14 IV. G. Langworthy Taylor 



gold and the price of exchange rose considerably in England, led 

 to the making of the famous Bullion Report, which is, perhaps, 

 the most masterly document that ever issued from a legislative 

 committee. 



The most of the Bullion Report is occupied by a convincing 

 argument that the rise in foreign exchange and in commodity 

 prices was due to inflation of Bank of England notes, as a conse- 

 quence of the exemption of the bank from the obligation to pay 

 specie on demand. The key-note of the report is that financial 

 legislation is interference, and that "sound money" is furthered 

 by leaving the banker exposed to his natural obligation as 

 a debtor. But the Bullion Report saw clearly the need of loaning 

 according to the demands of business ; in other words, that busi- 

 ness makes money, that the amount of loans is practically equal 

 to the amount of business. And it went further and indicated 

 that deposits performed the same function as notes. This state- 

 ment at that early period is so remarkable that it deserves 

 quotation : 



"The effective currency of the country depends upon the quick- 

 ness of circulation and the number of exchanges performed in 

 a given time, as well as upon its numerical amount ; and all the 

 circumstances which have a tendency to quicken or retard the 

 work of circulation render the same amount of currency more 

 or less adequate to the amount of trade. A much smaller amount 

 is required in a high state of public credit than when alarms make 

 individuals call in their advances, and provide against accident 

 by hoarding; and in a period of commercial security and private 

 confidence, than when mutual distrust discourages pecuniary ar- 

 rangements for any distant time. But, above all k the same amount 

 of currency will be more or less adequate, in proportion to the 

 skill which the great money dealers possess in managing and 

 economizing the use of the circulating medium. Your commit- 

 tee are of opinion that the improvements which have taken place 

 of late years in this country, and particularly in the district of 

 London, with regard to the use and economy of money among 

 bankers, and in the mode of adjusting commercial payments, 

 must have had a much greater effect than has hitherto been 



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