increase in the quantity of the local currency | from France, in return for which no merof a particular country will raise prices in chandise had been exported from this counthat country exactly in the same manner as try. He observed, on the other hand, that an increase in the general supply of precious the export of colonial produce to the contimetals raises prices all over the world. By nent had increased in the last year compared means of the increase of quantity, the value with former years; and that during the last of a given portion of that circulating medium, year there was an excess, to a considerable in exchange for other commodities, is low- amount, of the exports of colonial produce ered in other words, the money prices of all and British manufactures to Holland above other commodities are raised, and that of bul- the imports from thence, but not nearly equal, lion with the rest. In this manner, an excess he thought, to the excess of imports from other of the local currency of a particular country parts of the world, judging from the state of will occasion a rise of the market price of the exchange as well as from what fell genegold above its mint price. It is no less evi- rally under his observation. He afterwards dent, that, in the event of the prices of com- explained that it was not strictly the balance modities being raised in one country by an of trade, but the balance of payments, being augmentation of its circulating medium, while unfavourable to this country, which he asno similar augmentation in the circulating signed as the principal cause of the rate of medium of a neighbouring country has led to exchange; observing, also, that the balance a similar rise of prices, the currencies of those of payments for the year may be against us, two countries will no longer continue to bear while the general exports exceed the imports. the same relative value to each other as be- He gave it as his opinion that the cause of the fore. The intrinsic value of a given portion present state of exchange was entirely comof the one currency being lessened, while that mercial, with the addition of the foreign exof the other remains unaltered, the exchange penditure of government; and that an excess will be computed between those two countries of imports above exports would account for to the disadvantage of the former. the rates of exchange continuing so high as 16 per cent. against this country for a permanent period of time. In this manner, a general rise of all prices, a rise in the market price of gold, and a fall of the foreign exchanges, will be the effect of It will be found in the evidence that several an excessive quantity of circulating medium other witnesses agree in substance with Mr. in a country which has adopted a currency Greffulhe, in this explanation of the unfavour. not exportable to other countries, or not con-able state of the exchange; particularly Mr. vertible at will into a coin which is export- Chambers and Mr. Coningham. able. II. Your committee are thus led to the next head of their enquiry-the present state of the exchanges between this country and the continent. And here, as under the former head, your committee will first state the opinions which they have received from practical men, respecting the causes of the present state of the exchange. Mr. Greffulhe, a general merchant, trading chiefly to the continent, ascribed the fall of exchange between London and Hamburgh near 18 per cent. below par, in the year 1809, "altogether to the commercial situation of this country with the continent; to the circumstance of the imports, and payments of subsidies, &c., having very much exceeded the exports." He stated, however, that he formed his judgment of the balance of trade in a great measure from the state of the exchange itself, though it was corroborated by what fell under his observation. He insisted particularly on the large imports from the Baltic, and the wines and brandies brought Sir Francis Baring stated to the committee that he considered the two great circumstances which affect the exchange in its present unfavourable state, to be the restrictions upon trade with the continent, and the increased circulation of this country in paper as productive of the scarcity of bullion. And he instanced, as examples of a contrary state of things, the seven years war, and the American war, in which there were the same remittances to make to the continent for naval and military expenditure, yet no want of bullion was ever felt. The committee likewise examined a very eminent continental merchant, whose evidence will be found to contain a variety of valuable information. That gentleman states that the exchange cannot fall in any country in Europe at the present time, if computed in coin of a definitive value, or in something convertible into such coin, lower than the extent of the charge of transporting it, together with an adequate profit in proportion to the risk attending such transmission. He conceives that such fall of our exchange as has exceeded that extent in the last fifteen months, must. cent. certainly be referred to the circumstance of the course of exchange ?-Very considerable our paper currency not being convertible into shipments from the Baltic, which were drawn specie; and that if that paper had been so for, and the bills negotiated immediately on convertible, and guineas had been in general the shipments taking place, without consultcirculation, an unfavourable balance of trade ing the interest of the proprietors in this councould hardly have caused so great a fall in try much, by deferring such a negotiation till the exchange as to the extent of 5 or 6 per a demand should take place for such bills: He explains his opinion upon the sub- The continued difficulty and uncertainty in ject more specifically in the following answers carrying on the correspondence between this which are extracted from different parts of country and the continent: The curtailed his evidence. number of houses to be found on the continent "To what causes do you ascribe the present willing to undertake such operations, either unfavourable course of exchange?