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1819, by the same author; and ever since 1810 a small school of clever men have been scheming and dabbling in currency, to the great disadvantage of this country, and endeavouring to secure objects in their nature impossible of attainment—and, in their character, valueless, if they could have been attained. Under the pretence of advancing public interests, they have unquestionably promoted some private fortunes and ruined others; and it is certainly no re
the monied interest has subjected all classes. | but it was avowedly a supplement to the Act of Capitalists hug their dividends, their discounts, and their bargains, forgetful that in general disasters these also must perish. Bankers ponder over their bill-books and ledgers for the means of merely keeping above water for a time. Merchants who, until lately, never dreamed that suspended payments were amongst their contingencies, are engaged in a death-struggle with insolvency. Manufacturers stop their furnace fires, pay off their hands, and let their machinery stand, as being at least a longer road to ruin than that of persever-commendation of panics that they are not new. ance in their business. Industry, checked at every turn, grows sullen, and idle labour speculates regarding the means to dine. Idle labour-impatient labour, cannot afford to think long. It must act. It must be fed. It has not many days to lose in deputations. Its drafts are all payable on sight, or on very short notice, and all questions regarding its immediate subsistence must be immediately solved, for no bank on earth can renew its bills.
You say to a man suffering from gout, “Be patient, for you have been so often victimised— you were prostrate in January-down again in March-and confined in June; remedies are not in your way; you should throw physic to the doctors or the dogs, for you are not quite so bad as you were in February, 1845." You bid a man who has been robbed avoid alarming the police, because he was robbed half-a-dozen times before. You say to the lady who has lost her There are differences of opinion regarding the purse in a crowd, "Don't cry' stop, thief,' because, comparative approximation of the nation to ruin once before, you may remember that your pocket and penury. One gentleman at Hull, on the 22d, was cut away." You advise the robbed gardener declared that we were nearer the rocks in 1825. not to make a noise in the neighbourhood for these Some other gentlemen say that we were quite as grapes and peaches that are stolen, seeing that his nearly crushed at some other dates. Nero fiddling apples and pears were abstracted some time preas Rome burned, acted much in the manner of viously. You stand by the river, when its waters these gentlemen. We assume that Nero scraped have gone over the land, and count the sheaves of his instrument at such a distance from the blazes harvest, and the wrecks of industry floating past, that he was not particularly inconvenienced by hopelessly and profitlessly, to the sea, but you their heat. We think it even probable that Nero say, "Do not build more embankments-do not had so many suburban villas or country houses restrain the natural play of the waters-this is that he could always shift with the wind, so as to not yet quite so bad as the Morayshire floods." avoid the smoke. It may be also reasonably sup- You watch huge heavy waves rolling in and over posed that the Roman Emperor had taken the a rocky shore, from the broad ocean, and you see precaution of building his houses fire-proof, as them bear the broken fragments of noble shipswe do not read of fire insurance societies in those the spoiled fruits of distant industry-and the days. Perhaps, also, Nero may have had an in-lifeless forms that once had battled with the terest in property out of the range of the fire, and thus the hope of a rise in rent inspired his cheerful notes, and he swept away at " Blythe an' merry we's be a'," not from any love of mischief, as has been generally supposed, but from respect to three per cent. additional. If these suppositions be nearly correct-if they be at all reasonable suppositions-then one readily understands what otherwise is inexplicable in the extremely sanguine temperament of his successors. They are resigned, not to loss and suffering, but to apparent gain and aggrandisement. Their homilies are, however, impolitic. A man who lost a thousand pounds yesterday is not consoled by being reminded that he also was minus nine hundred and ninety-nine pounds, eighteen months since. That is one reason why he should not have lost one thousand now. We do not know that Napoleon would have thanked any friend who, observing him turning his horse's head from Waterloo, might have tried to console him with "Please, Sire, you were defeated at Leipsic." The memory of former disasters is merely evidence against the system on which, for a considerable period, the country has been misled. The Bank Charter Act dates only from 1844,
