The cause of the depreciation of paper has been strenuously disputed. That its abundance causes great depreciation, and that such depreciation must increase with the increasing issues, until the bank shall pay in gold, has been distinctly proved. We do not deny that the state of our commerce may have contributed also, though in a lesser degree, to augment the scarcity of bullion. The existence of depreciation is not, howe ver, disputable, whatever be the cause.
Mr Bosanquet himself has, in his second edition, giv en up completely the question of depreciation, in refer ence to our legal tender ; and without any allusion to it as a temporary occurrence, he proposes an entirely new standard of value, from a comparison with which he in fers that our currency is not depreciated. lie proposes that the interest of 1. 33 : 6 : 8, in the three per cent. stocks, should be the standard measure of the value of our currency. This is in effect saying, that a one pound note of the Bank of England is to be the standard by which we are to judge of the depreciation of that same one pound note. To this bold and alarming doctrine, it is to be trusted the public will never submit. If the bank directors, forsaking the metallic standard of value, should continue to act on the principle that a pound note can never be depreciated while it continues to be the interest of 1.33 : 6 : 3, in the three per cent. stocks, there is no excess nor depreciation of paper, no rise in the price of provisions, no extent of mischief, from which the public can be secure. The forgers of coins, who are whipt or sent to Botany Bay, for what in the cant phrase is called diminishing the scarcity of half crowns, would be harmless, compared to the diminish ers of the scarcity of paper, who should carry this prin ciple into full practice.
The committee conclude their report, by suggesting, that the restriction on cash payments cannot safely be re moved at an earlier period than two years. Adverting to the circumstance, that as the law stands at present, the bank would be compelled to pay in cash at the end of six months after the ratification of peace ; but the committee are of opinion, that if peace were to be im mediately ratified, it would be hazardous and impracti cable immediately to enforce the standing law. Two years they think ought to be given in the event of peace, but not more, though the war should continue so long. Those who have exhorted most strongly to the repeal of the restriction bill, have not denied, that, ex clusive of the clamours which would arise from those who are selfishly interested in the profits of the bank, the return to a better system must be made with cau tion. The remedy of the evil is acknowledged to re quire caution by those who most strongly advise it. Mr Blake himself expresses a doubt, whether the legisla ture may not be under the necessity of receiving, ra ther than proposing conditions. Such an influence have the directors acquired, not merely over the finances of but of government itself, that at one time they extorted a promise from the prime minister (Mr Pitt), that no future loan or advances to the emperor should be resolved on, without previous communication with them. On this occasion they controuled the minis
ter in the most important of political operations, to pro tect themselves from an embarrassment brought on by themselves, by their imprudent advances to government. Among the remedies proposed, by those who have written on the subject, it has been suggested, to oblige the directors every successive half year, to diminish the average quantity of their notes in circulation by half a million, and to continue this diminution till the market price of bullion be restored to its mint price ; then the resumption of cash payments might take place without the dangers apprehended front a sudden diminution of the currency. Another plan has been advised, viz. to begin the remedy by obliging the bank to pay a small percentage upon its notes, at the option of the holder, and increasing this percentage gradually.
The of establishing a new chartered bank has been also suggested, with much appearance of pro priety. The power of the bank, to he responsible in specie for all their notes at present in circulation, seems to be more than doubtful. Their attempt to make cash payments if it failed, might produce very serious con sequences, both to public and private credit. Nor does it appear lo be an unfounded suspicion, (if we may judge from the language of the bank directors and their advocates,) that sooner than submit to the injunction of government, (were it entorced at the end of two years,) to resume cash payments, they would employ the interim in making stid larger issues of paper, and thus protect themselves from being called to attempt what would thus become notoriously impossibk. The establishment of this new chartered bank, would not only defeat such a purpose, if it were cherished, but it would be compatible with the greatest caution, in pro ceeding with regard to the repeal of the restriction bill. The provisions of that bill might be extended to both corporations, so long as it might be thought expedient to continue the act in lorce ; and daily or weekly pay ments might be directed to be made between the two banks for the balance of their respective notes in each others hands, either in specie or in bullion, at the mint price. This injunction, and a clause forbidding any person concerned in the one bank from being concerned in the other, would preserve a competition between them, and prevent their forming any combination against the other for their mutual advantage. Although it is evident, that the proprietors in such a new undertaking, would act under one disadvantage in the first instance, that they would be obliged to pay interest to the Bank of England for the notes in which they subscribed their capital ; yet if the legislature patronized the New Com pany, this disadvantage could be soon overcome, and would be readily subscribed to.