§ The following SPEECHES of MR. WARD and SIR HENRY PARNELL, on the Scotch Small Notes Bill, were accidentally omitted at p. 1065, immediately following the Speech of Sir John Wrottesley and preceding that of Mr. Secretary Peel.
Mr. Wardcongratulated the right hon. gentleman, and the hon. baronet who moved the amendment, on the tone in which this discussion had been conducted. It was one of the most interesting subjects that could engage the attention of an English House of Commons. It was so far new to him, that he should be backward in expressing any decided opinion upon it; he wished rather to know what was the intention of the House than to pretend to lead them to any particular decision. He looked upon the question of the coinage as the peculiar prerogative of the Crown. The Bank had a right granted to them in an especial manner to issue paper; but they were bound to make that paper convertible into gold, so long as it was the pleasure of his majesty that gold should be the standard currency of the country. The right hon. gentleman had spoken of the amount of gold in circulation in the country, and his statement had been supposed to be overcharged. On that subject he would give the House as much information as he had been able to obtain from the facilities afforded him as a bank director. The Bank had the same right as other bodies to transact their affairs in their own way; but his knowledge of their affairs enabled him to give the House some information. That information related principally to the sum issued in the shape of specie, and tended to show, that the right hon. gentleman's statement had been very little, if any, overcharged. From January 1821, to: July 1824, 17,373,000l. had been issued in gold. Of that amount, 2,550,000l. had been exchanged for guineas. During that period, the exchange had been in favour of this country, and gold had been largely imported; and from that circumstance, there was little reason to fear that the gold had gone out of the country. From August 1824, to December 1825, "a sum of 8,660,000l. had been issued in gold; and out of that, 556,000l. had been exchanged for guineas. During that period the exchanges had been against this country, and gold was largely exported. 1784 A sum of 2,500,000l. ought to be deducted from the amount of the issue on account of the money advanced during that time to bankers to cover the amount of notes withdrawn during the existence of the panic. That deduction left 6,000,000l. as the amount of the exports, in addition to the bar and uncoined gold sold by the Bank. From January 1826, to April 1828, inclusive, which brought the account up to the latest possible period, 2,372,000l. had been issued in gold; and of that amount, 109,000l. had been exchanged for guineas; and 1,300,000l. must be deducted for the advances to country banks. The total amount of the issues was 28,405,000l.; from which rather more than 6,000,000l. must be deducted for the exports, during the time the exchanges were unfavourable to this country, which left a sum of 22,000,000l. as the quantity remaining in circulation in April 1828. From this calculation, and the conclusion thus arrived at, it would appear that the calculation of the Chancellor of the Exchequer was not exaggerated. Taking, therefore, into consideration the demand for the issues, and the permanence of the supply, there appeared to him no doubt of the stability and permanence of the present state of things as respected the currency. He would not dive into futurity, nor speak with too much confidence on subjects of that nature; but he was prepared to say, upon his own responsibility, that there was no danger of any failure of the supply in the currency of this country. He should be one of the first to take alarm, if there was any real occasion for it; but he saw no ground for alarm. He must acknowledge that he, in common with many others who were, like himself, rather of the old school, should, if such a circulating medium could be safely adopted, feel a preference for paper over coin; and if the question was now whether parliament should, for the first time, enact those laws that were now in existence, he should certainly entertain strong doubts upon the subject; but that was not now the question. They were called on at present to 1785 say whether the laws having been enacted, the country having accommodated itself to the difficulties attending the first operation of those laws, the House should retract all it had done, and, at this particular moment, stop short, after the country had, in a great measure, overcome the inconvenience of the change. He assured the House he did not undervalue those inconveniences. Since the peace they had been frequently severely felt. In 1816, in 1820, and in the present year, gold had been brought into this country, and that state of things had been accompanied with distress and with low prices. Some gentlemen seemed to think, that if that state of things was altered in one respect, there would be high prices—that the change of one would follow the change of another. He thought that opinion was founded in error. In such cases there never was a medium point. States rushed from one extreme to the other, and that was an evil which all wise legislators would wish to avoid.—There was another question connected with this subject, and that was the introduction of a silver standard.