upon him to London, as he could not get rid of it in the country, his customers all preferring his notes; many persons who had hoarded guineas, requested as a favour to have notes in exchange.

12. The partial resumption of cash payments was attended with perfect success; it caused no very great demand for gold which continued to accumulate in the Bank till October, 1817, when it reached its maximum, being £11,914,000. In that month the Bank gave notice that it would pay off in cash all the notes dated before 1st January, 1817, or renew them at the option of the holders. In the course of 1817 a very large amount of foreign loans were contracted for; Prussia, Austria, and other continental States of lesser importance, were endeavouring to replace their depreciated paper by a metallic currency; and as money was very abundant in England, a very large portion of these loans were taken up here. The effect of this began to manifest itself in April, 1817, when the exchange with Hamburg and Paris began to give way, and the market price of gold to rise. The Bank took no proper steps to reduce their issues, and the consequence was that these phenomena increased during 1818, and in January, 1819, the price of gold was £4 3s., the exchange on Hamburg 33.8, and that on Paris 23.50. In July, 1817, the new gold coinage began to be issued from the Mint in large quantities. The consequence was that 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 during 1818 a very decided drain went on. 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 for 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 country bank notes were two-thirds greater than in 1816.

The demand for gold continued to increase, and in January,

1819, 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 1816-17. 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. The Act, therefore, totally closed the Bank for payments in cash.

13. The chief points of interest in the Reports of the two Houses regarding our present subject, are the opinions held by the witnesses respecting the great doctrines of the Bullion Report. The reports of neither House entered into the question of the theory of the Currency, they were confined to recommending a certain course of action; but they examined a number of witnesses of the first eminence on the subject, and the result of their evidence is most extraordinary. It will be remembered that, both in 1804 and 1810, the immense preponderance of commercial testimony was entirely adverse to the doctrine that the issues of paper currency had any effect upon the exchanges, or the price of bullion, or should be regulated by them. Nevertheless, the reports of both Committees were entirely in the teeth of the mercantile evidence. The Bullion Report had now been before the country for nine years, and had caused more public discussion, both in Parliament and in the press, than almost any subject whatever; and it is perfectly manifest that if its principles were erroneous, the commercial world would only have been further strengthened in their opposition to them. But what was the result now? The overwhelming mass of commercial evidence was entirely in their favour. The current of mercantile opinion now was just as strong on their side as it had formerly been against them. What could be more triumphant than this? What could be more splendid testimony to their accuracy and soundness than the fact that they

had converted the immense hostile majority of the commercial world?

Several even of the Directors of the Bank were converted to these doctrines; but the majority of the Court was still hostile, and on the 25th March, 1819, they passed this resolution—

"That this Court cannot refrain from adverting to an opinion, strongly insisted upon by some, that the Bank has only to reduce its issues to obtain a favourable turn in the exchanges, and a consequent influx of the precious metals; the Court conceives it to be its duty to declare that it is unable to discover any solid foundation for such a sentiment."

Among the most distinguished converts to the doctrines of the Bullion Report was PEEL, who had voted in the majority in 1811 against them. He was appointed Chairman of the Commons Committee, and entrusted by the Government with the conduct of the Bill determined upon by the Government. The Bill was brought in on the 24th May, 1819,1 and Peel avowed his conversion to the doctrines of Horner. On five different occasions Parliament had declared that cash payments should be resumed as soon as possible: and the public now doubted the sincerity of these declarations. Every sound writer agreed that a certain weight of gold bullion of a certain fineness constituted the only true, intelligible, and adequate standard of value: and to that the country must return. No doubt the Bank was perfectly solvent, but did it follow from that that there could be no over-issue of its paper? If solvency alone was a sufficient proof that there was no excess of circulation, the theory of Law was just, and the land as well as the funds might be safely converted into a circulating medium. There was, in fact, no test of excess or deficiency, but a comparison with the price of gold. This was not indicated by theory alone; the last few years had afforded abundant experience to support and confirm it.

