of the world bears to the whole of such cir- culating medium, allowing for the utmost circulating power of which it is capable. In this case, a guinea, a pound sterling, a ducat, a Louis d or, a doubloon, are only so many defined weights, certain known fractional parts of a pound of Gold, and it signifies not by which of these-^ be measured. Havinsr thus considered society in its early and natural state, and defined, and, I hope, clearly defined, real or natural price, let us proceed a little further, and endeavour to trace, by regular steps, the progress of society to that artificial state in which we are now placed. It will not be denied, for the history of this and of every other country will prove the fact, that as society improves, and wealth becomes more abundant, (and by wealth I do not mean merely u an increase in the precious metals, but an increase of the produce of the lands and labour of a country, and augmentation of its fixed capital, buildings, live and dead stock,) the avarice and ambition of other nations are excited, and from thence it arises that wars are undertaken, either of offence or defence, and the government of such countries feel it necessary to interrupt the ordi- nary course of society, and to lay heavy taxes for the support of that unproductive part of the population which is necessarily employed either in offence or defence. Be it remembered, that these taxes are levied, not in kind, but in money ; that is to say, no specific part of the annual pro- duce of the land and labour of the country is taken, but certain articles, both foreign and do- mestic, must pay a certain fixed contribution in money, before they are allowed to go into con- sumption. Take salt, for instance : the workers of the salt-mines, or the manufacturers of salt from sea water, are obliged to pay a certain fixed sum before the salt can be sold. No one will contend, that the salt manufacturer suffers from this beyond any other person in the community; he will raise the price to the consumer to u the extent of the tax. Let taxes be imposed, in like manner, upon articles, equal to —, in all to the value of — : in this case, a continues g the same; b continues the same; and we have already supposed c, the circulating power, carried to the utmost limit. The Government does not take a given portion of the salt; nor does it take a certain quantity of the oil, corn, or wine, raised or imported: but it fixes a certain tax or price, which those articles are to pay to the extent of — that is, to the extent of a certain proportion of the whole value of what the commodities sold for before. So that, in addition to the natural price of y, which is equal to -^> nuist be added h y ; that is to say, that by means of taxation, y is rendered necessarily equal, or must be sold for Y + — • Then the remainder of all the goods untaxed we may call — , the natural value as be- fore shown would be—. But with this taxation, r without an increase of the circulating me- dium, they could only be sold for y -j-: if this were so, how would the growers or n)anufactu- rers of that portion of the annual produce of the lands and labour of any country, which before taxation sold at ~^, be able to fulfil their engage- 16 nients in money, in case the same produce sold only at -4 — . Taxation would, in this case, disarrange all the relations of society, and the proposition is thus brought to the reductio ad absurdum. What, therefore, is the remedy by which society is still kept together, and different articles still bear their relative value one towards another? I answer, an increase of the circulating medium ; either by advancing its nominal value, so as to call what before passed as a pound sterling, two ponnds sterling, or by adding a paper or fictitious circulating medium to the former Bullion circula- tion. You will, of course, not suspect me of using the word fictitious in an invidious sense ; but T know of no other word which will so clearly express the artificial value fixed upon ar- ticles by the arbitrary enactments of Govern- ment, over and above their real value as repre- sented in Bullion. The history of this country will sufficiently elucidate, that, prior to the reign of Elizabeth, it was the practice of the sovereigns to debase the coin, and thus to make the same weight of the precious metals pass for a larger 17 nominal amount. The same effect has since been produced by the system of banking and the issue of Bank-notes; and I shouhl hold as demonstra- bly true, that, since the first necessary introduc- tion of paper-money, coined Bullion has ceased to be the measure of value, even when the repre- sentative or Paper has been convertible, at option, into its nominal value in Coin. Let the Coin be the same as was before supposed, b; call the Paper in circulation /;: then -\- p X c, or be + pc-zia, andanyfractionalpartof «, say ~ — . ^^ i that is to say, that every fractional part of a, or of the annual produce of the lauds and labour of the country, must be represented partly in coin and partly in paper: and if we say that a com- modity sells for forty-four guineas and a half, or a pound troy of Gold, although such pound of Gold may be actually obtained, yet it becomes quite clear, that it is only so obtained through the general conlideiice or credit of the community ; and that, in point of