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commissioners, the supply or also avoided the necessity of funds. quantity in market was diminished; ing; for when the exchequer bills and therefore, if no new supply had became due, the holders of them been brought in, the stocks must were paid by new bills, or the bank have risen, the demand continuing of England took them up. Thus, the same; but this new supply was the necessity of finding being brought in, in the form of the avoided, the quantity of stock was stock created, to pay those who not increased ; and the sinking fund, advanced the loan.

having fair play, operated on the We have deemed it necessary stocks, without any counteraction and proper to go rather minutely from a creation of new stock. into this subject, because, in fact,

Hence the stocks rose to a great ninety-nine people in a bundred height. In November 1817, the are very vague and ill informed in 3. per cent. consolidated stock was their notions respecting everything rather above 84. It is supposed, that is connected with finance, and however, that other causes, besides especially respecting the nature and the operation of the sinking fund, operations of the funds, and the or the quantity of stock bought paying off of the national debt. regularly by the commissioners for

Having thus explained the several the reduction of the national debt, principles on which the stocks rise operated to raise the funds. There and fall, it will be proper to con- always are men of great capital sider in what mode the sinking who have great influence on the fund operated on them at a period stocks. A few years ago, the Gold. when there was no loan. The re- smids, a Jewish family, by their venue was by no means equal to connexions could bring such dethe expenditure in the year 1817; mands for, or such supplies of stock this deficiency the chancellor of the into the market, as greatly to afexchequer might supply, either, as fect the price of the funds. A few in the time of war, by a loan, or by years after the death of the princithe issue of exchequer bills: he pal person of this house, the house preferred the latter; apparently, of Rothschild, (who are also for two reasons. In the first place, Jews,) by the extent of their money he issued them on more advanta. dealings began to affect the funds; geous terms than those on which he and there can be no doubt that could have obtained a loan. We they and their connexions co-opehave said there was a large accu. rated with the sinking fund in mulation of unemployed capital in raisir.g the price of stocks. There the country; and this capital, those was, however, another cause which who held it were more willing to contributed to the effect of raising vest in exchequer bills than in a the funds to the height which they loan, which in fact would have attained in November and Decembeen in the funds; because, in ex- ber 1817. By an act passed last chequer bills, it was more readily session, for the consolidation of the got back, if they wished to employ exchequer, it was enacted, that in it in trade: hence the chancellor of order to make the period at which the exchequer borrowed money on the finance accounts and the acia those bills at a much lower rate of counts of the commissioners for the interest than he could have done by reduction of the national debt were way of loan—but secondly, he thus made up correspond; the money


available by the commissioners for which the former, at least, are not the reduction of the debt, between likely to rise. It is different, how. November and February, should ever, with the 5 per cents.; they' all be laid cut belween November have risen to 100, and hence, and the 5th of January,-one of the probably might be paid off: hence quarters to which the finance ac- they never are proportionally so counts are inade up. Now, it is high as the 3 and 4 per cents. evident that the demand for stock, Now, it was supposed to be the inby the commissioners, between No- tention of the chancellor of the exvember 1817 and January 1818, chequer to pay off the 5 per cents. being greater than usual, in so if he could have raised the 3 per much as in this period of two cents. to 90 or upwards; for the months was laid ouç by them the holders of the former stock, it was sum always before laid out in three imagined, would gladly take 100 months—the price of stocks would in the 3 per cents., for every 100 lise.

they held in the 5 per cents. and a Having thus explained the causes small sum in money, rather than which produced the rise in the receive the whole in money, at a funds, it will be necessary to revert period when it was scarcely possible to the observation we made,-that to employ capital at all. If this this rise was not advantageous to measure could have been carried the nation, so far as the reduction into effect, the interest of that part of the national debt was eoncerned; of the national debt, which constie for it is plain, that when the 3 per tutes the 5 per cent. stock, and cents. are at 60, a greater quantity which amounts to about 145 millions, of them may be purchased by a would have been reduced from 5 given sum than when they are to 3 per cent.; and thus a great higher; the reduction of the nation- saving would have been made to al debt, therefore, must go on at a the public. But towards the end slower rate, and require more mo- of the year 18:7 the funds fell; and pey to accomplish it, when the as they fell still more in the begin. stocks are high, than when they ing of 1818 (from causes which in are low,

