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If any doubt could arise on this part of the proposition, it appeared to him that it might be fairly applicable to the postponement of the period when it was proposed that the operation of the measure should commence. It might be asked, “ Why postpone it so long ?-If we are to begin with the market price of bullion, why not commence at the earliest day on which it may be practicable to carry the plan into effect?” He really thought, that on the first view of the subject, it was difficult to meet that question.
He could see no reason for not taking something higher than the present market price of bullion, as the foundation of the measure, and making it immediately operative,' were it not for the two circumstances of the great repayments that it appeared advisable to make of the advances from the Bank to the public, and of the necessity of a considerable loan; both of which would counteract the advantages that might otherwise result from the proceeding.
With respect to those Bank advances, their Lordships would see in the Report, that the Bank Directors stated the indispensable necessity of their being repaid by Government. But if the opinion which prevailed in a large part of the city of London on that subject could be accurately ascertained, he believed it would be found that the greatest jealousy existed on the subject of that repayment. He fairly confessed, that if there were to be no alteration in the system, he should consider that jealousy to be well founded; for he believed no merchant or other individual, however respectable the Bank of England (and no man was less inclined to deny its respectability than himself), but would rather that the circulating medium of the Bank should be partially founded on Government security; respecting which there could be no partiality or favor, or caprice, than that the whole of it should be issued upon commercial discount. As, however, the Bank was to be called upon gradually to resume cash payments, the gradual repayment to the Bank of a portion of the advances made to Government seemed to him to be a just proceeding. The advances of the Bank to Government amounted at this time to less than 20 millions, and it would be seen by the evidence that the Bank had recently considered a reduction to that amount as sufficient. It is true that a part of the balances of Government in the hands of the Bank had since been taken from them: for this an allowance should be made. In his opinion, the repayment of five or six millions was all that the Bank had a right to expect. He did not think that they had a right to demand ten millions. He was bound to say, that the repayment of such a sum did not appear to him necessary; although he was
so anxious to remove all pretence or excuse against the execution of the proposed plan at the earliest possible period, that in his opinion it ought to be accorded. But he had an undoubted right to declare, with reference to the interests both of Government and of the Bank itself, that the repayment ought not to be sudden. In the reports of the Committees of both Houses of Parliament, a gradual and not an immediate repayment of those advances was recommended. If done gradually, he was persuaded that no injurious effects whatever would result from it.
There was another point to which he wished to advert, namely, the reduction of the issues of the Bank. He did not believe that any
such reduction would be necessary for the purpose of lowering the price of bullion, and enabling the Bank to provide themselves with it for the purpose prescribed in the proposed plan. Even those who differed the most from the Committee on the other parts of the subject, agreed that the continuation of the Bank issues at their present amount would be sufficient eventually to bring the exchange in our favor. This fact also deserved consideration, namely, that when their Lordships' Committee began to sit, bullion was 41. 3s. an ounce; at the present moment it was only 41. Os. 6d., and this fall had taken place from natural causes, and without any reduction of Bank issues. On that point, therefore, he experienced no alarm. It formed no part of the proposed system, that the reduction of Bank issues should be sudden. On the contrary, by pursuing the plan recommended in the Report, it would be so gradual as to occasion no inconvenience whatever to the trading community. One great object of repaying to the Bank so large a portion of the advances made to Government, was to enable them to purchase bullion, for the purpose of supplying the place of the paper gradually withdrawn.
On the subject of the amount of circulating medium necessary in order to carry on the various transactions of the country without difficulty, much difference of opinion naturally existed. It would be found to be the opinion of some of the witnesses examined by the Committee, that the commercial world would be always against the resumption of cash payments; as it would diminish the facility with which they at present obtained accommodation. Several individuals had communicated to the Committee their opinion of the amount of specie which would be necessary on the resumption of cash payments. Among the rest, a very able evidence had been given by Mr. Alexander Baring, than whose statements and sentiments on the whole of this important subject, he (Lord Liverpool) had never heard any thing more intelligent and comprehensive. From that gentleman's opinion, however, on the amount of specie that would be neces
sary, under the circumstances which he had just described, he certainly differed materially, but he agreed with him and with others as to the advantages which the existing system had produced during the war. It had enabled the country to make efforts to which its means would otherwise not have been equal. He readily admitted likewise that in peace the same system afforded facilities to commerce which it would not otherwise enjoy. While the Bank of England was not bound to pay its notes in cash; while it could regulate its issues merely by the convenience of the public, and by those issues accommodate at discretion mercantile individuals, of sound capital, it would go greater lengths in doing so, than it would venture to do if it were under the necessity of regulating its issues by the price of gold. A facility was, thereby, given to merchants under the existing system, which they would certainly be sorry to lose. He would go a step further. The existing system appeared, under certain circumstances, to be favorable to the public at large. In the event of any distress, the Bank could go on with its issues, so that those who would otherwise be poor should not be poorer, and that distress might meet with relief. Undoubtedly this must frequently have the effect of mitigating evil, of obviating difficulty, and of diminishing temporary suffering. It must frequently give ease and facility to commercial transactions, and enable individuals engaged in those transactions to surmount obstacles which in the ordinary state of the circulation would be insuperable. But it was by no means an unmixed good. On the contrary, it was attended with great disadvantages. The consequence of it was too often an encouragement to speculation, to unsound dealings, to the accumulation of fictitious capital; from all of which, in the course of a given number of years, a greater quantity of evil would probably accrue than of real advantage. Even, therefore, on that narrow ground, although no one could deny that the existing system gave occasional and valuable facilities to trade, yet it was manifest that on the long run it tended to destroy that solid and secure foundation on which the commerce of a great nation ought to rest. To return to a currency of standard value, might be in some degree to limit mercantile transactions, but it would be to place them on a firm and honorable basis. People would know where they were.
