The Paper Pound of 1797-1812

Edwin Cannan

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136918537
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First Published in 1970. This is the second edition reprint of the Bullion Report of 1810, published in 1925 with an introduction that outlines why it is a useful document as reference to the similarities of the consequences that the United Kingdom found itself in after 1919 in regards to the printing of the currency note and the Cunliffe limitation.

REPORT FROM THE SELECT COMMITTEE ON THE HIGH PRICE OF BULLION

Ordered by The House of Commons to be Printed 8th June, 1810

Reprinted 1919

THE SELECT COMMITTEE appointed to enquire into the Cause of the High Price of GOLD BULLION, and to take into consideration the State of the CIRCULATING MEDIUM, and of the EXCHANGES between Great Britain and Foreign Parts;—and to report the same, with their Observations thereupon, from time to time, to The House;—HAVE, pursuant to the Orders of The House, examined the matters to them referred; and have agreed to the following REPORT:

YOUR Committee proceeded, in the first instance, to ascertain what the price of Gold Bullion had been, as well as the rates of the Foreign Exchanges, for some time past; particularly during the last year.

Your Committee have found that the price of Gold Bullion, which, by the regulations of His Majesty's Mint, is £3 17s. 10½d per ounce of standard fineness, was, during the years 1806, 1807 and 1808, as high as £4 in the market. Towards the end of 1808 it began to advance very rapidly, and continued very high during the whole year 1809; the market price of standard Gold in bars fluctuating from £4 9s. to £4 12s. per oz. The market price at £4 10s. is about 15½ per cent, above the Mint price.

Your Committee have found, that during the three first months of the present year, the price of standard Gold in bars remained nearly at the same price as during last year; viz, from £4 10s. to £4 12s. per oz. In the course of the months of March and April, the price of standard Gold is quoted but once in Wettenhal's tables; viz. on the 6th of April last, at £4 6s. which is rather more than 10 per cent, above the Mint price. The last quotations of the price of Gold, which have been given in those tables, are upon the 18th and 22nd of May, when Portugal Gold in coin is quoted at £4 11s. per oz.: Portugal Gold coin is about the same fineness as our standard. It is stated in the same tables, that in the month of March last, the price of new Doubloons rose from £4 7s. to £4 9s. per oz. Spanish Gold is from 4½ to 4¾ grains better than standard, making about 4s. per oz. difference in value.

It appears by the Evidence, that the price of foreign Gold coin is generally higher than that of bar Gold, on account of the former finding a more ready vent in foreign markets. The difference between Spanish and Portugal Gold in coin and Gold in bars, has of late been about 2s. per ounce. Your Committee have also to state, that there is said to be at present a difference of between 3s. and 4s. per ounce between the price of bar Gold which may be sworn off for exportation as being foreign Gold, and the price of such bar Gold as the Dealer will not venture to swear off; while the former was about £4 10s. in the market, the latter is said to have been about £4 6s. On account of these extrinsic differences, occasioned either by the expense of coinage, or by the obstructions of law, the price of standard Gold in bars, such as may be exported, is that which it is most material to keep generally in view through the present enquiry.

It appeared to Your Committee, that it might be of use, in judging of the cause of this high price of Gold Bullion, to be informed also of the prices of Silver during the same period. The price of standard Silver in His Majesty's Mint is 5s. 2d. per ounce; at this standard price, the value of a Spanish Dollar is 4s. 4d. or, which comes to the same thing, Spanish Dollars are, at that standard price, worth 4s. 11½d. per ounce. It is stated in Wettenhall's tables, that throughout the year 1809, the price of new Dollars fluctuated from 5s. 5d. to 5s. 7d. per ounce, or from 10 to 13 per cent, above the Mint price of standard Silver. In the course of the last month, new Dollars have been quoted as high as 5s. 8d. per ounce, or more than 15 per cent, above the Mint price.

Your Committee have likewise found, that towards the end of the year 1808, the Exchanges with the Continent became very unfavourable to this Country, and continued still more unfavourable through the whole of 1809, and the three first months of the present year.

Hamburgh, Amsterdam, and Paris, are the principal places with which the Exchanges are established at present. During the last six months of 1809, and the three first months of the present year, the Exchanges on Hamburgh and Amsterdam were depressed as low as from 16 to 20 per cent, below par; and that on Paris still lower. The Exchanges with Portugal have corresponded with the others; but they are complicated by some circumstances which shall be explained separately.