our next volume we shall investi. The chancellor of the exchequer gate), there was no opportunity of was in some measure compensated carrying this plan into execution. for this disadvantage by the de- We do not think that in writing mand for the exchequer bills: it the annals of such a country as Brio was supposed he looked forward to tain, any excuse is necessary for another benefit from the rise in the thus going into the details of its fic funds. All the different species of nance: it is indeed a topic which stock are redeemable at par; but the annalist and historian in gene, as the 3 per cent, stock originally ral pass over in silence:--but unbore an interest of 5 per cent. (and less it is entered upon pretty fully, the same is true of the 4 per cent.); bow can the state of the country be and as their par, or the price at explained or understood? And as it which they are redeemable, was is a subject on which, as we have not changed when the interest was before remarked, very few indeed lowered, it is evident that neither have clear ideas, it seems the more the 3. nor the 4 per cents, can be proper and necessary to illustrate edeemed under 100-a. price to it. The two leading topics respecting what may be called the money land, a similar cause seems to: transactions of the nation, which have operated against employing we proposed to discuss in this chap- money for that purpose: so long as ter, were the finances and the cir- it was in the funds or in exchequer culating medium:-the former, we bills, it was speedily and easily trust, we have explained with suf- available for any other purpose ficient minuteness; but before we which promised better returns; but proceed to the latter, there is an in-. if locked up in land, this was not termediate topic to be noticed, also the case. There were, however, connected with what we have call. two other causes operating to the ed the money transactions of the same effect: in the first place, mos country.

nied men were apprehensive of inIt might have been supposed that vesting their capital in land, after at a time when there was so great the dreadful losses agriculture had . an accumulation of unemployed sustained by the bad harvest of the capital in the country, and when, year 1816; and in the second place, for this capital, a rate of interest though the funds afforded a lower much lower than the usual and le- rate of interest than usual

lower gal rate, could only be obtained in than what mortgages gave, and the funds or other public securities, very little higher than what could the price of land would have be secured by the purchase of land, risen, and that mortgages on land - yet capital might be increased might have been procured easily, in the funds: if the 3 per cents. and to almost any amount.' This, were at 70, the holder did not get however, was not the case;--when 5 per cent. for his money; but the the price of stock affords 5 per cent. chance of their rising to 80, and of for money, land generally sells at his increasing his capital one seventh such a rate as to bring in about 3} by this rise, induced him to rest per cent.: when, therefore, mo- content with a smaller rate of inney in the funds brought in only terest; and in fact, if he had bought about 4 per cent., it might have in at 60 he still secured 5 per cent, been supposed that 34 per cent, de. for his original capital, `notwithrived from land would have been standing the rise in the funds. The preferred; but the fact was the re. case therefore stood thus: If a verse, In the midst of this great holder of stock sold out at 70, he accumulation of capital, and at a might procure 5 per cent on mostperiod when the funds were at gage for his money; but on the their highest rate, it was scarcely other hand, if he permitted his possible to raise money on the money to remain in the sunds, it mortgage of land, and extremely was more easily and readily avail. difficult to sell landed estates. The able, and in case of rise, he ine former is easily explained ;--the dif, creased his capital. ficulties and obstacles which by the Hence, notwithstanding the ac laws of England lie in the way of cumulation of capital, and the high recovering money vested in mort. price of the funds, it was extremely gages on land, are so great, that difficult in 1817,-especially in the few persons wish so to vest it, ex. early part of the year,-to sell land, cept those who have no prospect of or to raise money on mortgages otherwise employing their capital.- and hence the agriculture of the With regard to the purchase of country was little benefited from


the accumulation of capital. As country could be carried on, and the soon, however, as those who held interest of the national debt, or ra. money in the funds began to realize, ther the taxes, could be paid by a as it is called ; that is, as soon as, circulating medium of coin. In this from a belief that the funds had latter opinion they were joined by reached their highest point, they those who maintained that the re, began to sell out, -money flowed sumption of cash-payments would towards land and agriculture; mort. be a national blessing, but who gages could be procnred at 44 per denied that they could be resumed, cent., and land sold at a higher and the taxes paid to their present rate.

