The Sun.
London, England, 1844-12-30 00:00:00

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 dur-
ing the French war the paper currency of that period
was depreciated, because
.a gqinea was worth in the
market 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.
The difference arose from its worth as bullion at the
market price arising from a deficient supply, and a
jeweller of my acquaintance melted several hundreds
of guineas in one week to supply his manufactory.
Sovereigns now are the legal currency instead of the
one-pound notes of the Bank of England. Is a
sovereign depreciated in value as paper would be
considered, when wheat 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
per cent. ? If gold bullion rose in the market at the
same 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
generally in the purchase of all marketable commo-
litie4, like assignats in France, and vales reales 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
the question in a clear light; yet the writer of it
concluded that bank notes were 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 England notes in circulation was
23,844,0501., the price of gold was Si. 10s. per ounce,
and the depreciation of bank paper 291. 4s. ld. per
cent. At the end of 1814, the bank issues were in-
creased to 28,232,7301., and the price of gold had
fallen to 4/. 6s. 6d. per ounce ; so that the notes were
depreciated only to the extent of 91. 19s. sd. per cent.
This statement, drawn from documents furnished by
the Bank Directors to Parliament, makes it even
doubtful whether any contraction whatever of
their issues was necessary, 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
of an increased issue of more than 18 per cent., by
the great quantity of gold poured into the country at
the re-opening of our commerce." And to this is
added—" The Bank Restriction Act was for some
time so little needed for the security of that corpora-
tion, that its notes, during the first three years of the
system, were fully on a par with gold, and sometimes
even bore a small premium." If this does not prove
that gold, like all other commodities, rises and
falls in value according to the supply and demand
in the market, and not by the amount in the issue
of Bank of England notes, I know no evidence
that will show it. The writer's mind must have
been darkened by previous hasty but fashionable
conclusions, which banished the evidence of facts, and
dispassionate examination, when he wrote—" This
statement, drawn from documents furnished by the
Bank Directors to Parliament, makes it even doubtful
whether any contraction whatever of their issues was
necessary, in order to restore Bank of England notes
to their par value." The facts before him were, the
increase of the issue of Bank of England notes,
amounting to 5,388,6801., did not raise the price of
gold, but it fell from Si. 103. per ounce to 4/. 6s. 6d.,
simply from the greater supply in the market,
which reduced its value, like all other marketable
commodities.

In the report delivered by the Committee of the
House of Commons, appointed, in the year 1810, to
inquire into the causes of the high price of bul-
lion, and its effects on the circulating medium, the
Governor and Deputy-Governor of the Bank of Eng-
land, and others, " Men who, from their station
and commercial standing, must have had considerable
experience in regard to the working of financial ope-
rations, both concurred on that occasion in the opinion
that the amount of notes issued by the Bank could
not in any way operate upon the price of bullion or
the state of foreign exchanges, and stated to the Com-
mittee that there can be no possible excess of the issue
of Bank of England paper, so long as the advances in
which it is issued are made upon the principle which
at present guides the conduct of the Directors; 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
bank 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. 100. 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,
yet wheat was higher in price 10s. 6d. per quarter.
In 1799, the issue of bank notes was increased to
13,259,8731.; bullion was 3/. 17s. 9d. per ounce,
being lower than in 1797, when the issue of bank
notes was 10,568,216/. ; 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 4/. 65. per ounce, the
amount of bank notes issued was 14,735,378/. and
14,970,3211.; yet the two following years, 1802 and
1803, bullion fell in price to 41. 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 1307 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
19,357,241/., yet the bullion rose in price to 41. 1 ls.
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 41. ss. per ounce,
but wheat averaged 113 s. 4d. per quarter. In 1812,,
the issue of bank notes was 23,482,910/., wheat ave-
raged 140 s. 91. 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
24,024,869/., and bullion rose in price to Si. 10s per
ounce ! In 1814, the price of bullion fell to 4/. 11 s.
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 bank ers,
if adequate security be given for the payment of such
notes, " so brig 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" c tar-
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 be 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
prices must attend the demand for luxuries arising front
general opulence ; but in the latter case it will bct
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, i n
every district, arising from confidence in tE .e
known security given. No panics can then ensue,
and the interest of bankers will induce them to supp) y
each neighbourhood with the necessary paper cu r-

* See " Banking."—Penny Cyclopadia.