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of cash payments, took place at periods when the currency was least redundant, when the price of gold and the foreign exchanges indicated scarcely any depreciation; stores of gold were purchased and laid up in the Bank at a time when, had they resumed cash payments, little, if any, gold would have been demanded of them. In corroboration of this opinion, w may add, that when, under similar indications, the Bank did resume cash payments, no demand at all was made upon them for gold. The solution of this strange conduct appears to be simply this, that the Bank regulated, not their issues of notes, but their purchases of bullion, by the price of the precious metals—they bought gold only when it was below a certain price, that price being sometimes fixed by their resolutions considerably above the standard, or mint price, of 31. 17s. 10d. We have already shewn, by reference to the tables, that the periods at which they increased their stores of treasure, were exactly the periods when those reserves of bullion were. least required to meet a resumption of cash payments; and the periods at which those reserves ran lowest, were just those at which it behoved them to be best prepared, in case of a resumption, to stand a very considerable run upon them for gold.
Now it is easy to see that this is the necessary consequence of such a rule of conduct: for having affixed a maximum to the price at which they would purchase gold, the moment the currency arrived at a certain point of excess, gold rose above it, and they were forced by their own rule to discontinue purchasing it: their reserve consequently diminished. The reverse effect took place on a contraction of the currency; an influx of the precious metals into their coffers was then the result of their resolutions regarding the purchase of gold. Now if the idea of regulating their issues by keeping their circulation in a certain proportion to their reserve, had ever entered into their heads, (and it would have been fortunate if it had done so, for, as the amount of that reserve depended, under their rule, upon the price of bullion, their issues would have been effectually controlled,) they would either never have allowed the price of gold to remain above their maximum price for seven years, while their treasure was daily diminishing from the supplies of bullion which they afforded to government; or (if they were unaware that they had the remedy in their own hands) they would have felt and expressed alarm at such a state of things, which, had it continued, would have left their coffers absolutely empty, or obliged them to discontinue their supply of bullion to government. But the truth is, that the directors of the Bank of England had as little idea of regulating their issues by the price of gold, or amount of their reserve, as they had of the means by which they had it in their power to have lowered the former and increased the latter. They stoutly asserted that the currency was not in excess, that their notes were not depreciated. Mr. Vansittart moved, and the commons voted, that the contrary proposition was untrue—the depreciation (which existed, notwithstanding all these formidable authorities, and the omnipotence of parliament) might have continued—might have increased to any extent, but that the directors issued their notes and regulated their currency by a rule which made the supply of the circulating medium depend upon the number of applications for discounts at the bank,-in
other words, upon the rate of interest. Now as that rate fluctuates, and as the bank did not closely follow its fluctuations in the regulation of their rate of discounts, it is clear that, according as the bank discounted above the market rate, the circulation might have been reduced so as to enhance the value of the circulating medium to a very great degree, just as, in 1814, an excess of the circulating medium produced its greatest depreciation.
Had the Bank directors regulated their issues by the barometer, they could hardly have chosen a more effectual method of securing a continual fluctuation in the value of their notes. The consideration of these circumstances puts an end to all surprise at the strange anomalies presented under this head in the table given by Mr. Tooke, in which it appears that the amount of the reserve in the bank, instead of varying directly as the amount of their notes and the price of gold, during the greatest portion of the time of the restriction, ran low as the amount of their notes increased, and as the price of gold rose. We cannot then agree with Mr. Tooke in the following inference which he draws from the table: “ That the Bank directors did, during that long interval, regulate their issues with a pretty constant reference to their eventual liability to pay in specie; for what other possible motive could they have for keeping so large a part of their capital in an unproductive state?"--(Letter to Lord Grenville, p. 47.) We think we have shewn that their reserves were so managed as to negative the assumption that they were kept with a view to a resumption of cash payments; that their occasional high amount was the result of a comparatively low price of gold, a price which the Bank directors had no voluntary share in occasioning; and, moreover, that the general conduct of the persons who managed the affairs of the Bank, does not make it absolutely incumbent upon him or upon us, as Mr. Tooke implies by the latter part of the sentence, to give a substantial reason for their acts.
