As I moved, the adjournment of the debate on the last occasion, Sir, I take it that the position is that I should resume the discussion. In doing so, I want to make a few general remarks about some general principles which we should keep in mind in all considerations of currency policy. There has been a good deal of talk about the fact that our currency is based on sterling. Well, that might mean various things. Actually, our currency is based on sterling in the sense that our currency is supported at a parity with sterling on a £ for £ basis, but it would be perfectly possible to have our currency based on sterling and to have the Irish £ worth, say, 25/- English, or worth, say, 15/- English. In fact, the currency of the Dominions, New Zealand and Australia, is based on sterling, but as we all know, the Australian £ is only worth 15/- English, and the New Zealand £ is much the same. In any event, whatever parity we adopt in relation to sterling, if the basing of our currency on sterling is to have any real meaning there must be in this country some institution which maintains balances in terms of that foreign currency, sterling, on which our currency is based, and which is prepared to buy and sell our money in unlimited quantities at a fixed price in terms of that sterling currency.
That is the sense in which our currency is and must be based on sterling, and whether the £ is worth 15/- English, or 25/- English, it is essential that there should be some national institution which is prepared to buy and sell our currency at that fixed rate, and in no other way can a fixed value of our currency be maintained—a fixed value, that is, in terms of sterling. Of course there is another alternative, and that is that we should abandon the effort to maintain a fixed value of our currency in terms of sterling or any other foreign currency, but that is a policy which I hope will never have to be adopted and which is open to very grave objections, as every country, which has suffered from fluctuating foreign exchange values of its national currency has realised in the last 20 years.
Senator MacDermot, in the course of his remarks, mentioned as a point of interest that there was a time in our history when the national currency was cattle, and it might be true to say that even now there is a sense in which our national currency may be said to be based on cattle. After all, if the meaning of our currency being based on sterling is that we maintain important sterling assets or sterling balances in another country—if that is the meaning of that phrase—then the question of how we acquired those foreign assets becomes interesting and important. The only way in which we could have acquired those foreign external assets is by the export, on balance, of a greater volume of goods than we import and cattle, as you know, play a central part in the total volume of our exports of all kinds. Our currency, therefore, is based on the fact that we have sterling assets and that is due to the fact that we have export balances because we have exported more cattle and other goods than we imported. That is by the way.
It is sometimes argued that instead of basing our currency on sterling, we should base it on the national credit, whatever precisely that phrase may mean. Now, in my view, in basing our currency on sterling, as it is now based, it is in a true sense based on the national credit, for it is based on something which we, as a nation, have by way of credit or claim, on a neighbouring nation. Our currency represents, on the one side, a debt of our monetary authority to the people using that currency but, on the other side, it represents a claim possessed by that monetary authority against the resources of a neighbouring economy. Therefore, in a true sense, it is based on the national credit because it is based on a credit which we, as a nation possess, having the form of a claim on the economic resources of a neighbouring country. A currency not so related to a neighbouring currency and not so supported by external assets held abroad might be and would be nothing in its essence other than a form of national debt, a debt due by the State to the persons circulating and using the currency of that country. On the whole, I prefer that our currency should be based on the national credit in the sense in which it is so based rather than that it should be based on nothing but a national debt.
Now, the fact that we are one of the few European countries which enjoy a creditor position in international financial relations is a considerable national advantage. It gives us a strength in dealing, even with greater and more powerful neighbours, which other countries have not got and which other countries envy us for having. In that respect, the fact that we are to a substantial degree a creditor in terms of sterling of our neighbours, places us in a much more advantageous position in currency and other matters than, for example, New Zealand or Australia. As many of you probably know, in recent years New Zealand exhausted her sterling balance, or came very close to the point where her sterling balance was exhausted, and they had to walk the plank in their dealings with English financiers before they would obtain the accommodation necessary for them in order to continue their economic and financial life.