fact, if every person insisted upon receiving coined Bullion for his commodity, that it would be impossible that commodities should sell at the same nominal price. But it B 18 has already been shown, that if the prices are re- duced, contracts could not be fulfilled; and it, therefore, follows, that wherever the precious metals and paper circulate together, although one may be constantly exchangeable for the other, yet that, in fact, every article is measured by a standard, bearing a higher nominal value than it would be possible to obtain, if the precious metals were the real measure, and the amount of depreciation on any given article is exactly yj that is to say, such article, in fact, sells for -^-~^, whereas the real natural price would only be Y- I shall shortly endeavour to prove that this fictitious price is not only necessary, but that, in fact, it causes taxation to fall evenly on the community. Suppose, for instance, a farm, the produce of which, at natural prices, would produce exactly ^900 per annum, and that it was thus appropriated; one-third to the landlord, one-third for the support of the farmer and his family, and one-third for the expenses of labour- ers and other necessary charges : suppose, then, by an arbitrary act of Government, the farmer was compelled to pay J0300 per annum as taxes. 19 what would be the effect of his produce, still sold at the same price? Either that ^300 only would be left both for the support of himself, his family, the labourers, and charges, or that less rent could be paid to his landlord. But go on still further, and suppose that instead of ^£300 the Government were to exact ^'600 ; it beconjes quite self-evident either that the farmer must be totally ruined, as well as his landlord, or that the produce must sell at a higher nominal value. But how can it so sell, if the circulating medium is not increased ? and how can the cir- culating medium be increased, unless artificially, when we suppose the produce to remain sta- tionary? It can only be increased artificially; and, in point of fact, I defy the production of proof to establish the reverse of the position which I lay down, that prices have always no- minally increased with the artificial excess of value caused by taxation. In the case first sup- posed, the landlord had one third of produce ^6^300 Farmer, one-third 300 Labourers, one-third 300 i^OOO B '2 20 But by artificial prices the produce sells for c£l200. Then Government taxes, one-fourth j£300 Landlord, one-fourth 300 Farmer, one-fourth 300 Labourers, one-fourth 300 c£'1200 Thus the weight of taxation is borne equally by all, according to the relative situation they bear in society. Taxation, in fact, fixes a mini- mum, below which any given article so taxed cannot be sold ; and the difFusibility of the pre- cious metals, if I may be allowed such an expres- sion, is destroyed. It is no longer a piece of Gold of a relative magnitude, according to the whole quantity which is to cover the value of any given article ; but it is at once declared, without reference to the whole quantity, that the article in question must be covered by a piece of Gold of a definite size. Continue this to a greater ex- tent, and the whole quantity of Gold may still be insufficient to cover the articles upon which such minimum is fixed, and nothing would be left to measure the remaining articles, which is quite absurd. I have thus endeavoured to prove 21 that all Paper circulation, whether exchangeable for Gold, or not, is a fictitious circulation ; that it is the offspring of necessity, and the conse- quence of prices being necessarily raised by tax- ation, and not the cause of such rise. After these remarks, the truth of wliich I have endea- voured to demonstrate, I proceed to the no less important consideration of the past and actual state of the Paper currency of this country. Prior to the establishment of the Bank of England by King William the Third, the interchange of com- modities between man and man in this country was carried on, 1 believe I may say exclusively, through the medium of the precious metals; and whatever supplies were required for the support of the Government of thecountry, were raised within the vear. But William found it necessary, in order to maintain himself upon the throne, to which he had been called by the majority of the nation, (opposed, however, by a powerful party,) to support a large standing army, and further by his wars in defence of Europe against the am- bition of France, and in Ireland against James and his adherents, to incur expenses which could no longer be met by the ordinary revenues of the 2-2 country. He was, therefore, obliged to raise money upon the credit of the country ; and by means of the establislmient of the Bank of Eng- land, he created a new species of circulating medium, to answer the increased prices which the extraordinary taxation throughout the coun- try rendered necessary. The plan, thus devised by William, of borrowing, and of establishing fixed taxes to meet the annual interest of the mo- ney so borrowed, was found too easy a mode of shifting the burthen of the present on the future, to be abandoned by his successors ; and accord- ingly, the system has ever since been pursued whenever the wants of Government have ex- ceeded the usual annual revenue. It is unneces- sary