India and China, which used for ages to receive large supplies of silver from Europe, have of late years drawn them direct from America ; one result, among others, of the extended traffic of the United States. It happens indeed, oddly enough, that in consequence of the high price of bullion in England, our mint is now at work on silver imported from Bengal. The partial diminution which has taken place in the present age, in the relative value of silver to gold, is to be accounted for by the dif ference in the quantities respectively produced at the American mines, where gold has hardly kept up its for flier amount, (Evidence, Bullion p. 1290 the supply of sik er has been nearly doubled. Mexico is in this, as in other respects, by far the foremost of tin Spanish colonies, the yearly produce of her silver mine, appearing now to amount to nearly five millions sterling The collective produce of the rest of Spanish America in silver and gold, may be estimated at three million, more. Adding to these somewhat less than a million sterling for the produce of Portuguese Amet lea in both metals, and somewhat more than another million for the mines of our own hemisphere, we make a total of tett millions sterling annually, added to the stock of the pre cious metals throughout the world. When we thus find that the produce of the mines of the old world form a tenth part only of those of the new, we need hardly wonder at the rapid decrease in the value of the preciou, metals which took place throughout Europe in the six teenth century, the time when the Spanish American mines began to be effectually w nought. A much greats: fall would have ensued, had not the extended commerce to India and China opened, chiefly through the medium of the Dutch, a wide vent for these metallic treasures It appears, from tables in the Appendix to the Builtsit Report, p. 183, that the relative weight of gold annually produced is to that of sitter as one to fifty-two ; its rela tive value as one to three and a half. Spain being the country in Europe which is supposed to feel the effect of depreciation in the first instance, the state of her corn markets becomes an object of consideration. in oh serving the course of prices in them during the century from 1675 to 1765, we find very little appearance ol enhancement; a circumstance which serves to confirm Dr. Smith's opinion, that during that period there was no material rise in the money price of commodities, wink, on coming to a later epoch, from 1765 to 1787, the en hancement that took place in the Spanish corn markets, (Appendix to Bullion Report, p. 183,) will be found to bear a close resemblance to what happened in our own.
II. We now come to the second division of our article, we mean the question that is still pending, in regard to the resumption of cash payments by the Bank of Eng land. We may look back to the history ()I parliamentary proceedings for ages, without being enabled to find a topic which has excited a larger share of public interest, or more ample contributions of individual exertion, both in and out of parliament ; contributions creditable, on the whole, to their authors, though often marked by the erroneous conclusions inseparable from the application of a limited experience to the discussion of a w i.lc and com plicated subject.
Among the vatious inconveniences produced 1) oto eager participation in the war of the French Rem olution. one of the most consult rabic was the °eel-throw of our exchanges. That this was not immediately pc ice laiblc in 1793, must have been owing to the eircunost...tice of our aid consisting not in money but in troops, and to the large proportion of military stores transported from Eng land. Next summer, the commencement of the Prus sian subsidy caused a temporary depression of the ex change, which ceased to exist as soon as it became known, that the infidelity of that power to its engage ments would lead to a suspension of our remittances. Besides, Holland and all the north of Germany being open to our merchants during 1794. the counteracting power of commerce had full play in affording a corrective to those encroachments which public expences abroad never fail to make in the natural level of exchange. Bet in 1795, the case became very different. Our troops had been withdrawn, and our contribution to the conti nental struggle consisted wholly in money. Holland was no longer open to our commerce, and, what was unfortunately of much more consequence, a deficiency 'n our harvest forced us to make larger importations of corn from the north of Europe. The balance of com mercial payments came thus to be added to the balance of political payments, and their conjunct effect was, a considerable reduction of the exchange. Of the distress ing consequences of this state of things, both to our merchants and to government, those only can judge who knew the pecuniary straits of 1795 and 1796, or who have read, in the reports of our parliamentary commit tees, the anxious conferences and correspondence be tween Mr Pitt and the Bank directors. It was then November 1795) that the directors declared that gold had risen in the market eight per cent. above its coinage value, and that Mr Pitt fomrd it necessary to make a promise (which has since been much talked about) of enteruig into no political engagement likely to the state of our circulating medium, without a communication to the bank directors. This expression on the pat t of the minister, which has since been urged as an evidence of the undue influence of the bank, is merely an example of the difficulties in which govern ments involve themselves, by aiming at exertions be yond their means. Gladly would the bank have been relieved from that connection with government which led to such conferences, but ministers were sanguine in the cause of Austria, and repeated one demand on the bank after another, with all the confidence which marks the feelings of men unacquainted with the practice of business, and the limited resources of commercial esta blishments. A better harvest in 1796 had delivered us from one source of embarrassment, and was restoring the xchange ; but, towards the end of the year, the threat e..ed invasion from France created an alarm which more than coutterbalanced this partial relief.
The failure of some country banks having unluckily taken place at this critical period, a run On other country banks, and a drain of gold from the bank of England, was the consequence. It was in vain that the directors re sorted to the expedient which, in ordinary times, they had always found to answer,—a reduction of the quantity of their notes. The evil was of a new and peculiar kind, and the drain continued to go on. At last, after dimi nishing their circulation to nearly eight millions and a half, the directors, finding their demand for cash una bated, conuntinicated to ministers the exhausted state of their coffers; and the consequence was, an injunction from the priN y council to suspend all further payments ur Spt"ir. his suspension was first notified to the pub lic on Monday, `..7th February, accompanied with an intimation, that " the general concerns of the hank were in the most affluent and prosperous situation, and that the directors meant to continue their usual discounts, paying the amount in bank notes." And here it is important to remark, by us Lat gradual steps innovations, at first tem porary, became incorporated into our permanent policy.
