Copyright
Joseph Lowe.

The present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France online

. (page 10 of 40)
Online LibraryJoseph LoweThe present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France → online text (page 10 of 40)
Font size
QR-code for this ebook


ment of our currency, the decline in prices has
been about 15 per cent, greater in England than on



110 The Quest toll ()f

the Continent, a coincidence which seems iiilly to
justify our computation, that that proportion of the
rise in war was produced by the fall of our bank paper.

The Supporters of the Bullion Committee. — We
are next to address ourselves to the adherents of
a dirterent doctrine, to men who take a bolder
tone, and do not scruple to tax their antagonists
with ic'iiorance of the principles of productive indus-
try. Nor need we, in truth, be surprised at the con-
fidence of their language in regard to the question
under discussion. The rise of our prices during
the war was so progressive, and so coincident in
point of time with the increase of bank paper, that
the connexion of cause and effect was generally
asserted, long before it received a kind of official
sanction from the Bullion Report. To ascribe en-
hancement to over-issue, was easy ; to trace it to
other causes and to define the limited operation
of the exemption act, would have been a tedious
and intricate task. Yet the difference between
us and the Bullionists consists less in the extent
of enhancement, attributed to our bank paper,
than in the mode by which that enhancement
was produced. While tlieij hardly notice the effect
of taxation, demand of men for government, or the
insufficient growth of corn, as causes of rise of price,
and ascribe almost all to bank paper, 5x'^ consider
these as the direct causes, and our paper as opera-
tive only in a passive sense, by giving scope to these
causes, and consequently facilitating the continu-
ance of the war. We can trace no direct power in
banks to over-issue ; and those who insist on it, will
find themselves involved in all the difficulty attend-
ant on an attack ol' the strong hold of their oppo-



Depreciation and Over-issue. Ill

nents, viz. the power possessed by the piibHc of
reheving themselves of a surcharge, by paying bank
notes into tlie Treasury.

The Bulhonists, being 4n general political eco-
nomists, will readily assent to the arguments of Dr.
Smith, that banks, while subject to cash payments,
possess no power of increasing the amount of cur-
rency ; a power which many projectors, about the
middle of last century, fondly imagined to reside
in banks, and the non-existence of which is so clearly
explained by Dr. Smith, in his account of the un-
successful career of the Ayr Bank. When satisfied
of this, let them next endeavour to show in what
manner it was possible that such power could have
been conferred by the exemption act. That act
was evidently incapable of giving solidity to bills or
other securities, which, without it, would liave been
bad or doubtful ; nor did any of its provisions either
oblige or induce the public to pay interest on more
currency than they required. During its operation
as before, our notes were nothing more than an
instrument of circulation, and one which continued
to cost the holders fully as much as prior to the
war. Obtained by a sacrifice of interest, it was
important to every indi\idual, whether a speculative
or a regular dealer, to circulate them as quickly as
possible, to retain them no longer than was neces-
sary to accomplish a specific purpose. From this
reasoning we infer that bank paper, whether pay-
able or not in cash, must await the call of the cus-
tomer, and that its circulation can be augmented
only to meet a rise proceeding from other causes.
Farther, this extended circulation can continue
only so long as the causes of high prices remain
in force; for bank paper lias neither the power
of raising prices in the first instance, or of main-



112 The (liics/ioti o/

tainini^ llioin wlieii tlic causes of" enlianccincnt
cuasc to opcMate.

If tliis doctrine appear somewhat ])oId, \ve ap-
peal to the evidence of facts, and invite our readers
to consider how remarkably our conclusions are
su])ported by the course of circumstances since the
peace. During the years 181.5 and 1810 no com-
pulsion was exercised in regard to a return to cash
payments, nor were the advantages arising to bank-
ers fiom the exem})tion act, restricted in a single
instance ; yet country bankers were forced greatly
to curtail their circulation, a measure which, had
they possessed the power commonly attributed to
them, would, doubtless, have been postponed till
the act had been repealed. Further, had our banks
possessed this })ower, the latitude given to circula-
tion during the war, would, we may be assLU'ed,
have been much greater. Mr. Huskisson, when
writing on this subject in 1810, and viewing the
question in the light of the Bullion Committee, ac-
knowledged his surprise that the issues of the Bank
had not been far greater. Is it going too far to ask
whether this does not justify the suspicion of a
latent error in the reasoning of bulHonists ; of the
existence of circumstances of which their arguments
take no account ? Without pressing this point in
the abstract, we shall adduce a fact entitled to the
most attentive consideration of those who invest
the exemption act with so formidable an attribute
as that of enabling bankers to make a direct increase
of their issues. Our growth of corn, inadequate
during the whole war, became so, in a high degree,
soon after the exemption act : our farmers had
then a powerful motive to extend their tillage, and,
in fact, did extend it as far as their means admitted.
It was a general notion on the part of the public,



Depreciation and Over-issue. 113

and we believe of ministers, that this extension was
limited, not by want of funds, but by the nature of
the soil ; an opinion, however, wlioUjj disproved by
the experience of the last seven years, in which the
amount produced from our soil has been so greatly
augmented. To what has this augmentation been
owing, except to the application of additional capi-
tal and labour ? Observe the importance of the
conclusion to which this leads : our soil having
been, as far as regarded natural fertility, equally
capable of increased production, ten or twelve years
ago, would not our farmers, had our banks possessed
the power ascribed to them, have obtained such an
issue of notes as would have enabled them to ex-
tend their tillage, and bring our growth of corn on
a level with our consumption ? If want of hands
be alleged as the obstacle, we answer, that in Ire-
land and in Germany there were many thousand
labourers unemployed, and that a command of ca-
pital, such as is vulgarly ascribed to our banks,
would soon have transported them to our shores.

Historical Enquiries.

I. The Exemption Act, viexved in connection with
the events of the War. — We shall now bestow a
few paragraphs on an interesting, but hitherto un-
noticed topic, in the history of our paper currency ;
we mean the question, " whether the exemption
act, had it not taken place when it did, would
have been resorted to at any subsequent ajra in
the war?" This enquiry, brief as we shall make
it, requires an attentive notice of our situation
relatively to the Continent at particular periods.

The preliminaiies of peace between France
and Austria were signed at Leoben in April 1 797,



1 1 i. The K.reinpHnn Act vie7vefi

a frw wooks af'fer the exemption act, and thoii



Online LibraryJoseph LoweThe present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France → online text (page 10 of 40)