- That point, had been adverted to by an hon. member, as one which it was very desirable to obtain, and a double standard had been recommended. He confessed he did not know what a double standard meant. The moment he could be convinced that there were two standards for a bushel of of wheat, or two standards for a yard of cloth, he could understand the proposition of a double standard in money; but not till then. It seemed to have escaped the notice of those who indulged in the idea of the advantages of a double standard, that the price of silver had varied more even than that of gold. During the years of peace, silver had varied from 4s. 11d. to 5s. 7d. an ounce, while gold had only varied from 3l. 17s. 6d. to 4l. 3s.; a fact which showed that gold had fluctuated in price in a much less proportion than silver, and that it was consequently much better as a standard of value. He thought it was high time for the legislature to act with caution on the subject of gold and silver, and to recollect the influence which the changes of the circulating medium produced in the relations of debtor and creditor. The former, if he had the option, would always pay his debt in the cheapest possible manner; and if there were two standards of metallic circulation, as one of them must be cheaper than the other, 1786 the debtor would take that for the purpose of discharging his debts. Such a choice ought not to be offered to him. That the price of these metals would be different from each other there could be no doubt. In Mexico large sums had lately been expended by various companies, for the purpose of raising metal, and in proportion as adventurers were successful in procuring large quantities either of gold or silver, one would be comparatively cheaper than the other; and he thought it unwise to afford to either of the parties, debtor or creditor, the means of taking advantage of such accidental circumstances.—He wished to say a few words with reference to the country bankers. They, and others who acted upon the same principle, had done much that militated against a sound currency. They seemed to imagine, that a low rate of interest for money was a proof that there was a sufficiency of the circulating medium. That opinion was not correct. The fact was, that there were two circumstances that might produce a low rate of interest, without affecting the quantity of the circulating medium. When the interest fell from three to four per cent, bankers imagined that there was a redundancy of the circulating medium, and diminished the amount of their issues; but if they went to market, they would often find that at the same time the farmer was much pressed for ready money, and could hardly procure it in payment of his corn. That mistake had sometimes led to the most detrimental consequences in this country, and the necessary quantity of circulating medium had often been withheld when it was most wanted. He was afraid that many gentlemen had thought it necessary to support any measure that appeared to have for its object the increase of the circulating medium. He thought they did so under a mistake. If they adverted to the state of the foreign exchanges, they would see that those exchanges had always been in accordance with the state of the circulating medium, whatever that might be. If a large quantity of money was issued, the exchanges would be against this country, and money would go away. That would peculiarly be the case at the present moment. In consequence of the war that was now going on in one part of the continent, it was fair to suppose that persons abroad would be desirous of possessing themselves of funds that might be employed in the war; and that would 1787 create a cause of inconvenience to this country, in the event of an increase of circulating medium, and of the exchange being against us. He would only now add, that personally he was perfectly indifferent as to the course the House might think proper to take. He should be willing and anxious, as a bank director, to do every thing to carry their wishes into effect; and in times to come, as in those which had passed, he could have no desire but that of preserving for the country the best circulation that human ingenuity could invent.
Sir H. Parnellsaid, he had heard with great pleasure the observations of the hon. member for London upon the silver currency. He hoped the House would bestow on them the attention they deserved, from the high authority of the hon. member on subjects of this kind. The hon. member for Callington (Mr. Baring) had endeavoured to persuade the House to believe that it was right to alter the present plan of the silver coin; but, in doing so, he showed that he was not so well informed upon the subject as many might be disposed to believe he was. When he proposed this alteration in 1826, he (sir H. Parnell) opposed it; and every thing he had learned since made him feel he was right, and that he was supported by the best authorities on the question, out of this House. The fact was, that the last settlement of the coinage of this country, both of gold and silver, was perhaps the only instance in which the attempt to use both for coin had completely succeeded; the effects of all other countries had failed; there was, therefore, no doubt of the inexpediency of making: any experiment founded on the theories of the hon. member for Callington. In this instance, all the facts of the case were against his project.
As to the general question of the currency and banking, he would now state to the House the opinions which he had formed, after a great deal of pains to form correct opinions. In the first place, he was sorry to find that ministers had made no change in theirs since 1826. He thought then, that they were very imperfectly acquainted with the subject: and further investigation, and the means of consulting the best informed persons, made him feel quite convinced he was right. The leading error of ministers was, and now is, their adopting the doctrine, 1788 that the commercial distress of 1825–6 was wholly owing to excessive issues of paper: this lead them to think a metallic currency was requisite to a large amount, and to have little confidence in the use of paper. The time that had elapsed since these notions were first published early in 1826, had served to clear up the errors on which they were founded; and it was now generally allowed by all those, who are deserving of credit for sound opinions on these subjects, that the over-trading of 1825–6 arose from commercial causes, but was aggravated by improper issues of paper.
