“How do you distinguish between your paper and the rags which have in other cases been issued?—Unless I know the principle, I cannot say.
“Take the French assignats.—The French assignats were issued upon no principle at all, because no provision was made for their redemption.”[188]
Against these witnesses was the testimony of a person perhaps the highest living authority on this question. I refer to Lord Overstone, known before his elevation to the peerage as Mr. Jones Loyd, the eminent banker, whose life makes him practically acquainted with this subject, while his liberal studies and various experience add to the solidity of his judgment. His testimony on this occasion, extending over almost three days, occupies nearly one hundred folio pages. Writers on finance have quoted it ever since, and practical men have accepted it as a guide. In reply to questions by the Committee, he declared himself strongly opposed to the issue of Government notes not payable in specie on demand. In his opinion “they would generate a state of utter confusion which could not be tolerated for three months.”[189] Then again:—
“It is quite clear that there would be a discount upon these notes in the first place; they would not answer the purpose of a circulating medium; it would throw everything into confusion in the very first stage of the process: that would be the first difficulty.”[190]
Here are his answers to other questions.
“Your Lordship was asked, on the last day, whether it would not be possible in a great degree to mitigate such difficulties as I have endeavored to portray, by having two sorts of notes, one of them payable in bullion, but the other, if I may use the expression, a sort of I O U note between the Government and the public; whether, inasmuch as the Government owes £6,000,000 or £7,000,000 every quarter, in the shape of dividends or expenses, and the country owes £6,000,000 or £7,000,000 of taxes, it would not be possible to arrange that there should be two sorts of currency afloat,—one the common banking note, payable in bullion, and applicable for all general purposes, and the other a note applicable in the more limited sense?—Our affairs would then go on very much in the way that a man would walk with one of his legs six inches shorter than the other. One set of notes would circulate at a depreciation, compared with the other set of notes; hence great inconvenience and confusion would arise.”[191]
“Do you believe, that, if any person had notes which insured to him the payment of all the Government demands upon himself, though he had no demands upon him directly, he would not find numbers of persons who would exchange those notes for him at a premium or a discount?—Then you would have a certain proportion of the monetary system of the country circulating at a discount. I cannot conceive a greater state of monetary disorganization than that.”[192]
But the testimony of Lord Overstone, strong as it was, against an inconvertible currency, still admitted a possible occasion for departure from it; and here his testimony bears directly on the pending proposition. Alluding to the well-known suspension of specie payments by the Bank of England in 1797, he says:—
“I am bound to say that with regard to that period of 1797 there are circumstances which may make it doubtful whether the Suspension Act was not a justifiable measure. The pressure in 1797 was undoubtedly, to a considerable extent, connected with political alarm, with the fear of foreign invasion, causing an internal demand for the exchange of notes into coin. Under such circumstances, there is no measure founded upon principle which can pretend to afford an adequate protection. If, for instance, at this moment, this country were suddenly exposed to the calamity of a very large foreign force occupying its soil, or if it were exposed to the calamity of a very formidable and serious civil insurrection, no doubt a state of panic alarm with regard to the paper money might arise, against which no provisions of the Act of 1844, nor any provisions founded upon principle, could possibly afford an adequate protection. But from that view of the subject, again, there is an inference to be drawn of a very instructive and warning character, namely,—to make this Committee very cautious how they extend the issues upon securities. The only protection against such contingencies is the existence of a large amount of coin, or of bullion, in the country; and therefore, when we are looking to contingencies of that nature, we may very properly pause at the questionable recommendation of increasing our issues upon securities, which is, in other words, diminishing our issues upon bullion.”[193]
If this authoritative testimony be accepted in favor of a constant specie currency, it is unquestionably important as recognizing grounds of exception,—as, according to the language of the witness, if the country were “suddenly exposed to the calamity of a very large foreign force occupying its soil, or to the calamity of a very formidable and serious civil insurrection.” In these exceptions there is matter for much reflection. Strong as we may be against any questionable currency, we must not be insensible to a possible limitation even of this just principle. In short, we must be content with the best we can command. And here history affords valuable illustrations in conformity with this testimony.