"To what do you ascribe the unfavourable course of exchange, which has now existed for several months between England and foreign countries ?"—4." I believe it has arisen chiefly from an uncommonly great importation of goods into this country during the last twelve months; and I believe it has also been much increased by a great diminution of remittances that would have been made to this country from different parts of Europe, on account of their imports from the United States of America, if the embargo in America had not prevented the usual shipments of goods from that country to Europe; and also, I am inclined to think there was a considerable diminution of exports from this country in consequence of the Orders in Council in England, the Decrees in France, and the American Embargo."

A similar opinion was expressed by an eminent Continental 'merchant, (page 78.) to whose evidence the Committee have in general paid considerable attention:

2. "You have stated your opinion, that the unfavourable state of the exchange was occasioned by the decrees of the enemy prohibiting trade with this country; did not the prohibition, on our part, of the American trade to the Continent, in a great degree aggravate the unfavourable state of the exchange?"

4. "As nearly the whole of the American importations with the Continent are remitted by bills to this country, it must have had that effect in as far as it prevented the American trade going there; and further, I am of opinion that the exchange would be much lower at this moment, if it were not for the importations received from Ame rica into Holstein, during the last six months."

It may be remarked, by those who are still unwilling to acknowlege the influence of the American trade on our exchanges, that the cause and the effect were not simultaneous; the fall of exchange not taking place till November 1808, nine months after the operation of our Orders and of the American embargo. The answer is, that the interruption to the mercantile intercourse between England and the Continent, during 1808, prevented, on the one hand, our having to pay for large imports; while, on the other, we still continued to receive billremittances for American account in liquidation of sales of the former year's importation to the Continent: but, when these remittances drew to a close, and when in 1809 our renewed intercourse with the Continent led to our having occa sion to pay for heavy imports, the rapid fall of exchange discovered the want of the former counterpoise. As soon as the loss on bills became so great as to exceed the cost of transporting specie, our merchants had recourse (as they always have in such cases) to the export of coin and bullion. Still the exchange rose, and the price of bullion rose along with . The following extract from Lloyd's list, with the accom

U 2

panying

panying calculations by Mr. Mushet, (See Appendix to his pamphlet, p. 100.) will convey an idea of this progressive ad

Unfortunately, a remarkable coincidence prevails in regard to the consequences of our political imprudence in 1799, as explained in our last Number, and those of our Orders in Council. In both, the evils of our impolicy have been augmented by the calamity of a deficient harvest. The large supplies of foreign corn, which were rendered necessary by the inadequacy of the last year's crop, have aggravated and con tinue to aggravate a pressure originating in other causes. Yet were we to believe our Custom-house returns, we should appear, even in these our years of commercial distress, to be large creditors in our mercantile intercourse with the Continent. Such is the fallacy of our political arithmetic, in the crude shape in which it is still received and published by the Treasury.

3dly, Rules of the Bank, in regard to the Issue of Notes. If on the subject of exchange the Report of the Committee was deficient, we are amply indemnified by its full and explicit observations on the rules of the Bank-Directors in managing their circulation. It is here that the opinions of the Committee and of the Bank first appear at variance. The balance of our trade with the Continent, and the inaccuracy of our Custom-house returns and of other inquiries of the sort, are mysteries which the Bank-Directors do not profess to understand, and on which they leave the Committee at liberty to say whatever they think fit:-but, when the Committee venture to touch the home question of regulating the quantum of their notes, the Directors are roused from their passive attitude, and meet the ungracious proposition with a sturdy resistance. The Committee maintain that the Bank issues too much paper; and the Directors answer, "That cannot be, for we never issue except on undoubted security, and no man will give security and pay in

terest

terest unless he actually wants the money." The Committee appeal to the rate of exchange and the price of bullion; and the Directors contend that they have nothing to do with either. Their testimony on this head is somewhat positive, and we ex

tract it.

(Evid. p. 89.) Mr. Whitmore, late Governor of the Bank. "I do not advert to the circumstance of the exchanges, it appearing upon a reference to the amount of our notes in circulation and the course of exchange, that they frequently have no connection."

(Evid. p. 96.) Mr. Pearse, Governor of the Bank. "I cannot see how the amount of bank-notes issued can operate upon the price of bullion or the state of the exchanges, and therefore I am individually of opinion that the price of bullion or the state of the exchanges, can never be a reason for lessening the amount of the bank-notes to be issued."

"Mr. Whitmore. "I am so much of the same opinion, that I never think it necessary to advert to the price of gold, or the state of the exchange, on the days on which we make our advances."

(Evid. p. 144.) Mr. Harman, a Bank-Director. "I must very materially alter my opinions, before I can suppose that the exchanges will be influenced by any modifications of our paper-currency."

