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currency consists entirely of the pre- ed under an opinion that the paper cious metals, or of paper convertible could not be issued to excess if advancat will into the precious metals, the ed in discounts to merchants in good natural process of commerce, by es bills payable at stated periods, and like. tablishiog exchanges among all the wise under an opinion that neither the different countries of the world, ad. price of bullion nor the course of ex. justs, in every particular country, the changes need he adverted to, as affordproportion of circulating medium to ing any indication with respect to the its actual occasions, according to that sufficiency or excess of sirch paper, supply of the precious metals which the your cominittee cannot hesitate to say, inines furnish to the general market that these opinions of the Bank must of the world. The proportion, which be regarded as in a great measure the is thus adjusted and maintained by the operative cause of the continuance of natural operation of commerce, can- the present state of things. not be adjusted by any human wisdom Your committee will now proceed to or skill. If the natural system of cur- state, from the inforination which has rency and circulation be abandoned, besu laid before them, what appears to and a discretionary issue of paper have been the progressive increase, and noney substituted in its stead, it is to be the present amount, of the paper vain to think that any rules can be circulation of this country, consisting devised for the exact exercise of such primarily of the notes of 1: Bank of a discretion ; though some cautions England not at present convertible into may be pointed out to check and con. specie ; and, in a secondary manner, of trol its consequences, such as are indi- the notes of the country bankers which cated by the effect of an excessive issue are convertible, at the option of the opun exchanges and the price of gold. holder, into Bank of England paper. The directors of the Bank of England, After having stated the amouni cxf in the judgment of your committee, Bank of England paper, your cominithave exercised the new and extraordi- tee will explain the reason which innary discretion reposed in them since duce them to think that the numerical 1797, with an integrity and a regard to amount of that paper is not alone to the public interest according to their be considered as decisive of the, ques.' conceptions of it, and indeed a degree tion as to its excess : and before stat. of forbearance in turning it less to the ing the amount of country baok paper, profit of the Bank than it would easily so far as that can be ascertained, your have admitted of, that merit the cone committee will explain their reasons tinuance of that confidence which the for thinking, that the amount of the Public has so long and so justly felt in country bank circulation is united by the integrity with which its affairs are the amount of that of the bank of directed, as well as in the unshaken England. stability and ample funds of that great i. It appears from the accounts laid establishment. That their recent po. before the cominiltees upon i licy involves great practical errors, affairs in 1797, that for several years which it is of the utmost public im. previous to the year 1796, the averportance to correct, your committee age amount of bank notes in circiiare fully convinced ; but those errors lation was between £10,000,000 and are less to be imputed to the Baok 11,000,000. hardly ever falling bedirectors, than to be stated as the low £9,000,000, and not often exceedeffect of a new system, of which, ing to any great amount 11,000,000. bowever it originated, or was ren. The following abstract of the seve. dered accessary as a temporary expedi. ral accounts referred to your commitent, it might have been well if parlia- tee, or ordered by your conimitice liament had sooner taken into view all from the bank, will sbew the pro. the consequences. When your com. gressive increase of the notes from mittee consider that this discretionary tbe year 1798 to the end of the last power, of supplying the kingdom with year. circulatiog medium, has been exercise



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Average Amount of Bank of England Notes in circulation in each of the

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Taking from the accounts the last at the desire of your committee, fur. half of the year 1809, the average will nished a comparative scale, in progres. be found higher than for the whole sive numbers, sbewing the increase of Fear, and amounts to £.19,880,310, the amount of their discounts from the

The notes of the bank of England vear 1790 to 1809, both inclusive. are principally issued in advances to They made a request, with which your government for the public service, and conimittee have thought it proper to in advances to the merchants upon the comply, that this document might not discount of their bills.

