It says, p. 17

"The experience of the Bank of England itself, within a very short period of its first establishment, furnishes a very instructive illustration of all the foregoing principles and reasonings. In this instance, the effects of a depreciation of the coin by wear and clipping were coupled with the effect of an excessive issue of paper. The Directors of the Bank of England did not at once attain a very accurate knowledge of all the principles by which such an institution must be conducted. They lent money, not only by discount, but upon real securities, mortgages, and even pledges of commodities not perishable; at the same time, the Bank contributed most materially to the service of Government for the support of the army on the continent. By the liberality of those loans to private individuals, as well as by the large advances to Government, the quantity of the notes became excessive, their relative value was depreciated, and they fell to a discount of 17 per cent. At this time there appears to have been no failure of the public confidence in the funds of the Bank, for its stock sold at £110 per cent., though only 60 per cent. upon the subscriptions had been paid in. By the conjoint effect of this depreciation of the paper of the Bank from excess, and of the depreciation of the silver coin from wear and clipping, the price of gold bullion was so much raised that guineas were as high as 30s.: all that remained of good silver gradually disappeared from circulation, and the exchange with Holland, which had been before a little affected by the remittances for the army, sunk as low as 25 per cent. under par, when the Bank notes were at a discount of 17 per cent. Several expedients were tried, both by Parliament and the Bank, to force a better silver coin into circulation, and to reduce the price of guineas, but without effect. At length the true remedies were resorted to; first, by a new coinage of silver, which restored that part of the currency to its standard value, though the scarcity or money occasioned by calling in the old coin, brought the Bank into straits, and even for a time affected its credit. [Surely, if Bank notes were at a discount of 17 per cent. before this, its credit was affected.] Secondly, by taking out of the circulation the excess of Bank notes. In proportion to the amount of notes sunk in this manner, the value of those that remained in circulation

began presently to rise; in a short time notes were at par, and the foreign exchanges nearly so. These details are all very fully mentioned in authentic tracts, published at the time, and the case appears to your Committee to afford much instruction upon the subject of their present inquiry"

The Report refers, in a marginal note, to A Short Account of the Bank, by Mr. Godfrey; A Short History of the last Parliament, 1699, by Dr. Drake

50. On examining this paragraph, it may be said to contain the following allegations

1. That, very soon after the foundation of the Bank, it made excessive issues of paper

2. That, in consequence of these excessive issues, and while they continued to pay their notes in specie on demand, their notes fell to 17 per cent. discount

3. That in consequence of these excessive issues of paper by the Bank, and the depreciation of the silver coin from wear and clipping, guineas rose to 30s. from 21s. 6d., and that the remaining good silver disappeared from circulation

4. That in consequence of the two preceding causes, Exchange with Holland rose to 25 per cent. against England

5. That many attempts were made by the Bank and Parliament to reduce the price of guineas, and force a better silver coinage into circulation, which all failed

6. That measures were at length resorted to of calling in the old silver coinage, and re-issuing it at full weight, and taking the excessive issues of the Bank out of circulation, which were finally successful, restored the 'Bank notes to par, and restored the Exchanges

The Committee ground their allegations upon Mr. Godfrey's pamphlet on the Bank, and Dr. Drake's History of the last Parliament, 1699, as well as a number of anonymous pamphlets to which they give us no clue to discover their names

51. We must now examine each of these propositions separately

With respect to the first, what is, or what is not an excessive

issue, is a matter of so much speculation that it is quite impossible to affirm or deny it

With respect to the second allegation, there is not only no evidence in its favour in the pamphlets quoted, but the most. overwhelming evidence against it. Mr. Godfrey's pamphlet was written in 1695, when the credit of the Bank was in the most flourishing condition, when he makes this credit a matter of great boast, and he says that the only reason why the credit of the Bank notes was so good, was that their holders knew that they could get their money instantly on demand for them. Mr. Godfrey was killed at Namur, in July, 1695, and Bank notes were not at a discount till May, 1696

With respect to the third allegation, we have the most positive and overwhelming evidence the guineas were at 30s. in the spring of 1695, when the credit of the Bank was unimpeached and its notes were all paid instantly on demand

