other time more. The quantity of cur- a smaller sum of money is required than formerly, to perform the same number of exchanges and amount of payments, if the rate of prices had remained the same. It is material also to observe, that both the policy of the bank of England itself, and the competition of the country bank paper, have tended to compress the paper of the bank of England, more and more, within Londoa and the adjacent district. All these circunstances must have co-operated to render a smaller augmentation of bank of England paper necessary to supply the demands of our increased trade than might otherwise have been re. quired; and shew how impossible it is, from the numerical amount alone of that paper, to pronounce whether it is excessive or not: a more sure criterion must be resorted to; and such a crite. rion, your committee have already shewn, is only to be found in the state of the exchanges, and the price of gold bullion. The particular circumstances of the two years which are so remark. able in the recent history of our circulation, 1793 and 1797, throw great light upon the principle which your committee have last stated. In the year 1793 the distress was occasioned by a failure of confidence in the country circulation, and a consequent pressure upon that of London. The bank of England did not think it advisable to enlarge their issues to meet this increased demand, and their notes previously issued, circulating less freely in consequence of the alarm that prevailed, proved insufficient for the necessary payments. In this cr sis, parliament applied a remedy, very similar, in its effect to an enlarge ment of the advances and issues of the bank, a loan of exchequer bills was authorized to be made to as many mercantile persons giving good sccurity, as should apply for them: and the confidence which this mesure diffused, as well as the increased means which it afforded of obtaining bank notes through the sale of the exche. quer bills, speedily relieved the distress boto of London and the country. Without offering an opinion upon the expediency of the particular iode in which this operation was effected, your committee think it an importaat illustration of the principle, that an enlarged coro dation is the true remedy for that occasional failure of confidence confidence in the country districts, to which our system of paper credit is unavoidably exposed. The circumstances which occurred in the beginning of the year 1797, were very similar to those of 1793; an alarm of invasion, a run upon the country banks for gold, the failure of some of them, and a run upon the Bank of England, forming a crisis like that of 1793, for which perhaps an effectual remedy might have been provided, if the bank of England had had courage to extend instead of restricting its accommodations and issues of notes. Some few persons, it appears from the report of the secret committee of the Lords, were of this opinion at the time; and the late governor and deputy governor of the bank stated to your committee, that they and many of the directors, are now satisfied, from the experience of the year 1797, that the diminution of their notes in that emergency increased the public distress; an opinion in the correctness of which your committee entirely concur. It appears to your committee, that the experience of the bank of England, in the years 1793 and 1797, contrasted with the facts which have been stated in the present report, suggests a distinction most important to be kept in view, between that demand upon the bank for gold for the supply of the domestic channels of circulation, sometimes a very great and sudden one, which is occasioned by a temporary failure of confidence, and that drain upon the bank for gold which grows out of an unfavourable state of the foreign exchanges. The former, while the bank maintains its high credit, seems likely to be best relieved by a judicious increase of accommodation to the country; the latter, so long as the bank does not pay in specie, ought to suggest to the directors a question, whether their is sues may not be already too abun. dant. Your committee have much sa. isfaction in thinking, that the direc⚫ tors are perfectly aware that they may err by a too scanty supply in a period of stagnant credit. And your committee are clearly of opinion, that although it ought to be the general policy of the bank directors to dimiuish their paper in the event of the long continuance of a high price of bullion and a very unfavourable ex. change, yet it is essential to the com mercial interests of this country, and to the general fulfilment of those mercantile engagements which a free issue of paper may have occasioned, that the accustomed degree of accommodation to the merchants should not be suddenly and materially reduced; and that if any general and serious difficulty or apprehension on this subject should arise, it may in the judgment of your commitice, be counteracted without danger, and with advantage to the public, by a liberality in the issue of bank of England paper, proportioned to the urgency of the particular occasion. Under such cirew instances, it belongs to the bank to take likewise into their own consideration, how far it may be practi cable, consistently with a due regard to the immediate interests of the public service, rather to reduce their paper by a gradual reduction of their advances to government, than by too suddenly abridging the discounts to the merchants. 