BULLION. 



95 



Bullion, took place was this : The fall of the continental cx- 

 c!i.inj;r in I7!><>, led, as it always docs, to the oc- 

 currence of mercantile failures ; hence scarcity of 

 mum y, arising partly from actual exportation, but 

 much more from that olv.tnicti-d circulation at home 

 i never fails to follow a want of confidence a- 

 I'.-rsons in trailr. The mercantile distress of 

 ntiunn of this year will bc % long remembered by 

 \\lio \vc \\- then in hu:;n:r.ss in London. In this 

 of . disquietude and cmbarras ment, the eyes of 

 the meichnnt were fixed on the bank. An enlarge- 

 ment of discounts was called for, on account both 

 of the direct aid resulting from an increase of our 

 currency, and the still more considerable relief which 

 would arise from an example of confidence afforded 

 by the bank, the reputed centre of mercantile infor- 

 mation. The directors, had they been liable to pay 

 in specie, would have telt the necessity of rtfuMVDC 

 all applications for an extended issue, and even of 

 contracting their current circulation. The unfavour- 

 able exchange would have produced a run on them 

 for guineas, which could have been counteracted on- 

 ly by raising the value of their paper, or, in other 

 words, by contracting its amount. But, exempted 

 as they were from such apprehensions,- they deemed 

 themselves at liberty to keep the state of exchange 

 out of consideration, and to go as far, or nearly as 

 far, as they were warranted by the validity of the 

 bills presented for discount. The extended issue 

 consequent on this latitude of rule, while it afford- 

 ed a large profit to the bank, was productive of great 

 relief to the mercantile body. It stopped the pro- 

 gress of the mischief engendered by the overthrow 

 of the exchange ; and, had future circumstances, and 

 the disposition of the bank, led to a gradual con- 

 traction of the overissue, the public might have reap- 

 ed the benefit of aid in the day of need, without 

 much injury from future retribution. But corporate 

 bodies are almost as slow as individuals in persuad- 

 ing themselves to remove the possession of advan- 

 tages ; the bank felt the profit of increased circula- 

 tion, and did not cleaily see that what was good for 

 them could be bad for the country. The rise of 

 bullion above paper, which had now taken place to 

 the extent of nearly three per cent., although con- 

 clusive proof of depreciation in the mind ot an at- 

 tentive observer, was little understood by the public 

 at large, and equally little by the weak ministry who 

 had preceded Mr Pitt. It is fair to add, that the 

 year 1802, in bringing us peace and a favourable 

 harvest, proved by no means an era of termination 

 to mercantile difficulties. The fall in the value of 

 merchandise on the one hand the dread of a renew- 

 al of war on the other the heavy loss sustained by 

 the contractors for the loan were all circumstances 

 which led the commercial body to desire a conti- 

 nuance of bank discounts on the enlarged scale. The 

 abrogation of the restriction, though twice expect- 

 ed (1802 and 1803), did not take place ; and, on the 

 renewal of war, its continuance was regarded as a 

 matter of coarse. 



It may be useful here to direct our attention to 

 the degree of increase which had taken place in the 

 stock of bank of England notes. In regard to 

 small notes (L.I and L.2), nearly three years elap- 



i (1 niter the suspension, before their an cunt rote to 

 two millions a circuimtaccc to be attributed to the 



I7 r '7, I7'<'-, and pan 



'. But when xchange underwent the 



serious revolution which we have mentioned, our 

 guineas began to find their way abroad ; so that, by 

 the end ot ..- tmall-nnte circulation h.ul rue* 



to four millions. The augmentation of our larger 

 notes had been less considerable, being, in the end 

 of 1803, only two millions and a half above the 

 amount of the ordinary currency preriou* to the 

 suspension. When we consider, that -the increase of 

 small notes, however profitable to the bank, formed 

 rather a substitution for guinea* than an addni 

 the mass of our circulating medium, the remaining 

 sum (two and a half million*} appears a moderate 

 augmentation for such years of pecuniary diflic 

 To this, however, ie to be added the extended IMUCS 

 of country banks, the amount of which bad been, 

 for some time, in a state of progressive increase, in 

 consequence of the aid afforded them by the bank 

 of England. That aid was partly direct, in the 

 shape of discounts to the London agent* of country 

 banks, and to a much greater degree collateral by 

 the general diffusion of confidence in paper money. 

 To the two and a half millions of increase in bank 

 of England notes, is therefore to be Blade an addi- 

 tion, probably larger, for the extension of country 

 bank paper ; and if we, moreover, make allowance 

 for a cause of more real than apparent efficacy, we 

 mean those improvements in banking which make the 

 same stock of paper go a much greater way, we 

 shall be disposed to regard the total augmentation 

 of our circulating medium, from 1797 to 1803, as 

 very considerable, and as affording an adequate rea- 

 son for the partial depreciation which had now taken 

 place. 



If we divide the history of the bank, since its sus- 

 pension, into epochs, the years 1797 and 1798 may 

 be termed a season of tranquillity, while the follow- 

 ing years, till the conclusion of peace, must be pro* 

 nounced to come under a less satisfactory description. 

 The renewal of war may be considered a third era % 

 an era in which the advance of national power and 

 prosperity was retarded by enormous burdens, bat 

 in which there was, for several years, little direct 

 pressure on our money system. This happy exemp- 

 tion was owing to a double cause ; f from con- 

 tinental subsidies, and from the uecesMty of large 

 importations of foreign corn. The harvest of 1803 

 was abundant ; that of 1604-, although partially de- 

 ficient, led to nothing in the shape ot scarcity ; and 

 that of 1805, 1806, and 1807, were uot, taken all 

 together, below a fair average. In regard to subsi- 

 dies, we were long unable to stir the continent to 

 arms ; and when, in the end of 1805, we had suc- 

 ceeded in our favourite plan of a coalition, the rapid 

 success of Bonaparte saved us, as before, from a pro- 

 longation of remittances, at the moment (December) 

 when their magnitude had completely overset the ex- 

 change. Our subsequent aid to Prussia and Russia 

 was of an extent to prevent a me, rather than to oc- 

 casion a fall of exchange ; and a gradual recovery be- 

 fan to take place after the peace of Tilsit. The 

 rst five years of the war, therefore, were a period 



