depreciation, guineas began to be regarded as an unnecessary incumbrance. So strong a hold did this notion take in the minds of men, that when Bank notes passed in the market at a considerable discount, many writers affirmed that paper had not fallen, but that gold had risen in value.
Mr. Boyd, Lord King, and other Economists, showed the incorrectness of this opinion, and Mr. Ricardo placed its erroneousness in a strong point of view, in a pamphlet published in the latter part of the year 1809, entitled, "The high price of Bullion, a proof of the depreciation of Bank notes." This work, Mr. Joplin avers "was the immediate cause, and formed the ground-work of the Report of the Bullion Committee."
"The principles of this Committee, supported by a host of writers, became now," says the historian, "the received opinions upon the subject, and they were as follows:
"They entirely agreed with Smith in the general principle, that if Banks were obliged to pay their notes in specie on demand, the trade might, in all other respects, be left perfectly free. They agreed with him, that the sum of paper in circulation ought not to exceed the sum of metallic money that would be in circulation if there were no paper: and they further agreed with him, that, if this amount of paper was not exceeded, no great demand for gold for exportation would ever arise: and that, if it were exceeded, a demand would arise for exportation, adequate to the excess. But in every other respect they differed from him, and laid down principles equally new and important.
" In the first place, they repudiated the principle that Banks could not issue to excess if they confined themselves to advancing money on real bills of exchange. This principle they proved totally incorrect.
"In the next, they denied that an excess of issues would be discovered by the merchant previously to the money's entering into consumptive circulation, and be returned upon the Banks for gold: though they admitted that an excess of issues would produce a demand upon the Banks for gold for exportation. But this, they proved, would take place after the paper had been introduced into circulation, and had depreciated the value both of itself and of the gold