2. Before your committee proceed to detail what they have collected with respect to the amount of country bank paper, they must observe, that so long as the cash payments of the bank are suspended, the whole paper of the country bankers is a superstrueture raised upon the foundation of the paper of the bank of England. The same check, which the convertibility into specie, under a better system provides against the excess of any part of the paper circulation, is, during the present system, provided against an excess of country bank paper, by its convertibility into bank of England paper. If an excess of paper be issued in a country district, while the London cir. culation does not exceed its due proportion, there will be a local rise of prices in that country district, but pri ces in London will remain as before. Those who have the country paper in their hands will prefer buying in London where things are cheaper, and will therefore return that country paper open the banker who issued it, and will demand from him bauk o Ergland notes or bills upon London; and thus, the excess of country paper being continually returned upon the issuers for bank of England paper, the quantity of the latter uecessarily and effectually limits the quantity of the former. This is illustrated by the account which has been already given of the excess, and subsequent lim tation, of the paper of the Scotch banks, about the year 1763. If the bank of England paper itself should at any time, during the suspension of cash payments, be issued to excess, a corresponding excess inay be issued of country bank paper which will not be checked; the foundation being enlarged, the superstruc ture admits of a proportionate extension. And thus, under such a system, the excess of bank of England paper will produce its effect upon prices not merely in the ratio of its own increase, but in a much higher proportion. Number of country bank notes exceeding 21. 2. each, stamped in the years ended the 10th of October 1508, and 10th of October 1809, respectively. Assuming that the notes in the two first of these classes were all issued for the lowest denomination to which the duties respectively attach, and such as are most comtnonly met with in the circulation of country paper, viz. notes of 51. and 101. [although in the second class there is a considerable number of 201.] and even omitting altogether from the comparison the notes of the three last classes, the issue of which your committee understands is in fact confined to the chartered banks of Scotland, the result would be, that, exclusive of any increase in the number of notes under 21. 28. the amount of country bank paper stamped in the year ended the 10th of October 1809, has exceeded that of the year ended on the 10th of October 1808, in the sum of 3,095,340. Your committee can form positive conjecture as to the amount of country bank paper cancelled and withdrawn from circulation in the course of the last year. But considering that it is the interest and practice of the country bankers to use the same notes as long as possible; that, as the law now stands, there is no limitat on of time to the re-issuing of those not exceeding 21. 2s.; and that all above that amount are re-issuable for three years from the date of their first issuing; it appears difficult to suppose that the amount of notes above 21. 2s cancelled in 1809, could be equal to the whole amount stamp ed in 1808; but even upon that supposi tion, there would still be an increase for 1809 in the notes of 51. and 101. alone, to the amount above specified of 3,095,3401; to which must be added an increase within the same period of Bank of England notes to the amount of about 1,500,0001, making in the year 1809, an addition in the whole of between four and five millions to the circulation of Great Britain alone, deducting only the gold which may have been withdrawn in the course of that year from MONTHLY MAG. No. 208. actual circulation, which cannot have been very considerable, and also making an allowance for some increase in the amount of such country paper, as, though stamped may not be in actual circulation. This increase in the general paper currency in last year, even after these deductions, would probably be little short of the amount which in almost any one year, since the discovery of America, has been added to the circulating coin of the whole of Europe. Although, as your committee has already had occasion to observe, no certain conclusion can be drawn from the numerical amount of paper in circulation, considered abstractedly from all other circumstances, either as to such paper being in excess, or still less as to the proportion of such excess; yet they must remark, that the fact of any very great and rapid increas in that amount, when coupled and attended with all the indications of a depreciated circulation, does afford the strongest confirmatory evidence, that, from the want of some adequate check, the issues of such paper have not been restrained within their proper limits. Your committee cannot quit this part of the subject without further observing, that the addition of between four and five millions sterling to the paper circulation of this country, has doubtless been made at a very small expence to the parties issuing it, only about 100,0001. baving been paid thereupon in stamps to the revenue, and probably for the reasons already stated, no corresponding deposits of gold or Bank of England notes