THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 332
 
 SUBSTANCE Z^ 
 
 OF TWO 
 
 SPEECHES 
 
 OF 
 
 HENRY THORNTON, ESQ 
 
 IN THE 
 
 DEBATE IN THE HOUSE OF COMMONS, 
 
 ON THE 
 
 lii:PORT 
 
 oir 
 THE BULLION COMMITTEE, 
 
 ON THi: 7TfI AND HTH OF MAY. iS) 1 . 
 
 LONDON 
 
 rRlNiiiDFOK J. MATCIIAKDjEOOKSIiLLKllTOHlilt M.AJESTY 
 
 190, PICCADILLY, 
 
 »v ELI.EItTOV AND HEVUEKSON. JOHNSON'S COnii;-, I- LKI-.TSIJ: li: r. 
 
 1811.
 
 PREFACE. 
 
 Jl he first of the two following S|)€ech€s 
 was delivered soon after the opening of 
 the debate in the House o- Commons on 
 the Report of the Bullion Committee ; the 
 question then under consideration being 
 the first of the Resolutions moved by Mr. 
 Horner, the Chairman of that Committee. 
 The general object of his Resolutions may 
 be stated, briefly, to have been, P'irst, to 
 declare what was the standard of the 
 country; secondly, to affirm the depre- 
 ciation of Bank paper; thirdly, to suggest 
 the hmitation of it, as the means of im- 
 proving its value and preparmg for a 
 return to cash payments ; and, lastly, also 
 to recommend that the Bank should open
 
 Yi PREFACE. 
 
 in two years. It was chiefly to the third- 
 point, liamely, the practical measure of 
 limiting the Bank paper, that the first 
 Speech was directed. 
 
 The second Speech was dehvered after 
 a debate of five days had taken place. The 
 Resolutions of Mr. Horner had then been 
 negatived, and the counter Resolutions, 
 moved by Mr. Vansittart, were under con- 
 sideration. 
 
 The imperfect manner in which the very 
 extended debates on the Report of the Bul- 
 lion Committee have been given to the 
 public, and the importance of spreading 
 sound opinions on the fundamental prin- 
 ciples of the system of our paper credit, are 
 the considerations which have led to the 
 present publication. 
 
 It contains the substance of the facts and 
 arguments adduced, as far as they could 
 be recollected, though the order may have 
 been in some degree changed ; and a few
 
 PREFACE. vli 
 
 passcvges, which appear to have been mis- 
 understood, are rendered more clear. 
 
 The substance of these Speeches is sub- 
 mitted more especially to those numerous 
 Constituents, to whose favour the indivi- 
 dual who delivered them stands indebted 
 for the opportunity which he has had of 
 expressing his sentiments on this subject 
 before the House ; — a subject which has 
 long engaged his careful attention, and on 
 which he has been most anxious to form a 
 sound and dispassionate, as well as disin- 
 terested, judgment.
 
 TWO 
 
 SPEECHES 
 
 OF 
 
 MR. HENRY THORNTON. 
 
 May 7, 1811. 
 Mr. H.THORNTON said, that however ably, 
 as weU as fully, the Learned Gentleman (Mr. 
 Horner), who opened this discussion, had treat- 
 ed the subject, he conceived that there were 
 some important points which required amplifi- 
 cation; and he should prefer entering on these, 
 to the examination of those numerous and 
 smaller questions respecting the accuracy of 
 the Report of the Bullion Committee, on which 
 the Right Hon. Gentleman who preceded him 
 (Mr. Rose) had principally dwelt. A time would' 
 come, when the respective merits of the se- 
 veral propositions intended to be submitted by 
 different members would be brought into mi- 
 nute discussion, and an answer to the Right 
 Hon. Gentleman might then, perhaps, be 
 more conveniently given. He trusted the 
 House would agree with him in the pro- 
 priety of his confining himself, for the pre- 
 sent, to great and broad principles ; he should
 
 V 
 
 2 
 
 apply himself to the spirit of some of the 
 first resolutions now proposed, and to the 
 main point at this moment in issue. That 
 main point was, not whether the Bank should 
 open at any particular time, or any change 
 be made as to the law in this respect^ which 
 would be a second consideration; but whether 
 with a view to facilitate such opening if it should 
 be prescribed, or with a view to secure the due 
 maintenance of our standard during the long- 
 continuance of the restriction of cash payments^ 
 if the continuance should be deemed advisable^ 
 it was or was not expedient that the Bank 
 should regulate the issues of its paper with a 
 reference to the price of Bullion, and the state 
 of the Exchanges. The Bank and the Bullion 
 Committee were at variance on this leading 
 and essential point. The Committee affirmed, 
 that the quantity of paper had an influence on 
 the price of Bullion, and the state of the Ex- 
 changes y all the Directors of the Bank who had 
 been examined, affirmed that it had not. The 
 Right Hon. Gentleman over the way (Mr. 
 Rose) likewise insisted that it had not. " None 
 whatever," were his words. This was a great 
 practical question. If the Bank had in their own 
 hand the power of improving the Exchange, 
 and lowering the price of Bullion, and did not 
 use it, if they had the means of restoring, or
 
 contributing to restore, the standard of the 
 country, and did not at all believe that they 
 possessed it, then it became the House, who 
 had exempted them from the necessity of 
 making payments in cash, supposing it to agree 
 with the Bullion Committee, to take care that 
 the Bank should resort to the proper remedy of 
 the present evil, by interposing some sugges- 
 tion of their own on the subject. 
 
 He would now proceed to prove, that quan- 
 tity of paper had an influence on the price of 
 Bullion and the Exchanges. There were two 
 steps in this argument. First, he had to shew 
 that quantity of paper influenced its value, or, 
 in other words, the relative value of commodi- 
 ties exchanged for it. Could it be doubted, on 
 the first mention of the proposition, that the 
 quantity of all articles aff'ected their value? 
 This was unquestionably true of the precious 
 metals, for the augmented supply obtained 
 from the mines of the new world, was acknow^ 
 ledged to have produced that general lowering 
 of the value of money, which had been expe- 
 rienced in Europe for many years. And why 
 was paper, the substitute for gold, to be ex- 
 empted from this universal law? He had never 
 yet found any man, who, when the simple 
 question was put to him, whether an augmen- 
 tation of paper had a tendency to reduce 
 
 v/
 
 its value, or raise that of commodities, had 
 been so singular as to refuse his assent to the 
 proposition. One of the Bank Directors of 
 Dublin, when examined before the Committee 
 on the State of the Irish Exchange, though 
 firmly persuaded that an extension of pa- 
 per currency had no influence whatever oa 
 Exchanges, had been very ready to agree that 
 it must have an effect on the price of commo- 
 dities, and one of the Directors of the Bank 
 of England had then, if he rightly recollected, 
 made a similar admission. 
 
 This point had been conceded only the other 
 day in the House; for in debating the question 
 of granting Exchequer Bills to the distressed 
 manufacturers, it was generally affirmed and 
 understood that the supply of those bills, which 
 would operate in some measure as circulating 
 medium, and would facilitate their obtaining 
 it, would enable them to maintain their prices 
 at a point higher than that to which they 
 otherwise would have fallen. He himself well 
 remembered having in 1796 observed the in* 
 fluence upon prices, which the restriction of 
 the Bank discounts at thai period had produced. 
 He recollected to .have then heard a West- 
 India merchant, who had failed to obtain from 
 the Bank the whole of his usual and expected 
 accomaiodatiou, declare bis intention of pro-
 
 ceeding in consequence to sell some of his su- 
 gar at a somewhat reduced rate ; half an hour 
 after which, he heard a sugar-baker express his 
 indisposition to buy sugar in consequence of 
 the same scarcity of money, which he also had 
 experienced. "Was it not obvious, that when 
 these two men met in the sugar-market, some 
 fall in the price of that commodity would be 
 the result? When money was generally scarce, {/ 
 an influence of this kind would diffuse itself 
 over all commodities: it was thus, in short, that 
 general prices were regulated ; and it was ab- 
 solutely necessary to set out in such an inves- 
 tigation as the present, with the establishment 
 of some great and fixed principles in the mind; 
 for a thousand points would then become ma- 
 nifest and simple, which otherwise would be 
 contradictory and perplexed. He did not 
 mean to say, that equal quantities of paper 
 would affect the value of equal quantities of 
 goods in an exactly equal degree, under all the 
 varying circumstances which might arise. Far 
 from it. He insisted, however, that augmen- 
 tation of paper always tended to the diminu- 
 tion of its value, and diminution to its increase. 
 The principle was always operative: its ten- 
 dency was uniform, though not always produc- 
 tive of an equal effect. 
 
 A great fail of prices had at one time been
 
 6 
 
 experienced in Dublin, in consequence of the 
 suppression of a large part of the currency of 
 the place, as one of the Irish Bank Directors 
 had incidentally observed. 
 
 Mr. H. Thornton admitted that great pressure, 
 and.even calamity, might arise from any sudden 
 /and very violent diminution of the circulating 
 medium: he had himself complained, of what 
 he thought too great and rapid a reduction of 
 the paper of the Bank of England, in the year 
 1797, when called upon to give evidence be- 
 fore the Secret Committee of the Lords and 
 Commons on that point. He was as earnest 
 as any man to prevent severity of pressure 
 in any quarter, and having already shewn this 
 disposition in the Bullion Committee, he was 
 anxious to express it also in the House. But 
 he was now investigating principles : he was 
 aiming to shew the tendencies of things ; and 
 such tendencies were often most clearly evinced 
 by the palpable effects manifested in some 
 strong and striking case. 
 
 Assuming, then, the tendency of every in- 
 y crease of paper to lower its own value, or, in 
 other words, to augment that of commodities 
 exchanged for it; a point, as he had just ob- 
 served, admitted on all hands, and so plain 
 as scarcely to demand proof; he had, in order 
 to establish the second and concluding part
 
 of his argument, merely to xprove something 
 which was as undeniable as any mathematical 
 proposition, as plain as any common question 
 in arithmetic, and of which he felt just as con- 
 fident as of his own existence. 
 
 This was, that supposing an increase of paper 
 to take place, and to augment the general price 
 of commodities in exchange for that paper, it 
 must influence also the state of the Exchanges, 
 and raise the price of Bullion. For what, in 
 the first place, do we mean by the rate of 
 our Exchanges? We mean the rate at which 
 the circulating medium of this kingdom passes 
 in exchange for the circulating medium of 
 other countries. Supposing, then, the circu- 
 lating medium (the gold or silver coin for ex- 
 ample) of other countries to remain as before, 
 that is, to bear the same price as before in 
 exchange for commodities, while the value of 
 our currency, in exchange for commodities, has 
 been altered, it follows that our currency must 
 exchange for a new quantity of such foreign 
 coin. It also follows equally, that it must ex- 
 change for a new quantity of Bullion j for fo- 
 reign coin is itself made of Bullion, deviates 
 from it in only a limited degree, and is al- 
 most identified with it. Bullion, indeed, is a 
 commodity: it comes from America in the 
 same manner as other commodities — is subject
 
 to those laws which govern their rise and fall — 
 and consequently, when it is affirmed that an 
 increase of circulating medium, raises the 
 price of commodities. Bullion must be consi- 
 dered as included among their number. It 
 could not be supposed that one article would 
 be affected by an increase of the general cur- 
 
 V rency, and not another ; — the produce of ma- 
 nufacturing industry, for example, and not the 
 produce also of the surface of the earth, and 
 of the mines. All things, it is manifest, must 
 ultimately partake in that increase of price 
 which an augmentation, of currency tends to 
 produce, as well as in that depression of price 
 which a reduction of it occasions. 
 
 Mr. H. Thornton next proceeded to observe 
 on the doctrine which was maintained that the 
 present high price of Bullion and state of the 
 Exchanges resulted fi*om the unfavourable 
 circumstances of our commerce, and the pre- 
 sent extraordinary state of the world. The 
 evil was referred to what is called the unfa- 
 vourable balance of trade or of payments, and 
 
 •^ was thought to have nothing to do with quan- 
 tity of paper inasmuch as this balance of trade 
 ^ and payments was deemed a separate and in- 
 dependent cause. He was willing freely to 
 admit the influence of the present circum- 
 stances of our trade and expenditure, on Ex-
 
 9 
 
 changes and the price of Bullion ; but lie could 
 not allow that these liad a separate and inde- 
 pendent operation. 
 