The suspension of cash payments appears to have been intended at first for a few weeks only ; it was next pro longed to the end of the current session of parliament, and afterward, to a short time subsequent to the opening of the succeeding session. Nor were the means of re suming cash payments wanting at the last of these pe riods. Corn had become plentiful among ; and the rapid successes of Bonaparte had at that time, as well as afterwards, cut short the projected duration of our continental subsidies. These circumstances, co-operat ing with the effect of a contracted currency (a cause which we shall more fully explain under the head Ex produced a great rise in the exchange he tween England and the Continent. Specie flowed in on us ex actly as it has lately gone out ; and an opportunity was afforded to the bank directors to accumulate such a quan tity of bullion as might enable them to fulfil their en gagements to the public. A resolution was accordingly taken, at a court of directors, on 26th October, 1797, to the effect that they were able to issue specie in any man ner that might be deemed necessary for the accommo dation of the public, if the political circumstances of the country do not render it inexpedient ; but the directors, deeming it foreign to their province to judge of these points, wish to submit to the wisdom of parliament, whether, as it has been once judged proper to lay a re striction on the payments of the bank in cash, it may or may not be prudent to continue the same. A parliamen tary committee being again appointed to report on the state of the bank, and finding that no inconvenience had resulted from the suspension of cash payments, declared that, in consideration of political circumstances, particu larly the avowed intention of the enemy to injure our credit, " they were led to think it expedient to continue the restriction now subsisting." suspension of cash payments was now considered our settled policy for the remainder of the war. The year 1798 was as prosperous as it is reasonable to expect that a year of war can be : we had a favourable season at home, and exemption from the burden of subsidic. abroad. Our naval operations were eminently successful, and our merchant convoys arrived in safety from both cast and west. Bank notes were in perfect credit ; and,_ confidence being restored among commercial men, mo ney, as always happens in such a case, became more rapid in circulation, and comparatively plentiful. But the succeeding year presented a very different spectacle : Our government, encouraged by the accession of Rus sia, and in no small degree by our financial prosperity, to call forth anew the power of the Continent against France, engaged both for the payment of large subsi dies, and for the maintenance of a powerful army in Hol land. No sooner was the formation of this second coali tion known, than the continental exchange began to bear the marks of sudden declension ; and, as in 1795, it most unfortunately happened, that the evils of scarcity were added to the pressure of foreign expenditure. season, at first promising, became extremely unproduc tive front continued rain, and reduced us to seek a sup ply from the north of Europe, the quarter to which we had already become largely indebted for military aid. The burden of subsidies was not of very long duration ; the caprice of Paul, and the vigour of Bonaparte, con curring to the same end ;—producing, in the first place, a diminution in the amount of our payments, and soon after bringing them to a close by a continental pacifica tion. But the visitation of a deficient harvest took place, for the third time, in 1800,—a calamity which raised the price of corn, during that and next year, to an unexam pled height. The average price of wheat during these two years was nearly 61. a quarter ; and it has been de clared in evidence, before a parliamentary committee, that the demand for foreign corn, before it came to a close in cost this country no less than fifteen millions sterling. Here, then, was a season of set ere trial for our paper currency ; and it was in the year 1800, that an observing eye could first perceive the effects conse quent on the irregularity introduced into our system by the suspension of the convertibility of oo• paper into rash. The mode in which it took place was this : The fall of the continental exchange in 1799, led, as it always does, to the occurrence of mercantile failures ; hence scarcity of money, arising partly front actual exportation, !nit much more front that obstructed circulation at home which never fails to follow a want or confidence among persons in trade. The mercantile distress of the autumn of this year will be long remembered by those Nvho were then in business in London. In this scene of disquietude and embarrassment, the eyes of the merchant were fixed on the hank. An enlargement or discounts was called fOr, on account both of the direct aid resulting from an increase of our currency, and the still more considerable relief which would arise front an example of confidence afforded by the bank, the reputed centre of mercantile information. The directors, had they been liable to pay in specie, would have felt the necessity of refusing all applications for an extended issue, and even of contract ing their current circulation. The unfavourable ex •hange would have produced a run on them for guineas, tt hick could have been counteracted only by raising the N hie of their paper, or, in other words, by contracting Is amount. But, exempted as they were from such ap rrehcnsions, they deemed themselves at liberty to keep •lie state of exchange out of consideration, and to go as t. r, or nearly as far, as they were warranted by the vali of the bills presented for discount. The extended ;cue consequent on this latitude of rule, while it afforded a large profit to the bank, was productive of great relief o the mercantile body. It stopped the progress of the mischief engendered by the overthrow of the exchange ; and, had future circumstances, and the disposition of the bank, led to a gradual contraction of the over-issue, the :tublic might have reaped the benefit of aid in the day of need, without much injury from future retribution. llut corporate bodies are almost as slow as individuals in persuading themselves to remove the possession of ad -.antagea ; the bank felt the profit of increased circula ,ion, and did not clearly see that what was good for them •ould be bad fur the country. The rise of bullion above paper, which had now taken place to the extent of nearly .hree per cent., although conclusive proof of deprecia in the mind of an attentive observer, was little un c:erstood by the public at large, and equally little by the weak ministry who had preceded Mr Pitt. It is fair to add, that the year 1802, in bringing us peace and a fas ou•able harvest, pi oved by no means an era of termi nation to mercantile difficulties. The fall in the value of merchandise on the one hand,—the dread of a renewal of war on the other,—the heavy loss sustained by the contrac tors for the loan,—were all circumstances which led the commercial body to desire a continuance of bank dis counts on the enlarged scale. The abrogation of the restriction, though twice expected (1802 and 1803), did not take place ; and, on the renewal of war, its continu ance was regarded as a matter of course.