16. The circumstances which gave rise to the appointment of this Committee and its report, are deserving of great attention, as they are the first regular investigation by Parliament into the theory of the Paper Currency, and they were the antetype of what afterwards occurred in England, and gave rise to the appointment of the Bullion Committee

17. The Bank of Ireland sent two of its Directors to be examined as witnesses, Mr. Colville and Mr. D'Olier. Mr. Colville stated that the issues of the Bank notes at the time of the restriction were between £600,000 and £700,000, but they were now about £3,000,000; and when asked the motives for such an extraordinary increase, said that the Exchange became extremely adverse about two years after the restriction: the money of the country was carried out of it, for the purpose of paying the balances of remittances: and, consequently, as the medium of gold decreased, it became necessary to supply its place with paper. He said that, after the restriction, it was necessary to supply notes for the payments that would have been made in guineas, and this amount he placed at £1,200,000. He admitted that before the restriction, whenever there was a drain of gold from the Bank, they were in the habit of diminishing its issues to strengthen themselves against the continuance of the drain. That whenever the Exchange was unfavourable, the necessity for self-preservation compelled them to reduce their issues, and that this limitation was for the purpose of lessening the drain of guineas. But he said that it was generally thought that the extension of paper in Ireland was the cause of the high Exchange, but, in his opinion, it was directly the reverse, inasmuch as far as the circulation of paper has supplied the circulating medium, it enabled the gold which before stood in its place to be exported out of the country, and so far was a clear and decided cause of preventing the Exchange getting to a higher pitch; and he said that it must appear that his opinion was that the circulation of Bank paper in Ireland was in no shape the cause of the high exchange. He said that he clearly and decidedly considered the sole cause of the high rate of Exchange to be that Ireland owed a great deal more money than she could pay. He considered the true criterion of such balance of debt to be the state of Exchange

between Dublin and London, and London and Dublin. That when the Exchange was considerably above par it was said to be against Ireland, and in that case certainly at that time Ireland owes more money than she is able to pay. Mr. Colville repeated these opinions several times: more often than it is necessary to quote. When pressed with the question whether the Rates of Exchange might be influenced by the value of the medium in which the balance of debts was paid, as, for instance, if it were paid in degraded or adulterated coin, he admitted that it might be so with respect to coin, but he denied that such views in any way applied to Bank of Ireland paper. Mr. D'Olier coincided with these views, and attributed the state of the Exchanges to the same causes. When asked whether it was possible, in any case whatever, for there to be such an augmentation of inconvertible Bank paper as to diminish its value in exchange for goods, although the confidence that they might be paid off at some remote and indefinite period might be maintained, he said he thought it possible, but not probable. He said "I have heard it stated that because gold is bought at a premium, that, therefore, Bank of Ireland notes are by so much depreciated, and at an absolute discount as to the amount of that premium. That was not the proper way to look at the question. The circulation said to be depreciated must first be proved to have become burdensome to the holders, and bargains to have been made by unnecessary purchasers to get rid of that which they found inconvenient, or were apprehensive to hold. The mere buying of gold at an advanced price beyond that of the Mint, is the effect, and not the cause, of the Exchange, and, therefore, no proof of the depreciation of the paper itself." As both these witnesses maintained that the Exchanges might be depressed to any extent by the mere fact of debts being due by the country, it is much to be regretted that the Committee did not ask them if it were possible, in their opinion, for the Exchange to be depressed beyond the limit of the expense of the transmission of bullion, and, if so, how it could be possible?

18. The description given by the witnesses of the state of the Metallic Currency was most astonishing. Mr. D'Olier had some of it weighed. The base currency took about 1268. to the