 He should best explain himself, on this dif- 
 ficult but important subject, of tlie influence 
 of balance of trade, as it is called, or balance 
 of payments, by putting three several ca.<es ; 
 in each of which cases, he would suppose iliat 
 we had to struggle with political and commer- 
 cial difficulties exactly resembling the present. 
 
 First, he would assume that we had no laws*/ 
 forbidding the melting and exportation of our 
 coin, or limiting the rate of interest, or pro- 
 tecting the Bank against cash payments, it 
 being the simple policy of the country to let 
 every thing take its own course. By thus ad- 
 verting to what might be called a state of nature, 
 we should be able to discover what was the 
 natural limitation of the evil to which we were 
 now subject; and what the kind of corrective 
 which administered itself. He wasnotexamining 
 whether it was wise to commit ourselves to this 
 state of nature; he was now only investigating 
 principles, that we might thus obtain some light 
 to guide us amidst those difficulties of our own 
 artificial system, in which our understandings 
 seemed to be lost. 
 
 His second case would be, the actual case of / 
 this country before the cash payments of the 
 c
 
 10 
 
 Bank were suspended ; and his third, our case 
 at present. 
 
 First, then, he would suppose, that we were 
 paying in cash, and that we had no usury laws, 
 and nolaw forhiddingthemeltingor exportation 
 of coin; the King merely affixing his stamp to 
 those pieces of gold which were the current cir- 
 culating medium, in order to certify their quan- 
 tity and fineness. For the sake of simplifying 
 the subject, he would also assume the same 
 circulating medium to be employed in sur- 
 rounding countries. If, while we were thus 
 circumstanced, the same evils of which we 
 now complam were to arise, what would be 
 the consequence ? Doubtless much of our gold 
 coin would be taken from us ; and, perhaps, a 
 larger quantity of this than of other articles. 
 The whole, however, would not leave us; a 
 high rate of interest would arise, and this extra 
 profit on the use of gold, which would increase 
 as its quantity diminished, would contribute to 
 detain it here — some foreigners, probably, trans- 
 ferring property which would take the shape of 
 the precious metals, or continuing to afford to us 
 the use of it for the sake of this high interest. 
 Such portion of our coin would be transferred, 
 as would cause the remaining quantity to bear 
 the same value in exchange for our remaining 
 commodities, which the same coin in foreign
 
 II 
 
 countries bore to commodities abroad. In 
 other words, gold and commodities would be 
 exported in that relative proportion in which 
 the exportation answered ; and since every 
 diminution of the quantity of our gold would 
 produce an augmentation of it abroad, the rela- 
 tive value of gold to goods, in this and in foreign 
 countries, w ould soon find one general level ; 
 and thus s^old would remain the standard of 
 value among us all. This, indeed, was simply 
 to suppose the same case to occur in respect to 
 Europe, which usually exists in respect to the 
 different provinces of the same kingdom. He 
 repeated, that he was merely putting a case 
 for the sake of illustration ; and the great point 
 which he meant to press was this, that accord- 
 ing to what he had denominated the state of 
 nature, there would be a reductioii of the circu- 
 lating medium of (his country under the present 
 circumstances of our trade — a reduction which 
 would tend to bring down our prices to the 
 level of the prices which similar commodities, 
 allowing for all expenses of transportation, 
 were found to bear in exchange for gold in the 
 general market of the world. 
 
 He would now put the second case. He 
 would suppose our laws to forbid both the 
 melting and exportation of coin, and to limit 
 the rate of interest to five per cent. ; and the
 
 12 
 
 Bank to be paying in cash. In other words, 
 he would assume that we were circumstanced 
 as we were before n97, and that exactly the 
 same political and commercial difficulties which 
 we now experience were to arise. 
 
 The effect of these difficulties upon the 
 quantity of our currency, would resemble the 
 effect assumed to be experienced in the former 
 case, though it might not be exactly equal in 
 degree. There would arise a similar demand 
 for cash, with a view to exportation ; and 
 though the law would interpose some obstacle 
 to its transmission, yet some of our gold 
 would probably go abroad, and it would serve, 
 as in the former case, both as a remittance 
 which would contribute to pay our debts, and 
 as the means of augmenting the circulating 
 medium of foreign countries, as well as of 
 diminishing our own. The Bank, in this event 
 experiencing a drain,would, in some degree, con- 
 tract its issues. It would not only not increase 
 them, as it has in some degree done during 
 the last two or three years of the very unfa- 
 vourable state of our exchanges; it would 
 diminish them; it would feel itself, in conse- 
 quence of our new circumstances, under the 
 painful necessity of straitening its accom- 
 modation either to merchants or govern- 
 ment, or both; and some difficulty in effect-
 
 13 
 
 ing the Jimitation would arise out of tlie neces- 
 sity under whicli the Bank would consider itself 
 to be placed of still contiiiuin<i^ to lend at only 
 five per cent. It was only by limiting its paper 
 that it could maintain its own cash payments. 
 The reduction would nndoubtedy be an evil, 
 but it would be an evil to be balanced against 
 another evil otherwise to be incurred, that of 
 stopping payment, and ceasing to abide by 
 the standard of value which the King and the 
 law had prescribed. 
 
 He was aware that this view of the case was 
 not the most gratifying, and might not be 
 welcome to some gentlemen around him ^ but 
 it was the truth, and it was only by the right 
 knowledge of the nature of our situation, that 
 we could expect to come to any just con- 
 clusion. Thus, in this second case, exactly 
 as in the first, there would be a reduction of 
 the total quantity of circulating medium^ 
 which would be carried so far as to equalize, 
 or nearly equalize, the relative value of our 
 currency and commodities with the relative value 
 of currency and commodities in other countries. 
 Doubtless a pressure might arise which possibly 
 might be considerable: fA ay of Hear! 
 ■Hear! ) He wished to know whether his prin- 
 ^:iples were admitted. Was it acknowledged, 
 •that if we wei'c now paying in cash, as before
 
 u 
 
 1797, the Bank would thus limit its issues, and 
 by such limitation would lower the price of 
 Bullion, and rectify the Exchange? He should 
 ^^be glad to have a distinct affirmative or nega- 
 tive to this question. What degree of pressure 
 might result, was not the main point now 
 under consideration. He did not care at this 
 moment what gentlemen said as to that point. 
 He was in search of a principle. Did they or 
 did they not admit his fundamental position, 
 namely, that when a very unfavourable ex- 
 jhange, resulting from what is called an un- 
 favourable balance of payments, arises, the 
 limitation of the currency of the country 
 serves to limit the evil ? He had shewn, first, 
 that this was the corrective which applied 
 itself in what he had called the state of nature; 
 and, also, secondly, that this corrective applied 
 itself under that partly artificial system, under 
 which we lived before our cash payments were 
 suspended. 
 
 He now advanced to his third, which w^as 
 the present case. The Bank, since they be- 
 came protected against the necessity of making 
 cash payments, not unnaturally thought that 
 they might use more liberality than they would 
 have ventured to exercise under the same cir- 
 cumstances of our trade, if they had been sub- 
 ject to a drain for cash. They, perhaps, were
 
 15 
 
 mot much to be blamed on this account. In- 
 deed, they appear not to have believed that a 
 reduction of their paper would mend the Ex- 
 change, for they had not examined very 
 deeply or philosophically into the subject. 
 They had continued, although the exchanges 
 turned much against us, gradually a little to 
 augment their notes, as they had done for a 
 long time before, they appearing to them- 
 selves not to increase, but merely to main- 
 tain the existing prices; and they hoped 
 that the evil of the unfavourable exchange 
 would correct itself. Possibly some new lati- 
 tude might fairly be allowed under the new 
 political circumstances in which we were 
 placed. It was, however, important not to 
 mistake leading principles, and not to fancy 
 that an exchange running against us with all 
 countries for two or three years, and reaching 
 the height of 25 and 30 per cent., accompanied 
 with a corresponding high price of gold, ought 
 at no time and in no degree to be checked by 
 that limitation of the currency to which nature, 
 as it were, as well as our own practice before 
 1797, taught us in such cases to resort. He 
 was aware that before 1797, if our coin was 
 sent abroad, it went illegally. fA cry of Hear ! 
 Hear! J Tiie illegality of the transaction, 
 however censurable it might render the indi-
 
 16 
 
 viduals engaged in it, was no reason for dis- 
 missing the consideration of this part of the 
 subject. It was by this illegal melting and 
 exportation of our coin that the drain on the 
 Bank used heretofore to be produced j and it 
 was by the operation of that drain on the 
 mind and practice of Bank Directors, that the 
 evil of a high price of gold, and an unfavour- 
 able exchange, was checked. 
 
 It was iiffirraed in the resolutions to be pro- 
 posed by his Right Hon. friend (Mr. Vansit- 
 tart), that there was a want of correspondence 
 between the amount of bank paper in circu- 
 lation at a variety of periods, and the state of 
 the exchanges, the exchanges being often 
 /\ more favourable when the notes were higher, 
 and less favourable when they were lower in 
 amount. This might be the case in certain 
 instances which might be selected; for a variety 
 of undefniable circumstances would lead to 
 little fluctuations, both in the exchange and the 
 amount of notes. It, however, was remarkable, 
 that three cases had occurred, and only three 
 within the memory of persons now living, in 
 which the experiment of a restriction of discounts 
 had been made; and in each of these the effect 
 had been conformable to the principles which 
 he was affirming. He meant to say, that at 
 three several times — namely, first in 17S2 and
 
 17 
 
 1783; secondly, in the end of 179-^ and the 
 beginning of 1796; and, thirdly, in Fe- 
 bruary 1797; and only at these three times 
 the Bank had experienced a material drain of 
 their cash; — that in each of these cases they had 
 been led by the drain, as they themselves pro- , 
 fessed, to restrain their supply of discounts;— -^ 
 and that not long after each of these three 
 periods, the exchange and^ the price of bullion 
 manifestly improved. Perhaps a question 
 might arise, whether the improvement of the 
 exchange through the year 1797> might not 
 be referred to the restriction of paper in 1795 
 and 1796, rather than to that in the single 
 month of February 1797: on which supposi- 
 tion the cases might be said to be two, instead 
 of three ; the effect of the limitations in the two 
 latter periods being considered as combined. 
 
 That in the first period, namely, in 1782 
 and 1783, the experiment both was made and 
 answered, was proved by the testimony of the 
 late Mr. Bosanquet before the Secret Com- 
 mittee of 1797, vvho referred the improvement 
 to this cause. The improvement of the ex- 
 change in 1796 and 1797 would be seen in the 
 papers now before the House, and would also 
 be found to be stated in the evidence of Mr. 
 Pitt before the Secret Committee; by whose 
 testimony it also would appear how earnestly 
 D
 
 the Bank had previously insisted on his re- 
 paying them some large advances, on the 
 alleged ground of the existing drain ; of which 
 advances only a part was afterwards afforded 
 in the way of accommodation to the merchants. 
 A resolution of a new and very strict kind had 
 been passed by the Directors, on 31st De- 
 cember 1795, with a view of limiting the total 
 amount of mercantile discount, and served re- 
 markably to shew how much their liberality 
 had been restrained, before the suspension of 
 cash payments, by a drain of gold. 
 »'^' The limitation of paper in February 1797 
 was sudden and very great, and arose from a 
 drain occasioned, not by an unfavourable ex- 
 change, but a totally distinct cause — an alarm 
 produced through fear of an invasion. He had 
 always thought, and still was of opinion, that 
 the sudden limitation of paper at that period 
 tended not to mitigate the alarm, but rather to 
 increase it ; but it unquestionably served to 
 manifest the general habit of the Bank of 
 reducing their issues when they found" their 
 gold taken from them. Since 1797, the Bank, 
 havingbeen subject to no drain, in consequence 
 of their being under no obligation to pay in cash, 
 the experiment of a limitation of discounts had 
 pot been tried, and it had not been likely to be 
 tried between 1783 and 1795, for that was an
 
 interval of peace, when exchanges are less sub- 
 ject to fluctuation, and when, moreover, the 
 current rate of interest in the market being 
 lower than in war, and as low perhaps as the 
 rate charged by the Bank, there would be less 
 disposition than in war to borrow of the Bank 
 to an extent which should lead to an excessive 
 issue of notes. It was in evidence before the 
 Secret Committee of 1797, that the Bank had, 
 at one period of the peace, deliberated, whether 
 they should not lend at a less rate of interest 
 than five per cent., so small was then the de- 
 mand for discount. 
 
