ས. 1819. CHAP. only a portion of their value. But, when the currency of a state is depreciated, it is equally impossible to restore it to its former value without inflicting a loss on every debtor in the community. Debts incurred when a pound was really only worth fifteen shillings have to be paid in the new pound which is worth twenty. For this reason it is probably desirable for a community which has had the misfortune to have had recourse to issues of inconvertible paper to resume cash payments by gradual processes, and to contract its inconvertible currency by degrees. The change in the value of the currency takes place in this way more slowly, and debtors and creditors are able to arrange their mutual concerns without any very serious loss or any very great gain on either side. It is possible, in short, to question the propriety of any particular method of resuming cash payments; but it is impossible to doubt that it should be the object of every community to resume them. The nation which deliberately retains an inconvertible paper currency prefers the risk of constant fluctuation in the money market to the certainty of one sharp crisis. The writer who proposes to defend the issue of inconvertible paper must be prepared to show that a fixed standard of value is not as necessary as fixed standards of weight and measure. Selection the sole standard of value. It is impossible, then, to doubt the prudence of the of gold as decision which induced the Government in 1819 to return to cash payments. The Act of 1819 effected the termination of an exceptional state of things, which had only been tolerable from the circumstances which had led to it. Had the suspension of cash payments continued, violent fluctuations must have again occurred in the value of Bank paper; and each of these fluctuations must have involved a crisis ruinous in its consequences to some class of persons. The Act of 1819 placed the commerce of the country on a sounder basis. The standard of value V. .1819. no longer varied with every rise and fall of the poli- CHAP tical barometer; but was exempt from every variation except that slow and gradual change which, it is possible, is occurring in the value of gold. But there is another reason for which the Act of 1819 may be remembered with gratitude. A nation returning to cash payments may obviously select either gold or silver as the standard of value, or it may establish what is called a bi-metallic currency, and allow gold and silver to be equally legal tender. In deciding that gold should be the sole standard of value, the framers of the Act of 1819 conferred a benefit on posterity which it was almost impossible to foresee at the time. It was obvious, indeed, that it was impossible to predict that the relative value of two metals, produced in different places and under different circumstances, would always remain unchanged. But experience favoured the assumption that a pound of gold would always be worth about fifteen-and-a-half pounds of silver; and a rapid fall in the value of silver could not have been foreseen. More than half a century after the Act of 1819, a variety of circumstances contributed to depreciate the value of silver; and in consequence to raise the relative value of gold. The inconveniences experienced by other countries, in which either bi-metallic money had been established, or silver had been made the sole standard of value, proved the foresight of our ancestors in resting our monetary system on one metal alone, and that metal the most valuable of all metals, gold.1 son's memorandum The decision to return to cash payments necessitated Huskismore than ordinary care in the financial arrangements of the year. The Government owed the Bank 10,000,000l. on finance. A good many of the Whigs and of other moderate politicians thought that the crisis might have been more easily tided over by making silver the legal standard, or by adopting a bi-metallic currency. Ward raised the point in one of his letters to the VOL. I. K K Bishop of Llandaff; and Lord Lans- V. 1819. CHAP. Peel's committee had recommended that the debt should be paid, and the Bank required its payment in the course of the next two years. Some caution was necessary on this account; and a much more important reason for deliberation was to be found in another circumstance. The leading members of the Opposition had already realised the fact that the financial system of the country was founded on a delusion. But the truth was only slowly stealing on the perceptions of the Government. Among the less prominent, but abler, members of the Liverpool Administration was William Huskisson. Born in 1770, brought into Parliament in 1796, he had been appointed at the close of the century to a subordinate office in Pitt's Ministry. In 1801 he had retired with Pitt; and, on Pitt's restoration to power in 1804, he had filled the office of Secretary to the Treasury. He resumed this situation under the Duke of