to dwell upon particulars ; it will be suffi- cient to state that the public debt increased up to the year 1793, to the sum of about £228,000,000; and that the annual revenue raised to meet the interest of this debt, and to pay the ordinary expenses of Government, Avas about £15,000,000. During the whole of this long period, nearly one hundred years, the notes of the Bank of England had constantly been exchangable for the current gold and silver coin of the realm ; and so 23 few persons seeiii to have devoted their attention to the real state of the currency, that the fact seems hardly to have been contemplated, that, even during the whole of the above-mentioned period, all prices were partly artificial. The fact is, that the stability of the Bank of England be- came nearly proverbial ; and because ten guineas could always be obtained for a ten-pound note and ten shillings, the standard or measure of value was considered to be the pound sterling, or 44^ of a guinea, equal to 44f parts of an ounce of standard Gold, without considering that it was imiversal credit alone which gave this value, and that, if the Paper circulation had been destroyed, such a weight of Gold could never have been obtained for what at that time did so sell for ^4t parts of an ounce of Gold. In 1793 we arrived at a new epoch ; war was declared by this country against revolutionary France. Perhaps no war was ever undertaken more completely in unison with popular feeling. Mr. Pitt, then Prime Minister of this country, supported as he was by some of the wisest and best of hLs former opponents in Parliament, •24 Mr. Burke, Mr. Wyndham, and others, lost no time in availing himself of this popular enthu- siasm, and he conducted the war upon a scale of expenditure unknown and uncontemplated at any former period of our history. Not content also with supporting the expenses of our own fleets and armies, he listened, and in my humble opinion, most injudiciously listened, to the re- presentations of foreign powers, and in a war in which their interests were quite as deeply involved as our own, consented, by means of very large subsidies to those powers, to pay the greater part of the expenses of their warfare, in addition to our own. In order to enable him to pay those subsidies, all the ordinary resources of commerce were soon exhausted. It must be recollected that all foreign trade is for the most part carried on by means of barter ; not indeed between the indi- viduals engaged in it, but it may be so stated as be- tween nation and nation ; and it is only the balance, which in the course of years must be trifling, which remains to be liquidated in the precious metals. The resources of commerce having been, as before stated, soon exhausted, our commissaries 20 or agents with foreign powers were then in- structed to draw largely on his Majesty's Trea- sury, and these bills were negotiated through the medium of the first bankers and merchants in the respective foreign states. But what was the con- sequence of this? The bills being more than were required by the ordinary routine of com- mercial demand, the bankers and merchants on the Continent would only take them at a high profit ; that is to say, they would only give a less sum in the Paper or Coin circulating in their own country than what was called the British Pound Sterling : and thus the exchanges became mifa- Yourable to this country throughout the world, and Bullion was largely exported both by private merchants and on the Government account. But Mr. Pitt, not content with this, made frequent and most pressing demands upon the Bank for the current coin of the realm, for the purpose of exporting it, to pay our own and foreign armies. To the repeated remonstrances of the Bank, on the danger of such a continued and unnatural drain upon its coffers, he, with his characteristic boldness, stated that it was essentially necessary for the public service ; that, without it, the whole 26 plans of this country, with reference to its own immediate policy, and that also of its foreign relations, must fall to the ground. I never approved the policy of Mr. Pitt ; but, had I held a seat in the direction of the Bank of England at the time of which I am now speak- ing, I very much question whether I should have hesitated to make those advances which he so strongly stated the public service required. The Bank, as a corporate body, has no right, and very fortunately for the country has never pretended to any right, to sit in judgment on the policy, either foreign or domestic, of those to whom the reins of government may be entrusted. But it has felt, and I trust always will feel, that it is imperative upon it to afford all the aid in its power to those financial arrangements, which the Government may think necessary, which Parlia- ment may sanction, and which are consistent with the safety of its own establishment. But there have been, and may be again times, in which the particular interests of the Bank must give way to the paramount necessities of the country ; and when the Prime Minister stated that it would be impossible to bring the war (and that 27 a war, whatever my own individual opinion may be, which it were vain to contend the great mass of the population did not esteem just and necessary) to a successful issue, without the sacrifices which he called