-The first by accepting bills for English account drawn great depreciation took place when the French from the various parts where shipments take got possession of the north of Germany, and place, or by accepting bills drawn from this passed severe penal decrees against a commu- country, either against property shipped, or nication with this country; at the same time on a speculative idea that the exchange either that a sequestration was laid upon all Eng-ought or is likely to rise: The length of time lish goods and property, whilst the payments that is, required before goods can be converted for English account were still to be made, into cash, from the circuitous routes they are and the reimbursements to be taken on this obliged to take: The very large sums of mocountry; many more bills were in consequence ney paid to foreign ship owners, which in to be sold than could be taken by persons re- some instances, such as on the article of quiring to make payments in England. The hemp, has amounted to nearly its prime cost communication by letters being also very dif-in Russia: The want of middle men who as ficult and uncertain, middle men were not to formerly used to employ great capitals in exbe found, as in usual times, to purchase and change operations, who, from the increased send such bills to England for returns; whilst difficulties and dangers to which such operano suit at law could be instituted in the courts tions are now subject, are at present rarely of justice there against any person who chose to be met with, to make combined exchange to resist payment of a returned bill, or to dis-operations, which tend to anticipate probable pute the charges of re-exchange. Whilst ultimate results." those causes depressed the exchange, pay- The preceding answers, and the rest of this ments due to England only came round at gentleman's evidence, all involve this princidistant periods; the exchange once lowered ple, expressed more or less distinctly, that by those circumstances, and bullion being bullion is the true regulator both of the value withheld in England to make up those occa of a local currency, and of the rate of foreign sional differences, the operations between this exchanges; and that the free convertibility of country and the continent have continued at a paper currency into the precious metals, and low rate, as it is only matter of opinion what the free exportation of those metals, place a rate a pound sterling is there to be valued at, limit to the fall of exchange, and not only not being able to obtain what it is meant to check the exchanges from falling below that represent.' limit, but recover them by restoring the ba ble assistance, however, may be derived from the information which the evidence of these persons affords, in explaining the true causes of the present state of the exchanges. "The exchange against England fluctuat-lance. ing from 15 to 20 per cent., how much of that Your committee need not particularly point loss may be ascribed to the effect of the mea-out in what respects these opinions, received sures taken by the enemy in the north of from persons of practical detail, are vague Germany, and the interruption of intercourse and unsatisfactory, and in what respects they which has been the result; and how much to are contradictory of one another; considerathe effect of the Bank of England paper not being convertible into cash, to which you have ascribed a part of that depreciation?-I ascribe the whole of the depreciation to have taken place originally in consequence of the Your committee conceive that there is no measures of the enemy; and its not having point of trade, considered politically, which recovered, to the circumstance of the paper is better settled, than the subject of foreign of England not being exchangeable for cash." exchanges. The par of exchange between "Since the conduct of the enemy which you have described, what other causes have continued to operate on the continent to lower two countries is that sum of the currency of either of the two, which, in point of intrinsic value, is precisely equal to a given sum of par the currency of the other; that is, contains and so, if that same country has the balance precisely an equal weight of gold or silver of of trade in its favour, the computed rate of the same fineness. If 25 livres of France exchange will appear to be much less favourcontained precisely an equal quantity of pure able than the real difference of exchange will silver with twenty shillings sterling, 25 would be found to be. Before the new coinage of be said to be the par of exchange between our silver in King William's time, the exLondon and Paris. If one country uses gold change between England and Holland, comfor its principal measure of value, and another puted in the usual manner according to the uses silver, the par between those countries standard of their respective mints, was 25 cannot be estimated for any particular period, per cent. against England; but the value of without taking into account the relative value the current coin of England was more than of gold and silver at that particular period; 25 per cent. below the standard value; so and as the relative value of the two precious that if that of Holland was at its full standard, metals is subject to fluctuation, the par of ex- the real exchange was in fact in favour of change between two such countries is not England. It may happen in the same manner, strictly a fixed point, but fluctuates within that the two parts of the calculation may be certain limits. An illustration of this will be both opposite and equal, the real exchange in found in the evidence, in the calculation of favour of the country by trade being equal to the par between London and Hamburgh, the nominal exchange against it by the state which is estimated to be 34/3 Flemish of its currency: in that case, the computed shillings for a pound sterling. That rate exchange will be at par, while the real exof exchange, which is produced at any parti- change is in fact in favour of that country. cular period by a balance of trade or payments Again, the currencies of both the countries between the two countries, and by a conse- which trade together may have undergone an quent proportion between the supply and the alteration, and that either in an equal degree, demand of bills drawn by the one upon the or unequally in such a case, the question of other, is a departure on one side or the other the real state of the exchange