 This subject, of the rate of interest, was one v/ 
 to which he wished to call the attention of 
 the House ; it seemed to him to be a very 
 great and turning point. If the princi- 
 ple adopted by the Bank was that which 
 they professed, of lending to the extent, or 
 nearly to the extent, of the demand made 
 upon them by persons offering good mer- 
 cantile paper, the danger of excess was ag- 
 gravated in proportion to the lowness of the 
 rate of interest at which discounts were af- 
 forded ; and one cause, as he conceived, of 
 the somewhat too great issues of the Bank, 
 during tlie present war, had been the circum- 
 stance of their lending at five per cent., when 
 rather more than five per cent, might in
 
 ^0 
 
 reality be considered as the mare eurrent rate 
 paid by the merchants. Private bankers had 
 generally found, during the war, that the grow- 
 ing demand of their customers on them, for 
 discounts at five per cent, on very good bills> 
 was apt to exceed the supply which any 
 means of theirs could enable them to afford. 
 If they gratified every wish, there would be no 
 bounds to the gradual increase of applica- 
 tions. They therefore gave the preference to 
 some applicants, and the persons who obr 
 tained the accommodation conceived them- 
 selves to be receiving a favour. The usury 
 laws forbid the banker to charge more than 
 five per cent. ; but he who borrowed from 
 a private banker, naturally, and of his own 
 accord, bestowed the benefit of his funning 
 cash, which was often an important considera- 
 tion ; while, in the case of his discounting at 
 the Bank, he kept a running cash which was 
 extremely insignificant, and therefore borrowed 
 at the rate of exactly five per cent, in that 
 quarter. Again, if he borrowed in what is 
 called the money market, he gave to a broker 
 a small per centage on every bill^ and thus 
 paid not less than five and a half or six per 
 cent, per annum, in the way of interest. 
 
 It was material to observe, that there had, 
 since the beginning of the war, been a conti*
 
 n 
 
 nual fall in the value of money: he meant, of 
 money commonly so called, whether consisting 
 of cash or paper. This had been estimated 
 by some at 60 or 70 per cent, and certainly 
 was not less than 40 or 50 per cent. ; which was, 
 on the average, 2 or 3 per cent, per annum: 
 it followed from hence, that if, for example, a 
 man borrowed of the Bank 1000/. in 1800, and 
 paid it back in 1810, having detained it by 
 means of successive loans through that period, 
 he paid back that which had become worth less 
 by 20 or 30 per%cent. than it was worth when 
 he first received it. He would have paid an 
 interest of 501. per annum for the use of this 
 money ; but if from this interest were deducted 
 the 20/. or SO/, per annum, which he had gain- 
 ed by the fall in the value of the money, he 
 would find that he had borrowed at 2 or 3 per 
 cent, and not at 5 per cent, as he appeared to 
 do. By investing his money either in land or 
 in successive commercial undertakings, in the 
 year 1800, and then finally selling his land or 
 his commodities in the year 1810, he would find 
 the produce amount to 200/. or 300/. above the 
 1000/. which he had borrowed; which 2 or 300/. 
 being deducted from the 500/. interest which 
 he had paid, would make the neat sum paid 
 by him to be only 200/. or 300/. It was true, 
 that men did not generally perceive, that, during
 
 22 
 
 a fall in the price of money, they borrowed at 
 this advatntageous rate of interest; they felt, 
 however, the advantage of being borrowers. 
 The temptation to borrow operated on their 
 minds, as he believed, in the following manner: 
 — they balanced their books once a year, and, 
 on estimating the value of those commo- 
 ditres in which they had invested their bor- 
 rowed money, they found that value to be 
 continually increasing, so that there was an 
 apparent profit over and above the natural and 
 ordinary profit oh mercantile transactions. 
 This apparent profit was nominal, as to per- 
 sons who traded on their own capital, but not 
 nominal as to those who traded with borrowed 
 money ; the borrower, therefore, derived every 
 year from his trade, not only the common mer- 
 cantile profit, whicfh would itself somewhat 
 exceed the 5 per cent, interest paid by him 
 for the use of his money, but likewise that ex- 
 tra profit which he had spoken of This extra 
 profit was exactly so much additional advan- 
 tage, deri vedfrom the circumstance of his being a 
 trader upon a borrowed capital, and was so much 
 additional temptation to borrow. According- 
 ly, in countries in which the currency was in 
 a rapid course of depreciation, supposing that 
 there were no usury laws, the current rate of 
 interest was often, as he believed, proportion-
 
 23 
 
 ably augmented. Thus, for example, at Peters- 
 burgh, at this time, the current interest was 
 20 or 25 per cent, which he conceived to be 
 partly compensation for an expected increase 
 of depreciation of the currency. 
 
 The observations which he had made had been 
 suggested to him by his attention to a variety of 
 facts; and he would now trouble the House with 
 the statement of some specific cases, which would 
 contribute to establish the truth of the doctrine 
 which he had asserted — namely, that an in- 
 crease of the quantity of paper tended to di- 
 minish its value; and a reduction of its quan- 
 tity, to improve it; — that when the quantity be- 
 came too great, a drain of cash arose; that 
 this drain was checked by a limitation of 
 paper; — and that the excess, and consequent 
 drain, were most likely to accrue when any 
 circumstances rendered the rate of interest 
 taken, less than the current and actual rate 
 at the time in the common market. 
 
 The case of the Bank of Paris was remark- 
 ably in point, and it was full of instruction to 
 the parliament and people of this country. 
 That Bank stopped payment in 1805, the year 
 when the war had again broken out. It was a 
 Bank as independent as any such institution 
 in France could be, of the French government. 
 It had a good capital, and circulated notes
 
 24 
 
 around the metropolis of France; which it 
 emitted only in the way of discounts, and, as 
 far as he understood, only on the security of 
 bills at short dates, and of a good character: it 
 thus exceedingly resembled the Bank of Eng- 
 land, though inferior in the extent of its trans- 
 actions. The French government having oc- 
 casion in 1805 for some advances on the secu- 
 rity of what they call their anticipations, a 
 species of security on which it was not con- 
 sistent with the rules of the Mnk of Paris to 
 lend, borrowed the sum in question of some 
 French merchants and capitalists, who then 
 contrived to fabricate among themselves, and 
 proceeded to discount at the Bank, as many 
 securities as were sufficient to supply their 
 occasions; so that the Bank was the true 
 lender. The object of thus borrowing at the 
 Bank, was to save something in the way of in- 
 terest; for if these anticipations had been sold 
 in the market, the price would have been very 
 disadvantageous. The consequence of this 
 transaction was, an augmentation of the paper 
 of the Bank of Paris; a drain of their cash 
 followed ; the diligences were found to be car- 
 rying off silver into the departments, which 
 the Bank, with a view to its own safety, had 
 continually to bring back, with much expense 
 and trouble. The circulating medium of the
 
 25 
 
 metropolis had now plainly become excessive. 
 Greater facilities were afforded for borrowing 
 in that quarter than in other places, and the 
 country wished to partake in those opportuni- 
 ties of extending purchases which the metro- 
 polis enjoyed. But the paper of the Bank 
 would not circulate in the departments : it was 
 therefore necessary first to exchange it for coin ; 
 and the coin being then carried away from 
 Paris, the plenty of circulating medium would 
 equalize itself through the French territory. 
 In England we had country bank paper, which 
 was interchanged for Bank of England paper, 
 and proportioned itself to it; but no part of the 
 English paper would circulate out of the coun- 
 try. What therefore the departments of France 
 were to Paris, that Europe was to Great Bri- 
 tain. If large opportunities of borrowing 
 were afforded in London, and over England, 
 by a free emission of paper, there would arise 
 a disposition to exchange that paper for gold, 
 because the gold might then be sent abroad, 
 and it would tend to diffuse over the continent 
 that plenty of circulating medium which we had 
 introduced into our own territory. — It might, 
 perhaps, be thought that the cases were dissi- 
 milar, inasmuch as we had an unfavourable 
 course of exchange, and a high price of gold.. 
 !•:
 
 26 
 
 into which the evil which we suffered appeared 
 to resolve itself. But it would be found that 
 there arose also a premium on silver at Paris, and 
 an unfavourable exchange between Paris and 
 the departments of France ; and this was pro- 
 portionate to the expense and trouble of bring- 
 ing back the silver from the departments. There 
 was, therefore, a similarity in the two cases. 
 The Bank of Paris at length stopped payment; 
 the Government was consulted ; the Bank was 
 directed to reduce its paper; and in the course 
 of three months, having pursued this principle, 
 it opened without difficulty. The discount on 
 its paper, or, in other words, the premium on 
 coin, had varied from 1 to 10 or 12 per cent.; 
 but after the reduction of paper it ceased. The 
 exchanges of France with foreign countries 
 had also turned about 10 per cent, against that 
 country. 
 
 A special commission, of which M. Dupont 
 de Nemours was the secretary, was subse- 
 quently appointed to inquire into the causes 
 and effects of this stoppage of the Bank of Pa- 
 ris; and it was from the French Report published 
 by this gentleman that he collected the facts 
 ■which he had stated. The report proceeded to 
 suggest the means of preventing th^ recurrence 
 ♦f a similar evil, and it advised three things;
 
 97 
 
 first, that tlie Government slionld never solicit 
 any loans from the Bank, on the ground that 
 such an application amounted to a demand, and 
 might lead to issues inconsistent with the true 
 nature of a hanking establishment. It was un- 
 necessary to observe, how unlike our circum- 
 stances, in this respect, were to those of France. 
 Our Bank Directors had sufficiently shewn, in 
 1796, their complete independence of the Go- 
 vernment ; for they then peremptorily refused 
 to afford to Mr. Pitt even the continuance of the 
 existing advances. The second suggestion of 
 the commission was, that the Bank of France 
 should lend only on securities coming due 
 within two months ; and this, as well indeed as 
 the other, was for the purpose of enforcing the 
 third and principal admonition, — namely, that 
 the Bank should always " draw in its discount 
 as soon as it perceived the existence of a more 
 than ordinary disposition to exchange bank 
 paper for money*." ** For what," added the 
 Report, " mean these applications for money ? 
 I'hey imply that there are more bank notes on 
 the spot than the circumstances of the time de- 
 mand. And how are you to provide against this 
 evil? By diminishing their quantity, through a 
 
 * " Reserr«r Icscomptt', aussilot fjuc Ton s'apper^oit (]u'il 
 •e presenle a hi Caisec plus ilc billets d rcaliser en argent 
 que de coutunie."
 
 28 
 
 reduction which shall exceed the new emis- 
 sions*." It is then added, that if the Directors of 
 the Bank will but be attentive to the first signs 
 of superabundance, if they wiH moderate the 
 evil in thelirst instance, they will almost always 
 retain the mastery; and thus the horseman 
 (it is said) will not be thrown out of his saddle. 
 
 Many of the principles urged by the Bullion 
 Committee, would be found to be remarkably 
 confirmed by this Report. It appeared by it, 
 that the French over-issue arose from an at- 
 tempt to turn certain securities into cash, at a 
 rate of interest lower than that which was the 
 natural one at the moment. The Report dwelt 
 much on the error committed in this respet;t. 
 The anticipations, it said, ought to have been 
 sold, though at a losing and discreditable price, 
 at whatever might have been the rate in the 
 market. 
 
 Again, the Report stated that the limitation 
 of the French bank paper did not produce an 
 instantaneous, or exactly corresponding effect j 
 but yet that after three months it issued in the 
 expected consequences. All this was in exact 
 conformity with the doctrines of the Bullion 
 
 * " Qu'est-a-dire que ces demandes d'argent ? Qu'il y asuv 
 la place plus de billets que les affaires du moment n'en exigent. 
 Et comment y pourvoir? En diminuant leur quantite par 
 un retrait plus fort que remission nouvelle."
 
