THE MONTHLY MAGAZINE. No. 207.] JANUARY 1, 1811. [6 of VOL. 30. As long as thofe who write are ambitious of making Converts, and of giving their Opinions a Maximum of Influence and Celebrity, the most extensively circulated Mifcellany will repay with the greated Effect the Curiofity of thofe who read either for Amufement or Inftruction.-JOHNSON. YOUR ORIGINAL COMMUNICATIONS. . For the Monthly Magazine. ABSTRACT of the REPORT of the SELECT COMMITTEE of the HOUSE of COMMONS, on the HIGH PRICE of GOLD BULLION. OUR committee have found that the price of gold bullion, which, by the regulations of his Majesty's mint, is 3l. 17s. 101d. per ounce of standard fineness, was, during the years 1806, 1807 and 1808, as high as 47. in the market. Towards the end of 1808 it began to advance very rapidly, and continued very high during the whole year 1809; the market price of standard gold in bars fluctuating from 4l. 9s. to 4l. 12s. per oz. The market price at 4l. 10s. is about 15 per cent. above the mint price. It appeared to your committee, that it might be of use, in judging of the cause of this high price of gold bullion, to be informed also of the prices of silver during the same period. The price of standard silver in his Majesty's mint is 5s. 2d. per ounce; at this standard price, the value of a Spanish dollar is 4s. 4d. or, which comes to the same thing, Spanish dollars are, at that standard price, worth 4s. 11 d. per ounce. It is stated in Wettenhall's Tables, that throughout the year 1809, the price of new dollars fluctuated from 5s. 5d. to 5s. 7d. per ounce, or from 10 to 13 per cent. above the mint price of standard silver. In the course of the last month, new dollars have been quoted as high as 5s. 8d. per ounce, or more ti.an 15 per cent, above the mint price. Your committee have likewise found, that towards the end of the year 1808, the exchanges with the continent became very unfavourable to this country, and continued s.ill more unfavourable through the whole of 1809, and the three first months of the present year. Hamburgh, Amsterdam, and Paris, are the principal places with which the exchanges are established at present. During the last six months of 1809, and the three first months of the present year, the exchanges on Hamburgh and MONTHLY MAG. No. 297. Amsterdam were depressed as low as from 16 to 20 per cent. below par; and that on Paris still lower. So extraordinary a rise in the market price of gold in this country, coupled with so remarkable a depression of our exchanges with the continent, very clearly, in the judgment of your committee,, pointed to something in the state of our own domestic currency as the cause of both appearances. But, before they adopted that conclusion, which seemed agreeable to all former reasonings and experience, they thought it proper to enquire more particularly into the cir cumstances connected with each of those two facts; and to hear, from persons of commercial practice and detail, what explanations they had to offer of so unusual a state of things. It will be found, by the evidence, that the high price of gold is ascribed, by most of the witnesses, entirely to an alleged scarcity of that article, arising out of an unusual demand for it upon the continent of Europe. This unusual demand for gold upon the continent is described by some of them as being chiefly for the use of the French armies, though increased also by that state of alarm, and failure of confidence, which leads to the practice of hoarding. Your committee are of opinion, that, in the sound and natural state of the British currency, the foundation of which is gold, no increased demand for gold from other parts of the world, however great, or from whatever causes arising, cannot have the effect of producing here, for a considerable period of time, a material rise in the market price of gold. But, before they proceed to explain the grounds of that general opinion, they wish to state some other reasons, which alone would have led them to doubt whether, in point of fact, such a demand for gold as is alleged, has operated in the manner supposed. If there were an unusual demand for gold upon the continent, such as could influence 3R influence its market price in this country, it would of course influence also, and indeed in the first instance, its price in the continental markets; and it was to be expected that those who ascribed the high price here to a great demand abroad, would have been prepared to state that there was a corresponding high price abroad. Your committee did not find that they grounded their inference upon any such information; and so far as your committee have been enabled to ascertain, it does not appear that during the period when the price of gold bullion was rising here, as valued in our paper, there was any corresponding rise in the price of gold bullion in the market of the continent, as valued in their respective currencies. With respect to the alleged demand for gold upon the continent for the supply of the French armies, your cominittee must further observe, that, if the wants of the military chest have been latterly much increased, the general supply of Europe with gold has been augmented by all that quantity which this great commercial country has spared in consequence of the substitution of another medium of circulation. And your committee cannot omit remarking, that though the circumstances which might occasion such an increased demand may recently have existed in greater force than at former periods, yet in the former wars and convulsions of the continent, they must have existed in such a degree as to produce some effect. The two most remarkable periods prior to the present, when the market price of gold in this country has exceeded our mint price, were in the reign of king William, when the silver coin was very much worn below its standard, and in the early part of his present Majesty's reign, when the gold coin was very much worn below its standard. In both those periods, the excess of the market price of gold above its mint price was found to be owing to the bad state of the currency; and in both instances, the reformation of the currency effectually lowered the market price of gold to the level of the mint price. During the whole of the years 1796 and 1797, in which there was such a scarcity of gold, occasioned by the great demands of the country-bankers in order to encrease their deposits, the market price of gold never rose above the mint price. Your committee have still further to remark upon this