being deemed by the country banks necessary to support their additional issues. These parties therefore, it may be fairly stated, have been enabled under the protection of the law, which virtually secures them against such demands, to create within the last year or fifteen months, at a very trifling expence, and in 42 the very high price of bullion, and next te that, the low state of the continental ex. changes; that this excess is to be ascribed to the want of a sufficient check and control in the issues of paper from the bank of England; and originally, to the suspension of cash payments, which removed the natural and true control. For upon a general view of the subject, your committee are of opinion, that no safe, certain and constantly adequate provision against an excess of paper currency, either occasional or permanent, can be found, except in the convertibility of all such paper into specie. Your committee cannot, therefore, but see reason to regret, that the suspension of cash payments, which, in the most favourable light in which it can be viewed, was only a temporary measure, has been continued so long; and particularly, that by the manner in which the present continuing act is framed, the character should have been given to it of a permanent war measure. a manner almost free from all present risk to their respective credits as dealers in pper money, issues of that article to the amount of several millions, operating, in the first instance and in their hands, as capital for their own benefit, and when used as such by them, falling into and in succession mixing itself with the mass of circulation of which the value in exchange for all other commodities is gradually lowered in proportion as that mass is angmented. If your committee could be of opinion that the wisdom of parliament would not be directed to apply a proper remedy to a state of things so unnatural, and teeming, if not corrected in time, with ultimate consequences so prejudicial to the public welfare, they would not hesitate to declare an opinion, that some mode ought to be derived of enabling the state to participate much more largely in the profits accruing from the present system; but as this is by no means the policy they wish to Your committee conceive that it would recommend, they will conclude their observations on this part of the subject, by be superfluous to point, out in detail, the observing, that in proportion as they most disadvantages which must result to the fully agree with Dr. Adam Smith and all country, from any such general excess of the most able writers and statesmen of this currency as lowers its relative value. country, in considering a paper circulation The effect of such an augmentation of constantly convertible into specie, as one prices upon all money transactions for of the greatest practical improvements time; the unavoidable injury suffered by which can be made in the political and do- annuitants, and by creditors of every demestic economy of any state; and in view- scription, both private and public; the ing the establishment of the country banks uniutended advantage gained by governissuing such paper as a most valuable and ment and all other debtors; are coi seessential branch of that improvement in this quences too obvious to require proof, and kingdom; in the same proportion, is your too repugnant to justice to be left withcommittee anxious to revert, as speedily out remedy. By far the most important as possible, to the former practice and state portion of this effect appears to your of things in this respect: convinced on the committee to be that which is communione hand, that any thing like a permanent cated to the wages of common country and systematic departure from that prac- labour, the rate of which, it is well known, tice must ultimately lead to results, which adapts itself more slowly to the changes among other attendant calamities, would which happen in the value of money, than be destructive of the system itself; and the price of any other species of labour or on the other, that such an event would be cominodity. And it is enough for your the more to be deprecated, as it is only in committee to allude to some classes of the a country like this, where good faith, both public servants, whose pay, if once raised public and private, is held so high, and in consequence of a depreciation of money, where, under the happy union of liberty cannot so conveniently be reduced again to and law, property and the securities of its former rate, even after money sha!! every description by which it is represented have recovered its value. The future proare equally protected against the encroach-gress of these inconveniencies and evils, if ments of power and the violence of popular commotion, that the advantages of this system, unaccompanied with any of its dangers, can be permanently enjoyed, and carried to their fullest extent. Upon a review of all the facts and reasonings which have been submitted to the consideration of your committee in the course of their enquiry, they have formed an opinion, which they submit to the house-that there is at present an excess in the paper circulation of this country, of which the most unequivocal symptom is not checked, must at no great distance of time, work a practical conviction upon the minds of all those who may still doubt their existence; but even if their progres sive increase were less probable than it appears to your committee, they cannot