Portland in 1807, but unfortunately found it necessary to withdraw his services from the Ministry on the retirement of Canning in 1809. Since 1814 he had occupied a newly-created and comparatively unimportant office as Chief Commissioner of Woods and Forests and Land Revenue.1 But, though he was placed in an unostentatious position, his financial knowledge, which far exceeded Vansittart's, was fully recognised by the Ministry. His views, indeed, had little accord with those of his colleagues. Alone among the Tory Ministry, Huskisson had accepted the truths of Adam Smith's gospel; and was prepared to act, as far as possible, on the principles of free trade. The single financier that England produced between the death of Pitt and the rise of Peel, it was his fate never to be employed in any high financial situation. The Ministry preferred the routine errors of Vansittart to the novel truths which were being pressed on them by Huskisson. At the very commencement of the Session of 1819, 1 Huskisson's Memoir and Speeches, vol. i. pp. 36-66. Huskisson forwarded to Lord Liverpool a remarkable memorandum on the resumption of cash payments. He insisted in it on the necessity of a large reduction in the Unfunded Debt, and he dwelt on the method by which cash payments should be resumed. He went on to point out the follies of the course which the Chancellor of the Exchequer was pursuing. The mystery of our financial system no longer deceives anyone in the money market; selling exchequer bills daily to redeem funded debt daily, then funding those exchequer bills once a year, or once in two years, in order to go over the same ground again; whilst the very air of mystery, and the anomaly of large annual or biennial loans in times of profound peace, create uneasiness out of the market, and in foreign countries an impression unfavourable with respect to the solidity of our resources. In finance, expedients and ingenious devices may answer to meet temporary difficulties; but, for a permanent and peace system, the only wise course either in policy or for impression is a system of simplicity and truth.'1 CHAP. V. 1819. Such were the views which Huskisson propounded to his colleagues. He recommended that the Sinking Fund should be cancelled, and that the surplus income should alone be applicable to the redemption of the debt. The real surplus amounted to about 2,000,000l. But, as the Sinking Fund amounted to about 15,500,000l., there was an apparent deficit of 13,500,000l. In addition, moreover, to the supplies of the year, Vansittart desired to fund 10,597,000l. of unfunded debt. The total sum, therefore, which he required was not 13,500,000l. but 24,000,000l. Vansittart decided on raising one-half of Vansitthis sum, or 12,000,000l., in the ordinary way by a loan. financial He decided to borrow the other moiety of 12,000,000l. policy. from the Sinking Fund.'2 A new Sinking Fund was created 1 Yonge's Liverpool, vol. ii. P. 382. Hansard, vol. xl. p. 1004. tart's СНАР. V. · 1819. on the money so borrowed; and solemn preparations were made for extinguishing on paper a debt which had no real and palpable existence. All Vansittart's efforts, however, to preserve the Sinking Fund could not hide the fact that the fund, or three-fourths of it, was being applied to the current services of the year. The fact was so plain that Vansittart decided on attempting to increase the surplus by additional taxation. He persuaded the House of Commons to resolve that to make such progressive reductions of the National Debt as may adequately support public credit, it is necessary that there should be a clear surplus of not less than 5,000,000l., and that, with a view to the attainment of this object, it is expedient to increase the income of the country by the imposition of taxes to the amount of 3,000,000l. per annum.' '1 It was exactly eight years since Vansittart had induced the House to affirm that the paper of the Bank of England was equivalent to the legal coin of the realm. The resolution had been received with the ridicule which it had deserved; but it had fortunately proved only a harmless misstatement of a fact. The consequences of his new resolution were much more serious. Prudent men failed to see the necessity for maintaining the clear surplus of ,000,000l. which Vansittart insisted on preserving. They thought that no obligation was thrown upon the country except that of honestly paying its way, and that it was both ridiculous and dangerous to affirm that, in addition to doing so, it was necessary to reduce its mortgages by 5,000,000l. annually. 5,000,000l. was obviously an arbitrary sum, having no special virtue of its own. No doubt a surplus was eminently desirable, but it was a mere matter of degree, and therefore of opinion, whether it should amount to 5,000,000l. or only 2,000,000l. It could not be advisable to resort to additional taxation at 1 Hansard, vol. xl. pp. 864, 912-974. Ann. Reg., 1819, Hist., p. 90. |