In support of the theory laid down in the report of the bullion committee, statements have been given of the amount of the bank notes in circulation, with the rates of exchange at corresponding periods. In Janua ry 1795, the amount of bank notes in circulation was nearly thirteen millions, and the exchange between Hamburgh and London was from three and a half to six per cent. against England. In February 1797, the amount of bank notes in circulation was only SI mil lions, and the exchange hetwcen Hamburgh and Lon don was between 6 and 7 per cent. in favour of Eng land. By the last returns laid before parliament, the bank notes in circulation were 21 millions ; and the ex change between Hamburg!) and London was 161.9s. per cent. against England. Statements have also been giv en, in order to shew that the quantity of bank notes in circulation affects the market price of gold. In Febru ary 1797, it was 93.7y. per ounce below the mint price : as the bank increased their issue of notes, it soon rose above the mint price, and now it exceeds it by 15 per cent. Counter statements have been produced by the bank di rectors, with the view of sheaving that the increased is sue of their notes has not been foliowed by a correspon dent change in the rate of foreign exchanges, and the difference between the mint price and the market price of gold. It is obvious, that these effects of an increas ed paper circulation, may be retarded, or even counter acted, by other circumstances than our excess of paper; but the preceding facts and reasonings afford strong grounds for presuming that such effects will, in course of time, inevitably follow.
It is laid down in the report of the bullion commit tee, that while the paper currency of a country is con vertible into specie, the greatest depreciation in the rate of foreign exchanges that can continue for any length of time, is the amount of the expense of con veying bullion from one country to another ; and the average expense of transporting it between Great Bri tain and the continent of Europe, is stated, in the evi dence before the bullion committee, to be 5 per cent. The actual depreciation is estimated, by Mr Huskisson, at 15 per cent.: if, then, the difference, or 10 per cent; and a corresponding increase in the price of all com modities, be considered as the effect of the present over issue of paper, it will be found that the bank re striction bill costs the public as much as the property tax, or 12 millions per annum ; and that the continu ance of this restriction, while it thus oppresses the indi vidual, does no benefit to the state.
The advocates for the bank, without denying the ge neral correctness of the theory advanced by the bullion committee, contend, that it is not applicable to the pre sent case, and that the high price of bullion, together with the low rate of foreign exchanges, ought not to be attributed to the increased issue of paper currency, but to an unfavourable balance of trade and payments, occa sioned by the great foreign expenditure of government, and the unprecedented restrictions imposed by the cue my on our commerce to the continent. Mr Hill, (in his Inquiry into the Causes of the present high price of Gold Bullion,) says, " I am decidedly of opinion, that since the year 1797, we have drained England by foreign expenditure, of a very considerable part of the specie ant] bullion, which at that time remained in it ; that though the bank restriction bill, by reducing the domes tic demand, prevented us from being sensible of the deficiency for some years afterwards, yet our stock is now reduced so low as to be inadequate to the limited demand which at present continues for it ; and that this real scarcity of the precious metals in the country, is the genuine cause of the present high price of bullion."
Mr Cock, treating of the same subject, observes, " As therefore we arc not exporting gold from the cheap to the dear, but from the clear to the cheap country, all the usual observations about the expense of transmission, and the commonly adopted theories on the subject, are inapplicable to the case, which is evidently an unnatu ral one, occasioned by unnatural circumstances ; and those arising, not out of the stoppage of payment in specie at the bank, but the stoppage of importation of British goods on the continent by Bonaparte." Mr Jas per Atkinson, in his pamphlet on the same subject, says.
" It is in evidence before the committee, that the unfa vourable situation in which we stand, both in respect to our metallic currency and our foreign exchanges, arises out of the state of our payments abroad ; and yet they make no mention of such a cause in their remedial re commendation." Some of the arguments of the advo cates of the bank, prove too much. When those advo cates assert, that the indefinite extension of paper circu lation is a real blessing, they go to prove that you can not give too much food to adventurous speculation ; that you may with justice reduce to beggary every person of a fixed income in the kingdom. They would, in short, justify the assignats of France, or the swindling system once proposed by John Law. These assertions, which we have now quoted, arc more respectable. They are, to a certain extent, true, but what is true in them proves too little. It may, and ought to be admitted, that an un favourable balance of trade and payment, independently of paper issues, have contributed to aggravate the high price of bullion ; but they do not prose, that the restric tion of the bank payments has not also had its full share in the generation of the same evil, and has actually oc casioned more than any other assignable cause, the unfa vourable exchange with foreign countries. Their argu ments do not invalidate the justice of the recommenda tion offered by the bullion committee, that the bank should resume their payments in cash. It appears also, from the report of the committee, that since the check on paper issues has been removed, the bank have not only doubled the number of their own notes, but have given rise to a country paper circulation, still more ex tensive. Before the restriction bill, the bank, we be lieve, never discounted bills to any banker ; and while they adhered to this rule, no banker could trade upon artificial copital. Since the passing of the act, many of the London bankers have opened discount accounts with the Bank. This has contributed to increase the number of country banks. Since 1797, the number of country banks has increased from 230 to 721. The immense profits which the bank directors make these dis counts, prevents them from being scrupulous about the real solidity of the trath.rs to whom they extend their discount. The public, in the mean time, is not more protected from the over-issue of those 721 country banks, than against the over-issues of the Bank itself. The Bank of England is the fountain head from which the country banks are supplied, and when the country banks are called upon to change their notes for cash, they give out Bank of England notes.