help expressing an opinion, that the integrity and honour of parliament are con eerued, not to authorise, longer than is required by imperious uecessity, the continuance in this great commercial country of a system of circulation, in which that natural check or controul is absent which maintains maintains the value of money, and, by the permanency of that common standard of value, secures the substantial justice and faith of monied contracts and obligations between man and man. Your committee moreover beg leave to advert to the temptation to resort to a depreciation even of the value of the gold coin by an alteration of the standard, to which parliament itself might be subjected by a great and long continued excess of paper. fhis has been the resource of many governments under such circumstances, and is the obvious and most easy remedy to the evil in question. But it is unnecessary to dwell on the breach of public faith and dereliction of a primary duty of government, which would manifestly be implied in preferring the reduction of the con down to the standard of the paper, to the restoration of the paper to the legal standard of the coin. Your committee, therefore, having very anxiously and deliberately considered this subject, report it to the house as their opinion, that the system of the circulating medium of this country ought to be brought back, with as much speed as is compatible with a wise and necessary caution, to the original principle of cash payinents at the option of the holder of bank paper. Your committee have understood that remedies, or palliatives, of a different nature, have been projected; such as, a compulsory limitation of the amount of bank advances and discounts, during the continuance of the suspension; or, a compulsory limitation during the same period, of the rate of bank profits and dividends, by canying the surplus of profits above that rate to the public account. But, in the judgment of your committee, such indirect schemes, for palliating the possible evils resulting from the suspension of cash payments, would prove wholly inadequate for that purpose, because the necessary proportion could never be adjusted, and if once fixed, might aggravate very much the inconveniencies of a temporary pressure; and even if their efficacy could be made to appear, they would be objectionable, as a most hurtful and improper interference with the rights of commercial property. According to the best judgment your committee has been enabled to form, no sufficient remedy for the present, or security for the future, can be pointed out, except the repeal of the law which suspends the cash payments of the bank of England. In effecting so important a change, your committee are of opinion that some difficulties must be encountered, and that there are some contingent dangers to the bank, against which it ought most carefally and strongly to be guarded. But all those may be effectually provided for, by entrusting to the discretion of the bank itself the charge of conducting and completing the operation, and by allowing to the bank so ample a period of time for conducting it, as will be more than suffici ent to effect its completion. To the discret on, experience, and integrity of the directors of the bank, your committee believe that parliament may safely entrust the charge of eflecting that which parliament may in its wisdom determine upo as necessary to be effected; and that the directors of that great institution, far from making themselves a party with those who have a temporary interest in spreading alarm, will take a much longer view of the permanent interests of the bank, as indissolubly blended with those of the public. The particular mode of gradually effecting the resumption of cash payments ought therefore, in the opinion of your committee, to be left in a great measure to the discretion of the bank, and parliament ought to do little more than to fix, definitively, the time at which cash payments are to become as before compulsory. The period allowed ought to be ample, in order that the bank directors may feel their way, and that, having a constant watch upon the varying circumstances that ought to guide them, and availing themselves only of favourable circumstances, they may tread back their steps slowly, and may prescive both the course of their own affairs as a company, and that of public and commercial credit, not only safe but unembarrassed. With this view, your committee would suggest, that the restriction on cash payments cannot safely be removed at an earlier period that: two years from the present time; but your committee are of opinion, that early provision ought to be inade by parliament for terminating, by the end of that period, the operation of the several statutes which have imposed and continued that restriction. In suggesting this period of two years, your committee have not overlooked the circumstance, that, as the law stands at present, the bank would be compelled to pay in cash at the end of six months after the ratification of a definitive treaty of peace; so that if peace were to be concluded within that period, the recommen. dation of your committee might seem to have the effect of postponing, instead of accelerating the resumption of payments. But your committee are of opinion, that if peace were immediately to be ratified, in the present state of our circulation, it would be most hazardous to compel the bank to pay cash in six months, and woul |