pound weight; the Mint silver which was in circulation, was very scarce and very much worn, contained 948. 6d. to the pound weight, whereas, when new from the Mint, it contained 62s. to the pound weight. Of the base shillings, the best did not contain more than 6d., and the worst about 3d. These base pieces were coined and sold privately to agents who had the means of circulating them, at 28s. to 35s. the guinea. When such was the state of the Metallic Currency in Dublin, the provinces in the south were even worse off. One witness stated that the silver Currency had totally disappeared from the southern parts, that the vacuum was supplied by silver notes; that these silver notes had driven out the whole of the silver Currency, and from their increased amount, as well as the increasing issues of private bankers' notes of every other description, prices had risen greatly. That the bad Currency had been increasing most mischievously during the last twelve months, that there was still a very good supply of good silver in the south which was hoarded on account of these silver notes; but if they were suppressed, it would come into circulation again. He said all sorts of traders, as well as bankers, issued notes for 3s. 94d. and 6s., payable at twenty-one days after date. He thought that the increase of the paper circulation augmented the state of Exchange against Dublin. That the premium on guineas was a proof of the depreciation of the Bank notes; and that as the Exchange rose the depreciation continued. That the premium on guineas was then 7 or 8 per cent. He himself had bought large quantities of guineas at a premium of 2s. 6d. each. In the north of Ireland, however, all bills were payable in gold; they would have nothing to do with any Paper Currency, and while the Exchange on Dublin was 16 (7 two-thirds below par) the Exchange on Belfast was 7 or 8 per cent. (one-third above par). He argued that, since the exchange in gold was favourable to Ireland, the Real Exchange must be in her favour, and that if any considerable quantity of gold came into circulation it would at once tend to diminish the premium on guineas, and lower the rate of Exchange. However, he thought that the high state of the Exchange was a clear proof that the balance of payments was against Ireland annually. While no Bank of Ireland or private Bank notes could be exchanged for guineas, except on paying a premium of 2s. 6d.

each, Bank of England paper bore exactly the same premium as guineas, and were received in every transaction as equivalent to guineas. And yet the directors of the Bank of Ireland maintained that their notes were not depreciated!

19. In the north of Ireland, where nothing but gold was current, and paper was tabooed, the Exchange at Belfast with London had always continued favourable to Belfast, and even while the Exchange at Dublin was progressively sinking, the Exchange at Belfast continued to rise; thus, the state of the Exchanges during the years 1803 and 1804, when the Committee were appointed, was as follows :—

There was, therefore, at that time, a difference of 12 per cent. between the Exchange at Dublin and at Belfast. Consequently, if the opinions of the Directors of the Bank of Ireland were true, enormous payments were being made from Dublin to London, and a balance of payments was due from London to Belfast. However, Mr. Marshall, the Inspector General of Imports and Exports at Belfast, held a very different opinion with respect to Irish Bank notes, for he appends to the table of Exchanges prepared by him this note

"It has certainly been heretofore held as a maxim of commerce, that the balance of trade has in a great measure regulated the Rate of Exchange; and if specie was equally in circulation in England and Ireland as formerly, the criterion would, no doubt, still be tolerably just. But the issue of paper in Ireland is so great as to make it subject to a heavy discount, whilst in England it circulates without any depreciation at all. I imagine the Rate of Exchange between the two countries, therefore, is very much influenced by the rate of discount on Irish Bank notes"

20. It is scarcely necessary to observe that if the opinion of the Directors of the Bank of Ireland were true, that the Rate of Exchange at Dublin on London was due entirely to the heavy debts due from Ireland to England, their townsmen must have been great simpletons to purchase bills on London in Dublin at such an enormous sacrifice, when they could have got them at Belfast 10 to 12 per cent. cheaper. But it appeared that specie was at a premium of 10 or 12 per cent. in Dublin, so that the bills, when paid for in cash, were exactly the same rate in Dublin and Belfast

21. In order to test the fact that the Rate of Exchange was due to the excess of payments owing by Ireland, the Committee had evidence on the subject, and it appeared most decisively that so far from the balance of payments being against Ireland, there was a very large balance in her favour. The witnesses differed as to the precise sum, but they agreed as to the fact of there being a large sum due to Ireland, and, consequently, that the Exchange ought to be in her favour, which was precisely the case at Belfast, where payments were made in specie. With this incontrovertible evidence before them, the Committee did not hesitate to express their conviction that the real balance of pecuniary transactions was greatly in favour of Ireland, and that, consequently, the Real Exchange was and ought to be under par, and that they felt themselves compelled to seek in other causes than the balance of debts for the unfavourable Exchange then existing between them

22. We have already seen that when in 1696 the silver coinage was being recoined, a difference arose between Bank notes and specie of 20 per cent., and between tallies and specie of 40 per cent., it was universally said that Bank notes and tallies were at a discount of 20 and 40 per cent. There is no trace of any other language but that being applied to them. In the year 1804 Irish Bank notes were exchanged for specie at a difference of 10 per cent., so that, with a guinea in specie, any one might purchase a guinea note and 2s. or more in silver. The merchants of 1696 would have expressed such a state of things by saying that the note had fallen to a discount of 10 per cent. But at this period