ENGLAND: THE BANK RESTRICTION
Further than incidentally it is inconsistent with the design of this book to refer to the period of suspension of cash payments and the Bullion Report. These latter are banking phenomena, and will find their place in a treatise of currency in the fuller acceptance of the term, rather than in a treatise definitely restricted to the subject of the metallic currencies. The events of 1797 which led to the suspension,—the remittances to the Continent for war purposes, a failure of credit, a run on the country banks, and then upon the London banks,—had been experienced in 1793 as acutely as in 1797; and, according to the express statement of the report itself, even in the years 1796 and 1797, when the country bankers were making great demands in order to increase their deposits, the market price of gold never rose above the Mint price. These events were therefore one phase of the internal experiences of the country, and have no relation to an international outflow of gold, caused by the heightened ratio which definitely set in in 1794. On the mere ground of first principles, therefore, it is inadmissible to make argumentative use of this event, known as the Bank Restriction, for judgment and illustration in the wider question of bimetallism. Further, the argumentative use that has been made of it—viz. that if from 1773 to 1797 England had possessed a true rather than a halting bimetallic régime, she would have been supplied by its means with an amount of silver that would have increased the metallic reserve and
strength of the country, and enabled it to avoid suspension—is inadmissible: and the argument itself is untenable. Such bimetallic action supplying silver could only have begun to operate in 1794, three years before the suspension. It could only have operated by substituting one metal for the other, not by adding silver to gold, but by taking away higher valued gold, and furnishing lower valued silver, i.e. by actually decreasing the metallic strength and reserve of the kingdom. And, lastly, there is the peculiar fact still requiring explaining, that the years of the bank restriction, until, that is, the new Mint law of 1816, saw the heaviest export of silver probably that England has ever experienced. During the ten years, 1801-10, nearly 10 millions sterling of silver was exported from England (over 38,176,016 oz.), while the gold exports amounted only to £2,088,483, so that, of the total export, silver formed 82 per cent. (net amounts used in both cases). It is still well known to what straits this export of silver put the country. In almost every town where there was any employment of labour the tradesmen were obliged to issue token money of their own—shilling tokens, sixpenny tokens, half-crown and five-shilling promissory-notes. Every conceivable form of hand-to-mouth unauthorised currency was resorted to, in order to relieve the needs of the situation caused by the want of silver coins. And stories are still remembered of the straits to which the working classes were driven in order to make their purchases at the week end with one pound notes, for
which they could get no change. The explanation of such a phenomenon can only be that the one pound notes having driven gold out of circulation, by a law which is merely another form of the bimetallic law, left only silver available for remittance to the Continent for loans and war purpose. But, whatever the explanation, the fact cuts the ground from under the argument that bimetallism would have saved England from the bank restriction. If silver had not been legal tender to any amount (up to £25 by tale, and beyond that by weight), or again if it had been protected by an agio in 1808 as it was in 1816, it could not have left the country. The straits of the poorer classes in those years of hardship were due to the existing bimetallic system, and to it must, therefore, be attributed the aggravation rather than alleviation of the bank restriction.
If anything is required to confirm such view it can be found in the very terms of that statute of 1816 (56 Geo. III. c. 68), which established the gold standard in England. They reveal the fact that the Act was not so much a philosophical or theoretical declaration of monometallism, such as might have been expected if Lord Liverpool had still lived to dictate it, but a measure for the protection of and relating almost entirely to silver.
ENGLAND: THE ACT OF 1816
"Whereas the silver coins of the realm have, by long use and other circumstances, become greatly diminished in number and deteriorated in value, so as not to be sufficient for the payments required in dealings
under the value of the current gold coins, by reason whereof a great quantity of light and counterfeit silver coin and foreign coin has been introduced into circulation within this realm, and the evils resulting therefrom can only be remedied by a new coinage of silver money...."
The Act therefore prescribes the coining of silver, 11 oz. 2 dwts. fine, at a tale after the rate of 66s. per Troy pound, whether the same be coined in crowns, half-crowns, shillings, or sixpences, or pieces of a lower denomination, but to be issued to the importer of the silver, or to the public, after a rate of 62s. per pound Troy.
"And whereas at various times heretofore the coins of this realm of gold and silver have been usually a legal tender for payments to any amount, and great inconvenience has arisen from both these precious metals being concurrently the standard measure of value and equivalent of property, it is expedient that the gold coin made according to the indentures of the Mint should henceforth be the sole standard measure of value and legal tender for payment, without any limitation of amount, and that the silver coin should be a legal tender to a limited amount only, for the facility of exchange and commerce." The Act therefore prescribes the limit of 40s. for the tender of silver.