between them from the real and fixed par. But this real becomes a little more complicated, but it is to will be altered if any change takes place be resolved exactly upon the same principle. in the currency of one of the two countries, Without going out of the bounds of the prewhether that change consists in the wear or sent enquiry, this may be well illustrated by debasement of a metallic currency below its the present state of the exchange of London standard, or in the discredit of a forced paper with Portugal, as quoted in the tables for the currency, or in the excess of a paper currency 18th of May last. The exchange of London not convertible into specie; a fall having on Lisbon appears to be 67; 671⁄2d. sterling taken place in the intrinsic value of a given for a mill ree is the old established par of exportion of one currency, that portion will no change between the two countries; and 674 longer be equal to the same portion, as before, accordingly is still said to be the par. But of the other currency. But though the real by the evidence of Mr. Lyne, it appears that, par of the currencies is thus altered, the in Portugal, all payments are now by law dealers, having little or no occasion to refer made one half in hard money, and one half in to the par, continue to reckon their course of government paper; and that this paper is deexchanges from the former denomination of preciated at a discount of 27 per cent. Upon the par; and in this state of things a dis- all payments made in Portugal, therefore, tinction is necessary to be made between the there is a discount or loss of 13 per cent.; real and computed course of exchange. The and the exchange at 674, though nominally at computed course of exchange, as expressed par, is in truth 13 per cent. against this in the tables used by the merchants, will then country. If the exchange were really at par, include not only the real difference of ex-it would be quoted at 56,5, or apparently change arising from the state of trade, but 13 per cent. in favour of London, as comlikewise the difference between the original pared with the old par which was fixed before par and the new par. Those two sums may the depreciation of the Portuguese medium of happen to be added together in the calcula- payments. Whether this 134 per cent. which tion, or they may happen to be set against stands against this country by the present exeach other. If the country, whose currency change on London, is a real difference of exhas been depreciated in comparison with the change, occasioned by the course of trade, and other, has the balance of trade also against by the remittances to Portugal on account of it, the computed rate of exchange will appear government, or a nominal and apparent exto be still more unfavourable than the real change occasioned by something in the state difference of exchange will be found to be; of our own currency, or is partly real and partly nominal, may perhaps be determined circumstances of the present state of the war, by what your committee have yet to state. and the increased difficulties of intercourse It appears to your committee to have been with the continent, the cost of transporting long settled and understood as a principle, the precious metals thither from this country that the difference of exchange resulting from has not only been rendered more fluctuating the state of trade and payments between two than it used to be, but, upon the whole, is countries is limited by the expense of convey-very considerably increased. It would aping and insuring the precious metals from one pear, however, that upon an average of the country to the other; at least that it cannot, risk for that period when it seems to have for any considerable length of time, exceed been highest, the last half of the last year, that limit. The real difference of exchange, the cost and insurance of transporting gold to resulting from the state of trade and pay-Hamburgh or to Holland did not exceed 7 per ments, never can fall lower than the amount cent. It was of course greater at particular of such expense of carriage, including the times, when the risk was above that average. insurance. The truth of this position is so It is evident also that the risk, and conseplain, and is so uniformly agreed to by all quently the whole cost of transporting it to an the practical authorities, both commercial inland market, to Paris for example, would, and political, that your committee will assume upon an average, be higher than that of carit as indisputable. It occurred, however, to your committee, that the amount of that charge and premium of insurance might be increased above what it has been in ordinary periods even of war, by the peculiar circumstances which at present obstruct the commercial intercourse between this country and the continent of Europe; and that as such an increase would place so much lower than usual the limit to which our exchanges might fall, an explanation might thereby be furnished of their present unusual fall. Your committee accordingly directed their enquiries to this point. rying it to Amsterdam or Hamburgh. It follows, that the limit to which the exchanges, as resulting from the state of trade, might fall and continue unfavourable for a considerable length of time, has, during the period in question, been a good deal lower than in former times of war; but it appears, also, that the expense of remitting specie has not been increased so much, and that the limit, by which the depression of the exchanges is bounded, has not been lowered so much as to afford an adequate explanation of a fall of the exchanges so great as from 16 to 20 per cent. below par. The increased cost of such remittance would explain, at those moments when the risk was greatest, a fall of something more than 7 per cent. in the exchange with Hamburgh or Holland, and a fall still greater perhaps in the exchange with Paris; but the rest of the fall, which has actually taken place, remains to be explained in some other manner. It was stated to your committee, by the merchant who has already been mentioned as being intimately acquainted with the trade between this country and the continent, that the present expense of transporting gold from London to Hamburgh, independent of the premium of insurance, is from 14 to 2 per cent. ; that