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Page 46
In the same 'Moral Essay' he alludes to paper money in the following
lines:
'Blest paper credit! last and best supply!
That lends corruption lighter wings to fly!
Gold imp'd by thee, can compass hardest things,
Can pocket states, can fetch or carry kings;
A single leaf shall waft an army o'er,
Or ship off senates to a distant shore;
A leaf, like Sibyl's, scatter to and fro
Our fates and fortunes, as the winds shall blow:
Pregnant with thousands flits the scrap unseen,
And silent sells a king, or buys a queen.'
These are among the earliest tirades against paper money; which, like
many other good things, is condemned because its power has been abused
and prostituted.
England's enormous debt, which should have warned the Georges against
further war, was not contracted without severe sacrifices. The legal
rate of interest at the opening of the funding system was six per cent.
In 1714 it was reduced to five per cent. Loans during the early wars of
the eighteenth century were raised on annuities for lives on very high
terms, fourteen per cent. being granted for single lives, twelve per
cent. for two lives, and ten per cent. for three lives. But so far was
England from being awake to the enormous debt she was creating by her
expensive wars, that the seventy-five millions existing in 1748 became
�132,000,000 at the close of the Seven Years' War in 1763. This volume
was enlarged at the end of the American Revolution to �231,000,000.
During all this time the bank was the lever with which these enormous
sums were raised; but the end was not yet.
The French war with Napoleon became more exhaustive, and within twenty
years from the peace with America to the Peace of Amiens, in 1802, the
debt went up from �231,000,000 to �537,000,000 sterling. From this
period to 1815 the debt accumulated annually, until it reached its
maximum, or eight hundred and sixty-one millions sterling.
During these severe changes, reverses, extravagance, and extraordinary
governmental expenditure, the bank was considered the prop of national
finance. The French Revolution and its consequent war with England led
to many heavy outlays by the British Government. In 1795 the bank
desired the chancellor of the exchequer to make his arrangements for the
year without 'any further assistance' from the bank. This was again
urged in 1796, and the bank appealed again to Mr. Pitt.
'The only reply from Mr. Pitt was a request for a further
accommodation, on the credit of the consolidated fund, which the
court refused to sanction, until they had received satisfaction on
the topic of the treasury bills, and requested Mr. Pitt to enter
into a full explanation on this subject, which was not even touched
upon in his letter. This resolution being communicated, Mr. Pitt
wrote to the governor and deputy-governor on the 12th August, that
'they might depend upon measures being immediately taken for the
payment of one million, and a further payment, to the amount of one
million, being made in September, October, and November, in such
proportions as might be found convenient. But, as fresh bills might
arrive, he was under the necessity of requesting a latitude to an
amount not exceeding one million.' About the same period the court
'desired the governor and deputy-governor would express their
earnest desire that some other means might be adopted for the
future payment of bills of exchange drawn on the treasury.' (_Vide_
'History Bank of England,' pp. 114, 115.)
The circumstances of the nation and of the bank were known to the
capitalists and to the people. Hence various causes of uneasiness and
distress. The bank loaned the public treasury seven and a half millions
in the years 1794, 1795, 1796, and the more they loaned to the
exchequer, the less they could loan to the people. Thus followed a
diminution of gold in the bank, and hoarding by the people. Gold was
exported more freely to the Continent, and reduced accommodation was
given to the merchants. Finally, on the 26th February, 1797, the king's
council passed an order for the suspension of cash payments.
The bank was on the eve of suspension in the year 1847. On the 25th of
October the cabinet authorized a violation of the charter, thereby
acknowledging the inability of the bank to maintain specie payments.
This order of Lord John Russell inspired fresh confidence, and the bank
immediately recovered strength, and reduced the rate of interest from 8
per cent. in October to 7 per cent. in November, to 6 and 5 per cent. in
December, to 4 per cent. in January, and to 3-1/2 in June following. The
distress and revulsion of 1847 were consequent upon the over-trading
and railway mania of 1844, 1845, and 1846, and the failure of crops in
Ireland and England in 1847.
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