upon the Directors to make in the very teeth of their own Remonstrances, — it surely will hardly be asserted that the Directors failed in their duty in at last yielding to such reiterated and pressing demands. The consequence, how- ever, of yielding was as foreseen by the Directors, and stated by them to the minister, — the total in- ability of meeting the continued drains both of the Government and the Public ; and the bold measure of the Restriction of Cash Payments was resorted to by the minister. Whether this was, or was not, a wise measure, need not at the present time be inquired into; that it was absolutely necessary at the moment, will hardly be disputed. Perhaps I may be al- lowed to say here, that it very ill becomes those who were instrumental in bringing about this ne- cessity, in spite of remonstrance upon remon- strance repeatedly and pressingly urged by the Directors of the Bank, now to turn round upon those, whose only fault, if fault it can be called. 28 was having yielded to the intercessions of those very men. I say again, it very ill becomes those men, by an apparently candid confession of their own errors, to throw the blame which attaches to themselves upon those who trusted to them; and unblushingly to attribute at this day all the evils attending our present artificial state to an over-issue of Bank paper, instead of ascribing it to that enormous expenditure which rendered such over-issue, if over-issue there really be, ab- solutely necessary. This is, indeed, to confound cause and effect ; and to the confusion of ideas arising from this, is to be attributed those wild and dangerous doctrines which would lead the public mind to believe that a simple diminution of Bank-notes would remedy all the evils of twenty-two years, and cure that artificial state created by an increase of six hundred millions of Public Debt, and a corresponding increase of Taxation from ^£^15,000,000 to upwards of o£'54,000,000. But I must proceed. The consequence of the Bank Restriction was to banish from circulation that portion of the precious metals, or of Gold, which had been em- ployed in our circulation jointly with Paper, and 29 which, perhaps, up to that time was our full pro- portion of what belonged to us as a nation, com- paring our commodities with the commodities of the rest of the world. It is necessary that we should fairly view the difficulties of our situation. It thus became ap- parent, for the fii'st time in this country, that pro- mises to pay, or acknowledgements of debt, could not always be converted into actual Bullion ; that alarm, great foreign expenditure, and increasing taxation, were incompatible with that universal credit upon which our whole Banking-system de- pended. But, at the same time, it also became evident, that for the purposes of internal circula- tion the pound-note, or promissory pound, could effectuate that interchange of commodities upon which the convenience of society so materially depends; that is to say, that the manufacturer of broad -cloth could sell his cloth for an hundred promissory pounds, and with those hundred pounds purchase an equivalent value in corn, oil, or wine, or any other of the necessaries or conve- niences of life. In this state we have reniained ever since, and to all practical purposes the pro- 30 niissory pound has acted as completely the part of a measure of reciprocal value between man and man, in the exchange of commodities, as the Bul- lion pound ever did, or ever could do. In fact, as I have endeavoured to show, the great mistake in all argument upon the currency has proceeded from what is expressly laid down in the Bullion Report ; " that in this country Gold is itself the *' measure of all exchangeable value, the scale to *' which all money prices are referred. That it is *' so, not only by the usage and commercial habits " of the country, but likewise by operation of " law." That it was believed to be so, and that too not only by the generality of mankind, but by most of the ablest authors on political economy, cannot be questioned ; but that it really is so, whenever, by means of taxation, a minimum is fixed below which any given article, or articles, cannot be sold, is what I expressly deny, as con- trary to all sound induction ; and it is only won- derful that the fact that law cannot enact impossi- bilities should have escaped the acute mind of the late Mr. Horner. In illustration of this, take any one article, wheat for instance. The natural price of wheat^ as raised throughout the world, mea- 31 sured by that part of the current Bullion existing iu the world, may be about half an ounce of gold per quarter. But, by means of taxation, the growers of wheat in this country would be abso- lutely ruined if they could not sell their wheat for what will pass current, and enable them to pay their rent to their landlord, and taxes to the Go- vernment, at the rate of an ounce of gold per quarter, or what is nominally called ^3: 17: lOf sterling. But a quarter of wheal is a quarter of wheat all over the world, capable of maintaining the same quantity of labour, affording equal sus- tenance, and of the same intrinsic value. The natural value, if measured in Bullion, is precisely, as I have assumed, half an ounce of gold. But by the artificial state created, not as I must con- tend by an issue of