As to a metallic currency, an abundance of instances existed to show that even in countries where there was no other, great commercial revulsions had occurred; bills of exchange and promissory notes served the purpose, in those instances, of bank notes, and enabled speculations to be carried on to a ruinous extent. There was the case of Hamburgh, mentioned in Mr. Tooke's works, and instances in this country, when but little bank paper was in circulation, that established the correctness of these observations. But those who advocate a metallic currency, wholly overlook the expense and loss of maintaining it. The twenty-two millions of gold now in circulation, which was a matter of so much satisfaction to the chancellor of the Exchequer, was so much dead capital. They had been taken out of useful employment in producing goods with a profit, to be employed without leading to any production, so that there was an annual loss on them of the average rate per cent of ordinary commercial profit, which, if taken so low as six per cent, made a loss of 1,320,000l. a year, and a further loss of the accumulation of profit on the annual profit.
With regard to paper-money, the whole tenor of the speech of the chancellor of the Exchequer shewed that he felt nothing but horror at the idea of having any thing to say to it. He obviously did not comprehend any of the proper functions of it in a commercial country; and therefore all the arguments and conclusions of his speech were necessarily wrong, because he started on premises which were at variance with every thing like sound principles, and long-tried experience on the subject. His speech made it necessary to state what the use was of paper-money, in order that the House might not be lead to 1789 adopt, by improperly restricting it, a course that would be destructive of the commercial prosperity of the country. It was only necessary to refer to the first elements of the silver currency, to show that a country, in proportion as it had a free use of paper, could keep its capital productively employed. Where there was no paper, or but little, every man in trade was obliged to keep a large sum of money in his coffer, to meet the demands of his business: this was so much dead capital; but, in a country where there was a general use of paper, the facility of obtaining money by discounting bills, enabled every man in trade to carry on his business with little or no idle money. In this way all the capital of the country was productively employed; but this was not all, for it was also more actively employed, there was more credit and confidence; and in this way every man could with safety extend his dealings, with the help of paper, greatly beyond what he could do without it. Instead, therefore, of looking with dread to the use of paper, the true principle was, that the more the currency of a commercial country consisted of paper, the more flourishing it would be, because its capital would be more efficient and more productive of wealth, and of the means of accumulating new wealth; this was the right principle of legislation, and in whatever degree we departed from it, we did injury. But, though this was undeniably true, it must be allowed that, if a country was placed under an absurd system of banking-laws, it would be very wrong to say, that the more the currency was composed of paper, the more it would be for the public good. This was just what was the case now. We had a most absurd banking system, and therefore it was right to be cautious in allowing a perfectly free use of paper, in order to check the tendency of the system to produce evil. It was in consequence of this, that, in 1826, he had voted for putting clown small notes, and it was in consequence of the banking system being still the same that he should now vote against an attempt to restore small notes.
But, when he did this, he was not satisfied to follow the example of ministers, and make up his mind, that nothing more was necessary to be done with our currency and banking system. In doing this, they added another error to the many which had been already exposed, and from the same cause, which was from not being 1790 as well acquainted with the subject of banking and paper money, as they ought to be, to conduct legislation among them. They seemed to be quite insensible to the great defects of our banking-laws, and to have no notion of their influence in helping to disturb all commerce, and to fill the country with insecure paper. Our system consisted of one over-grown bank, sustained by monopoly, and allowed to exercise an unlimited power to issue paper-money to any amount the twenty-four gentlemen who governed it thought proper; while an unlimited power was given to open branch banks in the country, and to issue any amount of worthless notes. But the system not only gave them power of doing harm, it absolutely prohibited the possibility of having a general plan of sound country banks, by preventing the associating of that number of persons, and the collecting together of that amount of capital, which was necessary for forming a strong bank, by the restriction which prevented more than six persons from forming a company for issuing bank notes.
