Paper Currency. 



211 



mense hoards came forth from their hiding-places; goods and commod- 

 ities of all sorts being very cheap, from the anxiety of their owners 

 to possess money, caused immense sums to be imported from foreign 

 countries. The exchanges immediately turned in favor of France, 

 and in a short time a metallic currency was permanently restored. 

 And during all the terrific wars of Napoleon, the metallic standard was 

 ahoays maintained at full value.'' 



The war in which France and England became involved in 1793, 

 and which made such great demands on both countries, embarrassed 

 the latter as well as the former, although at a little later period. Great 

 Britain relied on the Bank of England for its financial assistance. 

 The expenses of the war were so great that it was impossible for the 

 bank to honor all the government's drafts and redeem its bills, in 

 coin, on demand. On the 27th day of February, 1797, the Bank of 

 England suspended specie payments. The result was the old story 

 over again — loss of confidence, timidity of capital, suspension of busi- 

 ness, low wages and high prices for food products (for particulars, see 

 Martineau's History of England, vol. 1, p. 329). The people suffered 

 till the cry for relief was so strong that the House of Commons was 

 compelled to take action and, on the 8th of June, 1810, appointed a 

 committee to C£ inquire into the high price of gold bullion, and to take 

 into consideration the state of the circulating medium and of the ex- 

 changes between Great Britain and foreign parts." 



The report of the committee was most exhaustive and to the stu- 

 dent of finance is an interesting document. The following is Prof. 

 Sumner's digest of it: 



" 1. The value of an inconvertible currency depends on its amount 

 relatively to the needs of the country for a circulating medium (only 

 to a very subordinate degree on the security on which it is based, or 

 the credit of the issuer). 



"2. If gold is at a premium in paper, the paper is redundant and 

 depreciated. 



"3. The limit of possible fluctuation in the exchanges, is the ex- 

 pense of transmitting bullion from the one country to the other. If 

 it costs two per cent to transmit bullion, the fluctuations of the ex- 

 change due to the ratio of imports and exports never can exceed two 

 per cent above or below par. Par of exchange is the par of the metals, 

 height for weight, in the two coinages. 



"4. If there is a drain of the precious metals, it is due, aside from 

 exportations to purchase food or pay armies, etc., to the presence of 



iuf, Hoi 



currency of some sort in the country it leav< 



