The Sun.
London, England, 1844-12-31 00:00:00

Sherwood and Co., 23, Pat roster-row.

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PAPER OR GOLD FOR A CUR-
RENCY?

The advocates of the present monetary system as-
sert that gold is the standard of value, and that dui.-
•fig the French war the paper currency of that period
vas depreciated, because a guinea was worth in the
uarket as bullion five shillings more than its nominal
value, and therefore concluded that one-pound bank
notes were depreciated in the ratio of that difference.
foe difference arose from its worth as bullion at the
:narket price arising from a deficient supply, and a
ieweller of my acquaintance melted several hundreds
of guineas in one week to supply his manufactory.
Sovereigns now are the legal currency instead of the
me-pound notes of the Bank of England. Is a
sovereign depreciated in value as paper would be
sonsidered, when *heat or any other commodity rises.
In value from a' deficient supply ? If a sovereign
purchases three bushels of wheat this week, and next
week its cost is 24s -is the sovereign depreciated 20
ger cent. ? If gold bullion rose in the market at the
,ame time 20 per cent., the sovereigns would be con-
verted into bullion, as the guineas were during the
French war; but in that case, to pass them as sove-
reigns, would you say they were depreciated 20 per
cent. Depreciation in bank notes can only refer
s•enerally in the purchase of all marketable commo-
dities, like assignats in France, and yak* realea in
Spain ; and this delusion of depreciation of bank notes,
compared with the variable price of bullion, was the
blind guide in passing the mischievous Restriction
Act in 1819, and the present despotic system.
The following extracts from past experience places
he question in a clear light; yet the writer of it
concluded that bank ....a As s ..vere depreciated by the
rise of the price of gold above the Mint price ; whether
correctly, will be seen.* "At. the end of 1813, the
amount of Bank of En land_potes in circe.l4,tion was
23,844,0501., the price t gold was 51. 10a, .per ounce,
and the depreciation ofi auk paper 29/. `,li. ld. per
:ent. At the en 1 of Ifl4, the bank issues were in-
creased to 28,232,73 W and the pried' of gold had
iallen to 41. 6s. 61. pevosance ; so that*. notes were
lepreciated only to the'extent of 9/. 19`s. sd. per cent.
Luis statement, drawn from documentg furnished by
the Bank Directors :to Parliament makes it even
doubtful whether any contraction whatever of
their issues was nee'essary, in order to restore
Bank Of England notes to their • par value. The
rise in value which they actually experienced,
amounting to 191. 4s. Bd. per cent., or nearly two-
thirds of-their depreciation, was occasioned in the face
sif an increased is-u of more tlfati 18 'per cent., by
'the great quantity OE-gold poured into the netintry at
.he re opening of our commerce." And to-this is
added-" The Bankßestriction-Act was for some
time so little needed fur the sepurity of that corpora-
tion, -that its notes, during the'first three years of the
System, were fully Tr a par with gold, and sometimes
even,bore a small premium:'" If dila does not prove
that gold, like all other commodities, rises and
-tails in value according to the supply and.:{femand
in the market, and not itit the amount in the-issue
of Bank of England rilt6s; I know no evidence
that will show it. The irriter's mind must have
been darkened by previotis hasty' but fashionable
conclusions, which banished the evidence of facts, and
dispassionate examination; wlten• lie avrote-" This
statement, drawn from documents. furniertsal by the.
Bank Directors to Parliament, makes it even doubtful
whether any contraction whatever of. their. issues %Vas
teecessary, in order.to re4toreißank of England notes
to their par value." - The facts- before him were, the.
increase of the issue df Rank 'of England notes,
amounting to 5,388,6801., did not, raise the price of
gold; but it fell/r0t...1h 5/.lQ.ger' ounce to '4/. ' 6s. -6d.,
aimply from -4.10.4' greiteliv(sui)pli
.in the market,.
i.• s
which reduced--iti valtSs). all other -:rftarketable
I - - • - .•• ...
commodities • •• '
•4. , . - ese .• . • •'-i- - i
In the report deliyere(l:ty she Committee of the
!louse of Commons, appiguted, tin the year •1810:to
inquire into
.ti 6 •cautileaeitt,the .high price Of bill:,
'llion, and its effects on -the '-eireulating mediuinLg.;he