be made public; the committee there. Your committee have had an ac- fore have not placed it in the appendis count laid before them, of advances to the present report, but have returnmade by the bank to government on ed it to the bank. Your committee, land and malt, exchequer bills and however, have to state in general other securities, ia every year since terms, that the amount of discounts the suspension of cash payments; frorn has been progressively increasing since which, as compared with the accounts the year 1796; and that their amount laid before the committees of 1797, in the last year (1809) bears a very and which were then carried back for 20 high proportion to their largest amount years, it will appear that the yearly ad- in any year preceding 1797. Upon this vances of the bank to government hare particular subject, your corumittee are upon an average, since the suspension, only anxious to remark, that the larg. been considerably lower in amount than est amount of mercantile discounts by the average amount of advances prior the bank, if it could be considered by to that event, and the amount of those itself, ought never, in their judgment, advances in the two last years, though to be regarded as any other than a greater in amount tban those of some great public benefit; and that it is years immediately preceding, is less only the excess of paper currency than it was for any of the six years thereby issued, and kept out in circapreceding the restriction of cash pay, lation, which is to be considered as ments.

the evil. With respect to the amount of com. But your committee must not omit mercial discounts, your committee did to state one very important principle not think it proper to require from the that the mere numerical return of be directors of the bank a disclosure of amount of bank notes out in circuls. their absolute amount, being a part of tion, cannot be considered as at all de their private transactions as a commer- ciding the questiva, whether such pecial company, of which, without ure per is or is not excessive. It is neces. gent reason, it did not seem right to sary to have recourse to otber tests. demand a disclosure. The late go. The same amount of payer may at one vernor and deputy governor, however, time be less than cough, and at as. other time more. The quantity of cur- a smaller sum of money is required than rence required will vary in some degree formerly, to perform the same nunber with the extent of trade; and the of exchanges and amount of payments, increase of our trade, which has taken if the rate of price had remained the place since the suspension, must have same. It is material also to observe, occasioned some increase in the quan- that both the policy of the bank of Engtity of our currency. But the quantity land itself, and the co'npetition of the of currency bears no fixed proportion Country bank paper, huve tended to to the quantity of commodities; and compress the paper of the bank of Eagany inferences proceeding upon such a laud, more and more, within Londoa sopposition, vould be entirely errone. and the adjacent district. All these cirons. The effective currency of the curr stånces must hive co-operated to country depends upon the quickness of render a smaller augmentation of bank circulation, and the number of ex- of England paper pecessary to supply changes perforined in a given time, as the demands of our increased traile well as upon its numerical amount; than might otherwise have been reand all the circumstances, which have quired; and shew how impossible it is, a tendency to quicken or to retard the from the ninerical amount alope of rate of circulation, render the same that paper, to pronounce whether it is amount of currency more or less ade- excessive or not: a more sare criterion quate to the wants of trade. A much must be resorted to; and such a crite. sinaller amount is required in a high rion, your committee have alrea'ly state of public credit, than when shewn, is only to be found in the siate alarms make individuals call in their of the exchaoges, and the price of advances, and provide against accidents gold bullion. by hoarding; and in a period of com- "The particular circumstances of mercial security and private confidence, the two years wich are so reijark. than when mutual distrast discourages able in the recent history of our cir. pecuniary arrangements for any dis- culation, 1793 and 1797, throw great tant time. But, above all, the same light upon the principle which your amount of currency will be more or commiitee have last stated. less adequate, in proportion to the In the year 1793 the distress was skill which the great money-dealers occasioned by a failure of confidence possess in managing and economizing in the country circulation, and a con. the use of the circulating medium. sequent pressure upon that of London. Your commoittee are of opinion, that the bank of England did not think the improvements which have taken it advisable to enlarge their insges to place of late years in this country, and meet this increased demand, and their particularly in the district of London, notes previously issued, circulating less with regard to the use and economy of freely in consequence of the alarm money among bankers, and in the inode that prevailed, proveri insufficient for of adjusting commercial payments, the necessary payınents. In this cri. must have had a much greater effeet sis, parliament applied a reinedy, very than has hitherto been ascribed to similar, in its effect to an enlarge them, in rendering the same sum ade- ment of the advances and issues of quate to 1 much greater aillount of the bank, a loan of exchequer bills trade and payments than formerly. was authorized to be made to as many Some of those improveinents will be mercantile persons giving good scfound detailed in ihe evidence: they curity, as should apply for them : and consist principally in the increased ase the corfidence which this measure of bankers drafts in the common pay- ditfased, as well as the increased means ments of London ; the contrivance of which it afforded of obtaiping bank bringing all such drafts daily to a com- notes through the sale of the exche. mon receptacle, where they are ba. quer bills, speedily relieved the dislanced against each other; the inter- tress botn of London and the country. mediate agency of bill-brokers; and Without offering an opinion upon the several other changes in the practice expediency of the particular inude in of London bankers, are to the saine which this operation was eflected, effect, of repdering it unnecessary for your committee think it an importthem to keep so large a deposit of mine aut illustration of ine principle, that pey as formerly. Within the London ao enlarg - econo dation is the true district, it would certainly appear, that reinedy for that occasional failure of


