Front Page Titles (by Subject) I. The Resumption of Cash Payments - Studies in the Theory of International Trade
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I. The Resumption of Cash Payments - Jacob Viner, Studies in the Theory of International Trade 
Studies in the Theory of International Trade (New York: Harper and Brothers, 1965).
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I. The Resumption of Cash Payments
The Bullion Report, which advocated resumption of cash payments at the old par within two years, was presented to Parliament on June 8, 1810, but was not taken up for discussion until July of the following year. In the latter part of 1810 there began a marked depression, the result largely of a collapse of the boom in the export trade which had followed the opening of Latin America to British trade. This depression continued into 1811, and was accompanied by the suspension of many country banks and by credit stringency. To relieve the situation the government, in March, 1811, issued £6,000,000 in exchequer bills to merchants on the security of commodities, in order to provide the merchants with acceptable paper for discount at the Bank of England or at other banks.1 In the meantime the premium on bullion had been rising, and was not to reach its peak until 1813 for gold and 1814 for silver. These circumstances tended to strengthen the opposition to an early resumption of cash payments, and in the parliamentary session of 1811 the Horner resolutions embodying the conclusions of the Bullion Report were defeated by large majorities.
In 1813 and 1814 commerce and industry were in a prosperous state, and as the termination of hostilities impended the price of bullion began to fall. Napoleon's return from Elba and the resumption of hostilities in 1815 resulted in a rise of the premium on bullion, but a financial crisis, and a fall in prices and in the premiums on gold and silver, followed the definitive defeat of Napoleon at Waterloo.
These rapid changes within a few years in the fortunes of the paper pound appear to have converted many influential persons to the desirability of a return to a metallic standard. In 1816 the government enacted measures preparatory to a return to the gold standard at the old par. Silver coins were definitely relegated to a subsidiary status, thus completing the legal progress toward a monometallic gold standard begun in 1774. It was provided also that the authorization, by the Act of 1797 and later continuing legislation, of the issue of bank notes of smaller denominations than £5, should terminate within two years after the resumption of cash payments. But the government continued to refuse to obligate the Bank of England to resume cash payments, and both government and Bank were obviously waiting for the course of events to disclose the auspicious occasion for resumption. In 1816 gold fell to little above its mint price, and the Bank bought quantities of it at the market price and had it coined at a loss. In January, 1817, on its own initiative, it began partial resumption at the old par, giving gold upon demand for certain categories of its notes, under the authority of a provision in the Restriction Act of 1797 permitting the banks to pay notes under £5 in cash. But the exchanges soon after turned against England, with a resultant drain on the Bank's newly replenished gold reserves, and early in 1819 Parliament, at the suggestion of the newly-appointed committee referred to below, forbade the Bank to redeem any of its notes in gold.
Promises having been made on five different occasions of eventual resumption of cash payments, the House of Commons finally, in 1819, appointed a committee, under the chairmanship of Robert Peel the younger, to inquire into the expediency of the resumption of cash payments: A similar committee was appointed by the House of Lords. The House Committee, after hearing testimony of witnesses who, with one exception, were all favorable to resumption, recommended resumption with only one dissenting vote. In its report it took the desirability of resumption at the old par for granted, and confined itself to recommendations as to the time and manner of resumption. It recommended a gradual return to cash payments at the old standard, along lines which Ricardo had proposed. The government left the decision to the House, which, after but little debate, passed the Act of July 2, 1819, repealing the ancient restrictions on the export of coin and bullion and requiring the Bank to pay its notes in gold bars of a minimum weight of 60 oz. each, at rates per standard ounce which were to attain, by graduated stages, the old rate of £3. 17 s. 10½ d. per ounce by not later than May 1, 1821; after May 1, 1822, the Bank could pay its notes in gold coin or in ingots upon demand as it chose.
The price of gold fell to the mint price almost immediately, the exchanges turned in favor of England, and gold began to flow into the Bank. There was no demand whatsoever for the gold bars, and early in 1821 an act was passed, at the request of the Bank, which did not like the ingot plan, permitting it to cash its notes in gold coin after May 1, 1821.2
From 1816 on, there was a long period of economic distress, although with short intervals of prosperity. There had been voices raised before resumption, warning that it would bring evil consequences.3 Once it was in effect, many persons attributed the distress to it, and there arose an extensive controversy over the expediency of the resumption and of the manner and occasion of bringing it about, which was actively to persist for many years, and was in fact not completely to end until after the middle of the century there occurred a reversal in the hitherto downward trend of the price level.
The government had used this expedient to alleviate a credit stringency at least twice before, in 1782 and 1792.
For more detailed accounts, see A. E. Feavearyear, The pound sterling: a history of English money, 1931, chap. ix; A. W. Acworth, Financial reconstruction in England 1815–1822, 1925, chap. vi.
Thomas Attwood in particular protested vigorously against the casual manner in which what he regarded as the main question, i.e., whether there should be a metallic standard, and if so at what par, was answered by the Committees, and he predicted that the deflation necessary if return was made to the old par would not be as easily borne as the Committees supposed. “It is extraordinary,” he exclaimed, “... to observe the coolness with which the Committees speak about the Bank of England, and country bankers, having sufficient time ‘to call in their accommodations.’ ... ‘To call in accommodations,’ may be sport to them, and to the bankers, but it is death to the public. I wish that the Committees were to spend twelve months in a banking house, during the period of a general ‘calling in of accommodations.’ They would get more knowledge of human life, and of its ways and means, in that short period, than is to be learnt in all the books that ever were written from the beginning of the world.” He pointed out that general liquidation was a much more serious proposition than liquidation by a single bank. (A letter to the Earl of Liverpool, on the reports of the committees, 1819, pp. 34 ff. Cf. also ibid., A second letter ... on the bank reports, 1819.)