It might not be without interest to give a brief historical retrospect of the circumstances in which our currency came to be sterling or based on sterling. In that connection, I would remind the House that we have had no familiarity in present or recent generations at any time in the last 100 years or more, with those difficulties of currency and problems of fluctuating foreign exchanges which have been so familiar and so disastrous in other countries. We have also been fortunately free from any serious bankruptcies of any of our banks for the best part of a century.
But, if we look back over the long history of Irish currency, we find that the happy position we have enjoyed in recent generations was by no means characteristic of the history of our country in the centuries running from the 14th to the end of the 18th century. In fact there were many centuries during which Ireland did not enjoy a firm, stable exchange rate with England, centuries in which Ireland had no currency of her own, although she had her own monetary system, because she was deliberately prevented by British policy from having her own currency while at the same time she was prevented by British policy from using sterling. Henry VII forbade the export of sterling coins to Ireland, and this prohibition of this export was rigorously enforced, especially in the time of Elizabeth, though, in fact, it was evaded, because coins have a way of being exported in spite of regulations.
The only reputable coins circulated in Ireland for many centuries were foreign coins, sterling and others, because the country was forbidden by British policy to have a mint of its own, while at the same time difficulties were placed in the way of free circulation of English coins. Queen Elizabeth, as part of her policy for the destruction of the army and cause associated with Hugh O'Neill, deliberately imposed on Ireland a debased, or, as we now call it, an inflated currency, and the object of that issue of debased coin in Ireland was to deprive the Irish of the facilities they had of importing munitions of war by the use of coin of sterling character, whether foreign or sterling:
"In regard that the rebels drew to themselves a great part of the sterling coins that were in circulation, to buy munitions and provisions for the war."
So Queen Elizabeth, as a measure by no means friendly to the Irish people, deliberately depreciated our currency, and any section of the community to-day who sought deliberately to depreciate our currency would be acting in the spirit of Queen Elizabeth and would be producing somewhat similar effects on our economic structure. They would be giving us a currency of fluctuating and uncertain value in other countries, a currency with which we could not buy as much abroad as with our present currency and with reference to which we would be quite uncertain how much it would buy at any time at home or abroad. That would be the effect of a deliberate depreciation of the currency associated with a lack of parity with any other currency.
There was, as students of Irish history will remember, another famous occasion on which the currency was debased or inflated. That was in the reign of James II when he coined a lot of gun metal into current legal tender money of the realm and called four-pence worth of old gun metal "five pounds." It is on record that creditors who were paid £5 worth of debt with fourpence worth of metal were not at all satisfied with the transaction, and when the new monarch, King William, put an end to that particular form of debased currency, we had the origin of that slogan which is repeated to this day in Northern Ireland: "Here's to the glorious, pious and immortal memory of William III, who saved us from Pope and popery, brass money and wooden shoes." The brass money is the particular point germane to this discussion, and I would suggest that if we are going to emulate James II, and introduce a new form of brass money, we will not be contributing to that reunion of Ireland under a common Government which all of us have at heart.
On certain occasions, inflation of Irish currency has been disastrous to the nation, and fluctuation in its exchange value has been and was for centuries, a continuous cause of injury to Irish economy, but equally a deflation of Irish currency, that is a deliberate increase in the exchange value of the Irish currency unit has on one occasion proved disastrous. As I said before, although there was an Irish monetary system there was no Irish currency as such, but what happened was that coins, Spanish, Portuguese and English circulated in Ireland and were given a certain value in terms of what one might call an imaginary Irish monetary system. For example, the English guinea at one time circulated as 26/- Irish and at another time as 23/- Irish. The Moydore, a Portuguese coin had a value of £1 10s. Irish and at another time had a lesser value. In 1695, the English guinea was fixed at 26/- Irish and, by the same token, English shillings circulating in Ireland in those days, instead of being called 12 pence Irish, were called 13 pence or 14 pence Irish. We had the phenomenon of foreign coins circulating and being called by different denominational values in terms of Irish and in terms of the English system. The same coin would be called 13 pence in Ireland and 12 pence in England. The English guinea was fixed at 26/- Irish in 1695, but, for some reason or another which I have never been able to ascertain, the Irish Government changed the value of the English guinea to 23/-. That was an appreciation of the Irish monetary unit making it, so to speak, heavier in terms of gold than it had been before.