 29 
 
 Committee. They had never said that 
 every small fluctuation of Bank of England 
 paper would be attended by either ati im- 
 mediate, or an exactly proportionate, influ- 
 ence on the exchanges, or on the price of 
 gold. They had only aflirmed that the un- 
 questionable tendency of limitation was to 
 improve exchanges; and had recommend- 
 ed that the Bank should feel its way. The 
 discount of 10 per cent on the French paper 
 was not completely removed till the amount 
 was reduced from 90 to 54 millions of livres ; a 
 scale of reduction unquestionably greater by 
 far than would be found necessary here, under 
 all the circumstances of our metropolis. 
 
 The Report affirmed another principle of the 
 Bullion Committee, namely, that it was not 
 merely the numerical quantity of bank paper 
 which evinced either its deficiency or excess j 
 the true test being the disposition of the pub- 
 lic to demand payment for bank notes in cash. 
 At one time the Report observed that one hun- 
 dred millions of bank paper had circulated at 
 Paris, and that there was not a note too much, be- 
 cause there occurred no extraordinary demands 
 for cash ; but that at the period of the failure, 
 90 millions evidently were excessive; that at 
 the time of publishing the Report, 44 millions 
 was the whole amount. Circumstances were
 
 50 
 
 described as occurring from time to time, which 
 called for a diminution of currency, or an in- 
 crease. 
 
 The Bank of Sweden supplied another ex- 
 ample which it might be useful to consider. 
 It was not, properly speaking, a government 
 bank, being a bank only of the States : and it 
 issued its notes in the way of loan, at a mode- 
 rate interest, and their amount, as he had 
 been informed, there was reason to think had 
 been much extended. This bank had ceased> 
 for some time, to pay in cash, and its paper 
 had fallen to about 70 per cent, discount. Swe- 
 den, in one respect, was circumstanced some- 
 what like ourselves : it had experienced great 
 obstacles to the exportation of many articles, 
 with which it abounded ; and, probably, the 
 desire of keeping up the nominal price of those 
 commodities, contributed to dispose both the 
 government, the states, and the people to the 
 existing system. The public in Sweden, accord- 
 ing to what he had heard, were not fully per- 
 suaded of the depreciation of their paper; for 
 many of their commodities, their iron in par- 
 ticular, had not risen in any proportion to the 
 fall of their currency. Indeed, nations in general 
 were usually insensible at first to the declen- 
 sion of the value of their circulating medium. 
 They were accustomed to experience fluctua-
 
 31 
 
 lions of exchange, and they naturally referred, 
 at first, even a serious depreciation of their 
 paper, to the same commercial causes which 
 they were in the habit of contemplating. He 
 well remembered to have been himself, twenty 
 or thirty years ago, employed in a Russian 
 counting-house, where he had often heard con- 
 versations on the Russian Exchange. It used at 
 that time generally, and on the whole, to decline; 
 but as it occasionally rose, and evidently fluc- 
 tuated a little, with each political or commercial 
 event, the general tendency to depression, as 
 far as he remembered, was never ascribed to 
 an increase of the quantity of Russian paper ; 
 but it was now plain, that quantity had had a 
 leading and permanent influence upon it. The 
 ruble, originally, was worth 48 pence sterling; 
 at the tinae when he was in the Russian count- 
 ing-house, it passed for 35 or 40 pence: it was 
 now worth only 12 or 14 pence. AVas it possible, 
 that merely what is called balance of trade, or 
 political events, could in thirty years have re- 
 duced the ruble from 48d. to 12d. ? It was now 
 perfectly well known, that the late Empress, as 
 well as the succeeding emperors of Russia, had 
 from time to time, greatly augmented the quan^ 
 tity of paper money ; and hence, in truth, arose 
 the depression. Many of those who narrowly 
 watched the exchange, were the most misled
 
 32 
 
 on the subject. Thus, if a man watched the 
 falling tide, he might be deceived by seeing a 
 few occasional waves rise higher than the pre- 
 ceding ones, and might infer that the tide wa% 
 rising when it was falling. 
 
 It was reasonable to suppose, that men 
 should generally mistake in this respect. We 
 naturally imagine that the spot on which we 
 ourselves stand is fixed, and that the things 
 around us move. The man who is in a boat 
 seems to see the shore departing from him, 
 and it was the doctrine of the first philosophers 
 that the sun moved round the earth, and not 
 the earth round the sun. In consequence of a 
 similar prejudice, we assume that the currency 
 which is in all our hands, and with which we 
 ourselves are, as it were, identified, is fixed, 
 and that the price of bullion moves ; whereas in 
 truth, it is the currency of each nation that 
 moves, and it is bullion, the larger article serv- 
 ing for the commerce of the world, wjiich is 
 the more fixed. 
 
 It was remarkable, that when the American 
 banks, about the year 1720, issued their 
 excessive paper, the merchants of America 
 ascribed the consequent fall of the exchange 
 to something in the state of trade; a circum- 
 stance which is noticed, in the recent history of 
 General Washington, by Mr. Marshall. 
 
 i
 
 33 
 
 All the banks which he had mentioned, ex- 
 cept that of Russia — namely, the Bank of 
 France, the Bank of Sweden, and the Banks of 
 America, were establishments more or less in- 
 dependent of the government: they all emitted 
 their paper in the way of loan, furnished at a 
 moderate or low interest ; and they had all 
 issued it to excess. The adversaries of the 
 Bullion Committee had grounded a great part 
 of their argument on the following distinction 
 between the Bank of England and all those 
 Banks of which the paper had been depre- 
 ciated : — The Bank of England, they said, issues 
 nothing, except in return for something va- 
 luable: they receive a bill, representing real 
 property, for every note which they emit; and 
 therefore they cannot issue to excess. Now 
 the French Bank, the American Banks of 
 which he had spoken, and he believed also 
 the Swedish Bank, issued paper only in the way 
 of loan; they received something vaiuabie in 
 return for every note which they put out — in 
 this respect resembling the Bank of England. 
 It was true, that the Austrian and the Russian 
 Banks issued paper simply in discharge of the 
 expenditure of the government: they were, 
 strictly speaking, government banks; and the 
 excess in their case was more likely to be great. 
 But it was of the utmost consequence to un- 
 F
 
 34 
 
 derstand, that, even when a supposed equiva- 
 lent is received in return for the paper issued, 
 excess might arise; and the excess, as he had 
 already said, was likely to be great in propor- 
 tion as the rate of interest was low. 
 
 The Bank even of Mr. Law, in France, 
 issued its paper only in the way of loan. 
 This bank had been adverted to by the Learn- 
 ed Gentleman who opened the debate; and 
 the Right Honourable Gentleman who spoke 
 next to him had complained of the com- 
 parison between the establishment of that 
 projector and the Bank of England. Un- 
 doubtedly the name of Mr. Law, and that of 
 the present Directors of the Bank, ought not 
 to be mentioned on the same day, if the general 
 nature of the two establishments, or the com- 
 parative character of the persons presiding over 
 them, were the only subject for consideration. 
 It was, however, not improper to point out 
 what was the main error of Mr. Law. It very 
 clearly exposed itself in a small Essay on 
 Money and Credit, published by him in Scot- 
 land, containing a plan, submitted to the Scotch 
 Parliament, which was apparently not unlike 
 to that which he had more successfully recom- 
 mended in France. Mr. Law considered se- 
 curity as every thing, and quantity as no- 
 thing. He proposed that paper money should
 
 3.5 
 
 be supplied (he did not specify in his book at 
 what rate of interest) to as many borrowers as 
 should think fit to apply, and should offer the 
 security of land, estimated at two thirds of its 
 value. This paper, thouj^dinot convertible into 
 the precious metals, could not, as Mr. Law as- 
 sumed, be depreciated. It would represent, as 
 he said, real property, and would be worth 
 even more than the precious metals, because 
 land was not subject to the same fall in value 
 as gold and silver. He forgot that there might 
 be no bounds to the demand for paper; that 
 the increasing quantity would contribute to 
 the rise of commodities: and the rise of com- 
 modities require, and seem to justify, a still 
 further increase. Prices in France rose to four 
 times their antecedent amount; great seeming 
 prosperity was experienced for a time; but in 
 the end, the fall of exchanges, and the exporta- 
 tion of money, served to detect the error of 
 the system; and successive alterations of the 
 standard of the coin were among the means of 
 recovery to which the government resorted. 
 The Bank of Mr. Law preceded the French 
 Mississippi scheme, and was formed, in some 
 measure, after the example of the Bank of 
 England; but its notes, after a short time, 
 were made a legal tender, and they were lent 
 at the low rate of 3 per cent, interest. In the
 
 36 
 
 progress of the scheme, the Bank became con'- 
 founded with the Mississippi Company, for 
 whose actions the bank notes were inter- 
 changeable; so that it was not easy to trace 
 causes and effects through the whole progress 
 of those extraordinary speculations. 
 
 The present state of the currencies in Su- 
 rinam and Demerara afforded another proof of 
 the tendency of an increase of paper to in- 
 fluence exchanges. In one of these places, the 
 circulating medium consisted of paper; in the 
 other, of coin; and before these colonies came 
 into our possession, the coin of Demerara had 
 even been of less value than the paper of Su- 
 rinam, that paper having been carefully li- 
 mited. Through the facility of the govern- 
 ment of Surinam, the paper, as he had heard, 
 had been exceedingly augmented, and it was 
 now of only about one-third its former value, 
 and one-third the present value of the coin of 
 the neighbouring settlement. In Austria there 
 had been a manifest excess of paper, and a cor- 
 responding fall in its value, indicated by the 
 exchange. The case was somewhat the same 
 at Lisbon. Indeed, in all parts of Europe, 
 Hamburgh, Amsterdam, and Paris excepted, 
 the principle of a standard seemed to have 
 been lost; a suspension of cash payments had 
 every where taken place; and paper had been
 
 S7 
 
 issued to excess, and had also been depre- 
 ciated. It belonged, therefore, to Great Britain 
 to take care that she did not follow the course 
 of so many nations on the Continent ; and it 
 would be most presumptuous in her to assume 
 that her Bank, on account of some undefined 
 difference in its constitution, could act on their 
 principles, and yet not share in their fate. 
 . The Directors of the Bank of England, as 
 he had already shewn, before the suspension of 
 their cash payments, had been used to lessen 
 their paper when they experienced a drain of 
 their cash. The quantity of currency, indeed, \ 
 when gold was in circulation, in the event of a 
 \ery unfavourable exchange, lessened itself, for 
 a part of it was transported to other countries. 
 No such natural corrective now existed; and 
 it therefore was important that the general 
 and permanent state of the exchange should 
 be regarded as the index of an excess of paper, 
 and that the Bank Directors should not con- 
 tinue to act on the principle that a limitation 
 of paper had no influence whatever on the ex- 
 change. This was the point on which they 
 were at issue with the Bullion Committee. 
 That Committee, as he conceived, would have 
 rendered an essential service, even "though 
 guilty of all the errors with which the Right 
 Honourable Gentleman had charged them —
 
 38 
 
 errors, however, which he was by no means 
 ready to admit — if they had merely called the 
 attention of Parliament to this important sub- 
 ject. The Parliament had now to decide 
 on this point of difference between the Com- 
 mittee and the Bank. He would not affirm it 
 to be totally impossible that the exchange 
 should improve, or even recover itself, without 
 any change of system; but his fears predomi- 
 nated. The circumstance that most encouraged 
 hope, was the fact of our exchanges having 
 been restored, after a great depression, in 1800 
 and 1801, and apparently without any effort to 
 improve them made by the Bank. There were, 
 however, three points of difference between 
 that case and the present. First, the exchanges 
 did not fall, in the years of scarcity of 1800 
 and 1801, more than about 8 or 10 per cent, 
 below par — they had now fallen ft5 or 30, 
 and even more than 30 per cent, and had con- 
 tinued much depressed for nearly three years. 
 Secondly, we had in 1800 and 1801 a great 
 quantity of gold in circulation, the clan- 
 destine transmission of which undoubtedly con- 
 tributed to improve the exchange, by consti- 
 tuting a remittance; perhaps also to diminish 
 the sum total of the currency remaining in this 
 kingdom ; and it should be remembered, that 
 it is the amount of currency in general, and
 
 39 
 
 not of paper in particular, which regulates the 
 value. 1 nirdly, we had, after the fall of ex- 
 change in J 801 and 1802, the benefit of an in- 
 terval of peace. If the Right Honourable 
 Chancellor of the Exchequer would assure the 
 House of the approach of peace, he would con- 
 tribute much to dissipate the present fear. 
 