Bank-notes, but from the ar- bitrary enactments of Government, the quarter of wheat in this country must sell for what will pass current for an ounce of gold, or ^3 : 17 : 10|. But where is the ounce of gold to come from ? " I can call spirits from the vasty deep, " And so can I, and so can any man, " But will they come when you do call for them V 32 The world does not, and cannot, produce gold sufficient to make the natural price of a quarter of wheat equal to an ounce of gold, and it can only be sold for what is called ^3 : 17 : lOf, either by altering the coinage so as to make half an ounce of gold, instead of an ounce, into j£3 : 17 : 10|, or, what amounts to the same thing, by the substitution of paper promissory-notes to the extent of such depreciation. I have thus en- deavoured to provjB that gold has not been from the first establishment of a paper currency our real standard of value, and that because it was possible, for a long series of years, to exchange the paper pound for the gold pound ; still, that this possibility only proved that the gold itself, as a measure of value, was depreciated in this coun- try, although it continued to bear the same value in other countries not subject to the same neces- sarily artificial prices; and, that having been so depreciated, it continued to exchange freely for its equally depreciated representative in paper. What then, it may be asked, is to be done? Are we to continue for ever in the same artificial state? I am the last man in this country who would recom- mend such a course. I should say, that to restore 3a the country to its natural state, if I may be allowed to parody a well known expression of a deceased noble author, tliree things are necessary. That the first is retrenchment; the second, retrench- ment; and the third, retrenchment. That the nation, like any individual in a similar condition, can alone hope to recruit her finances, and return to a natural state, by the strictest economy, by the most watchful attention, and by using every exer- tion to improve her revenues. The edifice .of pub- lie credit has been shaken to its very foundation ; but thank God it is still standing, and let the legis- lature beware, that in their endeavours to repair it too hastily, the whole building does not fall to the ground by the weight and clumsiness of the ma- chinery they may employ. Let them remember, that as long as public confidence exists, paper credits may be constantly exchangeable for cur- rent coin ; but that they cannot be forced to be so exchangeable : and that the only way in which the issuers of such paper credits can satisfy the holders of them, is by cancelling them against the securities upon which they have been, issued; and, that in point of fact, the real question at the pre- sent moment is not whether the Bank can pay in 2S4 specie, b«t whether the public can pay the Bank. For although the Bank is a debtor to the public to the full extent of its notes, it is still a larger cre- ditor of the public, and that (exclusive of its large capital of nearly fifteen millions) to the extent of upwards of five millions : and this leads me to notice that part of your speech in which you com- mented upon the late Resolutions of the Court of Directors, and particularly upon that passage which runs thus ; " Under these impressions the Directors of the " Bank think it right to observe to his Majefety** " ministers, that being engaged to pay on demand " their notes in statutable coin, at the Mint-price **of <£3 : 17 : lOj per ounce, they ought to be the " last persons who should object to any measure " calculated to effect that end; but, as it is incum- " bent on them to consider the effect of any mea' *' sure to be adopted as operating on the general ** issue of their notes, by which all the pri\"ate ^ Banks are regulated, and of which the whole ** currency, exclusive of the notes of privateBank^ " ers, is composed, they feel themselves obliged, by *' the new situation in which they have been placed 35 " by the Restriction-act of 1797, to bear in mind '* not less their duties to the establishment over *' which they preside^ than their duties tathe com- " munity at large, whose interests in a pecuniary " and commercial relation have, in a great degree, "been confided to their discretion. The Directors " being thus obliged to extend their views, and *' embrace the interests of the whole^ community "in their consideration of this measure, cannot " but feel a repugnance, however involuntary, to " pledge themselves in approbation of a system, " which, in their opinion, in all its great tenden- ** cies and operations, concerns the country in " general more than the immediate interests of tb^ " Bank alone." -- Not being at present in the direction, I did not know of these Resolutions until I saw a copy of them in the newspapers, after they had been laid upon the tables of the Houses of Lords and Com- mons by Lord Liverpool and Mr. Vansittart^ It is almost unnecessary to say that I have read these Resolutions with the profoundest attention; and in my opinion there is not one word in them which is not fouuded in fact, and not a sentiment, which, c2 56 had I been in the direction, would not have met with my entire concurrence. It has, I understand, been asserted in another place, that the Directors of the Bank forsooth wished to erect