storm; but while some sense of sorrow comes stealing even over your granite hearts, you make haste and memorialise the commissioners of lighthouses not to erect a beacon on that fatal spot to guide the embayed mariner in the bitterness of the blast and the darkness of the nightnot to erect a beacon-and why? Why, because other vessels were shivered-other cargoes were scattered-and other crews were found dripping and drowned on that same coast, amongst these rocks, at different times, after various storms, long since. Yet the sun shone out again, and the moon cast a pale clear light on rock and headland, and the sea flowed so softly beneath the cliffs, that scarce its current could stir the green and gentle sea-weed that fringes them around; while hardly, it has oft since then been so sweetly calm, will the breeze sometimes stir a single leaf of the long round grass, that grows upon the graves, in the very small churchyard amongst the bents, where you buried the drowned sailors; and you say it will be thus again-there will be clear and quiet days, and soft calm nights, when the raging of this storm shall be hushed-when all its broken fragments have been gathered together, distributed, and forgotten; so you say build no lighthouses, lest
sailors, trusting too much to their warnings, grow rash, speculative, over-sailing, and come too nigh the rocks.
Is this system of yours not very base, when you defend it on the score of its absolute rottenness, and would have it left to cumber the ground for many years to come, on no better account than that it has cumbered the ground for many years that are past?
Is it true, however, that 1837 or 1825, or any other period, was commercially worse than 1847? Is what these gentlemen say correct, because, heated with argument, gentlemen will sometimes forget the truth, and deal in a very different article? Consols have sold for less within twenty-five years than the price to which they have hitherto fallen. In February and July, 1826, they were at £77 2s. 6d. In February, 1831, they were at £77 15s. In February, 1823, they were quoted at £73, and in August at £82 15s. In February, 1821, they had fallen to £73 2s. 6d., and in August they were sold for £76 2s. 6d. In February, 1820, consols were sold at £68 5s., and in August of that year they had fallen to £67 12s. 6d. The lowest price for twenty-seven years was therefore in 1820-immediately after Peel's bill of 1819 was passed, and one-pound notes were suppressed in England.
The depreciation in consols in thirteen months to the middle of the present month, is £17 15s., say 18 per cent., and on £800,000,000, for other stocks have fallen in a similar proportion, the difference is £144,000,000! Shares in the London and North-Western Railway have fallen from £248 to £138 10s. ; in the Midland, from £194 to £100; in the Edinburgh and Glasgow, from £85 to £48; and on many lines, such as the Great Western, in a yet larger proportion. On share property the depreciation has not been less than £100,000,000; and we make a moderate calculation in saying that on other property the reduction has been equal to another hundred millions-giving altogether nearly half of our ponderous national debt.
In 1825 the crisis was caused by the foolish investment of money in foreign funds. That capital was directly withdrawn from the country. It made no immediate return, and a considerable part of the sum has never paid interest. At this moment, when the numerous and gigantic bankruptcies in this country are rendering it a spectacle to the world, there is no nation that has onetenth of our foreign debts. All America and all European nations that borrow are our debtors. Spain owes us more than forty millions-the United States of America, by its individual governments, perhaps stands twenty millions-the Southern republics are still deeper on our books; and with the world's indebtedness to Great Britain, the enormous sums sunk in European Stocks would go far to mitigate the plague of our National Debt. Wherever there are mines wrought, railways constructed, canals dug, docks excavated, bridges built, there British Capital will be found; and the mania for foreign investment reached its greatest development in 1825.
With the exception of foreign railways, we had no similar transactions in 1846; but we required to buy a quantity of foreign corn, and we failed in obtaining it in exchange for manufactures. Hitherto, however, the quantity of gold exported has not exceeded seven millions, and it is folly to say that the export of seven millions of gold could in any way account for the tremendous depreciation of all stocks during the last thirteen months, if the currency were on a sound basis.