 The Right Honourable Gentleman over the 
 way (Mr. Rose) had spoken of the balance of 
 payments as having lately been peculiarly un- 
 favourable to this country. A short time be- 
 fore the appointment of the Bullion Com- 
 mittee, the same Right Honourable Gentleman 
 had stated in his place, from documents to 
 which he only had then access, how uncom- 
 monly favourable the balance of trade ap- 
 peared to be up to that time. He was right 
 in his statement; for, upon an inspection of 
 the annual Custom-house accounts of the year 
 1809, afterwards presented to the House, it ap- 
 peared that the balance of that year was no 
 less than about sixteen millions in our favour, 
 if reckoned according to the oflicial value — 
 a balance greater by several millions than it 
 had been in any preceding year. The balance, 
 computed according to the real value, proved 
 to be nearly as considerable, and equally ex- 
 ceeded the balance in real value of any pre- 
 ceding year. He admitted that the Committee
 
 40 
 
 had fallen into inaccuracy in stating some 
 parts of this topic ; but it was a subject on 
 which he defied any man to arrive at any thing 
 like precision, and he had chiefly to lament 
 that they had attempted too much specifica- 
 tion. They had been betrayed into this 
 course by too great a wish to follow their 
 adversaries into a detail of discussion of this 
 sort, which he was happy to find that the re- 
 solutions of his Right Honourable Friend did 
 not much countenance. He was convinced 
 that it was impossible to form any estimate of 
 the amount of precious metals which went out 
 of the country, or of what was called the ba- 
 lance of trade, by instituting calculations of 
 the value of exports and imports, and by then 
 combining with these the amount of drafts 
 drawn on Government account, and all the 
 other items which remained to be added to the 
 two sides of the statement. The errors com- 
 mitted by those who had gone the furthest 
 in such attempts were a warning on this sub- 
 ject. The Right Honourable Gentleman 
 had remarked, that the sum paid for foreign 
 freights had been erroneously stated by the 
 Committee, as being to be deducted from the 
 favourable balance; and he was right to a cer- 
 tain extent, in this observation. It, however, 
 only followed from hence, that the Committee
 
 41 
 
 had represented the balance somewhat less fa- 
 vourably than they should have stated it. The 
 year which had passed subsequenll}' to their 
 Report, was certainly much more adverse 
 than that to which they adverted, the large im- 
 portations of corn in 1810 having materially 
 augmented our imports. Neither this circum- 
 stance, nor the burning decrees of the enemy, 
 on which much stress had been laid, were 
 known at the time when the Committee made 
 their Report. 
 
 He must advert, before he concluded, to the 
 important subject of the standard of our cur- 
 rency. There was great danger of our finally 
 departing from it, if we suffered the present 
 depreciation of our paper to continue. The 
 first resolution of his Right Honourable Friend 
 appeared to him to be liable to the construc- 
 tion of laying in some claim to depart from it, 
 if such a measure should hereafter be deemed 
 expedient; for it asserted the King's right to 
 alter the standard: and the very mention of 
 such a right, at a period when the temptation 
 to exercise it was occurring, might naturally 
 excite apprehension among the public. Indeed 
 the argument in favour of a deterioration of 
 our coin (or of a change of its denomina- 
 tion, which was the same thing), would, while 
 G
 
 42 
 
 the present state of things continued, grow 
 stronger every day. To change the standard 
 when the paper has been long depreci- 
 ated, is only to establish and perpetuate a 
 currency of that value, to which we already 
 are accustomed, and may also be made the 
 means of precluding farther depression. The 
 very argument of justice, after a certain time, 
 jjasses over to the side of deterioration. If we 
 have been used to a depreciated paper for only 
 two or three years, justice is on the side of re- 
 turning to the antecedent standard ; but if eight, 
 ten, or even fifteen or twenty years, have passed 
 since the paper fell, then it rnay be deemed un- 
 fairto restore the ancient value of the circulating 
 medium ; for bargains will have been made, 
 and loans supplied, under an expectation of 
 the continuance of the existing depreciation. 
 If, therefore, we were in earnest in our pro- 
 fessions of attachment to the standard, we 
 ought not to place o urselves in a situation of 
 irresistible temptation. By the present deci- 
 sion of the House, the question of adherence 
 to the standard might be determined. It had 
 been said, that, by our present contest in Por- 
 tugal, we were in truth defending England, 
 since we were preventing a conflict which 
 might otherwise take place on English ground.
 
 A3 
 
 We might, by the parliamentary contest of 
 this day, prevent a struggle for the mainte- 
 nance of the standard of our coin. We were 
 now, perhaps, fighting that battle, and at a 
 time the most favourable for it. If the limi- 
 tation of paper had been urged when the ex- 
 changes were only six or eight per cent, against 
 us, it might have been said, that the evil was 
 not sufficiently considerable to deserve atten- 
 tion. If we waited till they were fifty or 
 sixty per cent, against us, it might have been 
 insisted, that the time for administering such a 
 remedy was past, and that the mischief was 
 become too formidable for us to deal with. Was 
 it not at least prudent to take the side of 
 limitation? He had no idea, that all that em- 
 barrassment would result from a moderate re- 
 duction of Bank paper, which some gentlemen 
 might suppose. Let the whole subject be 
 fairly understood, for much depended on the 
 general prevalence of sound opinions on this 
 question; — let the contending parties yield a 
 little to each other 3 — let it be known that the 
 Bank proposes to do nothing sudden or vio- 
 lent ; that they are determined to guard care- 
 fully against extensive failures; and to afford 
 to the mercantile world reasonable facility for 
 fulfilling the pecuniary engagements into
 
 44 
 
 which they might have already entered ; — let it 
 be seen through the country, that there was no 
 party spirit, or heat, in our discussions: — he 
 should, in that case, have little fear of disastrous 
 consequences. If, on the other hand, the ques- 
 tion was to be carried with a high hand, and 
 there was to be a triumph of the Bank over the 
 Bullion Committee j if the Bank were to be 
 encouraged in the extension of their issues for 
 the sake of the temporary ease which these 
 might afford to the merchants and to the go- 
 vernment; and we were resolved to shut our 
 eyes to the remoter consequences; the light 
 might possibly, at length, break in upon us, as 
 Mr. Burke, on another occasion, had observed, 
 not through the ordinary apertures, butthrough 
 flaws and breaches; and we might then lament, 
 too late, that we had not made timely efforts to 
 restore the value of our currency. Gentlemen, 
 he feared, had not sufficiently considered the 
 present state of the law on this subject. A 
 question was suspended, the decision of which 
 was expected every day, and might lead to the 
 establishment of two prices. We were, more- 
 over, at the mercy of events. Many persons 
 seemed to think that there was no particular 
 evil to be apprehended from perseverance in the 
 present system; and were unwilling to resort
 
 45 
 
 to a limitation of paper, because it was safer 
 not to change our course: but tliey ought to re- 
 flect, that, though a small depreciation of paper 
 produces little or no evil, and even may, for a 
 time, operate beneficially ; and though a great 
 depreciation may not bring on at once any 
 striking mischief; yet the long continuance and 
 the growth of it, might lead to the most serious 
 dangers. To the consequences of excess of 
 quantity distrust might add itself: new laws 
 might become necessary to enforce the receipt 
 of the depreciated currency ; and in order that 
 they might be effectual, their severity must in- 
 crease as the depreciation extended itself. This 
 had been the course in other countries. At the 
 same time, there probably would not be wanting 
 ill-affected persons, who would endeavour to 
 aggravate the evil, and would be glad to connect 
 with the temporary discredit arising from the 
 excess of our circulating paper, the discredit 
 of the whole mass of our stocks, which had 
 nothing to do with it. Surely it became the 
 Parliament to anticipate the possible occur- 
 rence of such a state of things, and not to 
 wait the uncertain course of events, as if we 
 had no power whatever to provide for our own 
 safety, or contribute to the improvement of 
 our condition.
 
 46 
 
 On these grounds he now supported the first 
 set of the Resolutions of the Learned Gen- 
 tleman, which affirmed the doctrine of a 
 standard, and which recommended, as the means 
 of expediting and insuring our return to it, a 
 cautious restriction of the paper of the Bank 
 of England.
 
 47 
 
 On the 14th of May, Mr. H. THORNTON ob- 
 served, that having, when he before addressed 
 himself to the House, spoken antecedently to 
 all those gentlemen to whom he was opposed, 
 excepting only one Right Hon. Gentleman 
 (Mr. Rose), who had chiefly dwelt on the 
 details of the Report; and having now the 
 advantage of distinctly knowing the grounds 
 on which their argument rested; he was anxi- 
 ous to be permitted once more to offer him- 
 self to their notice. 
 
 The speech of his Right Honourable Friend 
 (Mr. Vansittart), in support of the Resolutions 
 jiow proposed by him to be substituted in the 
 place of those of the Chairman of the Bullion 
 Committee, had particularly urged him to rise. 
 In the conclusion of that speech, his Right 
 Honourable Friend had enumerated the various 
 circumstances to which he looked as the means 
 of producing an improvement of the exchange : 
 — first, a continental peace ; secondly, a better 
 understanding, and, consequently, an open 
 trade with America; thirdly, some extension of 
 our commercial intercourse with Europe j —
 
 48 
 
 all of them, especially the first, events which he 
 did not] much encourage us to expect: — but it 
 was remarkable that he totally omitted any 
 mention of a limitation of paper, in this enu- 
 meration of the means of meliorating our ex- 
 changes. His Right Hon. Friend, in one part of 
 his speech, as well as the Right Hon. Chancel- 
 lor of the Exchequer, had admitted that a limi- 
 tation of paper had a tendency to produce 
 this effect; but it was plain, from the concluding 
 part of it, that the principle was practically 
 disregarded. Indeed, his resolutions were iii 
 the same spirit: they were silent on this 
 point : they did not venture to deny the doc- 
 trine, that quantity of paper had an influence 
 on its value ; but they seemed to throw a doubt 
 upon it ; for they specified a variety of facts, 
 with the evident view of discrediting the prin- 
 ciple ; and thus were calculated to lead men, less 
 enlightened than the Mover, to suppose that 
 the tenets of the Bullion Committee, in this 
 respect, were completely visionary and erro- 
 neous. 
 
 He rejoiced that his Right Hon. Friend was 
 the person who led the opposition to the Re- 
 port of the Bullion Committee, because he was 
 confident, that, with such an adversary, the dis- 
 cussion would be amicable, and free from party
 
 49 
 
 spirit, and because the House was sure of hearing 
 so much ability employed on that side of the sub- 
 ject. He could not, however, help remarking, 
 that his Right Hon. Friend himself had been 
 a party in an administration which had twice 
 extended the term of the continuance of the 
 restriction act on a principle which, if Parlia- 
 ment would now give its attention to the sub- 
 ject, he could not help thinking that they would 
 perceive to have been very objectionable. 
 
 Twice, under the administration of Lord 
 Sidmouth, of whom he wished to speak most 
 respectfully — namely, once in peace, and once 
 after the recommencement of the war — the act 
 for restricting the cash payment of the Bank 
 was renewed, upon the professed ground of 
 the unfavourableness of the exchanges. This 
 was not the principle on which the first act 
 had passed, and he much questioned whe- 
 ther the Parliament would have ever consent- 
 ed to institute such a measure merely on 
 that plea. It was by means of an unfavour- 
 able exchange, and a high price of bullion, 
 that an excess of bank paper was detected and 
 restrained, as he trusted that he had already 
 sufficiently shewn. The ground on which the 
 restriction bill had passed was much more 
 justifiable, namely, that of an alarm arising 
 H
 
 out of the idea of an immediate invasion, which 
 caused a violent run upon the Bank, and threat- 
 ened suddenly and unavoidably to exhaust its 
 coffers. The State, for political reasons^ on 
 that occasion interfered. To extend the sus- 
 pension because the exchange was unfavour- 
 able, was to adopt a new and dangerous course. 
 He recollected to have himself, on one occasion, 
 remarked on the insufficiency of this motive for 
 the renewal; but the subject did not always 
 particularly attract the attention of the House; 
 it now, therefore, became them, and especially 
 since they were resolved to continue the sus- 
 pension, to look well to the general principles 
 on which both they and the Bank proceeded, 
 and not to consider themselves as debating 
 merely on a temporary measure. 
 