themselves into legislators; that it was their sole province to look to the proper management of their own esta- blishment, and to leave it to the legislature to take care of the public interest. But I should wish to ask those, to whom these opinions relative to the conduct of the Directors are attributed, whether, when they themselves constituted part of his Ma- jesty's Government, they never urged the public interests upon the consideration of the Directors. Were riot remonstrances made again and again, relafive to the great extent of the advances to Government, and were not the Directors called upon for larger and larger advances, not as a mat- . ter of advantage to the Bank, but on the sole plea of convenience to the public service? And were the Directors pot to consider this ? More- over, what says the Bullion Report? After re- commending the repeal of the law which suspends cash-payments by the Bank of England, it pro- ceeds thus :— " In effecting so important a change, *' your Committee. are of opinion that some diffi- 37 **"culties must be encountered, and that there are *' some contingent dangers to the Bank, against " which it ought most strongly and carefully to be *' guarded. But all these may be effectually pro- *^ vided for by entrusting to the discretion of the *' Bank itself, the charge of conducting and com- " pleting the operation, and by allowing the Bank " so ample a period of time for conducting it, as *' will be more than sufficient to effect its comple- *' tion. To the discreiioti, experience, and integrity^ "of the Directors, your Committee believe, that *' Parliament may safely entrust the charge of '* effecting that which Parliament may in its '• wisdom determine upon as necessary to b6 " efl^ected, and that the Directors of that, great " institution, far from making themselves a " party with those who have a temporary in^ " terest in spreading alarm, wilt take a much " larger view of the permanent interest of the *' Bank, as indissolubly blended xoith those of " the public." And it goes on to recommend ** that the Directors, availing themselves only *' of favourable circumstances, may tread back " their steps slowly, and may preserve both the '* course of their own afliairs as a Company, and 38 " that of public and commercial credit not only " safe, but unembarrassed." Have, therefore, the Directors exceeded their province, in taking an extended view of the permanent interests of the Bank, as indissolubly blended with those of the public ? Have they exceeded their province in endeavouring to preserve both public and commercial credit not only safe but unembarrass- ed ? Would they have done their duty, either as Directors of the Bank, as merchants, or as men, if they had hesitated to lay before his Majesty's government, their view of those doctrines and af that plan, which, in their consciences, they believed would compromise not only the interests of the Bank, but those of the public, — not only endanger commercial but public credit? The noble merchant, Antonio, encountered the ha- tred of Shylock ; and so it is with the Bank of England. The vulgar, the purse-proud, the dis- appointed, will beset it vvith all the arts of eiivy, hatred, and malice; and this spirit has been so artfully fomented, that even many of those of en- lightened views upon most subjects, seem now never to speak of the Bank without reproach, or to regard it but through a jaundiced eye. So 29 that even its uoble sacrifice of at least a million in the public service, as was specified by one of its Directors, which ought to have been lauded both by the House and by the country, met with nothing but reproaches, even from so enlightened an individual as the honourable member for Port Arlington, who was pleased to say that, in at- tending to the public convenience, we had sa- crificed the interests of the proprietors. That he expected we had a great deal more money, but that we gave a million here, and a million there, and did not know how to manage our own affairs, much less to attend to those of the public. The honourable member in question is a proprie- tor of Bank-stock, and, of course, in that capa- city, has a right to arraign, at a General Court, the conduct of the Directors ; but, as a member of Parliament, it did seem rather extraordinary that he should complain of the generosity of the ^ank. On one day we hear of the inordinate gains of the Bank; on another, that it lavishly gives to the public million upon million. It is blamed for its rapacity, it is blamed for its generosity; and the very men who differ in so material a point as tlus, still draw together on all those occasions 40 where the Bank is concerned. But, perhaps, I may be excused, if I here state that no less distinguished an individual than the late Duke of Norfolk con- descended to attend one of the General Courts of the Bank, and, from his place as a proprietor, strongly to recommend to the Court of Directors, for the sake of the great public convenience, to undertake theissue of Tokens to that extent, which has entailed the loss of more than a million upon the Bank. But this part of their conduct is as no- thing compared with the measures they have taken, in order to bring about the resumption of cash-payments without danger to the country ; or, in other words, to restore to Great Britain, and