We now come to the second argument advanced by those who have contended against Mr. Ricardo's estimate of the depreciation of the currency. That argument rests upon a rise asserted to have taken place in the price of commodities subsequently to the restriction, and to have continued until the resumption of cash payments under Mr. Peel's bill. But, in order that prices may form any criterion by which the excess or deficiency of the circulating medium is to be ascertained, it is obvious that, in the first place, the rise or fall of price must be common to every commodity ; that where the precious metals do not compose any portion of the circulating medium, as they certainly did not during the Bank restriction, during which time gold ceased to be the measure of exchangeable value, and prices were estimated in Bank of England notes, bullion becomes a mere commodity ; subject, in the market, to the same laws of exchangeable value as corn, cotton, or iron, and that, therefore, a rise or fall in the price of gold would as necessarily accompany a redundant, or deficient circulation, as a rise in the price of cotton, corn, or iron; and that the rise or fall in gold would not only accompany, and be coincident with the rise or fall in the price of other commodities, but, in the absence of other disturbing causes, extrinsic to the state of the circulation, would be co-extensive. The redundancy, or deficiency of the circulating medium does not affect prices partially or unequally. 1f then, under a restriction, the rise in the prices of commodities, bullion included, be not universal and co-extensive, we must look for those disturbing causes intrinsic to the commodities themselves, which we have already alluded to in a former part of this article, when treating of the effects of the Bank restriction on the general value of the precious metals. It becomes necessary then to enquire into the existence and effect of those disturbing causes peculiar to commodities taken individually, arising out of circumstances affecting their demand and supply. The question then becomes one of infinite detail. It becomes absolutely necessary not only to trace the actual variations in price of a vast variety of articles, but to examine, at each period, the state of their production, distribution, and consumption, until we can discover one whose unvaried value may afford a standard whereby to estimate the depreciation, or enhancement of the exchangeable value of the currency. A discrepancy like this between the rise in the price of gold and that of a variety of other commodities being admitted to have existed at the period under consideration, such an analysis becomes necessary; yet at this we have never hitherto seen any attempt, attended with any thing approaching to success, made by any of the antagonists of Mr. Ricardo. On the other hand, Mr. Tooke, in his work on High and Low Prices,' has presented a view of the fluctuations in the prices of a vast number of the staple commodities of this country, and traced those fluctuations (and especially those most relied upon by the ultra-depreciationists) very minutely and satisfactorily, to causes intrinsic to the articles themselves; and he has disproved the connexion of a great portion of their rise with the state of the currency: whilst, at the same time, he has shewn the comparative steadiness in the general value of the precious metals, by reasonings wbich we have already had occasion to revert to. We regret that the length to which this article has already extended precludes our entering, at present, further into this branch of the subject; but, we regret it the less, as we hope that a continuation of the valuable work to which we have already so often alluded, is in process of completion by its author; and the prospect which he holds out in the pamphlet now before us, warrants us in supposing that it will not be long before it will afford us an opportunity of recurring to the subject.
The large amount of Bank of England notes in circulation is frequently referred to by the ultra-depreciationists as a proof of the excess of the currency. But the absolute amount of the circulating medium cannot, as an insulated fact, be of itself a proof of depreciation. That the circulating medium may be increased in absolute amount without necessarily producing a depreciation, is a simple and obvious deduction from the very elementary proposition in the theory of money, that the value of the whole circulating medium must be equal to the value of the exchanges of commodities which are simultaneously performing by means of its intervention ; thence we may infer that a greater degree of national wealth or of commercial activity will call for an increase of the circulating medium. This is one cause which, in any country, may produce an extension of the whole circulating medium, of whatever nature it may be, without necessarily occasioning any depreciation. But in a country like this, where commerce is in a high state of advancement, the circulation is composed of a vast variety of substitutes for money; and in the transaction of mercantile affairs numerous expedients are resorted to for the purpose of avoiding the intervention of so valuable an object as precious metal.