We deny that there has been any such apparent cause given in ordinary trading, or in anything whatever not directly chargeable on the legislature, for the panic of 1847, as existed in 1825 and similar periods; but we also deny that any other panic in the century has equalled in intensity and magnitude that of the present year.
It is singular that Manchester, the centre of the Anti-Corn-Law League, and dipped deeply in free-trade principles, is said to have a vulnerable heel respecting the currency. The Manchester merchants have made no movement, to the date of our writing, in a right direction on that subject. They had a meeting regarding railway calls; and, full of free-trade principles, they seemed to suggest some Legislative interference with this branch of trade; neither to regulate fares, nor to secure the safety of passengers, so far as that may be accomplished, and which would be consistent with the acts regarding mines and factories; but actually to prevent the public from expending more than a given sum annually on iron roads. They have not, however, taken any step regarding the currency; and yet freetrade in money must be equally desirable with free-trade in bread. Money may be so wrought as to make free-trade in corn a perfect nullity. It is at present in this state, that half the machinery in Manchester is idle, and there are anexecuted orders in the country.
Is there anything in the nature of money to make it exceptional from a general rule? Is there any reason why the principles of free trade, applied to corn and cattle, cannot be applied to currency? The bullionists answer this question in the negative; and their answer is, we believe, founded on a series of blunders. Originally men exchanged their surplus commodities by barter. Merchants carried the natural products of one land to exchange for those of another; and in most cases accompanied their consignments and transacted their business personally. The Ishmaelites were journeying to Egypt with spices when they purchased Joseph; but their spicery was not of value to the desert shepherds, so they paid for their slave in bullion, exactly as Abraham paid for the field which he purchased. Barter is the original state of society, but is necessarily of short duration, and rapidly supplanted by the use of some precious metal. The Egyptians and Arabs used silver as a precious metal, and gold came rapidly into use amongst these nations as still more valuable. Upon the sarne continent, however, and amongst other races, iron was used nearly four thousand years after the
period referred to, as a precious metal, and in competition even with silver and gold dust. Any metal, or any other substance that happens to be of extreme value in the circumstances of society, will constitute money. Gold and silver are universally adopted amongst civilised nations as the types of value and the instruments of exchange, either in reality, by the actual use of so much gold and silver, or in representation, by the promise of responsible individuals to pay so much gold or silver when it may be wanted.
There are two parties connected with the currency question; one who cling to the present ruinous laws; a second who want to establish a free-trade in the issue of paper money, along with its convertibility; to whose opinions we refer in the subsequent remarks. The first party are almost entirely located in England; the second date their practice and principles from Scotland, wherever they may have succeeded in infusing them.
The idol of the first party is "convertibility," and their bugbear is " depreciation." To secure the first and avert the last, they are sacrificing every interest of the country, and rendering certain those evils which professedly they seek to avoid. "Convertibility" is an utter and baseless fiction, except so far as public feeling, for public convenience, and through public credit and confidence, tolerates its existence. There is no such thing as convertibility, in the absolute meaning of the word. The circulating medium is the means of ultimately repaying debts; and is any man sufficiently simple to believe that this circulating medium ever can be convertible? The supposition, although thereon rest all the arguments for recent enactments, is utterly childish. Can the Bank of England convert its notes into gold? Can it keep its word, and pay them when presented? We do not know, while we write, that the nation is not on the eve of a terrible panic. There is a strong probability that this is the case, and an absolute certainty that the Bank of England could not keep its feet against a substantial run for a week. Let people once generally suspect that they should exchange notes for gold, and hoard their sovereigns-let this suspicion prevail for a week in timid minds, and the bubble, convertibility," will be exploded."