Before 1701, an Irish person exporting to Great Britain who sold a guinea's worth of goods had the means of paying a debt or remitting a rent having a value of 26/- Irish. When the change took place, by selling a guinea's worth of goods, after 1701, he could only pay a debt having the value of 23/- Irish, and, consequently, the effect of that change was to compel the export of a greater quantity of goods in payment of our liabilities, to "absentee landlords" and you like, than was the case before. By the appreciation of our monetary unit, which took place at that time, we imposed a burden on all our export industries, we depressed the export prices and, generally speaking, contributed in no small measure to that acute depression of Irish economic life which lasted for about three decades.
Most economic historians attribute the depression of the Irish economy in the early 18th century to the restriction on the woollen export; but, from what information I have obtained on the matter, I have come to the conclusion that the appreciation of the Irish currency unit was the primary cause which pushed our economy at that time into acute depression. That being so, it looks as if neither a violent depreciation nor a violent appreciation has been attended by happy consequences in the history of our currency.
However, I set out to explain as best I could the circumstances by which we attained to a sterling basis for our currency. Right down nearly to the end of the eighteenth century we were still suffering from the consequences of the British policy which refused to allow us to have a mint of our own, and which refused to allow the free circulation of English coins here. We did the best we could with all kinds of foreign coins, using those coins and whatever English coins we could illegitimately get hold of up to 1775. Then the situation improved considerably and more sterling coins were in fact coming in and were being more widely circulated by custom. In that year the Government of Ireland passed legislation to give to sterling coins the sole right of legal tender in the country, whereas before that the legal tender quality belonged to a whole list of foreign coins—Portuguese, Spanish, French, as well as sterling—so we may say that, in 1775, we changed for the first time to a sterling basis for our currency. At all events, sterling became the exclusive currency of the country and from that time we have, in one form or another, maintained the sterling basis. Actually, even when we achieved that result, we still called the English shilling 13 pence and Irish money was supposed to be on parity with English money when you had the relation of £13 Irish being exchanged for £12 English. It was only in 1825 that this difference in the denominational value of the two currencies disappeared and, since 1825 up to the present day, we have circulated coins in every respect similar to sterling; in fact, they were altogether sterling until the separation of the currencies in 1927.
The moral of that rather long history is that the sterling parity of our currency was not lightly achieved in the course of our long history and, in my view, it should not be lightly abandoned. Inflation and deflation of our currency in terms of sterling have been nationally injurious and, therefore, the whole rational attitude to the problem is that we should, as far as possible and unless very definite and unforeseen circumstances arise, adhere to a rigid sterling parity whereby the £ Irish will be exchangeable at par for the £ English. Certainly, under present conditions, if anyone wants inflation, he is quite likely to get enough of it from the inevitable degree of inflation that will probably come in spite of all efforts to prevent it. Any person desiring inflation should have no need to depart from sterling. On the other hand, in certain unforeseen circumstances it may become a matter for consideration whether the Irish £ should be appreciated in terms of sterling. If that situation arises, in consequence of some disaster threatening our neighbours, our whole outlook would be so gloomy in common with theirs that it would be of no use to try to save ourselves from that common disaster by any form of tinkering with currency. They would be dead and damned and we would be dead and damned along with them. Mainly as a matter of theory, it may be that we might give some consideration to the point whether and in what circumstances it would profit us to appreciate our currency in terms of sterling, or rather to try to prevent our currency unit suffering an excessive degree of depreciation in terms or sterling. Whether that was going too far or not, it would be a change which should not be made lightly either. If our currency is appreciated in terms of sterling, one can imagine the howl that would be raised by farmers. For example if a farmer were selling a bullock for £40 English and he were only going to get £30 Irish for it I think it would be extremely difficult—in fact, almost politically impossible—to maintain a state of affairs in which our currency would be allowed to appreciate.