This being four banking system, the chancellor of the Exchequer was contented to do no more than to prevent the restoring of small notes, and to expel Scotch small notes from England. But, said the hon. baronet, it was to be hoped that the House would take a more general view of the question, and not suffer this absurd system to continue, at least without making some effort to get rid of it. It was, no doubt, then, that the charter of the Bank of England presented a difficulty, but not a difficulty of such a nature as to be insupportable. If this charter, by its influence on the currency, so seriously affected the interests of the public of any kind, in a way to expose them to be most grievously injured, there certainly could be means found to get rid of it; and ministers ought not to be suffered to shut the subject out of their consideration, and leave the country to take its chance as to what may happen in the next five years, with respect to banking and paper money. They should endeavour to make an arrangement with the Bank of England for removing the obstacles in the way of reforming the banking-laws; not only by getting rid of the limitation of the number of partners in a bank, but by paying off a large part of the debt due to the Bank, so that it might not have a capital greater than other banks might have. If 1791 ministers would propose such an arrangement to the Bank, and at the same time give them to understand that they would no longer pay them 260,000l. a year for doing their business, nor leave five millions of money idle in their hands, but that they would look out for another establishment to act for them, there would be very little doubt of a successful result; but if this course should fail, the object of removing the obstructions in the way of a sound system of banking, was of such immense importance to the public, that it would be better to pay the Bank a sum of money as a compensation for the profits they would make from the privilege, till the year 1833. There was scarcely any sum to which such a compensation could be reasonably carried, that would not be repaid with an immense return, by the benefits which the public would derive from having a sound system of paper currency.
It was not, the hon. baronet continued, possible now to deny, that paper-money may be freely used with perfect security; and all that seemed to be required to have it so was, the removal of all legislation on the subject. In Scotland, the freest use of paper had existed for more than a hundred years; then there was only one law, and that to prevent notes being issued under the value of 20l., but then there had been only two failures, and no more loss to the public than the sum of 36,000l. Then there were no panics, or runs; and, although many persons attempted to deny the system, it was impossible to get over the conclusions which such facts sustained. The reason of the success of this free system seemed to be this, that it gave the power to the strong banks to combine together to lay down rules for their mutual protection against the interference of weak banks; for it has been by such combining together that all attempts to establish weak banks in Scotland had failed. The practice is, for all the banks to collect together the paper of a new and weak bank for some time, and then to call on it simultaneously for the payment of it. If a perfectly free system of banking was attained in this country, the motives of public and private interest would necessarily lead to a similar mode of doing banking business; and, in a short time, such banks as are now issuing paper, without having an adequate capital, would be obliged to retire.
With respect to the motion of the hon. member for Carlisle, if he had not made 1792 it so evident that the object of it was an alteration of the standard, and a scheme for raising prices and rents, he would have voted for it. He would never be a party to any plan for altering the standard; it was a most valuable triumph over a great deal of ignorance and private interest, the having restored it in 1819. It was now not only mischievous to try to change it, but it was to show utter want of the simplest principles of accuracy to suppose, that while paper money was convertible on demand into coin, the issuing of small notes, or any thing else, could have the effect of depreciating the whole money, and raising prices; it was equally ignorant to suppose that, if a depreciation of money could be thus accomplished, it would be of any benefit to landlords, because the rise of prices would be only nominal.
As to the bill for preventing the circulation of Scotch small notes in England, this was a most uncalled-for piece of legislation. Its first effect would be, to do a great injury to those who now made use of their notes; the inhabitants of the northern counties had declared this in their petition; they said they had derived great advantages from the use of Scotch paper, that they had lost nothing by Scotch bank failures, while they had lost a great deal by the failure of English banks. The effect of removing Scotch notes must be an evil, either by substituting English paper in their place, of questionable security, or gold at the expense to the public of providing that gold. As to the idea of English banks setting up in Scotland close to the borders, if the proposed bill was not to pass, this would be a good measure, because such banks would be obliged to conform to the Scotch rules, and thereby would probably become better banks than they now are.
In respect to what had been said by the hon. member for Callington, about the Scotch notes finding their way to London, the total want of foundation for this conjecture was made evident by the fact, that previous to 1797, when there was no small notes in England, Scotch small notes did not so find their way up to London. The hon. member concluded by saying, that he found himself under the necessity of opposing both the motions before the House, but declared he was ready to support the member for Carlisle, if he would bring forward a motion, having for its object, the reformation of the banking system.