value of all other articles, depending on the proportion between demand and supply. In the creditor-country, the bills on the debtor-country will be abundant, and therefore cheap; while, in the debtor-country. the bills on the creditor-country will be scarce, and of course dear; the supply, as Mr. Foster expresses it, being in each case inversely as the demand. The rates of exchange between bills are regulated by precisely the same considerations which determine the rates between all other commodities but it is very justly observed that the variation produced in rates of exchange by this cause, namely, a balance of debt, has a known invariable limit; which is that of the expence of transmitting gold from the one country to the other. It therefore follows that the variation in the rate of exchange between England and Ireland, arising from this cause, cannot much exceed two per cent. Between England and the Continent, it will, on the same principle, admit of a variation considerably higher. We are then compelled to look out for other causes, to account for the enormous high rate of exchange against Ireland. A balance of debt, if there were such, we have seen would only account for a little more than two per cent. out of that excess above par, which has been so high as 10 per cent. but this cause, in respect to Ireland, never actually existed. Examining the debtor and creditor account between the two islands, we find that Ireland is the creditor party; and that, during the years in which the rate of exchange has been highest against it, there has been annually a balance in its favour of more than half a million. As far, then, as balance of debt goes, it gives an exchange of about 2 per cent. against England; and allowing to this cause its proper weight, instead of diminishing, it swells the difficulty which we have to remove, for it gives us 13, instead of nearly 11 per cent., for which we are to account. A balance of debt is not, then, the sole cause of variations in the rates of exchange. We have seen that such variations have a fixed limit; and they are also limited not only as to amount, but likewise in regard to duration. Let us suppose the rate of exchange to be unfavourable to a country; a part of its specie is sent out of it; this raises the value of what is left behind, it becomes scarce, and less of it can be given for the same quantity of commodity; this is cheapness. The cheapness works an outlet for the commodity into foreign countries, which goes on while the cheapness continues; that is, till gold enough has found its way into the country, to allow of the same portion of it to be given for commodities as before the unfavourable exchange. The diminution of specie, which follows on the exportation of gold occasioned by an unfavourable rate of ex change, change, causes fewer importations to take place; for cheapness checks imports as much as it forces exports: thus we see that, by the admirable laws which regulate the course of human transactions, an unfavourable rate of exchange operates its own cure, and effects that level in commerce without which it would cease to be carried on. An unfavourable exchange, by operating as a premium on exports, and as a check on imports, bears in itself the seeds of its own annihilation; and in a healthy and sound state of bodies politic, it can be of no long continuance. It is impossible sufficiently to admire this wise provision of nature, which prevents human affairs from fallinginto irretrievable confusion. Suppose a nation to betray almost incredible improvidence for a short period; the consequence, will be, that a greater quantity of gold will be taken from her when the balance comes to be settled: but the greater this sum is, the higher will be the artificial value allotted to the remainder; that is, the less will be the quantity of the same metal given for the same commodity :-in other words, the greater will be the cheapness, and of course the larger will be the exports, and the fewer the imports. The more ground there is to work up in or-` der to attain the level, the more is the operative force tending in, that direction; and, in proportion to the intenseness of the action, is that of the re-action; the greater the mass of specie is, that has been extracted from a country, the greater will be the tenacity, with which it adheres to the remainder, and the attraction with, which it draws to itself a foreign supply. These illustrations apply only to exhaustions occasioned by improvident speculations in commerce, and reasonable voluntary grants made on political considerations to other states; not extending to those copious drainages to which outward violences sometimes give rise,-violences which impair the functions and affect the vitals of a community. Had certain eminent writers, and among others Swift, (it is observed by Mr. Foster,) been aware of this law of nature, they would not have indulged in some predictions which the event has proved to be unfounded. It was supposed, during a great part of the last century, that the remittances to absentees regularly drained Ireland of its specie; and an author had so fully satisfied himself respecting the rate at which this drainage proceeded, that he assigned a period at which her last guinea would be taken from unhappy Hibernia : while, in fact, notwithstanding that the absentees did not decrease, nor their demands diminish, the quantity of specie went on regularly increasing. The mischief of which the absentees were very innocent, the resident representatives.of Ireland, at a later period, found the means of effectually accomplishing, we mean the banishment of coin. D83 The The size and permanence of the excess above par of the rate of exchange against Ireland, without the fact of its being the debtor-country, demonstratively shew that it must have another cause than the balance of debt. Where shall we find that cause? It is shewn by a superfluity of proof, by both these writers, to arise from the depreciation of the currency of Ireland. The fact admits not of a doubt, Ireland exhibits all the symptoms usually attending such a currency. The market price of bullion is considerably higher than the mint price. The paper has undergone a discount, which, commencing at three-fourths, gradually increased till it has reached 10 per cent. The country suffers from an unfavourable rate of foreign exchange; from the disappearance of coin of the smaller denomination; from the absence of a favourable exchange with England, in consequence of the latter being the debtor-country, and also of the small depreciation of its Bank notes *. This demonstration à priori is corroborated by notorious facts. Immediately that the Bank was restrained from making its payments in cash, it began to increase its issues of paper; and it continued this system till the amount of its notes nearly quintupled the aggregate of those in circulation previously to the