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a new mode of expressing it was discovered ; it was stoutly maintained that it was not the paper which was depreciated, but the guinea which had risen in value! Thus, one witness being asked -"Do you know that the Bank of Ireland paper is depreciated ?" said—“I am not aware of it, because I should not say paper was depreciated, unless there was a forced issue of it, and that it was offered at a discount on all occasions. I should rather now say that gold is increased in value than the paper is depreciated." When asked—“What do you consider to be the best criterion of the depreciation of paper currency, an alteration of its value compared with the general property of any country, or its alteration compared with a given article, viz., guineas ?” he says—“I think the first the best criterion, because guineas may be wanted, as in the present case, for special purposes." It is somewhat surprising that the witness did not remember that Bank notes are a “promise to pay" guineas, and they are not a promise to pay any other kind of property. When asked—“Do you not conceive that the fact of a premium existing on English Bank notes in Ireland and exchanged for Irish Bank notes, affords some indication that it is Irish paper which is depreciated, and not the price of gold which is locally raised ?”—“I do not.” Other witnesses agreed in these opinions. When we consider the nature of an Exchange, and the state of facts proved with regard to the Irish coinage, at that time, we might almost smile at these ideas, and attribute them to the peculiar methods of thinking which are sometimes prevalent on the western side of St. George's Channel ; but we shall find that when a precisely similar state of things took place in England, with regard to the Foreign Exchanges, the very same doctrines were long and stoutly asserted by a very numerous party in this country, and would probably be so again under similar circumstances

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23. There was one witness, however, who held very different opinions—Mr. Marshall, the Inspector General of Imports and Exports. He said that there were shops in the principal streets of Dublin for buying and selling guineas, and that the retail price of a guinea then was a paper guinea and 2s. 2d. He said that at the end of December, 1803, the price of a bill in Dublin upon London for £100 British was £116 10s., if bought with Irish Bank notes, but if purchased with specie the price was only £106 108. Irish. The same thing was observable in all domestic transactions. The man with a gold guinea in his pocket, going to market, had the advantage of the same premium over the man with the paper guinea, so he could go to a specie shop, and with his gold guinea buy a paper guinea and the premium ; then he had a paper guinea of the same value as the other man and the premium besides. Bank of England notes were exactly equiyalent to guineas. From all these facts, it appeared that the Irish Bank note wanted 10 to 12 per cent. of the value of specie. It was contended that this was due to the rising in value of specie, and not to the depreciation of notes ; but if specie had risen so much in value, or, which was the same thing, if commodities had fallen so low as 10 or 12 per cent., such a state of things could not have continued for any length of time, because such a degree of cheapness would have attracted specie from Great Britain, where it had not risen. Moreover, Bank notes had been issued at par with specie, at its current value, whatever it was, and they ought to have risen pari passu with it, so as to be exchangeable with it, and, therefore, whatever they wanted of this exchangeable property must be considered as a falling off from their original value, or a depreciation to that extent. And, therefore, he was clearly of opinion that the Irish paper currency was depreciated

24. After shewing that the balance of payments had been for a long series of years favourable to Ireland, but that the exchange had never ceased to be greatly depressed, he was asked“Do you also mean, on the whole of your evidence, to give it as your decided opinion that there is and has been a depreciation in the paper currency in Ireland, and that the high rates of exchange, which have prevailed and still prevail, have arisen from the depreciation ? "

“I do; the high exchange in Dublin which has now continued for some years, must, no doubt, have arisen, like all other permanently high Exchanges which have ever existed, from the depreciated state of the Currency with which Bills of Exchange are purchased, and the same remedy might, perhaps, be resorted to with success in the present case, which has never failed to be

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effectual on all former occasions, namely, a removal of the depreciation "

These are the ideas of the men of 1696; we shall find a long dreary period elapse before their truth was again generally recognised in this country. The amazing absurdity of supposing that the Exchange could have fallen to 118, on account of the balance of payments alone, can be easily shewn. We cannot suppose that the cost of transmitting the specie from Dublin to London could have been more than £2 at most. Consequently, as £108 68. 8d. was the par of exchange, if the rate of the Exchange fell below £110 68. 8d., it would have been cheaper to send the specie itself. Surely, the Irish would never have been so foolish as to pay £118 in Dublin to purchase a debt in London of £100, when they could place the cash itself on the spot for £110 68. 8d.