introduce into circulation, that portion of the precious metals which ought to belong to it, and by the possession of which, in ordinary cases. Paper credits, or Bank-notes, might be ex- changeable for Gold at the Mint-price. By act of Parliament, the Bank was to open for cash-pay- ments in July next, and the following fact is stated in the Resolulions of the Court of Directors of the 25lh March last, " that, in the course of the " years 1816 and 1817, the Bank accumulated ** a sum of treasure, which, in addition to what 41 ** was already in its coffers, would have been *' sufficient to meet the opening, if the hopes which ** were then entertained had been reahzed." No- thing which the Bank could do was left undone. They made arrangements with his Majesty's Go- vernment for the gradual repayment of the loans of six millions and three millions : and thev had taken special care, that the greater part of the other advances on Exchequer-bills should fall into the regular course of re-payment prior ■to the day when the restriction was to expire. Is the Bank to blame because his Majesty's Go- vernment found themselves unable to fulfil their Engagements, not only for the re-payment of the loans, but even of those Exchequer-bills, which had been advertised to be paid off, and which the Bank always held, as any individual might hold them, to be renewed or not at the option of the holder, and this, too, to the extent of no less than eleven millions. His Majesty's Go- vernment, having thus failed in the4r engagements, wished to propose to Parliament to continue the restriction to March next. But, upon the receipt of the Minute of the Committee of 42 Trfcasury of the 29th January, stating "That ♦* -the Committee thought it a matter of the " highest importance that the public should not ** be deluded with an expectation not likely to " be realised, and that it would be better to sub- ** tnit to the consequences of a Parliamentary "inquiry, rather than pass a bill for a time in- " adequate to the circumstances in which th^ "country was placed,'* without any farther dis- cussion, his Majesty's Servants immediately pro- posed to the two Houses of Parliament the ap- pointment of separate Committees, to consider of the expediency of resuming cash-payments. Over the Committee of the House of Commonc you had the honour of presiding, and it then - fore became your duty to lay the Report upon the table of the House, and to propose the Her solutions founded upon it ; and this leads me to revert to the Report itself. After sifting the con- duct of the Court of Directors to the very bottom, and perhaps we may proudly affirm that few esta- blishments could have borne such a scrutinizing examination, the Committee, instead of stating broadly the simple fact (as in my humble view of 4/i the question should have been done) that lh« Bank had made every preparation in their powcsr, but that the Government had failed in their en- gagements, and that not only part of the loans of «ix millions and three millions remained unpaid, but that eleven millions of the purchased Exche- quer-bills were actually over due, endeavoured, by a kind of side wind, to escape the main ques- tion, and by impugning not the motives but the judgment of the Directors, to lead the public mind to imagine, as I have before expressed my- self, that all the evils of our present state have proceeded from an over-issue of Bank-notes, arising from the Directors having neglected con- stantly to diminish the circulation whenever the market-price of Gold bullion exceeded the Mint- price, and the foreign exchanges became unfa- vourable to this country. It is the favourite doctrine of the Bullionists, the pivot upon which their whole machinery turns, that the high price of Bullion and the exchange! can constantly be regulated by contracting the issue of Paper ; and the declaration of the Court of Directors, that they could see no solid founds- 44 tion for snch an opinion, was commented upon more severely, by one of his Majesty's present ministers, than any other passage in their Reso- lutions, and was of itself, according to that Right Honourable individual^ 'la, sufficient cause for the interference of Parliament. So that it becomes of no small importance to examineinto the truth of this theory ; and I must crave your particular attention, while I endeavour to expose the fallacy upon which, according to my view of the subject, such theory is founded. The question constantly asked by its supporters is this. Do you not increase the value of any aTticle by diminishing its quantity ? and, if so, do you not, by decreasing the amount of your Notes, increase their value in exchange for every other article, and, of course, in exchange for Gold ? It seems difficult, at first sight, to question this ; and when a mind so acute as that of the late Mr. Horner could not penetrate the veil which in this instance has covered error with the garb of truth, it cannot be wondered that others, not very much accustomed to examine into abstract subjects of 45 this nature, should equally have failed in detect- ing the imposture. The great error, in my humble opinion, con- sists in confounding the shadow with the sub- stance. Coin is substance, constituting part of the ciiculating capital of the world. Bank-notes are only the shadows or images of wealth, and