_Governor and.Deprity-GoVerfior of the Bank ceßryt
hand, and others,. " Men whop' from th73l.49llitsq
and commercial, standing; have had4onitelable
experience in regard to thaWkking of financialtpe";
rations, both poricarred.flii that occasion in the opinion
'that the amount of notes, issued. bftlie. Bank could,
not in any way operate upon „the price of bullion or
the state of foreign exchanges, and stated to the Com-
alittee that there can be no possible excess of the issue
of Bank of England paper, so long as the advances in
which it iN issued are made upon the principle which
at present guides the conduct of the I);reetorg; that
is-so long as the discount of mercantile bills is con-
fined to paper of undoubted solidity, arising out of
real commercial transactions, and payable at short
and fixed periods."
The price of bullion, and the amount of notes issued
by the Bank of England, compared with the price of
wheat at several periods, proves the correctness of
those opinions as practical men of business-namely,
that bullion did not rise with the increase of issue of
hank notes, but from the demand of bullion in the
market to purchase wheat abroad in years of scarcity,
when it could not be paid for in manufactured goods,
in consequence of the continental ports being closed
against their introduction.
The document herewith appended shows that the
amount of bank notes issued August, 1792, was
11,006,969/. ; the market price of bullion was 3/. 17s.
6d. per ounce, and the average price of wheat was
395. 2d. per quarter. In 1797, the price of bullion
was 3/. 17s. 10i-d. per ounce, the amout of bank notes
in circulation was 10,568,216/., and the average price
of wheat 495. Bd. ; so that bullion then rose in price
when the issue of bank notes was less than in 1792,
vet wheat was higher in price 10s. 6,1. per quarter.
In 1799, the issue of bank notes was increased to
13,259,873/.; bullion was 3/. 17s. 9d. per ounce,
being lower than in 1797, when the issue of bank
notes was 10,568,2161. ; but the average price of
wheat was 645. 4d. The next years, 1800 and 1801,
wheat averaged 1345. sd. and 1295. Bd. per quarter,
bullion rose to 4/. ss. and 41. 6s. per ounce, the
amount of bank notes issued was 14,735,378/. and
14,970,321!.; yet the two following years, 1802 and
1803, bullion fell in price to 4/. 3s. 6d. and 4/. per
ounce, but the issue of Bank of England notes was
increased to 16,887,113/. and 17,035,959/. and the
price of wheat was 675. sd. per qUarter.
In 1807 the issue of bank notes was increased
to 20,034,112/., yet the price of bullion, 4/. per
ounce, was the same as in 1803 ; but the average
price of wheat per quarter was 89s. In 1809,
the issue of bank notes was reduced to
19,357,2411., yet the bullion rose in price to 4/. 1 Is.
per ounce, and wheat was 88s. ld. per quarter. In
1810, the issue of bank notes was increased to
24,446,175/., bullion fell in price to 4/. is. per ounce,
but wheat averaged 113 s. 4,1. per quarter. In 1812,
the issue of hank notes was 23,482,9101., wheat ave-
raged 140 s. 9i. per quarter, and bullion rose to Si. ss.
per ounce. In 1813, the average price of wheat was
116 s. 3d. per quarter, the issue of bank notes was
24,024,8691., and bullion rose in price to Si. 10s per
ounce ! In 1814, the price of bullion fell to 4/. 1 ls.
per ounce, wheat averaged 675. 9d. per quarter, yet the
issue of bank notes was increased to 28,979,876/. In
1817, the issue of bank-notes was 30,099,908/., bul-
lion fell to 4/. Os. 6d. per ounce, and wheat averaged
945. per quarter. If bullion were governed
in price by the amount of hank notes in circula-
tion, it would have sold at the highest price in this
year, yet it was lower by four shillings and sixpence
an ounce than in 1800, when the issue of bank notes
was 14,735,3781., that is, less than half the amount!
This evidence clearly shows that the opinions of the
Governor and Deputy-Governor of the Bank of Eng-
land in 1810, with other gentlemen of high station and
commercial standing, were correct in regard to the
working of financial operations, namely, that there
can be no possible excess of the issue of Bank of Eng-
land paper, and, I will add, the notes of other bankers,
if adequate security be given for the payment of such
notes, "so long as the discount for mercantile bills is
confined to paper of undoubted solidity, arising out of
real commercial transactions, and payable at short
and fixed periods."