of the nature of the former are bills of exchange, promissory notes; of that of the latter, are bankers' accounts* and credit. All these expedients were in use, and formed a part of the general circulation of the country at the period of the Bank restriction. But where the commercial affairs of a nation are carried on by such a variety of means, the amount of one only of the various descriptions of currency which are in use, affords obviously a very inaccurate criterion of depreciation: for any sudden contraction of any one branch of currency may call for an extension of another, in order to fill up the deficiency in the circulating medium. The amount of Bank of England notes, for instance, may, if they constitute the lawful
money of the realm, be increased to a great extent by those circumstances which frequently are the result of over-trading. The losses amongst those who have embarked in speculations which have not been attended with success, occasion frequent, and perhaps, unexpected failures; confidence is impaired; that part of the currency which depends upon confidence for its existence is reduced to so small an amount as to render the whole circulation inadequate to perform even a diminished amount of mercantile exchanges. Under these circumstances, it is obvious, that an extension of any one of the other branches of currency may be affected, not only without producing a depreciation, but may be absolutely necessary to prevent an enhancement of the value of the circulating medium. To give an example: such an event took place upon a great scale in the year 1810. “A great commercial revulsion,” says Mr. Tooke, (Letter to Lord Grenville, p. 89) “ began in the summer of that year, as a consequence of the extravagant speculations connected with an extension of credit which had occurred in the two preceding years. Besides numerous and extensive mercantile failures, no fewer than twenty-six country banks failed.
“ The applications for discount at the Bank of England rose to an unprecedented height, and an addition was made of four millions to its circulation, making the amount, in August, 1810, 24,446,1751., the greatest amount which it reached before the termination of the
“But this addition to the Bank circulation of nearly eight millions, compared with the amount in February, 1808, and six millions and a half, compared with the amount in February, 1809, was hardly sufficient to fill the void in the general circulation created by the diminution of banking and mercantile credit."
Now, during the restriction, when the notes of the Bank of England had been thus thrown into the circulation, they were not, upon the re
* A very masterly exposition, by Mr. Pennington, of the manner in which exchanges are affected, and intervention of money rendered unnecessary through the medium of bankers' accounts, is given in the appendix to Mr Tooke's pamphlet. turn of confidence, driven out again by those mercantile securities, whose place they had taken, so soon as a metallic circulating medium would have been : the 'motive of economizing, which had, in a great degree, given birth to those various substitutes for money, no longer existed, when they could no longer displace anything more valuable than themselves; and, being no longer a cheaper medium of exchange, it was only in those cases where they were a more convenient one that they re-entered the circulation. This circumstance will tend very materially to account for the great and progressive increase of the amount of Bank of England notes during the restriction.
We must now take leave of this subject. We are conscious that we ourselves have brought no new or original matter to the discussion of it; but we shall be amply satisfied if we shall have revived, in the recollection of those who have already studied them, or introduced to the notice of those who have not, the arguments of the able writers who have taken a part in this controversy; and if, by so doing, we shall have in any degree contributed to protect and maintain the integrity of public and private contracts, against the attacks of certain politicians, who, led away by mistaken views and partial considerations of the question we have been discussing, seek to disturb the prosperity of individuals, to violate the rights of the national creditor; and who do not scruple to affix to their scheme of plunder and injustice the monstrous misnomer of an “equitable adjustment.”
We are not sure that there is, after all, any better way of making knowledge, of any kind, popular, than that of mixing it up with the human interest of biography. Of course, this is not the method, according to which the regular student of any science or branch of literature will prefer instituting himself in the subject he would master : he is strong-headed enough to drink the merum of philosophy, its unmixed wine, or if necessary, its thrice concentrated alcohol. But we speak of the case of those, whose customary potations being of a comparatively very weak and uninspiring element, have neither brain nor palate for such potent draughts; and are apt, therefore, to be overset by their very presentment. As to them, we must remember, that the rule is "milk for babes,”-sugar with the physic,-a plentiful dash of water in the wine. It will not, administered in this fashion, elevate them at so rapid a rate, certainly ; nor perhaps ever lift them to the same transcendental state which men arrive at through means of the unmitigated spirit; but still, it is by no means incapable of supplying a very comfortable inspiration for all that, and imparting to the mind both enjoyment and refinement. The question then is, not what is the right method of teaching the truths of science to the professed student of science, but rather, how a taste for any kind of knowledge, and an acquaint