THE QUESTION

CONCERNING THE

DEPRECIATION OF OUR CURRENCY

STATED AND EXAMINED.

"It is the interest of every country that the Standard of its Money, once settled, should be inviolably and immutably kept to perpetuity. For whenever that is altered, upon what pretence soever, the Public will lose by it.

"Men, in their bargains, contract, not for denominations or sounds, but for the intrinsic value."-Locke on Money.

PREFACE.

FROM the circumstance of my having been a member of the Bullion Committee, and from its being known to several of my friends that I had taken a part in the discussion which preceded the Report, I have been pressed, by more than one of them, for some explanation of my opinions respecting the state of our currency and circulation, and of the grounds on which those opinions are founded. fied to find their attention awakened to all the importance of the subject, and with my own feelings fully alive to it, I committed to paper the substance of my opinions, in part before, and the remainder very soon after, the publication of the Report.

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Proportionate to the general interest excited by that Report, has been the clamour raised against it. That clamour, and the strange doctrines which are set up in opposition to the principles and conclusions of the Committee, have induced some of those who had originally read what I had written with the partiality of friends, to express a wish that I would publish it.

If this wish had not been fortified by other considerations, I should not, by yielding to it, have exposed myself to the imputation of that vanity, to which such indiscreet compliance is generally, and perhaps often justly ascribed. But when so many pens are employed to propagate what appear to me most false and dangerous theories upon the subject of our currency; when several of those who have taken upon themselves to controvert the Report have gone out of their way to misrepresent the conduct, and to cast obloquy on the characters and motives of those who concurred in it; and above all, when the many evil consequences of an erroneous, or even an unsettled state of the public mind upon a question of such vast importance, are considered; I trust that I shall be justified in submitting, what was originally prepared for an indulgent and limited circle only, to the examination and judgment of a more extended and impartial tribunal.

With deference, then, I venture to offer to the public an exposition of the course of reasoning which led my mind to the conclusion which I have formed upon a question in which the public has so deep an interest.

Any man, I think, who has read the pamphlet of Sir John Sinclair, or the speech of Mr. Randle Jackson to the Proprietors of Bank Stock (as reported in the newspapers), must admit, that I have not unfairly described the attacks which have been made upon the Report of the Bullion Committee.

Both these productions appeared long after the following observations were written. To enter into any examination of their contents is not compatible with the object and limits of these introductory remarks; nor indeed, if it were, should I be tempted to such an examination, notwithstanding the circular invitation with which the Right

Honourable Baronet is said to have accompanied the distribution of his pamphlet.

When among other theories equally extraordinary,— (whimsically dignified with the name of axioms in the work itself)-this author, before he is well clear of his preface, lays it down as a leading principle, "that the abundance of circulation is the great source of opulence and strength;" and emphatically styles it "the mine of national prosperity ;"-when he defines Money to be “ a well regulated paper currency with a certain proportion of coin ;"-I should be at a loss how to deal with such axioms. They appear to belong to that class of propositions which have been sometimes characterized by rhetoricians as being "neither true nor false;" and as they are (to me at least) wholly unintelligible, they must of course be unanswerable.

There is, however, one charge against the Committee, much dwelt upon both in the speech and in the pamphlet to which I have referred, with which I must detain my readers for a few moments. It is that of having made a Report directly contrary to, and altogether inconsistent with, the evidence. This assertion has surprised me; and I have looked in vain for any proofs in support of it.

The Committee endeavoured, in the first instance, to collect and place upon their records certain facts; such, for instance, as the continued high price of gold bullion, and the great depression of the foreign exchanges. To any explanations that were offered by the witnesses, of the causes which had produced this state of things, they listened with the most patient attention; and have given them a place in the Appendix, in the words of the parties examined. But when these explanations appeared to the Committee to be either unfounded or insufficient; to be contradicted by the experience of former times, or by the

actual state of facts; to be inconsistent with each other, or with the admissions of the witnesses themselves; could it be the duty of the Committee to adopt them as their creed? Was it not rather their duty to state, in what respect, in what degree, and in what instances these explanations appeared to them unfounded or insufficient; and to point out the circumstances by which they were contradicted, and the inconsistencies which they involved?

It was indeed for the House of Commons to consider whether they would appoint such a Committee at all, or refer such a subject to such a mode of examination: and if it was foreseen that the promulgation of an opinion, such as that which the Committee have formed, would be attended with public mischief (which I however am very far from thinking), it might, in that case, be matter of regret that the House should have consented to its appointment. But, even in that case, nothing can be more unjust than to impute as blame to the members of the Committee, acting under the orders of the House, the due discharge of a duty which the House had thought proper to impose upon them.

In the execution of this duty it became necessary to ascertain the principles by which the Directors of the Bank of England had been governed in the issues of their paper since the restriction.

This information could not be obtained from them in their corporate capacity: it could only be collected from those who were at the head of the Direction.

This forms by far the most important part of the evidence: because the supply of our circulation being now without control in the hands of Directors, it was essential to ascertain by what rules and principles they were guided in the exercise of this extensive discretion. Before this enquiry, these rules and principles were, I believe, unknown

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to the public: they were certainly unknown to me. Committee have stated them in the words of the Governor and Deputy Governor of the Bank; and have assigned reasons for thinking that they do not afford a check constantly and sufficiently operative against an over-issue, and consequent depreciation of Bank paper. Is this what is called making a Report directly contrary to the evidence?

Mr. Jackson, indeed, is of opinion that the Committee ought to have surrendered their judgment altogether to the authority of those witnesses who asserted, that Bank Notes are "not depreciated;" and who stated as the grounds of that assertion, that "in their extensive and various transactions, no difference exists between Bank Notes and coin." As Mr. Jackson is, unfortunately, not the only person to whom this inference appears to be conclusive, it may be regretted, as an omission, that the Report of the Committee did not more particularly guard against it. There is perhaps no part of the question which is capable of being settled with greater ease and certainty. The experience of our own, as well as of all other countries, has placed beyond the reach of controversy the proposition, that if one part of the currency of a country (provided such currency be made either directly or virtually a legal tender, according to its denomination) be depreciated, the whole of that currency, whether paper or coin, must be equally depreciated. This proposition, I trust, the reader will find satisfactorily made out in the following pages.

Whilst I am aware that I must despair of convincing persons so entirely at variance with the first principles of political economy, there is another, and I hope a larger class, to whose understandings the following observations must appear superficial and unnecessary. They certainly contain nothing which is new; or which can be striking or interesting to any readers of that class. A discussion which goes