In round numbers, we may state, that the Bank of England has nineteen millions of notes in circulation, and holds eight millions of bullion; but it is evident that eight millions cannot pay nineteen, if the holders demand payment. The Bank holds stock, and can throw it on the market; but what will be its value during a panic? It is now £79 10s. It has been lower within a few days. But will it bring £79 10s. when the Bank sells for the purpose of drawing in gold to pay its notes? If the bank broker put one million on the Exchange, will he obtain £75? If he places two millions, will he obtain £70? Should he require to sell three millions, would he receive £60? or, for four millions, could he command £50or anything? One or all of these questions must be answered, undoubtedly, in the negative;
for, in these circumstances-not unlikely occurrences-there would be more sellers than the Bank, and very few buyers. The convertibility of the circulating medium depends, therefore, entirely on public confidence in the public stock. Whenever that becomes largely depreciated, the circulation will no longer be convertible. Every sarcasm cast by the bullionists against Birmingham reverts thus upon themselves; for no arithmetical proposition can be clearer than that the destruction of public confidence must insure the inconvertibility of bank notes.
While these pages are in the printer's hands, the Government has issued their license, if we may use that phrase, to the Bank of England to break the law. In that letter the Premier and the Chancellor of the Exchequer express their hope, that any over-issue of notes which the Bank may make will be gradually recalled. We doubt whether the Bank will ever require to make an over-issue. The balance of two and a half millions in the banking department may suffice to restore a healthy tone to commerce, now that it can be let loose; but, however that may be, the charm of the Bank Charter Act is broken.
Nothing tends more clearly to show the ignorance of the Cabinet on this subject, than that the signatures, John Russell and Chas. Wood, appear to a letter in which this indefinite relaxation of the law is styled a temporary measure. The nature of the case forbids the use of temporary measures. The act must be, like Cæsar's wife, above suspicion-above the suspicion of being set aside under any circumstances-to be of the slightest utility to its framers.
There was a tradition current in our school-boy days regarding the Dutch mode of punishing certain criminals-a mode that certainly had its advantages in Holland-where, as the story ran, convicts were condemned to learn industry under pain of drowning, by working a pump for so many hours daily in such a situation, that relaxation on their part insured a rise in the water so steadily that a man had merely to do nothing in order to commit suicide. The efficiency of the punishment arose from the fact that there was no relaxation of the inward current. It was at the option of the labourer to stop the flow out, but the flow in was as completely out of his control as the lapse of time. He therefore pumped steadily; but if, when the water reached his shoulders or his chin, the convict had been assured, from precedent, that the inward current would be relaxed, then, doubtless, the regularity of the works would have been sadly interrupted, and the pumps would have often been wrought at leisure.
of paper money are suggested: the first is an exclusive issue by Government; the second, an issue by specially privileged incorporations, companies, and individuals, as at present; the third is by free-trade in money—that is, by permitting all companies who can comply with the regulations devised and adopted, to issue bills for small sums payable in bullion on demand. To the first scheme we have a leading objection, arising from the circumstance that the Government mechanism is already sufficiently unwieldy, and again from the suspicion that might be engendered of Government interference through its issues with the course of business.
In reference to the second or existing scheme, while we deny not the abstract right of Government to manufacture, or even to manufacture exclusively, paper money; yet we deny any right, in justice, that it can have to pass away this privilege to a certain number of private companies or individuals. The right in law is not to be questioned. The Legislature make the statutes, but what is right in law may not always be sound in policy or just in morals. We see no ground to justify the bestowal of an exclusive privilege to make money the current representative of capitaland itself real capital or not, as the case may be. The Government have monopolised the conveyance of letters, which is done ill and cheaply: the work is not done ill because it is done cheaply; but both characteristics exist together; and without denying the right of the Government to convey the mails exclusively, we should deny the moral right of the Legislature to bestow this privilege or business on one or two private companies-on the London and North Western, or on Pickford & Co. We have, therefore, a radical objection to the second plan. It is a monopoly, and all monopolies are essentially imprudent and impolitic.