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confidence in the country districts, to bullion and a very unfavourable ex. which our sysiem of paper credit is change, yet it is essential to the con. unavoidably exposed.

mercial interests of this country, and The circumstances which occurred to the general fulfilment of those in the beginning of the year 1797, mercantile engagements which a free were very similar to those of 1793; issue of paper may have occasioned, an alarm of invasion, a run upon the that the acrustomed degree of accomcountry banks for gold, the failure modation to the inerchants should not of some of them, and a run upon be suddenly and materially reduced ; the Bank of England, forming a cri. and that if any general and serious sis like that of 1793, for which per- difficulty or apprehension on this subhaps an effectual remedy might have jcct should arise, it mas in the judge been provided, if the bank of England ment of your commitice, be counhad had courage to extend instead of teracted without danger, and with adrestricting ils accimmodations and vantage to the publie, by a liberality issues of notes. Some few persons, in the issue of bank of England pait appears from the report of the se- per, proportioned to the urgency of crct committec of the Lords, were of the particular occasion. Under such this opinion at the time; and the late ciren hastances, it belongs to the bank governor and deputy governor of the to take likewise into their own con bank stated to your committee, that sideration, how far it may be practithey and many of the directors, are cable, consistently with a due regard now satisfied, from the experience of to the immediate interests of the pub. the year 1797, that the diminution of lic sersice, rather to reduce their patheir notes in that eniergency increas. per by a gradnal reduction of their ed the public distress; an opinion in advances to government, than by too the correctness of which your com- suddenly abridging the discounts to mittee entirely concur.

the merchants. It appears to your committee, that 2. Before your committee proceed the experience of the bank of Eny- to detail what they have collected with land, in the years 1793 and 1797, con respect to the amount of country trasted with the facts wbich have bank paper, they must observe, that been stated in the present report, sug- so long as the cash payments of the gests a distinctiou most important to bank are suspended, the whole paper be kept in view, between that de- of the country bankers is a superstruc mand upon the bank for gold for the ture raised upon the foundation of the supply of the domestic channels of paper of the bank of England. The circulation, sometiincs a very great game check, which the convertibility and sudden one, which is occasioned into specie, under a better systein by a temporary failure of confidence, provides against the excess of any part and that drain upon the bank for of the paper circulation, is, during the gold which grows out of an unfavour- presept system, provided against an exable state of the foreign exchanges. cess of country bank paper, by its conThe former, while the bank maintains vertibility into bank of England paper. its high credit, seems likely to be best if an excess of paper be issued in a relieved by a judicious increase of ac- country district, while the London cir. commodation to the country ; the lat. culation does not exceed its due proter, so long as the bank does not pay portion, there will be a local rise of in specie, ought to suggest to the di. prices in that country district, but prirectors a question, whether their is. ces in London will remain as before. snies may not be already too abuu. Those who have the country paper in dant.