Your Committee find, that in the course of the month of March last, that is, from the 2nd of March to the 3rd April, the Exchanges with the three places above mentioned received a gradual improvement. The Exchange with Hamburgh rose gradually from 29.4 to 31; that with Amsterdam from 31.8 to 33.5; that with Paris from 19.16 to 21.11. Since the 3rd of April last to the present time, they have remained nearly stationary at those rates, the Exchange with Hamburgh, as stated in the tables printed for the use of the Merchants, appearing as much against this Country as £9 per cent, below par; that with Amsterdam appearing to be more than £7 per cent, below par; and that with Paris more than £14 per cent, below par.

So extraordinary a rise in the market price of Gold in this Country, coupled with so remarkable a depression of our Exchanges with the Continent, very early, in the judgment of Your Committee, pointed to something in the state of our own domestic currency as the cause of both appearances. But before they adopted that conclusion, which seemed agreeable to all former reasonings and experience, they thought it proper to enquire more particularly into the circumstances connected with each of those two facts; and to hear, from persons of commercial practice, and detail, what explanations they had to offer of so unusual a state of things.

With this view, Your Committee called before them several Merchants of extensive dealings and intelligence, and desired to have their opinions with respect to the cause of the high price of Gold and the low rates of Exchange.

I

It will be found by the Evidence (Minutes of Evidence, pp. 41–45, 135, 136, 178, 179), that the high price of Gold is ascribed, by most of the Witnesses, entirely to an alleged scarcity of that article, arising out of an unusual demand for it upon the Continent of Europe. This unusual demand for Gold upon the Continent is described by some of them as being chiefly for the use of the French Armies, though increased also by that state of alarm, and failure of confidence, which leads to the practice of hoarding.

Your Committee are of opinion, that, in the sound and natural state of the British currency, the foundation of which is Gold, no increased demand for Gold from other parts of the world, however great, or from whatever causes arising, can have the effect of producing here, for a considerable period of time, a material rise in the market price of Gold. But before they proceed to explain the grounds of that general opinion, they wish to state some other reasons which alone would have led them to doubt whether, in point of fact, such a demand for Gold, as is alleged, has operated in the manner supposed.

If there were an unusual demand for Gold upon the Continent, such as could influence its market price in this country, it would of course influence also, and indeed in the first instance, its price in the Continental markets; and it was to be expected that those who ascribed the high price here to a great demand abroad, would have been prepared to state that there was a corresponding high price abroad. Your Committee did not find that they grounded their inference upon any such information; and so far as Your Committee have been enabled to ascertain, it does not appear that during the period when the price of Gold Bullion was rising here, as valued in our paper, there was any corresponding rise in the price of Gold Bullion in the market of the Continent, as valued in their respective currencies. Mr. Whitmore, indeed, the late Governor of the Bank, stated, (Min. pp. 178, 179), that in his opinion it was the high price abroad which had carried our Gold coin out of this Country; but he did not offer to Your Committee any proof of this high price. Mr. Greffulhe, a Continental Merchant (Min. p. 70), who appeared to be remarkably well informed in the details of trade, being asked by the Committee, If he could state whether any change had taken place in the price of Gold in any of the foreign markets within the last year ? answered, “No very material change that I am aware of.” Upon a subsequent day (Min. pp. 131, 132), having had time to refer to the actual prices, he again stated to the Committee, “I beg “leave to observe, that there has been no alteration of late “in the Mint price of Gold in foreign places, nor have the “market prices experienced an advance at all relative to the “rise that has taken place in England; one of the papers “I have delivered shews the foreign prices reduced into “sterling money at the present low rates of Exchange, and “the excess above our market price may be considered as “about equal to the charges of conveyance.” The paper he refers to will be found in the Appendix (Appendix of Accounts ; No. 56, 57, 58), and this statement made by Mr. Greffulhe throws great light upon this part of the subject; as it shews, that the actual prices of Gold in the foreign markets are just so much lower than its market price here, as the difference of Exchange amounts to. Mr. Greffulhe's paper is confirmed by another (Acc. No. 59, Min. p. 116), which has been laid before Your Committee. Mr. Abraham Goldsmid has also stated to Your Committee, that, during that part of last year when the market price of Gold here rose so high, its price at Hamburgh did not fluctuate more than from 3 to 4 per cent.

Here Your Committee must observe, that both at Hamburgh and Amsterdam, where the measure of value is not Gold as in this Country, but Silver, an unusual demand for Gold would affect its money price, that is, its price in Silver; and that as it does not appear that there has been any considerable rise in the price of Gold, as valued in Silver, at those places in the last year, the inference is, that there was not any considerable increase in the demand for Gold. That permanent rise in the market price of Gold above its Mint price, which appears by Mr. Greffulhe's paper to have taken place for several years both at Hamburgh and Amsterdam, may in some degree be ascribed, as Your Committee conceive, to an alteration which has taken place in the relative value of the two precious metals all over the world; concerning which, much curious and satisfactory Evidence will be found in the Appendix, particularly in the documents laid before Your Committee by Mr. Allen. (Acc. No. 21 to 33). From the same cause, a fall in the relative price of Silver appears to have taken place in this Country for some time before the increase of our paper currency began to operate. Silver having fallen in its relative value to Gold throughout the world, Gold has appeared to rise in price in those markets where Silver is the fixed measure, and Silver has appeared to fall in those where Gold is the fixed measure.