The third plan prevailed in Scotland to the date of the Act 1845 and 1846, which confined the power of issuing paper money exclusively to the banks of issue then established in that country. The Bank of England Charter presents an objection to the adoption of free-trade in the metropolis and some parts of England. That charter has its date, and it has its money value. We know when it will die out, and we know also that it may be bought out; while we do not think that any sum which could be necessary for that purpose should prevent a great national reform. Assuming, therefore, that the Bank of England can be approached with proposals regarding the sale of its charter, we reach the conditions on which any company might be permitted to issue notes for small sums payable on demand.
A bank of issue, however, asks credit from the public. Its wares are thrown into every man's hand; and it is not desirable, as a shopkeeper or trader takes their bills, that he should be obliged to consult some authority regarding their validity. They should bear the mark of being good and solvent promises to pay on their brow. There should be no doubt left on the subject. The Government warranty can be affixed to each note, and thus, wherever it passes, it may be known to represent in good faith one pound, or five, or ten pounds worth of negotiable property. In asking security for the currency, we are reminded of the much larger capital in deposits left with bankers ; but that is the business of each individual depositor; while the currency affects all classes, and no class should, we repeat, be compelled to make special inquiries regarding the character and solvency of every bank in the kingdom.
Our proposal embraces, first, the purchase of Consols by the bankers who mean to issue notes, equal in amount to one-third above the sum which they intend to issue. Thus, if their fixed issue shall be £240,000, we propose that they should hold Government stock to the nominal value of £320,000, productive of dividends annually to their concern, but in every other respect withdrawn from the market, and placed under a Government lock and key.
The first act in establishing a bank of issue, or continuing one already existing, would be to mortgage property amounting to one-third more than the circulation which the proposers would ever have before the public. Any other description of property might answer for this mortgage equally well with Government stock; but yet, the latter is the most convenient form; 2d, it is advisable, for the interests of the country, to maintain the value of this stock; 3d, it renders expensive and tedious inquiries unnecessary.
The bank of issue would necessarily obtain on an average 31 per cent. for the capital invested in this mortgaged stock; but we do not contemplate a state of business where that return will form any temptation to capitalists. They would also have the interest accruing from the average amount of circulation that their notes may obtain in the course of their business. A bank of issue, however, never really circulates to the amouut fixed by law. It must always have a stock of notes at its different offices for the transaction of business; and under a sound system of banking, it becomes the interest of every man to increase this slumbering stock of notes. The supposition, therefore, that bankers would always have in circulation, and yielding interest, a sum of money equal to their fixed issue, is erroneous. Still, as some expense must be connected with the re-establishment of Government offices to conduct this business, or with the extension of the staff in the present stamp offices, to include the requisite and additional operations, there is no fund by which it could be more fairly met than the profit accruing from the paper circulation. That might be done by an individual tax on each note stamped by the Government office, as has
There are many distinctions between a bank and trading companies for general purposes. In depositing money, a person satisfies himself specting his banker's solidity and solvency. Inquiries are not often made; appearances are readily set down for facts; and sometimes the shrewdest depositors choose the crooked stick; yet we are bound to suppose that in a leisurely and deliberate transaction, business is done, in this regard, on a sound basis.
therefore, for internal purposes, do not require a large stock of coin. A stock of bullion is required, however, somewhere to balance foreign exchanges. There is no probability that our outward business can ever present a fair account. There will be a balance on some side of the paper, and it must be squared off.
been previously the case; and as each note would require to bear very apparently a Government stamp as the guarantee for its validity, this mode of raising a revenue to meet the necessary expense seems least objectionable. A general tax of one or one and a third per cent, might be taken from the dividends accruing on the stock lodged against the notes issued; and that plan has also the advantage of simplicity. On its adoption, banks of issue would require power to withdraw part of their mortgaged stock, by lodging an equivalent amount of their notes to be cancelled. The common objection, that we should be inundated with paper money - that we should have over-issues, consequent depreciation, destruction of credit, of confidence, accompanied by periodical panics and crashes-may be made to this plan in England, but will scarcely be re-arrangements necessary for the commencement of peated in Scotland, where the guarantees against an over-issue have long and effectively checked the disease, or even in Ireland, where their operation is practically known.