amount ; at the same time the ar. We come now to the considera. guments by which they supported tion of the circulating medium of this opinion were certainly ingenithe country, a most important but ous. They assumed that low prices difficult topic. It is well known and heavy taxes were incompatible; that prior to the year 1797, the that if the farmer sells his wheat at bank of England notes were pay- 31. per quarter, and his beef and able in specie on demand. In con- mutton at 3s. Ed. per stone, he is not seqnence of a run upon the bank at nearly so well able to pay the taxes, that time, an act of parliament was as if he sold the former at 41. or 57. passed restraining them from pay- and the latter at 4s 6d, or 5s, 6d. : ing their notes in coin, till a cer. and they further maintained, that tain period: this restriction was af. high prices and a circulating me. terwards continued; and in 1811, dium consisting entirely of coin a committee of the house of com- werc incompatible ; because a cir-' mons was appointed to inquire into culating medium in coin could not its effects, and the propriety of be nearly so great in amount as a taking it off. The ministers con- circulating medium in paper ; and tended that it could not be safely consequently, as price must depend taken off during the war; and ac- on the demand, or, in other words, cordingly it was ultimately deter- on the quantity of money in the mined that it should continue till country, if coin were substituted June 1818.

for paper, prices would fall. The All political economists, as well whole of this argument went on as practical men, agreed that the the idea that, if the bank of En. return to cash payments would be gland resumed cash-payments, only attended with great difficulty. So coin would circulate ; or at least, far they agreed: but they differed that the amount of coin and paper with respect to the benefit and the in circulation would not be equal effect of this measure. By many it to the amount of paper, while the was concluded, that paper money restriction continued; and it like. not convertible into cash on demand wise supposed, that as soon as coin served all the purposes of cash ; and could be obtained for bank notes, Dot being of intrinsic value, was a the latter would no longer be taken. much more cheap medium of ex- Notwithstanding the real, as well change: they therefore doubted the as the imaginary and theoretical difnécessity or the advantage of resu. ficulties in the way of the resumpming cash-payments. Besides, they tion of cash-payments by the bank also doubted whether the immense of England, the chancellor of commercial transactions of this the exchequer declared that they


would paper then circulating (April 1810), at 20,000,000i. and Mr. Richardson at 30,000,000). The former of these gentlemen reckoned each bank, op an average, to have 30,000l. in circulation; but the latter must have computed their issues at above 40,000 . for at that time there were only 721 country banks. There seems little doubt that Mr. Richardson's estimate was at the time very moderate: and it is certain the issues, as well as the number of the country banks, were considerably increased, sub. sequently to the rejection by the house of commons of the ręconimendation of the bul. lion report,


would be resumed in June 1818; 1797, when the restriction was first and the bank itself declared that imposed, is not exactly known. Acthey were not only prepared, but cording to Mr. Thornton, in his anxious to resume them. Before Essay on Paper Credit, there were this, however, could take place, 353 ; but other accounts reduce the there were two preliminary and number to 230: probably there preparatory measures necessary : were 300. In the

year 1800 they the diminishing of the amount of amounted to 386; in January 1810 the issues of paper money by the to 721 ; and in subsequent years to bank of England, and the prepara. between 800 and 900. After this tion of a new coinage.

they declined in number.— The fol. Towards the end of the year 1815, lowing remarks offer a very proand during the whole course of 1816, bable conjecture of the amount of circumstances had occurred which the circulating medium of the had diminished the paper circula- country in 1797, when the restriction, not only of the bank of En- tion act was passed, and in 1812, gland, but also of the country when the system of paper money banks. It is evident that this circu. had attained its summit. lation will be greatest when agri. It is certain, that the circulation of culture, trade, manufactures, and all the old established country banks commerce flourish most, and when has greatly increased since the recommercial confidence stands firm- striction, and may be held to be at est; but at the period alluded to, least doubled. Assuming the issues agriculture, manufacture, and com. of the 300 private banks existing in merce were in a very depressed 1797 to have averaged 50,0001. state, and confidence was much each in 1812, and supposing their shaken, On the one hand, there- issues in 1797 to have amounted to fore, less circulating medium was 30,000/, which allows only 20,0007. required to carry on a diminished of increase, that will give an addi. agriculture and trade ; and on the tion of six millions to the circulation other hand, the bank of England from this source. and the country banks were much Supposing the issues of the 500 more cautious in the loan of their private banks established since 1797 paper money, Besides, a great num- to have each averaged 40,0001. in ber of the country banks failed ; this 1812, that would constitute a further necessarily diminished the amount addition to the currency of twenty of paper-money, both directly, and millions *. indirectly by lessening the confi- Now, if we could ascertain the dence that was placed in the banks quantity of specie in circulation in that stood the shock.

1797 and 1812, we would be able The number of country banks in to make a pretty accurate estima.

Mr. Tritton, in his evidence annexed to the Bullion Report, estimated the country bank

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