are not, as they are distinctly stated to be in the Bul- lion Report, capital. The real capital of the world, or of this country in particular, would continue ])recisely the same, if the whole of the Notes, not only of the Bank of England but of Country Banks, was annihilated instanter. We should have the same quantity of wheat in bur garners, the same quantity of goods in our ware- houses, the same ships, the same colonies, and the same power, although that power would be interrupted for the moment, of carrying on our commerce: and yet the evils of such an aimihila- tion no man of any reflection can contemplate without horror. All the relations of society would be completely overset; those who were in opulence would be reduced to beggary, and those who are in a state of indigence would gain pro 46 tantd. What the creditor lost, the debtor woold gain ; and all faith, both public aod private, !would be at an end. But let us consider what a Bank-note really is. Upon what is it issued ? First of all, upon Coin and Bullion ; and for every Bank-note so issued, a correspondent quantity of Coin and Bullion is withdrawn from circulation. Does this create fresh capital? In the next place, Bank-notes are issued upon Government securities, or JEx- chequer-bills ; and here they become the shadows or representatives of a certain portion of the an- ticipated revenue of the country. But does thi* also create fresh capital ? Exchequer-bills continue precisely to the same amount, whether held by the Bank or by the Public ; not, it is true, having the same facility of being broken into fractional parts, and as such serving as an easy nieasure of value for small quantities, but still furnishing to the possessor the same equivalent to give in exchange, the same power of commanding Gold or Silver Bullion, or any given quantity of commodities. To the ex- 47 tent, therefore, of the issue of Bank-notes upon Government Exchequer-bills, so much anticipated revenue is withdrawn from circulation as those Bank-notes represent ; and if there be excess, it seems contrarj' to all just reasoning to lay the evils attending such excess on the shadow instead of on the substance. The third security, or substance upon which Bank-notes are issued, is regular Commercial Paper of Exchange, or what is^ more commonly called Mercantile Bills, and whenever a Bank-note is issued upon such bill, a transferable security, , founded upon real trans* actions, and representing some real commodity, as far as the Directors can discriminate real from fictitious paper, is removed from circulation, and another, but more easily divisible paper, or credit, substituted in its stead. Bank-notes, there- fore, in this instance, create no new capital, but are merely the substitution of an easily transfer- able and easily divisible credit for another species of credit not so easily divisible nor in such gene- ral acceptation. And 1 really am totally at a loss to conceive how a diminution of credit, or, what is the same thing, a decrease in the facility with which Efchequer-bills, or Commercial bills. 48 could pass from hand to hand, could increase the facility of obtaining the precious metals. It is an anomaly, which I am totally unable to re- concile either with sound theory or past appear- ance. Do, I intreat you, examine carefully the following Table, showing, for every six months since 1813, the average number of Bank-notes in circulation, the average price of Gold, and of sundry staple articles of commerce ; and then ask yourself, coolly and dispassionately, whether that theory can be true which asserts the prices of Gold and all other articles depend upon the amount of Bank-notes, when the facts show directly the reverse ? 49 - -^ O O -* CO o T}- T}> o 'O 03 '■O o o -, 1 1 «> ^ 0 •o •* ^ 'O in r) •C T« -1< t CO CO CO i-O Tf »n ■^o *< 00 o o o o CO ■* o ■* 1 .,• Tj* _j«_ UO in •* ^ ■* ■* CO o CO >n CO "^'2 1 iC 1 1 •f) ■* CO o tH 'O c CO H* 1 1 1 tH ri TH iH tH tH th tH 'eJ ; ; : ; ; s «s 5 : 5 ; I ; . O o O o o o o O c o O o o O '» -1 •^ — ^3 •* f lO UO ■<}< CO o Oi o ■* T^ 0» tH ©» CO ►Id. so O T!ct> 1 1 1 1 "i~ 1 1 1 1 1 1 1 "t ~m i^ 'ca J 5 5 * ^ * •* ;; * 5 ; * t ^"^,5 l2>''" ^=0 CO 00 CO a» CO Oi ^ ■* CO t> lO CO 03 ■ 00 Oi 00 oo «5 >c 'C »C »n f^ f^ t^ >o of = ^4i 1 CO "0 1 1 1 1 1 1 o CO 1 1 CO 1 ^i O 'CJ 5 r t; ^ * " r s " : = - " ^^ o 03 o> CO tH t> t^ 03 a. «0 Tf CO 'H TH 11 /rt ^ ^ . ^ ^ ^ ^ ^ ^ ^ ^ , „ ** •^ "* "* " ** "• " "* " "* ^ * U a 'ji o ■fl •* ,^ t- ff. t> o t* t» 03 o^ CO yf e-1 tH . ^ 'f-. a* c ^ o IN ^ CO C o y^ a. « » a> CO o oo 03 •^ Tl T-l "-I = s = *" •* •» * * "^ ** •* •* - •^ *■ - "* t/1 s a as CO O OJ f~ o Ci 00 •o 00 t^ CO « CO S"' w 09 cl tH o» ■r^ o 0-. 00 00 «> 00 00 CO CO », . o Tj" O ■* UN oc o o sT" o CO o o o< V. CO CO 03 t» t* 6- t- cy> s^ Tj. o Ol 00 oo ^^ ■r< tH TH — w*?^ ^ ^ . ^ ^ ^ ^ ^ ^ ,« ^ ^ ^ fc •* "» * - "» ** "* •* " •« " -« •^ •? c o o o >o CO 03 t~ ■■A C CO (C «o ■* IC "O VO a» 09 « « in lO Ogjo -e ''^ CO o a\ th o o o o o •o « o OO o -' -< CO - Cl.U-^ S(>o >o "0 'i" 'C •* ■* CO CO T*< Tf -* ■* •* !,«— "^ -e" a. ~ ■<*' c c o o O C5 'O CO -ri »ft fi CO 00 TH oC o ■f J^ ^ E^ CO o a> >o \ CO >c ©< 'O *^ ■o o 3< ■Jt ■^5 *♦ •^» ■n o-l 3-1 -JJ _2j__ _0*_ 0-1 0-» •> ,^^ ^^7" C o : i * ; ; : : : I I : >> s s u b< 3 M n i« ra « -o •^^ -a m -o ■^ -o t! •T3 ts T3 ►n t^ •^ Ol •^ di '-'