their hands will prefer buying in LonYour committee have much sa. don where things are cheaper, and wil isfaction in thinking, that the direc. therefore return that country paper tors are perfectly aware that they open the banner who issued it, and will may err by a too scanty supply in a demand froin biin bauk o England rotes period of stagnant credit. Aud your or bills upon London, and thus, the committee are clearly of opinion, that excess of country paper being contialthough it ought to be the general nually returned upon the issuers for policy of the bank directors to dimin bank of England paper, the quantity wish their paper in the event of the of the latter uccessarily and effectually long continuance of a bigh price of limits tbe quantity of the former. This

is illustrated by the account which has been already given of the excess, and subsequent limitation, of the paper of the Scutch banks, about the year 1763. If the bank of England paper itself should at any time, during the suspeusion 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 superstructure 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.

Nuviber of country bank notes exceeding 21. 03. each, stamped in the years

ended the 10th of October 1908, and 10th of October 1809, respectively.

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Assurning that the notes in the two first actual circulation, which cannot have been of these classes were all issued for the lowest very considerable, and also making an aldenomination to which the duties respec- lowance for some increase in the amount of tively attach, and such as are most com such country paper, as, though stamped tnonly met with in the circulation of country may not be in actual circulation. This in. paper, viz. notes of 51. and 101. (although crase in the general paper currency in in the second class there is a considerable last year, even after these deductions, number of 201.] and even omitting altoge- would probably be little short of the ther from the comparison the notes of the amount which in almost any one year, since three last classes, the issue of which your the discovery of America, bas been added coinmittee understands is in fact confined to the circulating coin of the whole of to the chartered banks of Scotland, the Europe. Although, as your committce result would be, that, exclusive of any has already had occasion to observe, no increase in the number of notes under 21. certain conclusion can be drawn from the 28. the amount of country bank paper numerical amount of paper in circulation, stamped in the year ended the 10th of Oc. considered abstractedly from all other cir. tober 1809, has exceeded that of the year cumstances, either as to such paper being ended on the 10th of October 1808, in the in excess, or still less as to the proportion sum of 3,095,340. Your committee can of such excess ; yet they must remark, that forin i positive conjecture as to the amount the fact of any very great and rapid inof country bank paper cancelled and with crease in that ainount, when conpled and draw from circulation in the course of the attended with all the indications of a deJast yeur. But considering that it is the preciated circulation, does afford the interes' and practice of :he country bavkers strongest confirmatory evidence, that, to use the same notes as long as possible; from the want of some adequate check, the that, -- the law no stands, there is no li- issues of such paper have not been restrainmitat o of time to the re-issuing of those ed within their proper limits. not exceeding 21. 2s.; and that all above Your committee cannot quit this part of that amount are re-isstrable for three years the subject without further observing, that from the date of their first issuing ; it ap- the addition of between four and five milpears difficult to suppose that the amount lions sterling to the paper circulation of of notes above 21. 2$. Carcelled in 1809, this country, bas doubtless been made at could be equal to the whole amount stainp- a very small expence to the parties issuing ed in 1809; but 'even upon that supposi sit, only about 100,0001. baving been paid tion, there would still be an increase for thereupon in stamps to the revenue, and 1809 in the notes of 51. and 101. alone, to probably for the reasons already stated, no the amount above specified of 3,095,3401; corresponding deposits of gold or Bank of V which must be added an increase within England notes being deemed by the cuunthe saine period of Bank of England hoteß try banks necessary to support their addito the arhount of about 1,500,0001., mak- tional issues. These parties therefore, it ing in the year 1909, an addition in the may be fairly stated, have been enablod whole or between four aud five willions to under the protection of the law, which virthe circulation of Great Britain alone, de- tually secures then against such demands, dacting only the gold which may have been to create within the last year or ifteen Withlrawn in the course of that year from months, at a very trifling expence, and in MONIKLY MAG. No. 208.

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