With respect to the alleged demand for Gold upon the Continent for the supply of the French Armies, Your Committee must further observe, that, if the wants of the military chest have been latterly much increased, the general supply of Europe with Gold has been augmented by all that quantity which this great commercial Country has spared in consequence of the substitution of another medium of circulation. And Your Committee cannot omit remarking, that though the circumstances which might occasion such an increased demand may recently have existed in greater force than at former periods, yet in the former wars and convulsions of the Continent, they must have existed in such a degree as to produce some effect. Sir Francis Baring has very justly referred (Min. p. 199) to the seven years' war and to the American war, and remarks, that no want of Bullion was then felt in this Country. And upon referring for a course of years to the tables which are published for the use of the Merchants, such as Lloyd's Lists and Wettenhall's Course of Exchange, Your Committee have found that from the middle of the year 1773, when the reformation of the Gold coin took place, till about the middle of the year 1799, two years after the suspension of the cash payments of the Bank, the market price of standard Gold in bars remained steadily uniform at the price of £3 17s. 6d. [being, with the small allowance for loss by detention at the Mint, equal to the Mint price of £3 17s. 10½d.] with the exception of one year, from May 1783 to May 1784, when it was occasionally £3 18s. During the same period it is to be noticed, the price of Portugal Gold coin was occasionally as high as £4 2s. and Your Committee also observe, that it was stated to the Lords' Committee in 1797 by Mr. Abraham Newland (Report Comm. of Secresy, p. 66), that the Bank had been frequently obliged to buy Gold higher than the Mint price, and upon one particular occasion gave as much for a small quantity, which their agent procured from Portugal, as £4 8s. But Your Committee find, that the price of standard Gold in bars was never for any length of time materially above the Mint price, during the whole period of 24 years which elapsed from the reformation of the Gold coin to the suspension of the cash payments of the Bank. The two most remarkable periods prior to the present, when the market price of Gold in this country has exceeded our Mint price, were in the reign of King William, when the Silver coin was very much worn below its standard, and in the early part of His present Majesty's reign, when the Gold coin was very much worn below its standard. In both those periods, the excess of the market price of Gold above its Mint price was found to be owing to the bad state of the currency; and in both instances, the reformation of the currency effectually lowered the market price of Gold to the level of the Mint price. During the whole of the years 1796 and 1797, in which there was such a scarcity of Gold, occasioned by the great demands of the country Bankers in order to increase their deposits, the market price of Gold never rose above the Mint price.

Your Committee have still further to remark upon this point, that the Evidence laid before them has led them to entertain much doubt of the alleged fact, that a scarcity of Gold Bullion has been recently experienced in this country. That Guineas have disappeared from the circulation, there can be no question; but that does not prove a scarcity of Bullion, any more than the high price proves that scarcity. If Gold is rendered dear by any other cause than scarcity, those who cannot purchase it without paying the high price, will be very apt to conclude that it is scarce. A very extensive home dealer who was examined, and who spoke very much of the scarcity of Gold, acknowledged (Min. p. 35), that he found no difficulty in getting any quantity he wanted, if he was willing to pay the price for it. And it appears to Your Committee, that, though in the course of the last year there have been large exportations of Gold to the Continent, there have been also very considerable importations of it into this Country from South America, chiefly through the West Indies. The changes which have affected Spain and Portugal, combined with our maritime and commercial advantages, would seem to have rendered this country a channel through which the produce of the mines of New Spain and the Brazils passes to the rest of the world. In such a situation, the imports of Bullion and Coin give us the opportunity of first supplying ourselves; and must render this the last of the great markets in which a scarcity of that article will be felt. This is remarkably illustrated by the fact, that Portugal Gold coin is now sent regularly from this Country to the Cotton Settlements in the Brazils, Pernambuco, and Maranham, while Dollars are remitted in considerable quantities to this country from Rio Janeiro.

It is important also to observe, that the rise in the market price of Silver in this country, which has nearly corresponded to that of the market price of Gold, cannot in any degree be ascribed to a scarcity of Silver. The importations of Silver have of late years been unusually large, while the usual drain for India and China has been stopped. (Acc. Nos. 9 & 10.)

For all these reasons, Your Committee would be inclined to think, that those who ascribe the high price of Gold to an unusual demand for that article, and a consequent scarcity, assum...