restriction. One-fifth of this vast mass replaces the paper which circulated before the restriction, and two-fifths more come in the room of the gold which that measure forced out of the country. The remaining two-fifths operate to swell the circulating medium beyond what it was in 1797, the epoch of the restriction, as well as that of the commencement of the unfavourable exchange. No one will dispute that, the quantity of industry and the demands of a country remaining the same, any addition to its circulating medium will, in the proportion of its amount, depreciate that medium. There is no reason for supposing that the industry of Ireland has materially increased since 1797. Currency is to be distinguished from capital; let a sum, as 100, be added to the capital, and it will perhaps not require a greater sum than as to be added to the currency. It cannot therefore be supposed, for a moment, that Ireland can have made such addition to its capital as can require any thing like the addition above stated to its circulating medium; to say nothing of the issues of paper by private bankers, which are reported to be imm nse, It is then clear that the additions made to the currency by the Bank, and by private bankers, must have had * It appeared in evidence before the committee that 2 per cent. were given in London, to procure gold. The unfavourable exchange with foreign countries proves the same fact. the The effect of depreciating it; and this depreciation is justly estimated at the premium which is given for guineas, viz. 10 per cent. It is very obvious that, if the currency of a country be reduced in value, it will occasion the rate of exchange to be nominally against it: but that it will be, as far as it is caused by a degraded currency, only nominally and not really against it, may thus be made apparent let us instance the cases of England and Ireland; let us suppose the exchange at 184; an Irish man must give 1181. 6s. 8d. for a bill of 100l. on London: but if the 181. 6s. 8d. only represent the same quantity of commodities which 1081. 6s. 8d. of the old currency represented, it is clear that the exchange is only nominally against Ireland. The real variation takes place only when the currency remains the same, and when the unfavourable rate is limited and temporary, as we have before shewn. We have, we imagine, abstracted a sufficient number of facts and observations from the two authors, to satisfy our readers that the Bank restriction, and the consequences to which it led, have exclusively caused the unfavourable rate of exchange which presses so hard on our sister island. It now remains for us briefly to state the remedy which the same persons recommend to be applied to mitigate the evil. The only effectual measure for this purpose they state to be that of compel ling the Bank to renew its payments in specie: but this, if not impracticable, they regard as not likely to be adopted in present circumstances. It is observed that, previously to the restriction, no sooner did an unfavourable rate of exchange take place, than a run commenced on the Bank for gold; and the consequence of this was that the directors, as soon as they perceived any symptoms of such a change, began to lessen their issues of paper, and at the same time contracted their discounts. This diminution of the circulating medium raised its value, and in course the value of that part of it which consisted of gold, and thus the inducement to export it was destroyed. For the same reason, imports diminished and exports increased, till the balance with foreign countries became even, and the exchanges. diminished to a par. Thus did the convertibility of its paper into gold oblige the Bank to keep the equilibrium of the exchanges. Now that it has no interest, as a Bank, to preserve this balance, but a strong opposite interest, how is this most important object to be attained? This is a question which these tracts en deavour to solve. Too confined a circulating medium, it is observed by both writers, is undoubtedly prejudicial; it checks individual enterprize, and retards the advances of a community towards wealth; Dd4 while while one that is too large is attended with much more serious mischiefs, being pregnant with all the ills which precede, accompany, and follow a national bankruptcy. There is, as is here suggested, a mean with regard to a circulating medium, which secures public prosperity. If, as Mr. Foster intimates, we have no general rules on which we can proceed à priori to ascertain this middle point, he tells us that Banking on the system of payments in cash invariably ascertains it in practice. If the circulating medium exceeds its legitimate limits, it instantaneously experiences depreciation; it decreases in value, compared with those of neighbouring states; the rate of exchange becomes unfavourable; and money dealers are tempted to export the specie part of it. This brings the paper back to the Banks, and they experience a run. The paper which thus returns is cancelled; and the discounts are at the same time lessened. It is evident, then, that where paper is convertible into specie, the undue augmentation of the circulating medium soon effects its own cure; it first causes an unfavourable exchange; this occasions the exportation of specie, which ends in a run on the Banks; while the dread of stoppage induces them to withdraw their paper as fast as they are able, from circulation. This appears to be the grand function which renders the use of specie indispensable in commercial transactions; it prevents the possibility of a pernicious increase of the circulating medium ;-a mischief which, if allowed to extend to any length, proves to be the most prolific of political and individual calamities, of any with which humanity is visited:-it produces directly that effect, without which there would be no guarantee for public morals, the security of property, and the existence of states.-To oblige the Bank of England to resume its payments in specie would beyond all question remedy the evils, would remove the unfavourable exchange, and duly reduce the circulating medium: but the patient is too unpleasantly circumstanced, and is too much debilitated by a diseased state of long continuance artificially brought on, to admit of the immediate application of this remedy. It is recommended then, by both these gentlemen, that the Bank of Ireland shall be compelled to make its payments in Bank of England notes, or bills on London at par. This, in the first instance, would be attended with much expence: but Mr. Foster and Mr. Parnell are each of opinion that the Irish Bank may, without injustice, be constrained to incur it. If parliament feels too much tenderness for the Directors, to force them to this unpalatable measure, the two authors are ready to give their sanction to the plan proposed by the committee; which only differs from that which we have just stated, by recommending |