A.D. 1776
—1850.
02 LAISSEZ FAIRE
se guided by the state of the exchanges in making their
sauesl. But the opposite party were not prepared to give
but see reason to regret, that the suspension of cash payments, which, in the most
‘avourable light in which it can be viewed, was only a temporary measure, has
heen continued so long ; and particularly, that by the manner in which the present
sontinuing Act is framed, the character should have been given to it of a permanent
war measure.” Report from the Select Committee on the High Price of Gold
Bullion, in Reports, 1810, p. 80.
* «Jt is important, at the same time, to observe, that under the former system,
when the Bank was bound to answer its Notes in specie upon demand, the state of
;he Foreign Exchanges and the price of Gold did most materially influence its
sonduct in the issue of those Notes, though it was not the practice of the Directors
systematically to watch either the one or the other. So long as Gold was demand-
wble for their paper, they were speedily apprized of a depression of the Exchange,
and a rise in the price of Gold, by a run upon them for that article. If at any
jime they incautiously exceeded the proper limit of their advances and issues, the
paper was quickly brought back to them, by those who were tempted to profit by
she market price of Gold or by the rate of Exchange. In this manner the evil
soon cured itself. The Directors of the Bank having their apprehensions excited
by the reduction of their stock of Gold, and being able to replace their loss only by
reiterated purchases of Bullion at a very losing price, natarally contracted their
issues of paper, and thus gave to the remaining paper, as well as to the Coin for
which it was interchangeable, an increased value, while the clandestine exporta-
lion either of the coin, or the Gold produced from it, combined in improving the
state of the Exchange, and in producing a corresponding diminution of the
lifference between the market price and Mint price of Gold. or of paper con-
rertible into Gold.
“Tt was a necessary consequence of the suspension of cash payments, to exempt
she Bank from that drain of Gold, which, in former times, was sure to result from
an unfavourable Exchange and a high price of Bullion. And the Directors,
released from all fears of such a drain, and no longer feeling any inconvenience
‘rom such a state of things, have not been prompted to restore the Exchanges and
she price of Gold to their proper level by a reduction of their advances and issues.
The Directors, in former times, did not perhaps perceive and acknowledge the
srinciple more distinctly than those of the present day, but they felt the in-
sonvenience, and obeyed its impulse; which practically established a check and
limitation to the issue of paper. In the present times, the inconvenience is not
felt; and the check, accordingly, is no longer in force. But your Committee beg
leave to report it to the House as their most clear opinion, that so long as the
suspension of Cash Payments is permitted to subsist, the price of Gold Bullion
and the general Course of Exchange with Foreign Countries, taken for any con-
siderable period of time, form the best general criterion from which any inference
can be drawn, as to the sufficiency or excess of paper currency in circnlation; and
:hat the Bank of England cannot safely regulate the amount of its issues, without
naving reference to the criterion presented by these two circumstances. And
pon a review of all the facts and reasonings which have already been stated,
Your Committee are further of opinion, that, although the commercial state of
:his Country, and the political state of the Continent, may have had some influence
on the high price of Gold Bullion and the unfavourable Course of Exchange with
Foreign Countries, this price, and this depreciation, are also to be ascribed to the
want of a permanent check, and a sufficient limitation of the paper currency in
this Country.” Report from the Select Committee on the High Price of Gold
Bullion. 1810. 1. 20. 21.