the risk is very variable from day to day, Your committee are disposed to think, from so that there is no fixed premium, but he con- the result of the whole evidence, contradicceived the average risk, for the fifteen months tory as it is, that the circumstances of the preceding the time when he spoke, to have trade of this country, in the course of the last been about 4 per cent.; making the whole year, were such as to occasion a real fall of cost of sending gold from London to Ham- our exchanges with the continent to a certain burgh for those fifteen months, at such ave- extent, and perhaps at one period almost as rage of the risk, from 5 to 6 per cent. Mr. low as the limit fixed by the expense of reAbraham Goldsmid stated that, in the last nitting gold from hence to the respective five or six months of the year 1809, the ex-markets. And your committee is inclined to pense of sending gold to Holland varied ex- this opinion, both by what is stated regarding ceedingly, from 4 to 7 per cent. for all the excess of imports from the continent charges, covering the risk as well as the costs above exports, though that is the part of the of transportation. By the evidence which subject which is left most in doubt; and also was taken before the committees upon the by what is stated respecting the mode in which bank affairs in 1797, it appears that the cost the payments in our trade have been latterly of sending specie from London to Hamburgh in that time of war, including all charges as well as an average insurance, was estimated at a little more than 3 per cent. It is clear, therefore, that in consequence of the peculiar effected, an advance being paid upon the imports from the continent of Europe, and a long credit being given upon the exports to other parts of the world. Your committee, observing how entirely the present depression of our exchange with naval, military, and other expenses in foreign Europe is referred by many persons to a great parts. Your committee had hoped to receive excess of our imports above our exports, have an account of these from the table of the called for an account of the actual value of house; but there has been some difficulty and those for the last five years; and Mr. Irving, consequent delay in executing a material part the inspector general of customs, has accord- of the order made for them. It appears from ingly furnished the most accurate estimate of" an account, as far as it could be made out, both that he has been enabled to form. He of sums paid for expenses abroad in 1793, 4, has also endeavoured to forward the object of 5, and 6," inserted in the appendix of the the committee, by calculating how much lords' report on the occasion of the bank re.should be deducted from the value of goods striction bill, that the sums so paid were, imported, on account of articles in return for In 1793, £ 2,785,252 which nothing is exported. These deductions. 1794, 8,335,591 consist of the produce of fisheries, and of im11,040,236 ports from the East and West Indies, which are of the nature of rents, profits, and capital remitted to proprietors in this country. The balance of trade in favour of this country, upon the face of the account thus made up, 1795, 1796, 10,649,916 The following is an account of the official value of our imports and exports with the continent of Europe alone, in each of the last five years : 1806 So far, therefore, as any inference is to be drawn from the balance thus exhibited, the exchanges during the present year, in which many payments to this country on account of the very advantageous balances of the two former years may be expected to take place, ought to be peculiarly favourable. 1805 £10,008,649 £15,465,430 1806 1807 1809 The balances with Europe alone in favour of Great Britain, as exhibited in this imperfect statement, are not far from corresponding Your committee, however, place little con- with the general and more accurate balances fidence in deductions made even from the im- before given. The favourable balance of 1809 proved document which the industry and in- with Europe alone, if computed according to telligence of the inspector general has enabled the actual value, would be much more consihim to furnish. It is defective, as Mr. Irving derable than the value of the same year, in has himself stated, inasmuch as it supplies no the former general statement. account of the sum drawn by foreigners (which A favourable balance of trade on the face is at the present period peculiarly large) on of the account of exports and imports, preaccount of freight due to them for the em-sented annually to parliament, is a very proployment of their shipping, nor, on the other bable consequence of large drafts on governhand, of the sum receivable from them (and ment for foreign expenditure; an augmentaforming an addition to the value of our ex- tion of exports, and a diminution of imports, ported articles) on account of freight arising being promoted and even enforced by the from the employment of British shipping. It means of such drafts. For if the supply of leaves out of consideration all interest on ca- bills drawn abroad, either by the agents of pital in England possessed by foreigners, and government or individuals, is disproportionate on capital abroad belonging to inhabitants of to the demand, the price of them in foreign Great Britain, as well as the pecuniary trans- money falls, until it is so low as to invite puractions between the government of England chasers, and the purchasers, who are geneand Ireland. It takes no cognisance of con- rally foreigners, not wishing to transfer their traband trade, and of exported and imported property permanently to England, have a rebullion, of which no account is rendered at ference to the terms on which the bills on the custom-house. It likewise omits a most England will purchase those British commoimportant article, the variations of which, if dities which are in demand, either in their correctly stated, would probably be found to own country, or in intermediate places, with correspond in a great degree with the fluctu- which the account may be adjusted. Thus, ations of the apparently favourable balance; the price of the bills being regulated in some namely, the bills drawn on government for our degree by that of British commodities, and |