BULLION. 



Bullion. 



market eight per cent, above its coinage value, and 

 that Mr Pitt found it necessary to make a promise 

 (which has since been much talked about) of enter- 

 ing into no political engagement likely to affect the 

 state of our circulating medium, without a previous 

 communication to the b'tnk directors. This expres- 

 sion on the part of the minister, which has since 1 been 

 urged as an evidence of the undue influence of the 

 bank, is merely an example of the difficulties in which 

 governments involve themselves, by aiming at exer- 

 tions beyond their means. Gladly would the bank 

 have been relieved from that connection with govern- 

 ment which led to such conferences, but ministers 

 were sanguine in the cause of Austria, and repeated 

 one demand on the bank after another, with all the 

 confidence which marks the feelings of men unac- 

 quainted with the practice of business, and the limited 

 resources of commercial establishments. A better har- 

 vest in 1796 had delivered us from one source of em- 

 barrassment, and was restoring the exchange ; but, 

 towards the end of the year, the threatened invasion 

 from France created an alarm which more than coun- 

 terbalanced this partial relief. 



The failure of some country banks having un- 

 luckily taken place at this critical period, a run on 

 other country banks, and a drain of gold from the 

 bank of England, was the consequence. It was in 

 vain that the directors resorted to the expedient 

 which, in ordinary times, they had always found to 

 answer a reduction of the quantity of their notes. 

 The evil was of a new and peculiar kind, and the 

 drain continued to go on. At last, after diminish- 

 ing their circulation to nearly eight millions and a 

 half," the directors, finding their demand for cash un- 

 abated, communicated to ministers the exhausted 

 state of their coffers ; and the consequence was, an 

 injunction from the privy council to suspend all fur- 

 ther payments in specie. This suspension was first 

 notified to the public on Monday, 27th February, 

 accompanied with an intimation, that " the general 

 concerns of the bank were in the most affluent and 

 prosperous situation, and that the directors meant to 

 continue their usual discounts, paying the amount in 

 bank notes." And here it is important to remark, 

 by what gradual steps innovations, at first tempo- 

 rary, became incorporated into our permanent po- 

 licy. The suspension of cash payments appears to 

 have been intended at first for a few weeks only ; it 

 was next prolonged to the end of the current session 

 of parliament ; and afterward, to a short time sub- 

 sequent to the opening of the succeeding session. 

 Nor were the means of resuming cash- payments 

 wanting at the last of these periods. Corn had be- 

 come plentiful among us ; and the rapid successes of 

 Bonaparte had at that time, as well as afterwards, 

 cut short the projected duration of our continental 

 subsidies. These circumstances, co-operating with 

 the effect of a contracted currency (a cause which 

 we shall more fully explain under the head EX- 

 CHANGE), produced a great rise in the exchange be- 

 tween England and the Continent. Specie flowed 

 in on us exactly as it has lately gone out ; and an 

 opportunity was afforded to the bank directors to 

 accumulate such a quantity of bullion as might en- 

 able them to fulfil their engagements to the public. 

 A resolution was accordingly taken, at a court of 



directors, on 26th October 1797, to the effect that 

 they were able to issue specie in any manner that 

 might be deemed necessary for the accommodation 

 of the public, if the political circumstances of the 

 country do not render it inexpedient ; but the direc- 

 tors, deeming it foreign to their province to judge of 

 these points, wish to submit to the wisdom of par- 

 liament, whether, as it has been once judged proper 

 to lay a restriction on the payments of the bank in 

 cash, it may or may not be prudent to continue the 

 same. A parliamentary committee being again ap- 

 pointed to report on the state of the bank, and find- 

 ing that no inconvenience had resulted from the sus- 

 pension of cash payments, declared that, in consi- 

 deration of political circumstances, particularly the 

 avowed intention of the enemy to injure our credit, 

 " they were led to think it expedient to continue the 

 restriction now subsisting." 



The suspension of cash payments was now consi- 

 dered our settled policy for the remainder of the war. 

 The year 1798 was as prosperous as it is reasonable 

 to expect that a year of war can be : we had a fa- 

 vourable season at home, and exemption from the 

 burden of subsidies abroad. Our naval operations 

 were eminently successful, and our merchant con- 

 voys arrived in safety from both east and west. 

 Ban): notes were in perfect credit ; and, confidence 

 being restored among commercial men, money, as 

 always happens in such a case, became more rapid in 

 circulation, and comparatively plentiful. But the 

 succeeding year presented a very different spectacle : 

 Our government, encouraged by the accession of 

 Russia, and in no small degree by our financial pros- 

 perity, to call forth anew the power of the Conti- 

 nent against France, engaged both for the payment 

 of large subsidies, and for the maintenance of a pow- 

 erful army ii> Holland. No sooner was the forma- 

 tion of this second coalition known, than the conti- 

 nental exchange began to bear the marks of sudden 

 declension ; and, as in 1795, it most unfortunately 

 happened, that the evils of scarcity were added to 

 the pressure of foreign expenditure. A season, at 

 first promising, became extremely unproductive from 

 continued rain, and reduced us to seek a supply from 

 the north of Europe, the quarter to which we had 

 already become largely indebted for military aid. 

 The burden of subsidies was not of very long dura- 

 tion ; the caprice of Paul, and the vigour of Bona- 

 parte, concurring to, the same end ; producing, in 

 the first place, a diminution in the amount of our 

 payments, and soon after bringing them to a close 

 by a continental pacification. But the visitation of 

 a deficient harvest took place, for the third time, in 

 1800, a calamity which raised the price of corn, 

 during that and next year, to an unexampled height. 

 The average price of wheat during these two years 

 was nearly 6 a quarter ; and it has been declared 

 in evidence, before a parliamentary committte, that 

 the demand for foreign corn, before it came to a 

 close in 1802, cost this country no less than fifteen 

 millions sterling. Here, then, was a season of se- 

 vere trial for our paper currency ; and it was in the 

 year 1800, that an observing eye could first perceive 

 the effects consequent on the irregularity introduced 

 into our system by the suspension of the convertibi- 

 lity of our paper into cash. The mode in which it 



Bullion. 