Had the Bank-Directors been satisfied with saying that, since they have been exempted from the necessity of cash-payments, they give themselves no trouble about the state of the bullionmarket, the declaration would have been clear and candid; and it would have remained for the Legislature to judge of the public expediency of continuing such a course: but this was. not the object of the Directors. Eager to convey an impression that the suspension-bill made no difference in their rules, and that they have acted under it no otherwise than they did before, they strive, by the tenor of their answers, to persuade the Committee that an indifference to the price of bullion and to the state of exchange has been a permanent feeling with the Bank; but, in pushing this point, they appear to have forgotten that answers of a very different kind were on record. Let us con trast the above-mentioned extracts with the evidence of the Directors before the auspicious æra of the Suspension! - See Report of the Lords Committee of Secrecy on the affairs of the Bank, 1797, p. 15. Examination of Mr. Raikes, Mr. Darell, and Mr. Bosanquet:

2. In your transactions as Bank-Directors, and conferences with each other in that capacity, have you not always considered, that the state of exchange with foreign countries is a presumptive evidence of the increasing or decreasing demand of cash or bullion from the kingdom, and consequently of the increasing or decreasing quantity of cash or bullion within the kingdom?" Ans. "Certainly,"

Ibid. page 84. Copy of a written paper delivered to Mr. Pitt by the Governor, the 10th of October 1795, by order of the Court of Directors:

"Bank of England, 8th October 1795.

"The very large and continued drain of bullion and specie which the Bank has lately experienced, arising from the effects of the loan to the Emperor and other subsidies, together with the prospect of the demand for gold not appearing likely to cease, has excited such apprehensions in the Court of Directors, that on the most serious deliberation, they deem it right to communicate to the Chancellor of the Exchequer the absolute necessity they conceive to exist for diminishing the sum of their present advances to Government; the last having been granted with extreme reluctance on their part, on his pressing solicitation and statement, that serious embarrassments would arise to the public service, if the Bank refused.

It must occur to Mr. Pitt's recollection, that last January the Governor and Deputy Governor of the Bank did, by instruction from their Court, formally announce to him their apprehensions of the consequences that were likely to ensue from the Emperor's loan taking place; the events seem fully to justify their fears, and to Fender every measure of caution absolutely necessary for their future safety.

"In addition to the above causes, it may be proper to state, that large sums are likely soon to be called for by the claimants of the cargoes and freights of the neutral ships taken and about to be reimbursed; many of whom, as they are credibly informed, are instructed by their owners and proprietors to take back their returns in specie or bullion.

"The present price of gold being from 41. 35. 10`41. 45. per oz, and our guineas being to be purchased at 31. 175. 10žd、 per. oz clearly demonstrates the grounds of our fears, it being only necessary to state those facts to the Chancellor of the Exchequer."

Ibid p. 95. Extract of the record of the conversation with Mr. Pitt on the delivery of this paper :

"After Mr. Pitt had read this paper with great attention twice, . he began by expressing his satisfaction and approbation of the measure of communicating such matters to him; saying that he would most certainly frame his arrangements in a manner that might enable him to remove our fears and prevent unpleasant consequences; and that he would endeavour to do this in such a manner as should produce no alarm; strongly recommending to the Court of Directors to use every possible precaution to prevent that also.

"The Governor mentioned to him the draining of cash to Ireland, the calls for the West India armament, and the probability of soon perceiving those that will be occasioned by the claimants of the neutral ships being reimbursed; in all which he seemed to concur. Then the Governor stated to him that the price of gold, being so much above the value of our guineas, must necessarily impress his mind with the anavoidable consequences. The Chancellor of the Exchequer viewed this

in a most serious light. He candidly acknowledged that the expence of our troops on the Continent had been enormous; and intimated that the bent and operations of the war, as long as it did still continue, would he naval and in the West Indies."

The following passage is one out of many to the same effect, in the work of a writer who is by no means hostile to the Bank :

"The necessity which the Bank of England felt of curing any great excess of the market price above the mint price of gold, caused the limitation of Bank of England paper." Thornton on Paper Credit, P.233.'

Enough has now been adduced to prove that, in former days, the price of gold was a consideration of vital importance to the Bank but it did not, in the opinion of the Directors, suit their present situation to make any acknowlegement to that purport. Let us observe how pertinaciously they now endeavour to avoid giving a direct answer to the questions of the Bullion-Committee.

(Evid. page 79.) Mr. Whitmore's examination, 6th March.

2. "Antecedently to the suspension of the cash-payments of the Bank, was it not the practice of the Directors to restrain in some degree their loans or discounts, in the event of their experiencing any great demand upon them for guineas ?"-A." The Bink always act with that prudent caution, that their advances to the public upon dis count can be called in in two months, or at farthest ninety days.”

"Q"The question goes to this; whether antecedently to the suspension in 1797, a drain of guineas did not suggest to the Direc tors a restriction of their advances; for instance, did they not on this ground refuse to make the accustomed advances on the loans in 1783, when the drain of their gold was particularly great?"— A. "I am not prepared to speak to dates; but I have a recollection only of one instance, when the advance upon the loan was withheld. I be lieve that instance was in 1783, but I did not come into the Direc tion till 1786."

2. "Can you state generally whether, antecedently to the sus pension of the cash-payments, the Directors considered a drain upon them for guineas as a reason for restraining at all their loans or discounts A. "I apprehend it was done upon a view of that 'and every other circumstance that attended the state of their affairs at that time; I think, in point of prudence, that it ought to have been a reason at that period."

2. "Can you say whether in point of fact, prior to the sua pension, such a reason ever did operate with them to restrain their advances?" A. "Such a reason, connected with others, did certainly,"

(Evid. page 89.) Mr. Whitmore examined 9th March.