As the Bank had so entirely repudiated the principles of the Bullion Report, they could not be expected to act upon them. It had been proposed "to prescribe such a limitation of the issues of Bank Notes as would secure the power of the Bank over the foreign exchanges. He, for one, confessed that this always appeared to him a very unwise position, and, for this reason, that it depended so much on circumstances, when to say there was an 1 Hansard's Parliamentary Debates, Vol. XL., p. 676.

excess or not of circulation. There were occasions when what was called a run on the Bank might be arrested in its injurious effects by an increase of the issues. There were other occasions when such a state of things demanded a curtailment. In the year 1797, when a run was made on the Bank, but when the Exchanges were favourable, and the price of gold had not risen, it was proved that an extension of issues might perhaps, by restoring confidence, have rendered the original restriction unnecessary, and prevented the evil results of the existing panic. On the other hand, if the run was the effect of unfavourable exchanges and the consequent rise in the price of gold, the alarm must be met by a reduction of the issues. It was, therefore, impossible to prescribe any specific limitation of issues to be brought into operation at any period how remote so ever. The quantity of circulation which was demanded in a time of confidence varied so materially from the amount which a period of despondency required, that the House must feel the absolute incapability of fixing on any circumscribed amount."

14. As the Act which was passed on this occasion has acquired great celebrity, and has been much misunderstood, we will give its chief provisions. It was the Act, Statute 1819, c. 49.

1. "The Acts then in force for restraining cash payments should be continued till the 1st May, 1823, when they were finally to cease."

2. "That, on and after the 1st February, and before the 1st October, 1820, the Bank of England should be bound, on any person presenting an amount of their notes, not less than of the value or price of 60 ounces, to pay them on demand at the rate of £4 1s. per ounce, in standard gold bullion, stamped and assayed at the Mint."

3.

"That between the 1st October, 1820, and the 1st May, 1821, it should pay in a similar manner in gold bullion at the rate of £3 19s. 6d. per ounce."

4. "That between the 1st May, 1821, and 1st May, 1823, the rate of the gold bullion should be £3 17s. 10 d. per ounce."

5. During the first period above mentioned, it might pay in gold bullion, at any rate, less than £4 18., and not less than £3 19s. 6d. per ounce; in the second period, at any rate, less

than £3 198. 6d., and not less than £3 17s. 104d., upon giving three days' notice in the "Gazette," and specifying the rate; but, after doing so, they were not to raise it again.”

6. "These payments were to be made in bars or ingots of the weight of 60 oz. each, and the Bank might pay any fractional sum less than 40s. above that in the legal silver coin."

7.

"The trade in gold bullion and coin was declared entirely free and unrestrained."

These are the provisions of the Act which has so often been alluded to in terms of the greatest praise, or the greatest bitterness, as Peel's Act of 1819: and it is almost universally supposed that the resumption of cash payments was forced on the Bank by this Act. This, however, is a most profound delusion. The Act, as will be seen, did not compel payments in coin till the 1st May, 1823. Until that time the Bank was directed to pay its notes in ingots of gold bullion; and in sums of not less than 60 ounces at a time: and at a rate of depreciation which gradually diminished.

This fantastic scheme was a project of Ricardo's; and whether it was ever put into operation we have no means of knowing. But it is absolutely certain that it had nothing to do with the return to payments in coin. The accumulation of treasure in the Bank became so rapid in 1820, that early in 1821 the Directors felt themselves in a position to resume payments in coin: and they obtained an Act to permit them to do so on the 1st May, 1821, instead of 1823, as limited by Peel's Act. The Government had repaid £10,000,000 of the debt it owed the Bank, which all the witnesses agreed was a necessary preliminary to enable the Directors to contract their own issues. The Act, Statute 1821, c. 26, enacted that the Bank might resume payments in gold coin on the 1st May, 1821. That persons offered to be paid in coin should not have the right to demand ingots: but if the Bank did not offer to pay in coin, the right to demand ingots should continue. The last impediment to the export of bullion were swept away. The Bank was bound to exchange their larger notes for any one who demanded it, but they had the option of paying in £1 notes or gold.

This was the real Act under which payments in gold coin were resumed, which have happily never since been interrupted. And we see that those who extravagantly praise, and those who