 One great security to the Bank of England, 
 heretofore, had been its independence of the 
 Government: its paper had been properly re-^ 
 strained, because the Government had felt no 
 interest and taken no part in the extended issue 
 of it; and he submitted, whether, if the sub- 
 serviency of large issues from the Bank to the 
 purposes of the war, and the convenience of the 
 State, were, during the suspension of cash pay- 
 ments, to be a principle recognised by Parlia- 
 ment, the State and the Bank might not become
 
 51 
 
 identified in point of interest, somewhat in the 
 sa'm<? manner as those government banks on the 
 Continent, whose paper had become first exces- 
 sive and then depreciated. 
 
 It might not be improper to take a slight sur- 
 rey of the whole period which had passed since 
 the first Bank Restriction Bill in 1797. Pro- 
 bably, in consequence, as he had before shewn, 
 of a limitation of paper which was antecedent 
 to that eera, and perhaps in consequence also of 
 the caution which the Bank would naturally 
 exercise for some time after it, the exchanges 
 in 1797 and 1798 were peculiarly favourable, 
 and a great tide of gold flowed into the coun- 
 try. In the years 1800 and 1801, when the 
 scarcity of corn occurred — a commercial event 
 more likely, perhaps, than any other to preju- 
 dice the exchange — the tide turned quite as 
 much against us : the exchanges then fell below 
 the point which they had ever reached while 
 the Bank was open. The Bank did not at that 
 time limit its issues, which it certainly would 
 trave done if it had been liable to make its pay- 
 ments in cash. The exchange, however, recover- 
 ed itself in 1802, but it did not improve so much 
 as to bring back gold into the country. After 
 a few more years, the exchange turned much 
 against us; and it had now, for the space of 
 nearly three years, continued more unfavour-
 
 52 
 
 able than it was ever known to be before the 
 suspension. Thus the only influx of gold, of 
 which we had had the benefit, since the sus- 
 pension act of 1797, was, apparently, in cou- 
 I sequence of a limitation of paper antecedent 
 / to that period. There would naturally be a 
 tendency to excess during the suspension of 
 cash payments ; but the first consequences of 
 such excess, as well as the peculiar pressure of 
 1801 and 1802, would undoubtedly be miti- 
 gated by the exportation of a large portion 
 of that immense fund of gold, with which the 
 providence of the time preceding the suspen- 
 sion had enriched us j and the recovery of the 
 exchange in 18012 was thus facilitated. When 
 the second great pressure, of 1808 and 1809, 
 arose, it found us stripped of a great part of 
 our coin ; and this probably was the reason 
 why it proved so serious. It soon carried off 
 our little remaining gold; and we were there- 
 fore now arrived at a period when we were 
 no longer protected against the most fearful 
 fall of our exchanges. As long as the for. 
 reigner knew that the bill on England 
 wh'^h he bought, could be turned into cash, 
 which cash was of a given value, and subject, 
 though contrary to law, to be transported, 
 there, was a limit to the depression of the 
 price , qf the bill ; and this linait wouJ4 exist
 
 53 
 
 even during the suspension of the cash pay- 
 ments of the Bank, provided there was a mo- 
 derate quantity of gold coin actually circu- 
 lating; for, in that case, if the exchange fell 
 below a certain point, some men would clan- 
 destinely collect our guineas, and thus furnish 
 a remittance : but now a man must walk a mile 
 before he can collect a guinea: he must incur 
 great expense in gathering, as well as in pur- 
 chasing, the very trifling quantity of coin which 
 remained among us. The limit, therefore, to 
 the fall of the bill, was no longer what it had 
 been: we were ceasing to have any limit, 
 and were therefore now arriving at a new 
 state of danger; so that it was difficult to say, 
 in case untoward circumstances should arise, 
 what might be the extent to which the ex- 
 change possibly might run down. Such had 
 been the effect of the long continuance of the 
 Bank Restriction Bill, and of the system under 
 which we had acted during the fourteen 
 years of its existence. The House had now 
 decided against the repeal of it, and seemed 
 to intend that the bill should remain in force 
 until the period already assigned to it, of six 
 months after the ratification of a treaty of 
 peace. He was not eau^er as to the question 
 whether the Bank shonld now be required to 
 open at any early period. He would willingly
 
 54 
 
 have agreed to suspend the determination of 
 that point, if he could but have seen a dispo- 
 sition to act, in the mean time, in such a man- 
 ner as to facilitate the opening. But the mis- 
 fortune was, that the Directors of the Bank 
 seemed to consider the suspension as exempt- 
 ing them from the necessity of pursuing the 
 principles on which they would have acted if 
 no suspending bill had passed, and on which 
 also they could not fail now to act, if they 
 were liable to pay in cash. To one of them 
 the question was put, " Supposing the Bank to 
 pay in cash, and a great drain to arise (and 
 there could be no doubt that a great drain would 
 now arise if the Bank were liable to pay in cash) 
 should you advise some diminution of bank pa- 
 per ?" The answer was, " I must recommend it 
 from necessity, though in my opinion it would 
 not improve the exchange. I think it one of the 
 advantages of the Restriction Bill, that we are 
 not driven to that necessity." The Parliament, 
 if they voted the resolutions of his Right Hon. 
 Friend, would fortify the Bank in these opi- 
 nions. They had, indeed, already indicated 
 their approbation of them, by negativing all 
 tJie first resolutions of the Learned Gentleman ; 
 and in consequence of that vote, which he had 
 considered to be a vote against any limitation 
 of paper, he had reluctantly joined iji the sub-
 
 55 
 
 sequent vote for opening the Bank in two 
 years ; — a vote which he should have been glad 
 to have had an opportunity of qualifying, by 
 specifying certain accompanying measures, by 
 which he, thought that the apparent severity of 
 it might have been mitigated, and the opening 
 much facilitated. He had, when in the Bul- 
 lion Committee, expressed a wish to soften the 
 terms used in that part of the Report vyhich 
 suggested that the restriction should cease in 
 two years. He was clearly against a period 
 so indefinite as that of six months after the 
 ratification of a treaty of peace, considering 
 all the experience we had had. He was for 
 returning to the principle on which we had 
 set out, that of allowing to the Bank only a 
 short term ; possibly renewing it, if necessary, 
 but not as a matter of course, and on the mere 
 ground that the exchanges were unfavourable. 
 He was aware that the gentlemen opposed to 
 him had gained a great advantage by turning 
 the attention of the public to the opening of 
 the Bank ;. as if that were the only thing re- 
 commended by the Bullion Committee. This 
 was not the sole object of their Report. There 
 had been many shades of opinion upon tiiat 
 part of it, among men agreed in all their fun- 
 damental principles. The Bullion Committee 
 had been far more united on tlie other point
 
 56 
 
 on which he had dwelt — the propriety of lU 
 miting the bank issues with a view to the iiri^ 
 provement of the exchange. The Parliament 
 was now taking part with the Bank against 
 their own Committee, in respect to this im- 
 portant principle ; and the Right Hon. Chan- 
 cellor of the Exchequer, in exerting himself 
 on the same side, appeared to him to betaking 
 on himself a fearful responsibility. 
 
 It had appeared in the course of the pre- 
 sent debates, that the chief circumstance which 
 had led the Directors of the Bank to embrace 
 the opinion that the quantity of their paper 
 had no influence on the exchange, was the 
 doctrine which they entertained respecting 
 -4 what is called the Balance of Trade. The state 
 of the exchange was, according to them, the 
 unavoidable consequence of an unfavourable 
 balance : he therefore requested leave to enter 
 somewhat fully into this topic. 
 
 An inaccurate use of words had served to 
 confuse many parts of the general subject un- 
 der discussion j and the term balance of trade, 
 in particular, had contributed to this per- 
 plexity. He would endeavour to expose the 
 error involved in this expression; and in order 
 to do this, it might be convenient to remark 
 how it first obtained currency. 
 
 Our ancestors, eager for the acquisition of
 
 the precious metnls, exploring, as is well known 
 new continents, cliiefly with a view to this ar- 
 ticle ; and accustomed to consider trade as pro- 
 fitable or otherwise, in proportion as it broiif^ht 
 in or took out gold and silver, were naturally 
 led to denominate that part of our exports or 
 imports which consisted of these metals a ba- 
 lance. In truth, however, this was not a ba- 
 lance. Bullion was an article of commerce, 
 rising or falling in value according to the supply 
 and the demand, exactly like any other, trans- 
 porting itself in greater or less quantities ac- 
 cording to the comparative state of the market 
 for that and for other articles, and forming only 
 an item on one side of the general account. 
 Corn, or any other commodity, might just as 
 properly be said to pay the balance as gold or 
 silver ; but it would evidently be inaccurate td 
 affirm that corn discharged it, because it would 
 imply that the amount of all the articles 
 except corn was fixed ; and that these hav- 
 ing first adjusted themselves with relation 
 only to each other, a given quantity of corn 
 was then added to pay the difference. It was, 
 for the same reason, inaccurate to affirm, that 
 gold or silver paid the difference. He was 
 aware that many of our older writers of great 
 name bad used expressions of this sort, and that 
 a phraseology borrowed from such respect- 
 I
 
 58 
 
 able authority ought not to be too much cen- 
 sured. They had written, however, at a^time 
 when paper currency scarcely had an exist- 
 ence ; tliey had not contemplated the conse- 
 quences of the introduction of so much paper 
 credit : they had therefore not guarded or mea- 
 sured their expressions, as they probably would 
 have done, if they had foreseen the use which 
 was now made of them. 
 
 The Governor of the Bank (Mr. Manning) 
 had in his speech quoted a passage in Mr. Locke, 
 containing the term on which he had just ani- 
 madverted, and had grounded himself on what 
 he inferred from this expression to be the prin- 
 ciples of that author. The words of Mr. Locke 
 were these j^ — " The coming and going of our 
 treasure depends wholly upon the balance of 
 trade;" — a mode of speaking which certainly 
 countenanced the doctrine of the Honourable 
 Gentleman and other Bank Directors, namely, 
 that there is no possibility of preventing the 
 departure of our gold by any measures which 
 the Bank can take, inasmuch as it is balance of 
 trade, and balance of trade alone, which regu- 
 lates both its coming and its going, over which 
 balance the Bank has no controul. It would be 
 found, however, that Mr. Locke, could not be so 
 completely claimed as an authority, on the side 
 of the Governor of the Bank, as might at first
 
 59 
 
 view be supposed ; for Mr. Locke, in the part of 
 his work immediately preceding that from which 
 the quotation was taken, speaks of" two cases" 
 in which profit may be made by melting down 
 our money: '* First, when the current prices 
 of the same denomination are unequal and of 
 different weights, some heavier, some lighter ; 
 the other that of a losing trade, or an over- 
 great consumption of foreign commodities j" 
 and then goes on to say, that " the coming 
 and going of our treasure depends wholly on 
 the balance of trade." 
 
 Mr. Locke, therefore, refers to either of two 
 causes the disappearance of coin. Agreeing in 
 this respect with Sir Isaac Newton and others, 
 whom his Honourable Friend (Mr. Huskisson) 
 had quoted, he affirms that two kinds of cir- 
 culating medium, if of different value, cannot 
 long continue to pass interchangeably, because 
 the heavier and more valuable pieces will be 
 melted down, with or without law, and the 
 light ones only will remain. Did gentlemen 
 allow the truth of what Sir Isaac Newton and 
 other high authorities, not excepting Mr.Locke, 
 had laid down as a fundamental maxim in this 
 science ? If they did, they ought to admit not 
 only that silver currency would disappear, if 
 of more value than gold; and gold currency, if
 
 60 
 
 of more value than silver; and heavy pieces, 
 if light ones were allowed equally to pass;, but 
 also that gold currency would vanish, if a pa- 
 per currency of inferior value was circulating 
 at the same time. Silver coin was not now a 
 legal tender for more than a limited amount; 
 gold coin and paper were therefore the only two 
 currencies in use for the payment of large sums; 
 Gold was now to paper what it had formerly 
 been to silver, and what the heavier pieces of 
 gold had been to the lighter pieces of the same 
 metal. Thus, the present disappearance of our 
 gold coin, might be ascribed to the first of the 
 itwo causes mentioned by Mr. Locke, namely, 
 I the ditference in value between the two kinds of 
 I currency in the country; and not to the second 
 cause, the unfavourable balance of trade. 
 