From the beginning he had been of opinion, that we could never get back to our ancient system of currency, without temporary inconvenience. The only question was, whether it would be wise to adjourn the evil day. Even by the very appointment of the Committee to investigate this subject, some temporary inconvenience had been incurred. But if further
proceedings were to be adjourned for a year longer, the same course must be recommenced, and the present, which would then be a gratuitous inconvenience, must be again submitted to.
There was one point of great importance, and to which he wished the more particularly to call their Lordships' attention, because he knew that it was one which had made a greater impression on the minds of some persons than
other circumstance. He meant the comparison of the circulating medium of the present day with the circulating medium of former times. The argument, which at the first view was sufficiently captivating, he would endeavour to state in as strong à manner as he was able. It was assumed that the circulating medium at this time was not greater than it was in 1797, antecedent to the Bank Restriction and it was asked whether it was possible that the circulation could therefore be excessive or even sufficient. Now he admitted that the whole circulating medium was not greater at present than in the year 1797, or even in the year 1792, before the war; that the revenue had been augmented in the interval from 16 millions to more than 60 millions; that the commerce of the country had tripled or quadrupled; that the agricultural and other transactions may have increased in equal proportions; and yet it was possible that the same amount of circulating medium which existed at the first period might be sufficient at the last, or might even be excessive, though he did not say that it was excessive, at the present moment.
The whole fallacy of the argument to which he referred, had arisen fromí not considering the great difference between a metallic and a paper circulation.
Before the war the circulation (assuming it to have been 50 millions) consisted of 30 millions of gold, and about 20 millions
It now consisted (independent of the silver coinage for small payments) of about 50 millions of paper.
Previous to the close of the American war there were few Country Banks. They were confined to the great commercial towns, and to some of the large cities.
The Country Bank system grew up in fact between that period and the commencement of the succeeding war. Until this system had made considerable progress, the transactions throughout the country were in a great measure carried on by small hoards of money. Individuals received their rents in specie, and kept a considerable amount of specie by them to pay their bills as they came in. But by the extension of the banking system, the habit of keeping specie is almost wholly done away. There is now scarcely such a thing as dead capital, except the small
proportion which is kept in the respective banks. Besides, he power of paper, by its easy conveyance and transmission, enables a small amount of it to perform many times the same operation which an equal quantity of gold or silver can perform.
In addition to these circumstances commercial ingenuity has since devised a variety of means by which the greatest and most complicated transactions may be carried on by the smallest quantity of paper.
He would in the first place beg leave to read a note which would be found in the very valuable work of Mr. Colquhoun, which refers to the evidence that was collected on this part of the subject before the Bullion Committee in 1810.
“A refinement in giving velocity to the circulating medium, by uniting many bankers into one, for their private convenience, is practised by about two-thirds of the 71 private bankers of the metropolis, comprising chiefly those who reside in the city. According to the Report of the Bullion Committee, the daily payments made to these bankers (46 in number) amount on an average to 4,700,0001. If that sum were to be paid daily by one debtor to his creditor, without the intervention of banking, and in coins, even of gold of one guinea each, the multitude of people that would be required to convey the specie from place to place would crowd the metropolis from one end to the other, since even more than 4,700,0001. would probably be wanted. To make payments in all the variety of sums which would be necessary by the customers of the whole 71 bankers and the Bank of England, it might require five, ten, or perhaps twenty times 4,700,0001. daily. As the matter however is contrived, instead of this enormous sum of 4,700,0001. in coin, these daily payments, amounting in a year to fourteen hundred and fifty-seven millions, are made by means of the comparatively trifling sum of 220,0001. daily for 310 days, or sixty-eight millions yearly. The merchants agree that their orders on their respective bankers shall not be presented until the end of the day, when these 46 bankers meet and settle and exchange all the drafts and orders on each other, paying the difference in Bank notes, which is calculated to amount on an average to 220,0001. a day. If about two-thirds of the private bankers in
one thousand five hundred millions yearly for a part of their customers, how much must that yearly sum be increased by what the whole of the Bankers and the Bank of England pay, including the public revenue and loans, the latter exceeding one hundred millions alone? When it is considered also that the vast and almost 'incalculable number of payments are all accomplished by means of about twenty millions in