ABSTRACT
The downward trend of the English price level, which persisted without any sustained reversal from 1815 to the 1850's, was for English industry and tabor only partially compensated by the progress in manufacturing technique and the fall in the prices of imported raw materials. The occasional prosperous intervals were ordinarily terminated by sharp financial crises, and were followed by intervals of depression and unemployment. There was general agreement that these business fluctuations were inherent in the new structure of industry, but there was also a widespread conviction that they had been accentuated by chronic mismanagement--{)r misbehavior--{)f the currency. It became apparent soon after resumption of cash payments that strict adherence to a fixed metallic standard was not sufficient to assure the smooth and beneficent working of the currency system. The Bank of England succeeded throughout the period in maintaining convertibility of its paper notes, but on several occasions only with great difficulty and after resort to emergency measures. In
1825, in 1836, and again in 1839, suspension of convertibility was avoided only by a narrow margin. In 1847, and 1857, and 1866, the Bank was again in serious difficulty. Each period of special strain gave rise to an extensive controversy, turning on the quality of the Bank's management of its affairs and on the principles which should be followed in the management of the currency.1 That the currency was operating badly no one disputed, although there were not a few who would have agreed with Cobden that "managing the currency [was] . . . just as possible as the man'agement of the tides, or the regulation of stars, or the winds,"2 and that all that government could do, therefore, would be to place it on a wholly metallic basis, and then let "automatic" processes run their course.