 Still, however, the language of Mr. Locke 
 was certainly inaccurate, when he said, that the 
 " coming and going of our treasure depends 
 wholly on the balance of our trade," and served 
 to countenance that dangerous doctrine which 
 pow prevailed. According to this doctrine, 
 the fact of the disappearance of our guineas 
 attended with the highest imaginable price of 
 gold, was no indication of an excess of paper or 
 of a depreciation of it, but was simply an evi-i 
 dence of an unfavourable balance of trade; and
 
 61 
 
 the only remedy was generally to promote na- 
 tional industry and oeconomy. It might, indeed, 
 be imagined by some, that accord ing to this view 
 of the subject, even additional issues of paper 
 would operate as a remedy, for it might be said 
 that an increased emission of it tended to encou- 
 rage manufactures, an augmented quantity of ma- 
 nufactures supplied the means of enlarging our 
 exports, and more extended exports improved 
 the balance of trade; and thus an increased issue 
 of paper might be assumed to be the means of 
 rectifying the exchange, instead of prejudicing 
 it. This was exactly the course of argu- 
 ment into which the Noble Lord over the way 
 (Lord Castlereagh) appeared in one part of his 
 speech to be running. It was an error to which 
 lie himself had once inclined, but he had stood 
 corrected after a fuller consideration of the 
 subject. There must obviously be a fallacy in 
 this way of reasoning. It proved too much. It 
 implied, that indefinitely to increase our paper, 
 was the way indefinitely to improve its value in 
 exchange ior the circulating medium of other 
 countries, as well as in exchange for bullion 
 and for ail commodities. The utmost admission 
 which he was disposed to make was, that in 
 proceeding to limit our paper with a view to 
 the improvement of the exchange, we ought to 
 avoid that severity of pressure by which manu-
 
 62 
 
 facturing industry might be seriously inter- 
 rupted. 
 
 According to the same erroneous doctrine, 
 the export of our gold coin in each of those 
 instances of which Sir Isaac Newton and others 
 spoke, was referable to balance of trade, and not 
 to the cause to which they ascribed it. When 
 in the reign of King William, our gold coin 
 went abroad, in consequence, if we were to 
 credit Sir Isaac Newton, of its having become 
 more valuable than oursilver, through a change 
 in the relative value of the two articles, it went 
 to pay a balance of trade; for it was balance of 
 trade, and balance of trade alone, according to 
 the tenets in question, which caused the pre- 
 cious metals to transfer themselves to other 
 countries. When in a subsequent year a 
 similar difiference between the two kinds of cur- 
 rency occurred, it was in order again to pay a 
 balance of trade that the better coin quitted the 
 kingdom. He would put another case. Sup- 
 pose a fisherman on our southern coast, to col- 
 lect a thousand guineas, and exchange them in 
 the channel with some French fisherman for as 
 much French brandy as should be deemed an 
 equivalent, the gold, according to the doctrine 
 in fashion, would have gone to pay the balance 
 of trade. It would have been employed to dis- 
 charge a previously existing national debt. It
 
 63 
 
 wasalways, according to these tenets, the brandy 
 which forced out the gold, and not at all the gold 
 which forced in the brandy. By the French- 
 man's putting the brandy into his boat, the 
 Englishman was compelled to put the gold 
 into his. The brandy always went before; the 
 gold always followed after. It was one of the 
 peculiar properties of gold that it always served 
 to pay a balance. 
 
 The truth was, that our paper currency hav- 
 ing become less valuable by nearly twenty per 
 cent, than the gold contained in our coin, the 
 coin could no longer circulate interchangeably 
 for it, but went abroad, because there was a 
 profit of nearly twenty per cent, on the transmis- 
 sion. This profit operated as effectually in with- 
 drawing it from circulation, and causing that 
 part of it which was not bought at a high price 
 for manufacturing uses, to be exported, as if an 
 actual bounty of twenty per cent, were given 
 on the export of it ; and as much prevented the 
 importation of gold for the purpose of serving 
 as currency — the only purpose for which large 
 quantities of gold were usually imported — as if a 
 tax of twenty per cent, were levied on the im- 
 port of it. We deplored the loss of our gold coin ; 
 but by not limiting our bank notes, we were 
 thus, in substance, laying a tax on its importation, 
 and giving a bounty on its exportation : and
 
 64 
 
 then, referring its absence to balance of trade, we 
 imagined that we had no power of recalling it. 
 He admitted that son ething was to be conceded 
 on the ground of an unfavourable state of trade 
 and a bad harvest, as well as on account of large 
 drafts in discharge of the foreign expenditure 
 of Government. Our manufactures, and other 
 exportable commodities, might happen not to 
 be in such demand abroad as to supply, on such 
 occasions, the whole of the remittance advan- 
 tageously. The precious metals were in more 
 universal request than any other article; and 
 the transmission of a certain quantity of these 
 might prevent solow a selling price of our com- 
 modities, in the foreign market, as might other- 
 wise be necessary. But our gold was novr 
 gone, and that disadvantage of which he was 
 speaking, was therefore one against which we 
 were beginning to be quite unprotected. Our 
 coin had for the most part left us in 180K 
 The state of our trade and foreign expenditure 
 seemed not likely to improve materially. The 
 exchange could not be corrected, as heretofore, 
 by the transmission of specie. The cautious 
 limitation of our paper was, therefore, a prin- 
 ciple to which every consideration of prudence 
 should lead us to resart. 
 
 Several of the first Resolutions of his Right 
 Hon. Friend (Mr. Vansittart) were intended to^
 
 65 
 
 shew that there was no correspondence between 
 the variations in the exchange for some time 
 past, and the existing quantity of notes. He had 
 ip his former Speech remarked, in reply, that at 
 three several periods — in 1783, 1795 and 1796, 
 and 1797 — the Bank had experienced a drain of 
 gold, had consequently restrained their issues, 
 and had experienced a subsequent improve- 
 ment of the exchange. His Right Hon. Friend 
 erroneously assumed that theBullionCommittee 
 deemed the effect of a limitation of paper to be 
 instantaneous ; an error which was exposed by 
 the amendments intended to be offered by the 
 Chairman of the Bullion Committee. The in- 
 fluence both of a reduction and increase of 
 paper, though sure, might be slow, and pro- 
 bably would be various, both as to the degree 
 and time of its operation : it would affect, first, 
 one kind of commodity, then another; pro- 
 bably operating more early on those articles of I 
 which the sale was for ready money, reaching ^ 
 slowly the land, and still more slowly the la- 
 bour, of the country. When an over-issue of 
 paper had produced a general alteration in the 
 price of labour, and, through the price of labour, 
 on tliat of commodities, the improvement of the 
 exchanges became more difficult and hopeless; 
 and this consideration ought to induce us not j 
 to delay the reduction of our bank note* till 
 K
 
 66- 
 
 the wages of labour had become materially af- 
 fected. In the case of an alteration in the value 
 of the coin of a country, the operation on 
 prices, though in like manner sure, was also 
 in like manner slow and irregular. Mr. 
 Hume, in speaking of the successive deteriora- 
 tions of the French coin, in the reign of Louis 
 XIV,, had remarked, that they did not at once 
 produce a proportionate rise of prices. He 
 says, " Though the high price of commodities 
 be a necessary consequence of the increase of 
 gold and silver," (as it surely must also be of 
 the increase of paper currency), " yet it follows 
 not immediately on that increase, but some 
 time is required before the money circulates 
 through the whole state. At first, no alteration 
 is perceived : by degrees the price rises, first of 
 one commodity, then of another; till the whole 
 at last reaches a just proportion with the new 
 quantity of specie in the kingdom. In my opi- 
 nion," he adds, "it is only in the interval between 
 the acquisition of money and rise of prices, that 
 the increasing quantity of gold and silver is 
 favourable to industry." — Those gentlemen who 
 are eager to maintain an extended paper cir- 
 culation, with a view of serving commerce, 
 would do well to bear in mind this very sound 
 observation of Mr. Hume. They should re- 
 member, that it is only by the perpetual increase
 
 67 
 
 of paper that their object can be fully effected. 
 They should also reflect, that, in proportion to 
 this increase, the exchange will be prejudiced, 
 and the standard of the country forsaken. Mr. 
 Hume goes on to specify some facts in proof of 
 his general position. " And that the specie," 
 says he, "may increase to a considerable pitch 
 before it have thislattereffect" (of raising prices), 
 " appears, amongst other instances, from the 
 frequent operations of the French King on the 
 money; where it was always found, that the aug- 
 menting of the numerary value did notproduce 
 a proportional rise of prices, at least for some 
 time. In the last year of Louis XIV., money 
 was raised three sevenths, but prices augmented 
 only one." 
 
 The impression intended to be conveyed by 
 his Right Hon. Friend (Mr. Vansittart) was this; 
 that, inasmuch as there was no exact correspon- 
 dence between the quantity of paper and the 
 state of the exchanges, at the periods which were 
 specified by him, the evidence of facts was 
 against the doctrine of the Bullion Committee, 
 that a diminution of paper tended to melio- 
 rate the exchange. His Right Hon. Friend, if 
 reasoning at the time of Louis XIV., might 
 have shewn the evidence of facts to have been 
 against the corresponding doctrine of Mr. 
 Hume, that a debasement of the quality, and
 
 68 
 
 consequent enlargement of the quantity, 
 of the coin of a kingdom, tended to raise 
 prices. He would have only had to select 
 some day almost immediately following the 
 debasement, in order* to shew that no per; 
 ceivable consequence had followed. It then 
 took a year to produce an effect amounting to 
 l-7th, when the whole ultimate effect ought 
 plainly to be, and doubtless was, 3-7ths. The 
 case of the Bank of France, in 1805, might, in 
 like manner, have been turned by his Right 
 Hon. Friend to the purpose of proving his own 
 point. The restriction of its paper was not 
 effectual at once; it was not operative in any 
 kind of regular proportion to its degree. These 
 two cases served,- nevertheless, on the whole, 
 to establish the doctrine of the Bullion Com- 
 mittee. They shewed both the general effect 
 and the irregularity of it. Nothing, indeed, was 
 more easy, than for one who, in a case like this, 
 had the choice of the days on which he was to 
 make his comparisons, to state facts which would 
 seem to prove almost any thing. In one in- 
 stance, his Right Honourable Friend, arguing 
 from the amount of bank notes on a single day, 
 had stated them three millions higher than a 
 note supplied by a Bank Director (Mr. Raikes) 
 had allowed them to be; of which error he had 
 become so convinced, as to have altered his re-
 
 69 
 
 solution. It was only by averages of the amount, 
 and not by the amount on single days, and it 
 was by looking to periods subsequent to the 
 limitation of paper, that any sound inference 
 could be made. 
 
 There was another species of unfairness 
 in the Resolutions. They stated the fluctua- 
 tions in the exchange and the price of bullion, 
 for a long time preceding the suspension of 
 cash payments ; and then spoke of the varia- 
 tions since that period, as if these were some- 
 what similar in their deg?'ee. But was the 
 House aware of the different extent of the 
 fluctuations in the two periods ? He would 
 specify the fluctuations in the price of bullion. 
 This was a surer test of depreciation than the 
 exchanges. Many circumstances perplexed our 
 inquiry into the true par of exchange ; it was 
 necessary to know, first, the exact standard in 
 foreign countries ; — secondly, the degree of wear 
 of the current foreign coin ; for it was with the 
 coin actually circulating,and not with thatwhich 
 was fresh from the foreign mint, that the compa- 
 rison with our own was to be made ; — we ought 
 likewise to be informed whether tliere was any, 
 and what, foreign seignorage ; and also, indeed, 
 what obstacles to the exportation of the foreign 
 currency. But, besides these sources of inaccu- 
 racy, many of which were continually varying, 
 there was another most fruitful cause of error.
 