point, that the evidence It is important also to observe, that the Since the suspension of cash payments in 1797, it is certain, that, even if gold is still our measure of value and standard of prices, it has been exposed to a new cause of variation, from the possible excess of that paper which is not convertible into gold at will; and the limit of this new variation is as indefinite as the excess to which that paper will be issued. It may indeed be doubted, whether, since the new system of Bank of England pay. ments has been fully established, gold has in truth continued to be our measure of value; and whether we have any other standard of prices than that circulating medium, issued primarily by the Bank of England and in a secondary manner by the country banks, the variations of which in relative value may be as indefinite as the possible excess of that circulating medium. But whether our present measure of value, and standard of prices, be this paper currency thus variable in its relative value, or continues still to be gold, but gold rendered more variable than it was before in consequence of being being interchangeable for a paper currency which is not at will convertible into gold, it is, in either case, most desirable for the public that our circulating medium should again be conformed, as speedily as circunstances will permit, to Its real and legal standard, gold bullion. If the gold coin of the country were at any time to become very much worn and lessened in weight, or if it should suffer a debasement of its standard, it is evident that there would be a proportion able rise of the market price of gold bullion above its mint price: for the mint price is the sum in coin, which is equivalent in intrinsic value to a given quantity, an ounce for example, of the metal in bullion; and if the intrinsic value of that sum of coin be lessened, it is equivalent to a less quantity of bullion than before. The samne rise of the market price of gold above its mint price will take place if the local currency of this particular country, being no longer convertible into gold, should at any time be issued to excess. That excess cannot be exported to other countries, and, not being convertible into specie, it is not necessarily returned upon those who issued it; it remains in the channel of circulation, and is gradually absorbed by increasing the prices of all commodities. An increase in the quantity of the local currency of a particular country, will raise prices in that country exactly in the same inanner as an increase in the general supply of precious metals raises prices all over the world. By means of the increase of quantity, the value of a given portion of that circulating medium, in exchange for other commodities, is lowered; in other words, the money prices of all other commodities are raised, and that of bullion with the rest. In this manner, an excess of the local currency of a particular country will occasion a rise of the market price of gold above its mint price. It is no less evident, that, in the event of the prices of commodities being raised in one country by an aug mentation of its circulating medium, while no similar augmentation in the circulating medium of a neighbouring country has led to a similar rise of prices, the currencies of those two countries will no longer continue to bear the same relative value to each other as before. The intrinsic value of a given portion of the one currency being lessened, while that of the other remains unaltered, the exchange will be computed between those two countries to the disadvantage of the former. In this manner, a general rise of all prices, a rise in the market price of gold, and a fall of the foreign exchanges, will be the effect of an excessive quantity of circulating medium in a country which has adopted a currency, not exportable to other countries, or not convertible at will into a coin which is exportable. It appears to your committee to have been long settled and understood as a principle, that the difference of exchange resulting from the state of trade and payments between two countries is limited by the expense of conveying and insuring the precious metals from one country to the other: at least, that it cannot for any considerable length of time exceed that limit. The real difference of exchange, resulting from the state of trade and payments, never can fall lower than the amount of such expence of carriage, including the insurance. The truth of this position is so plain, and it is so uniformly agreed to by all the practical authorities, both commercial and political, that your committee will assume it as indisputable. Your committee are disposed to think from the result of the whole evidence, contradictory as it is, that the circumstances of the trade of this country, in the course of the last year, were such as to occasion a real fall of our exchanges with the continent to a certain extent, and perhaps at one period almost as low as the limit fixed by the expense of remitting gold from hence to the respective markets. And your committee is inclined to this opinion, both by what is stated regarding the excess of imports from the continent above the exports, though that is the part of the subject which is left most in doubt: and also by what is stated respecting the mode in which the payments in our trade bave been latterly effected, an advance being paid upon the imports from the continent of Europe, and a long credit being given upon the exports to other parts of the world. Your committee, observing how entirely the present depression of our exchange with Europe is referred by many persons to a great excess of our imports above our exports, have called for an account of the actual value of those for the last five years; and Mr. Irving, the Inspector-general of Customs, has accor dingly furnished the most accurate estimate of both that he has been enabled to form The following is an Account of the official Value of our Imports and Exports with the Continent of Europe alone, in each of the last five Years: The balances with Europe alone in favour of Great Britain, as exhibited in this imperfect statement, are not far from corresponding with the general and more accurate balances before given. The favourable balance of 1809 with Europe alone, if computed according to the actual value, would be much more considerable than the value of the same year, in the former general statement. A favourable balance of trade on the face of the account of exports and imports, presented