We must, therefore, have a stock of bullion, and it has been assumed that this stock should be kept by some large bank, at present by the Bank of England, We see no sound reason for that assumption. Some parties have proposed that the Government should buy all the railways, and trade in that way. It is, at least, more consistent with the functions of Government that the Mint department should have the custody of coin and bullion. We do not stop to examine here the
this system, because they are evidently matters of detail; but when the Government has come into the position of the Bank of England, as the bullion keeper of the country, the subsequent working may require to be explained, and that can be done in a few sentences.
There is at present a fixed price of gold; and as an internal standard of value, it may be advantageous, although a fixed price of any commodity appears inconsistent with principles very generally held. This fixed price, however, is a positive loss often in our transactions with foreign countries. Merchants have frequently exported gold not to balance exchanges, but as a commodity yielding a profit. The Government, therefore, should be empowered to sell coin to those who want it for its average value in foreign markets; or, what comes nearly to the same result, should be empowered to charge a commission on coin required from them.
In Scotland interest is allowed on current accounts; and no man, therefore, who has an account with a banker, retains money in his possession. There can be no doubt that the circulating medium of England is-gold being included-twenty-fold the currency of Scotland, for five times the population, who do not transact a proportionately much larger business than that of Scotland. A fivepound note in Scotland does four times the work of its English contemporary. Notes, however, thus rapidly paid into the office where the holder transacts his business, are not largely those of that office. They are composed in average quantities of the general currency; and thus bankers have a mutual exchange of their notes, paying the balances in bullion. The tendency to overissue is thus effectively checked by the knowledge that within three days the "promises to pay" will be returned. This currency must be convertible in bullion. There is a standard of money value, and we do not require it changed. The paper currency can still be held convertible into sovereigns at the present weight. This convertibility, as an absolute business extending to the whole circulation, however, as has been already stated, is, in any case, a fiction. No man really imagines that the currency is convertible. It cannot be supposed that all the paper in the country could be paid in gold. The existence of this ability is, indeed, absolutely unnecessary. Public confidence is the great requisite for an internal currency. Public confidence is possessed by the Scotch banks pre-eminently, and will ultimately be accorded to all banks governed on the same principles, and couducted with equal prudence. Until very recently, little or no gold has been demanded for notes in this country. The gold required has been for exportation, and we have had no run upon the banks for internal purposes, until within a few days in some localities of Eng-dard, if it were lower. This operation would not land. Convertibility, therefore, really means public confidence that, when required, the onepound note will bring twenty shillings; with a strong conviction that the change will never be required, except in small quantities. Bankers,
The principle on which the bullionists justify the suspended law is, that when the exchanges go against us by any cause, such as the recent large purchases of corn, the bill operates to return gold by reducing the price of commodities, thus forcing them upon foreign markets, and restoring the equanimity of the exchanges. The operation is extremely expensive. It reduces not merely the value of goods exported or stocks sold to a foreign country, but all other goods and stock whatever. We prefer to throw out the inducement in another direction. Under the system of currency we propose, there would not be large quantities of coin in the vaults of bankers. When, therefore, a merchant required gold for the purposes of export, he would draw on his banker for the sum in bullion. The latter would have to cancel notes to that amount in order to obtain gold; or deposit his notes with the Government office, to cover the advance he required, at the price of gold in the average of foreign countries, if that were higher than our standard; or at our stan.
narrow the circulation, because if bankers found their issues shortened too much by the transaction, they could increase them by farther purchases of stock. The price of stocks generally and indirectly of goods and produce would be