25. The directors of the Bank of Ireland had admitted that before the Restriction Act they were obliged to regulate their issues of paper by the price of guineas and the Exchange with London. Whether they had an unusual demand for guineas, and the Exchange was adverse, they had been obliged to diminish their issues to prevent the continuance of the demand for guineas. As soon, however, as they were released from paying in cash, they no longer thought themselves bound to follow the same rules, and we have seen how prodigiously they had extended their issues. They admitted, however, that it was a possible case, that their issues might be too great, and a new theory was now advanced which we shall be called on to discuss at some length in a future chapter, but we notice it now because this appears to have been the first occasion it was propounded by mercantile men. Mr. Irving being asked if, in his opinion, Irish Bank notes were depreciated, said that he did not think so, although guineas were selling at a premium

“Explain your reasons

"I am of opinion that a bank managed with prudence, would only issue notes in proportion to the demand which may be made for those notes in exchange for good and convertible securities, such as mercantile bills of exchange, payable at specific periods of undoubted respectability, founded upon real mercantile trans



actions, upon Government securities, such as exchequer bills, in the purchase of Spanish dollars, or other bullion; and the circumstances of the bank notes of Ireland being demanded for such good and convertible securities, I am of opinion, is a proof that they are not too large in amount, and that their value is not depreciated"

We shall see afterwards that this theory was adopted by the directors of the Bank of England. It is one quite opposed to that by which the Irish directors acknowledged themselves obliged to follow whilst they were liable to pay their notes in gold. Hence, if it was correct, it inevitably followed that the issues of a Bank should be governed on totally different principles under a convertible and an inconvertible paper currency

26. After accumulating a considerable body of evidence upon the subject, and examining witnesses of all sorts of various opinions and various professions, the Committee reported that the Real Exchange was in favour of Ireland, and that the difference between the Real and Nominal Exchange arose from the depreciation of the Irish paper. They pointed out the absurdity of supposing that the value of gold had risen, and not that the paper was depreciated. They said that the difference between the Rate of Exchange could never vary more than the cost of transmitting specie from one to the other, and that any excess above that could only arise from other causes. They then noticed the enormous increase of the paper currency that had taken place, since the only check against over-issue was removed, namely, convertibility into gold at the will of the holder—the great quantity of base and counterfeit coin fabricated and forced into circulation—and shewed that, under an unfavourable state of the Exchange, the paper currency had always been diminished. “If prudence had not dictated such a course, necessity would have compelled a diminution of issues, by diminishing the stock of specie which could only be replaced at a loss proportionate to the existing rise of Exchange, and your Committee observe that, in fact as well as in theory, the result of such practice always was and must be the redress of the unfavourable Exchange. Since the Restriction Act, however, the directors had acted exactly upon the opposite principle, when the Exchange was unfavourable, they had greatly increased their issues. Excessive issues of paper produce a proportionate rise in the Rates of the Exchange, for these are obviously influenced by the value of the medium in which the payments are made and the quantity of that medium necessary to effect a given payment must be increased as the value of the medium diminishes, no matter whether the payments be made in a degraded and adulterated coin, or in a depreciated paper. If paper by depreciation comes to represent a less quantity of money than it professes to do, it must make the Exchange which it is to pay appear unfavourable, in the same manner as coin in which it were to be paid would have done, if by degradation it should cease to contain the same portion of gold which it used to do ; and the removal of the degradation in the one case, and of the depreciation in the other, would have the same effect in bringing the Exchange to par, or whatever might be its real state"

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27. After recommending several minor remedies the committee said—“But all the benefits proposed by this mode of remedies would be of little avail, and of very limited duration, if it did not promise at the same time to cure the depreciation of paper in Ireland, by diminishing its over-issue. And your Committee do, in express terms, declare their clear opinion, that it is incumbent on the Directors of the Bank of Ireland, and their indispensable duty, to limit their paper at all times of an unfavourable Exchange, during the continuance of the restriction, exactly on the same principle, as they would and must ve done, case the restriction did not exist, and that all the evils of a high and fluctuating Exchange must be imputable to them if they fail to do so."

28. They then noticed the miserable state of the silver coinage, or rather the base metal, and notes and I O U's substituted in its place, which they said was clearly to be traced to the unfavourable Exchange. As long as the Exchange continued in that unfavourable state, all the genuine silver coin transferred itself to England, and the place of the genuine silver coin was supplied by these small silver notes in the country districts, and in Dublin, where they were not issuable, by an

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