annually to parliament, is a very probable consequence of large drafts on government for foreign expenditure; an augmentation of exports, and a diminution of imports, being promoted, and even enforced, by the means of such drafts. For if the supply of bills drawn abroad, either by the agents of government, or by individuals, is disproporti onate to the demand, the price of them in foreign money falls, until it is so low as to invite purchasers; and the purchasers, who are generally foreigners, not wishing to transfer their property permanently to England, have a reference to the terms on which the bills on England will purchase those British commodities which are in demand, either in their own country, or in intermediate places, with which the account may be adjusted. Thus, the price of the bills being regulated in some degree by that of British commodities, and continuing to fall till it becomes so low as to be likely to afford a profit on the purchase and exportation of these commodities, an actual exportation nearly proportionate to the amount of the bills drawn can scarcely fail to take place. It follows, that there cannot be, for any long period, either a highly favourable or unfavourable balance of trade; for the balance no sooner affects the price of bills, than the price of bills, by its re-action on the state of trade, promotes an equalization of commercial exports and imports. Your committee, have here considered cash and bullion as forming a part of the general mass of exported or imported articles, and as transferred according to the state both of the supply and the demand; forming, however, under certain circumstances, and especially in the case of great fluctuations, in the general commerce, a peculiarly commodious remittance. From the foregoing reasonings relative to the state of the exchanges, your committee find it difficult to resist an inference that a portion at least of the great. fall which the exchanges lately suffered, must have resulted not from the state of trade, but from a change in the relative, value of our domestic currency. when this deduction is joined with that which your committee have stated, respecting the change in the market price, of gold, that inference appears to be, demonstrated.. But In In consequence of the opinion which your committee entertain, that, in the present artificial condition of the circu lating medium of this country, it is most important to watch the foreign exchanges and the market price of gold, your committee were desirous to learn, whether the directors of the Bank of England held the same opinion, and derived from it a practical rule for the controul of their circulation; and particularly whether, in the course of the last year, the great depression of the exchanges, and the great rise in the price of gold, had suggested to the directors any suspicion of the currency of the country being excessive. Mr. Whitmore, the late governor of the bank, stated to the committee, that, in regulating the general amount of the loans and discounts, he did "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 connexion." He after wards said, "My opinion is, I do not know whether it is that of the Bank, that the amount of our paper circulation has no reference at all to the state of the exchange." And on a subsequent day, Mr. Whitmore stated, that "the present unfavourable state of exchange has no influence upon the amount of their issues, the bank having acted precisely in the same way as they did before." He was likewise asked, Whether, in regulating the amount of their circulation, the bank ever adverted to the difference between the market and mint price of gold? and having desired to have time to consider that question, Mr. Whitmore, on a subsequent day, answered it in the following terins, which suggested these further questions: the course of the last year, risen as high as 4l. 10s. or 41. 12s. has that circumstance been taken into consideration by you, so as to have had any effect in diminishing or enlarging the amount of the outstanding demands?—It has not been taken into consideration by me in that view." Mr. Pearse, now governor of the bank, agreed with Mr. Whitmore in this account of the practice of the bank, and expressed his full concurrence in the same opinion. Mr. Pearse." In considering this subject, with reference to the manner in which bank-notes are issued, resulting from the applications made for discounts to supply the necessary want of banknotes, by which their issue in amount is so controuled that it can never amount to an excess, 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 bank-notes to be issued, always under standing the controul which I have already described. "Is the governor of the bank of the same opinion which has now been ex. pressed by the deputy governor? Mr. Whitmore."I am so much of the same opinion, that I never think ic necessary to advert to the price of gold, or the state of the exchange, on the days on which we make our advances. "Do you advert to these two circumstances with a view to regulate the general amount of your advances?—I do not advert to it with a view to our general advances, conceiving it not to bear upon the question." And Mr. Harman, another bank director, expressed his opinion in these terms: "I must very materially alter my opinions, before I can suppose that the exchanges will be influenced by any mo difications of our paper currency.' "In taking into consideration the amount of your notes out in circulation, and in limiting the extent of your discounts to merchants, do you advert to the difference, when such exists, between the market and the mint price of gold? We do advert to that, inasmuch as we do not discount at any time for those per-expressing it to be their opinion, after a sons who we know, or have good reason to suppose, export the gold. "Do you not advert to it any farther than by refusing discounts to such persons? We do advert to it, inasmuch as whenever any director thinks it bears upon the question of our discounts, and presses to bring forward the discussion. "The market price of gold having, in The committee cannot refrain from very deliberate consideration of this part of the subject, that it is a great practical error to suppose that the exchanges with foreign countries, and the price of bul lion, are not liable to be affected by the amount of a paper currency, which is issued without the condition of payment in specie at the will of the holder. That the exchanges will be lowered, and the price |