r.\rF.R >roN!:v anp cor.n I'.xcriAXfiF.. i6r 



of Stellonbosch. where there had been a ^jreat fire. Then, as 

 now. it seemed easier to raise money in this way rather thaii 

 by increased taxation. But an increase in nionev does not cause 

 an increase in commodities. The Government could only f^et 

 the commodities it required by reducinc^ the amount available 

 for other jnuxhasers. With its paj^er money it jnu-chased some, 

 and the money in the hands of the inhabitants necessarily pur- 

 chased i^roportionately less. 



When, in 1806, the Cape was again occupied by the British, 

 the amount in circulation had increased to 2,o<S6.ooo Rds. The 

 terms of the second Capitulation did not limit the powers of the 

 British Government with reference to money to the same extent 

 as the first agreement had done. 



The Paper Money actually in circulation shall continue current 

 as heretofore, until the pleasure of His Britannic Majesty is known. 



The expenditure on the British forces again caused a tem- 

 porary rise in the external exchange value of the rixdollar. But 

 the nuantitv of money was soon increased. Tn June. 1810. a 

 proclamation announced that the currency would be increased 

 by one million rixdollars, to be issued through the Lombard 

 Bank. Of these, 500,000 Rds. were issued at once, and the 

 balance in five instalments up to March, 1814. Depreciation 

 continued. The average value of the rixdollar frorn 1806 to 

 1810 was 3/6, from i8ti to 1815 it w^as 2/6. By the end of 

 181 3 the circulation had risen to 3.071,204 Rds., or almost iyi 

 per head of the white population. 



The efifect of the increased issues first attracted the atten- 

 tion of the British Government during the administration of 

 Sir John Cradock, who came to the Cape with instructions not 

 to increase the issues without special authority. In February, 

 1 814. a Finance Committee, appointed by Cradock to deal with 

 the question, presented the following Majority Report : — 



1. An excess of paper money exists, more than the conunerce 

 of the Colony requires. 



2. An excess of paper money necessarily enhances the price of 

 every commodity, 



3. To counteract the evils arising therefrom, certain issues created 

 for puhlic purposes should be gradually destroyed. 



Two members, the Receiver-General and the Secretary to 

 the Colony, presented separate reports, which were opposed to 

 the destruction of any of the money. They held that the 

 increased prices were due to "augmented demand,'" though no 

 explanation was given of how an augmented demand can operate 

 except through an increased quantity of money or an increase 

 in the rapidity of circulation. Both Cradock and the British 

 (Government agreed with the Majority Report. But a few months 

 later Lord Charles Somerset became Governor. Fie consulted 

 the Receiver-General and the Secretary to the Colony, who 

 thought that the increase in paper money had made the people 



