1817, the new gold coinage began to be issued from the Mint in large quantities. The consequence was a steady demand for gold set in upon the bank, and in pursuance of its notices the sum of £6,756,000* was drawn out of it in gold. Just at this time the British Government reduced the rate of interest upon Exchequer bills. The much higher rate of interest offered by continental governments caused a great demand for gold for exportation, and in the beginning of 1818 a very decided drain set in. The Bank directors, however, determined to set all the principles of the Bullion Report ostentatiously at defiance. While this great drain was going on, they increased their advances to government from £20,000,000 to £28,000,000, and though they knew perfectly well that the demand of gold was for exportation, they took no measures whatever to reduce their issues for the purpose of checking the export. At the same time the issues of country banks had increased by two-thirds since 1816. 90. This demand for gold became more intense during 1818 and 1819, and it became evident that the bank would soon be exhausted if legislative interference did not take place. Accordingly on the 3rd February, 1819, both Houses appointed committees to inquire into the state of the bank; and on the 5th April they reported that it was expedient to pass an Act immediately to restrain the bank from paying cash in terms of its notices of 1816-7. An Act for that purpose was passed in two days' time. It was stated in the report of the Commons that in the first six months of 1818, 125 millions of francs had been coined at the French Mint, three-fourths of which had been derived from the gold coin of this country. The Act‡ forbade the Bank to make any payments in gold whatever, either for fractional sums under £5, or any of their notes, during that session of parliament. *Report of Commons' Committee, p. 4. Parl. Debs. Vol. xxxix. p. 1400. Statute, 1819, c. 23. The Act, therefore, totally closed the Bank for payments in cash. 91. Both Houses of Parliament immediately appointed committees to inquire into the subject. The one in the Commons was presided over by Sir R. (then Mr.) Peel. The entire and unanimous strain of evidence of the mercantile world was now completely in favor of the opinion of the Bullion Committee, which had been so ignominiously rejected eight years before. And the current of commercial opinion converted the chairman, who introduced the bill into the House, directing that the Bank should resume specie payments at the mint price of gold, on the first of May, 1823. However, the Bank was afterwards permitted to commence paying in specie on the 1st May, 1821. 92. Immediately after the cessation of the war, the government had taken in hand the great work of a complete re-coinage, when the great principle, first discovered by Locke, was at length adopted, of having only one standard of value. During the course of the preceding century, merchants had become accustomed to consider all contracts to be made in gold, and this was now declared to be the sole legal tender. At the end of the 18th century, the relative value of gold and silver had undergone a perceptible change in the markets of the world. Consequently, the adjustment that had been made in 1717, no longer corresponded to the market value of the two metals; and if a silver coinage had been issued at the former denomination and weight, the very same effects would have followed, which had been experienced so often before; it would have immediately disappeared from circulation. In order to guard against this the power of private persons to have silver coined was taken away, and the pound weight of silver was ordered to be coined into 66, instead of 62 shillings; but of these, 4 were kept back for the expenses of coinage, and consequently only 62 were issued. The result of which is, that the present shillings pass current for rather more than 6 per cent. above their intrinsic value. In order to prevent any injustice to individuals from this depreciation of the coinage, it was enacted that no tender of payment in silver above 40s. at any one time should be legal, either by tale or by weight. This arrangement of the English coinage has this great merit, that it allows a very considerable change to take place in the market value of gold and silver, without causing any disturbance in the currency. In France, where silver is the legal tender of the state, gold and silver are coined according to their relative market value, the consequence has been that silver has nearly disappeared from circulation. The fact seems placed beyond all question, that the prodigious additions recently made to the quantity of gold, have caused an alteration in the relative values of gold and silver. Gold has almost superseded silver in France, for exactly the same reasons as it did in England in the days of William III., and during the 18th century, namely, that gold was overrated in comparison to silver. This occurred notoriously in France during the autumn of 1856. It cannot take place in England until the difference in their relative values exceeds the artificial difference in the English coinage. 93. We have seen that when guineas were first coined, they were intended to represent 20s., and that it was owing to an error in the rating that they came to pass for 21s. On the first of July, 1817, a new gold coin was made current by proclamation, of the value of 20s., which was ordered to be called a sovereign, in imitation of the coin of that name, first issued by Henry VII. It was ordered to be of the weight of 5 dwts. 3.274 grns. of standard gold. And thus it became the British pound. When persons ask, What is a pound? The answer is very simple, it is 5 dwts. 3.274 grains of gold, 22 carats fine, and 2 carats alloy. And any bank note that promises to pay so many pounds, is a promise to pay so many multiples of that unit, and nothing else. The last coinage of guineas took place in 1813. Since this last reformation of the coinage, no alteration that requires notice has been introduced, except the striking of 2s. pieces, called florins, to pave the way for the decimal division of the currency. But a change of this magnitude, however beneficial it might ultimately be, involving as it does a temporary derangement in affairs of such stupendous magnitude, will not easily be effected in this country. |