The steady working of a paper currency in Scot-
land, and the occasional derangement of commerce
in this part of the kingdom, partly the mischievous
effects of deviating from it, ought to be the future
guide, if lessons of experience and the stability of
truth be more respected than the delusions of fashion-
able fancies to legislate. There has not been a case
of depreciation of the currency in one-pound notes
issued by the Banks of Scotland and Ireland before or
since the passing of the Bank Restriction Act of
1819; but the so-called " invariable standard" cur-
rency was depreciated from two to three per cent.
last year, and in many cases must be so now, and
will be, whenever the scales are used to ascertain
their variable value, arising from the temptations of
trade to " sweat the sovereigns," their loss by wear,
and the variation in the price of bullion.
In a prosperous community, generally, there must
ever he a great consumption of gold in manufactured
articles, and a small consumption in a community of po-
verty and distress ; in the former case, fluctuations in

* See " Banking."—Penny Cyclopadia.

' prices must attend the demand for luxuries arising from
general opulence ; but in the latter case it will be
nearly stationary, in consequence of food and clothing
only being sought to support life and provide com-
forts—the comparative baubles of superfluous wants
are then disregarded, and the small variation in the
price of gold during the past iron ages of ignorance
and poverty of the many prove it. But whenever
gold bullion shall rise a few per centages above the
usual price, and shall continue so from causes over
which human efforts have no control, the pre-
sent system of currency will cease. Experience will
then show that a paper currency can be safely and
most beneficially carried on for the general wel-
fare, under guarantees of local property, in
every district, arising from confidence in the
known security given. No panics can then ensue,
and the interest of bankers will induce them to supply
each neighbourhood with the necessary paper cur-
rency the general welfare requires ' • but so long as
commerce is affected by a currency dependent on the
uncertain supply of bullion, and chiefly confined to
the profit of one establishment, a feverish instability
must be occasionally looked for.
These observations vindicate the opinions given by
gentlemen of the first rank of commercial and finan-
cial knowledge in the City of London in the year
1810 ; and also make manifest the sound advice the
late Sir Robert Peel gave to his son previous to the
passing of the Bank Restriction Act in 1819, namely,
to leave the currency as he found it ; but to compel
all bankers to give security for the amount of notes
they issue. The present lion. Baronet probably re-
jected this advice from college impressions—that
money consists only in gold and silver coins. The
truth, however, is, all commodities are money at the
market prieec;nd gold and silver coins and one-pound
or other nodes on demand are the iarl',l2haer.4;',3 used to
exchange them. This error has misled rasmitaieat'sd
minds. Hence one-pound or larger notes are parts
of the guaranteed money property possessed by the
issuer of them in land, houses, gold, silver, tin, iron, and
all his other effects, and exchangeable for silver and
gold coins, bullion, &c., which society requires as the
instruments of exchange.
Hence a one-pound note Purchases the same Market-
able commodities that a sovereign of full weight can
purchase, during the existence of sovereigns as a cur-
rency—namely, until the price of bullion rises above
the Mint price so as to yield a profit to the trader to
convert them into bullion. But wheneVer bullion falls
below the Mint price, the one-pound note will pur-
chase more bullion than the sovereign, andin the ratio
of that depression. .
Hence a paper currency is inratiable in its nominal
value ; but a sovereign is -variable in its nominal
value according to the demand 'and supply of bullion
in the market; the loss by wear, and by " sweating
them," as practised „by the lbw trader, and already
noticed.
Having not canclUded the question of currency as
it appears to Shall feel obliged by any gentle-
man concisely": pointing out an error, addressed to the
editor of the Worcester Herald. All we need is the
guidance of truth for security and repose ; and how-
ever unwelcome it may be to those who are plumed
with the pride and conceit of selfsiufficiency; its
majestic, unchangeable course, will inevitably sweep
away the vanity and delusions which obscure it.
R.

• .
e t
Years.-

Bank of
England Notes
in Circulation
in Aucrust.
=

I Market Price of
Gold in August,l
per ounce.

1792 1
1793,,
1794'
1795:

kr°
11,095,9691 t
10,838,414
19,628-2'2, 0 --
11,45g;382
9,531;335-"-
10,568,1216

Average Price
of Wheat,
per Quarter.

.£ a. d.
. 3 _;l7. 6
3 17. 6
4.)
34 17 6
3 417 6
—3 —l7 6
*l3.er) 17 10.
:3; 17 10.
-a 17 9
'4- 5 0
:4 ' 6 0
v. 41 3 6
0 0
.4 0 0
4 0 0
-4 0 0 -
' 4 0 0.•
4 0 Q. •
4. 11 0
4 5 0
4 17 6
5 5 0
3 1(1 0
4 11 0
4 10 0
3 19 0
4 0 6
4 1 6
3 15 0
3 17 10
3 17 10
3 17 6
3 17 6
3 17 6
3 17 10}
3 17 6
3 17 6
3 17 6
3 17 9
3 17 10.
3 17 10
3 17 9
3 17 10i

s. d.

39 2
51 .3 •
51 8
77 2
81.,, 5
49 8
50 4

64 4
134 5
IP 8
:'67 5
/60 4
52 1
89 0
81 10
73 5
81 1
88 1 -
113 4
88 I 1

140 9
116 3
07
63 8
76 2
94 0
83 8
72 3
65 10
54 5
43 3
51 9
62 0
66 6
56 11
56 9
60 5
66 3
64 3
66 0
58 8
52 11