With respect to the fourth allegation, we have already seen that the exchange on Holland was at 25 per cent. against England in 1695, nearly one year before Bank notes were at a discount

The fifth allegation is entirely erroneous. Parliament made no attempt to reduce guineas till February, 1696, when the silver coin had already been called in

The commencement of the sixth allegation is quite wrong in point of time. It is an unquestionable fact, testified by the most conclusive evidence, that it was the scarcity of money while the old was called in; and before the new was fully in circulation, that caused Bank notes to fall to a discount, and their receiving the old coin at its nominal value, and binding themselves to pay in the new. We have read a considerable number of pamphlets of that period, and they all with one voice attribute the price of guineas, and the adverse state of the Exchanges, to the badness of the coin and to that only. This Report, then, is not borne out in any of these statements by the authorities they have cited. The only one in which they are correct, is that the new subscription in Bank notes and tallies raised their credit, by reducing their quantity, but they have been misled by Dr. Drake in saying that the exchanges began to recover at the same time. Dr. Drake, being a clergyman, and writing some years after the event,

probably did not have his attention directed to so minute a point as the exact date when the Exchanges rose to par, but we have in a pamphlet already quoted, written by a merchant, and dated on the 22nd of October, 1696, the express fact stated that at that time the Exchanges were at par, in consequence of the good coin which had been issued, whereas Bank notes were still at a heavy discount in June, 1697

52. We have been thus minute in examining the circumstances of this great monetary crisis because we shall see hereafter that it is of great importance in establishing the true Theory of the Currency. We have, we think, shown by the most conclusive evidence, that this paragraph in the Bullion Report is full of the gravest chronological errors, in a matter in which minute accuracy of dates is all important

53. There was one circumstance which we have not seen noticed by any writer, which we may probably suppose contributed greatly to increase the discount at which the notes were. There were none at that time under £20, and notes of that amount must have been obviously unfit for the ordinary purposes of trade. The great want was small change, but that had almost entirely disappeared, consequently, when the holder of one of these notes wanted change, he must have made a much greater sacrifice than was warranted by any want of confidence in the Bank. Under these circumstances we may be somewhat surprised that no one hit upon a plan which would certainly have been successful, namely, an issue of £1 notes, to have supplied the deficiency until a sufficient quantity of guineas had been coined for circulation

54. The issue of small Exchequer bills was entirely successful, although they had not a forced currency. The great cause of the mischief to the Bank was, that the old and the new coin were allowed to circulate together, which all experience showed would inevitably drive all the new coin out of circulation. And this is exactly what did happen

"While the hammered money, and pieces not clipped within the ring, were permitted to pass, for the present necessity of

trade, nobody was willing to make payments in new money, which so much exceeded the old in intrinsic worth. And, therefore, the new silver money as fast as it issued from the Mint and Exchequer, was in a great measure stopped in the hands of its first receivers, for none were disposed to make payments in the new silver coin at the old standard, when they could do it in clipped pieces so much below it. And those who had no payments to make, kept their new money as medals and curiosities in their chests, and there is reason to believe that at first a great quantity of new money, by the help of the melting pot, went abroad in ingots to purchase gold, which at this juncture was a very profitable commodity in England"

55. In this great discussion, all the fallacies which are so specious and plausible, and which were maintained with so much earnestness 116 years later, were put forward-except one. The invariable language of all writers at that period was that the Bank notes were depreciated. They always speak of the notes being at a discount, it was reserved to modern ingenuity to discover the crowning absurdity-that it was not notes that had fallen, but gold that had risen!

56. The Bank was instituted for the purpose of assisting the Government in the war with France, and did very materially do so in 1695, when its credit was high. In the next year, however, it continued to do the same, when its credit was greatly shaken. This no doubt was of great assistance to the army, and its conduct is highly lauded by Dr. Drake, but some of its own proprietors thought very differently of its management. In a pamphlet entitled A Second Part of a Discourse concerning Banks, which was published by one of them, which bears no date, but which was most probably written in 1697, which contains a series of excellent rules for the conduct of a bank, the direction is severely censured for dealing in exchanges, for running into remittances, and launching too deeply into loans, to which causes the author attributes the loss of their credit. This would seem to allude to the loan mentioned by Evelyn