 70 
 
 namely, the circumstance of the standard of this 
 country having now for some time been gold, 
 while that of Hamburgh in particular, as well in- 
 deed as of Amsterdam, was silver. There had 
 been a very varying disproportion between the 
 prices of gold and silver in the world; and this 
 variation, as he believed, would serve to ac- 
 count for much of that occasionally great de- 
 pression of our apparent exchange with Ham^ 
 burgh in times preceding 1797, on which the 
 opponents of the Bullion Committee had re- 
 lied. The people of this country were not bound 
 to examine into all the intricacies of the ex- 
 change,in order to know whether their standard 
 was adhered to. The state of the exchanges 
 merely afforded a confirmation of a deprecia- 
 tion of our currency : a generally high price 
 of bullion of itself distinctly established it. 
 What, then, was the price of bullion before 
 17973 and what was it now ? It had never, be- 
 fore 1797, except in the South Sea year, and 
 at the time when our coin was deteriorated, 
 risen higher than 4/. Is. 6d. per oz. and 
 had scarcely ever reached that point; that 
 is to say, it had never fluctuated more than 
 from 31. 17s. lOd. to 4/. Is. 6d. — it was now 
 4/. 14s. It had not exceeded its proper mint 
 price by more than 3s. 8d. or 2 to 3 per cent, 
 in the one period — it exceeded it by iCs. 2d. or 
 fifteen to twenty per cent, in the other. Was it
 
 71 
 
 fair, then, to infer, or to imply, that because we 
 had occasionally departed from the standard 
 before 1797, to the extent, at the utmost, of two 
 or three per cent. ; we need not now regard a de- 
 parture from it of fifteen or twenty percent.? Tiie 
 Bullion Committee had never intended to say, 
 that no deviation from the standard of our coin, 
 however small, ought to be tolerated. They were 
 not in this respect the theorists which they were 
 sometimes represented to be. They, indeed, 
 affirmed bullion to be the standard, and the 
 more the subject was examined, the more 
 did it appear that we had either this stan- 
 dard or none; but they allowed of a mode- 
 rate departure from it. Nothing human 
 was perfect. The very mint, though it pro- 
 fessed to convert a pound of gold into forty- 
 four and a half equal parts, or guineas, did 
 not effect their object with mathematical pre- 
 cision, and to their deviation was given the 
 technical name of a Remedy. Even the most 
 minute departure of this kind below the 
 standard might be called a depreciation.. 
 Through the wear of guineas there arose a fur-V 
 ther depreciation, which the Parliament had I 
 taken care to limit, by making them cease 
 to be a legal tender when their weight fell be- 
 low about one per cent. The strictness cf this 
 limit shewed the principle in the mind of Par-
 
 n 
 
 liament; it proved that depreciation to a cer- 
 tain extent was contemplated, and that depre- 
 ciation beyond that point was thought an evil 
 to be carefully provided against. The opera- 
 tion of our laws, which prevented the melting 
 and exportation of coin, had led to a further 
 increase of the difference between the market 
 price and mint price of gold, or, in other words, 
 to a further depreciation. The effect produced 
 by all these causes had never, before the suspen- 
 sion of cash payments in 1797, been such as to 
 cause the actual currency of the country to 
 differ from bullion more than to that extent 
 of two or three per cent, which he had stated, 
 except on the two occasions which he had spoken 
 of. The people, therefore, up to that time, were 
 secure of having the value of their currency 
 thus far sustained. The liability of the Bank 
 to pay in cash, guaranteed to th^m a paper in- 
 capable of departing below bullion further than 
 in the degree which he had mentioned. At 
 the present time this paper was fifteen or 
 twenty per cent, below bullion, and they had no 
 security against a further, and even indefinite, 
 depression. It was said, that gold itself had 
 risen ; but even if it had, gold being the stan- 
 dard, we were bound to hold to it : we had held 
 to it in its general fall, and we ought to abide by 
 it in its general rise also. The argument that
 
 73 
 
 gold had risea would justify an adulteration ot 
 the gold coin, just as much as it would justify 
 the present depreciation. On the whole, he 
 thought, that to confound the little differences 
 between the market price and mint price of 
 bullion before 1797, with the great difference at 
 present, was most unfair. The difference*, it 
 was true, might he said to be only in degree, 
 but degree was every thing in this case ; and it 
 was remarkable, that the Resolution of his Right 
 Hon. Friend studiously forbore to specify the 
 amount of the difference between the market 
 price and mint price of bullion at the two 
 periods. 
 
 There remained only one other topic on 
 which he had to remark. — The Resolutions of 
 his Right Hon. Friend assumed that the notes 
 of the Bank of England were not excessive, 
 because the difference between their numeri- 
 cal amount now and in 1797, was not greater 
 than the comparative trade and expenditure at 
 the two periods would fairly justify. 
 
 The notes of 5/. and upwards, for the average of 
 three years before 1797, were about ten millions 
 seven hundred thousand pounds; and, for the ave- 
 rage of the last three years, were about fourteen 
 millions two hundred thousand pounds. He would 
 fairly say, that if he had been asked to pronounce 
 them excessive on the simple ground of their re- 
 L
 
 74 
 
 lativ^ uantity at the two periods, he might have 
 hesitated to do it. He should have inquired 
 what was the state of the exchanges and the 
 price of bullion, and should have formed his 
 judgment chiefly by the answer to this question. 
 He was, however, very far from admitting, on 
 the other hand, that the due limitation of them 
 could be presumed from what was called the 
 small extent of their increase. There was much 
 misconception on tiiis subject, which those who, 
 like himself, were acquainted with the money 
 transactions of the metropolis, were best able to 
 remove. A very increased degree of economy 
 was practised in the use of notes. Gentlemen 
 uninformed on this topic naturally assumed, 
 that when our trade and revenue and public 
 expenditure were extended, the amount of 
 notes requisite for these enlarged payments 
 must be nearly proportionate. But this was 
 very far from being the case. In the infancy 
 of paper credit, the circulation of such an esta- 
 blishment a,s the Bank of England mightregular- 
 ly and uniformly increase : a time, nevertheless, 
 would come when it would begin to diminish j 
 but exactly at what period, and in what degree, 
 this change would take place, was not easily as- 
 certained. When the Bank was instituted^ and 
 for some time afterwards, the fund which private 
 bankers, who were then goldsmiths, kept in 
 store as a provision against emergency, con-
 
 75 
 
 sisted chiefly of gold ; but by slow degrees 
 it became Bank of England notes. The 
 papers before the House would according- 
 ly shew how very trifling was the circulation of 
 the Bank at an early period of their establish- 
 ment, and how greatly it after a time advanced. 
 But it was not regularly progressive in propor- 
 tion as confidence increased. The banker 
 suffered a loss of interest proportionate to 
 the amount of Bank paper in his posses- 
 sion ; for which, therefore, he would be dis- 
 posed to substitute a paper from which no 
 such disadvantage accrued. Exchequer bills 
 furnished one provision of this sort. They 
 yielded interest to the banker, and yet were 
 convertible by a very short and sure process 
 into bank notes. Bank paper, therefore, was by 
 no means the perfection of the system ; it was 
 not his " last and best supply." The last and best 
 supply had been furnished from the Bank of the 
 Right Hon. the Chancellor of the Exchequer, 
 who well knew to what an extent his issues of this 
 kind had been recently carried. Bills ofexchange 
 also, and other articles of a similar nature, served 
 exceedingly to spare the use of notes; and a 
 variety of devices was resorted to for the same 
 purpose. As in many manufacturing concerns 
 there had been a perpetual exercise of inge- 
 nuity, and a consequent abridgment of labour; 
 io in the banking system there had been an
 
 76 
 
 exertion of the talents of individuals in produc- 
 ing the necessary quantity of notes. Evidence 
 had been given before the Bullion Committee 
 of the increasing number of money-brokers, 
 who passed from one banking-house to another, 
 and supplied the daily and hourly wants of one 
 quarter, by carrying away the superfluity of 
 anothf-r. U w^ could suppose the sixty or 
 seventy bankers of the metropolis to be re- 
 duced to six or seven, it was obvious that a very 
 diminished quantity of notes would suffice 
 for the same business. The improvements in 
 the banking system tended to unite, as it were, 
 into one house, for the purpose of which he was 
 speaking, even those bankers who held no di* 
 rect communication with each other. 
 
 The quantity of notes kept by private fami- 
 lies was also, as he believed, continually dimi- 
 nishing, through the increased habit of employ- 
 ing bankers, and ofcirculating drafts upon them, 
 in and round the metro|jolis. The circulation 
 of Barik of England notes in the country (he 
 still spoke of those of 51 and upwards), had pro- 
 bably also diminished, in consequence of the 
 immense increase of country banks. The sum 
 total of the stock of Bank of England notes kept 
 in store by these banks might be augmented ; 
 but that stock consisted, in a great degree, of 
 those \l. and 21. notes, which he had left out of 
 bis calculation.
 
 77 
 
 Mr. H. Thornton concluded with observing^ 
 that he was conscious of having left almost un- 
 touched many important parts of this exten- 
 sive subject. The material point, however, of 
 the nature of the standard, over which so much 
 obscurity was thrown by the present Resolutions, 
 had been so very ably and satisfactorily treated 
 by the Right Hon. Gentleman over the way 
 (Mr. Canning), as well, indeed, as by the Ho- 
 nourable Gentleman near him (Mr. Huskis- 
 son), that he had felt little inclination to dwell 
 upon it: but he could not sit down without ad- 
 verting once more to the first of the Resolu- 
 tions now proposed, in which the right of the 
 Crown to vary the standard, both with and with- 
 out the concurrence of Parliament, seemed to 
 be asserted. It might be true, that to the King, 
 generally speaking, was committed the regu- 
 lation of the coin of a country ; but the lan- 
 guage which he should be disposed to use, 
 would be that, not of his Right Hon. Friend, 
 but rather of Sir Thomas Rowe, at the coun- 
 cil table of Charles 1. ; — a language, indeed, in 
 the first words of it a little resembling the 
 Resolution on which he was animadverting, but 
 far different in its conclusion. " The regu- 
 lating of coin," said Sir T. Rowe, " hath been 
 left to the care of prnices, who have ever 
 been presumed to be the fathers of the com- 
 monwealth. Upon their honours they arc debt.
 
 78 
 
 ors and warrantees of justice to the subject in 
 that behalf r 
 
 Dr. A. Smith had observed, that "in every 
 country the avarice and injustice, of princes 
 and sovereign states, abusing the confidence 
 of their subjects, has by degrees diminished the 
 real quantity of metal in their coin." This was 
 an evil to which, in times of difficulty, like the 
 present, all nations were prone. The Romans 
 (observed the same author), in the later and 
 worse times of their country, reduced their coin 
 to one twenty-fourth. England had reduced 
 her pound only to one third. Scotland enjoyed 
 the honour, and had also had the advantage — 
 for such the principles of the Right Honourable 
 Baronet over the way (Sir John Sinclair) would 
 probably lead him to consider it — of having 
 reduced its coin to one thirty -sixth j France to 
 one sixty-sixth. He had always deemed it 
 highly creditable to England, that the deterio- 
 ration of her standard had been comparatively 
 so small J but we seemed to be now willing to 
 expose ourselves to the danger of giving way 
 to this temptation, while Hamburgh and Am- 
 sterdam, and our great adversary in France, 
 were superior to it. Their several standards 
 were sustained. That we might not yield in 
 this respect to the pressure of our present cir- 
 cumstances, was the chief object for the sake 
 of which he had spoken. A country seldom
 
 79 
 
 was sensible of the first steps taken in this 
 downward course j and it therefore belonged 
 to those who possessed an extensive knowledge 
 of such subjects, and adverted to the history 
 of other nations, to point out the approaching 
 danger. 
 
 He feared that the members of the Admini- 
 stration, partly, perhaps, through their having 
 taken in the first instance a too transient view of 
 the question, inconsequence of their multiplied 
 employments, and of their having then com- 
 mitted themselves too hastily upon it 3 partly 
 also through a wish to enjoy the present be- 
 nefit of an extended issue of paper in their 
 financial and political concerns, were not the 
 safest guides on the present occasion. He had 
 endeavoured, for his own part, to fulfil his dun 
 ty, both as an individual of the Bullion Com- 
 mittee and as a member of Parliament; and 
 though he had not dwelt in his speech on the 
 difficulties by which we were encompassed, he 
 had not formed his judgment without taking 
 them fully into his consideration. 
 
 FINIS. 
 
 JTIItnoB Mid HMdenon, Printcrt, Johosou'i Court, London.