Commons Sitting of 13 June 1844

MINUTES.
BILLS. Public—1°. Duchy of Cornwall As. sessionable Manors; Duchy of Cornwall Lands.
2°. Bank of England Charter.
Reported.—County Rates.
3°. and passed:—Manchester Bonding.
Private.—1°. Stone's Estate.
Reported.—Rochdale Improvement; London and South Western Railway.
3°. and passed:—Brighton, Lewes, and Hastings Railway.
PETITIONS PRESENTED. By Viscount Clements, from Lavey, and Lara, for Repeal of the Union.—By many hon. Members (32 Petitions), against Dissenters Chapels Bill.—By Lord Howard, from St. Andrew's, Holborn, for the better Observance of the Lord's Day.—By Captain Maxwell, from Cavan, for Legalizing Presbyterian Marriages.—By Mr. Butler, from Lisdowney, and Mr. Redington, from Galway, for an Absentee Tax.—By Mr. Adderley, from Ashburton, and Uttoxeter, for Graduated Duties on Cheese and Butter.—By many hon. Members (33), against Repeal of Corn Laws.—By Mr. Thos. Dnncombe, from Wharfingers of London, against Customs Duties Bill—By Mr. Charles Round, from Saffrou Wal-

777
den, for Alteration of Law of Arson. — By Mr. Allix, from Cambridgeshire, Sir J. Trollope, from Spalding, and Mr. Wallace, from London, against Bank of England Charter Bill.—By Mr. Thos. Duncombe, from Leicester, for Alteration of Law of Blasphemy.— By Mr. Wallace, from Cathcart, etc., for Extending Factories Act to Bleaching Works. — By Mr. Thos. Duncombe, from Somers Town, for Mitigation of Sentence on Thomas Cooper.—By Sir R. Philips, from Narberth, in favour of County Courts Bill.—By Colonel Sibthorp, from London, for Alteration of Currency. — By Mr. Redhead Yorke, from York, against Poor Law Amendment Bill.—By Mr. Colvile, from Derbyshire (31), against Repeal of Gilbert's Act.—By Sir James Graham, from Belfast, and Mr. Vesey, from Abbeyleix, for Alteration of Poor Law (Ireland). — By Mr. Thos. Duncombe, from Journeymen Tailors (19), for better regulation of Tailors Trade.

COURTS OF LAW—IRELAND.
Mr. Frenchasked when the Government would proceed with the so long delayed subject of the Courts of Law in Ireland.
The Chancellor of the Exchequersaid he would give an answer in a couple of days.

BANK CHARTER—THE CURRENCY.
The Order of the Day for the second reading of the Bank of England Charier Bill. On the Motion that the Bill be now read a second time,
Mr. Hawesspoke as follows: — Mr. Speaker,—The subject which I propose to bring under the consideration of the House is one of great importance and involving many complicated details; I must at once therefore ask the consideration and indulgence of the House, while I endeavour to state as clearly as I can, the grounds upon which I venture to oppose the further progress of the Bill now before the House. I sincerely hope that I shall not be supposed to be guilty of presumption, or of any overweening confidence in my own judgment in taking this step, and in seeking the support of the House for the Motion with which I am about to conclude—and upon which it is my intention to take the sense of the House. It will be my object in directing the attention of the House to the plan which has been laid before it by the right hon. Baronet, to shew that it is not founded upon sufficient evidence, or in the words of the Motion:
"That no sufficient evidence has been laid before this House to justify the proposed interference with Banks of Issue in the management of their circulation."
That however great may be the importance attached to it—and it must necessarily be regarded by the House as highly
778
important, both in its principle and its details—it must be regarded as a plan not founded upon evidence sufficiently clear, and indisputable, to justify its adoption. In the first place, I must be permitted to say that the Bill of the right hon. Baronet, now under consideration, ought to be looked upon merely as a plan for regulating the paper currency of the country. It is brought forward upon no new data— it establishes no new principle—and if it be this evening negatived by the House, let it be remembered that the principles embodied in the Act of 1819, and those contained in the Report of the Bullion Committee of 1810, will still remain in force, and will not be in the slightest degree affected by that decision. The Bill is one of regulation, not of principle. To all that has been said by the right hon. Baronet, with respect to the value of a gold standard—to all that he has said of the importance of securing perfectly and fully the immediate and constant convertibility into gold of promissory notes payable at the will of the holder, I have not the smallest objection to offer. I subscribe to what is contained in that portion of his speech as completely and as cordially as the right hon. Baronet himself. I have, therefore, no objection to make to the principle of convertibility, as enforced by the Bill of 1819, nor do I mean in the course of my observations upon this part of the subject to put forward anything opposed to the doctrines advocated by the authors of the Bullion Report of 1810. But I do mean to contend that that principle, or those doctrines, afford no sufficient basis for the proposed interference with the Banks of issue in the management of their circulation. This measure is intended, avowedly, to surround the principle of the convertibility with additional security beyond that offered by the Bill of 1819, and in considering the plan of the right hon. Baronet, it will be necessary first to examine the argument by which it is sought to establish the expediency of giving that principle additional force and effect. As I understand the right hon. Baronet, his object in bringing forward the present plan is to cause the paper currency of this country to conform exactly to the fluctuations of a gold circulation, to make it oscillate as a metallic circulation would oscillate, and to prevent, as far as possible) those fluctu-

779
ations in our paper currency which, it is alleged, have endangered the convertibility of paper into gold at the will of the holder. The right hon. Baronet so clearly and distinctly developed his plan on laying it before the House, that I feel it scarcely necessary to do more than simply refer to such portions of it as I may have occasion to comment upon; but as the subject is so important, and as it is one in dealing with which perfect clearness is absolutely necessary, I will, to prevent the possibility of mistake as to the principles or objects avowed by the right hon. Baronet quote the words he used on that occasion. The right hon. Baronet said;—
"If we admit the principle of a metallic standard, and admit that the paper currency ought to be regulated by immediate reference to the foreign exchanges,—that there ought to be early contractions of paper on the efflux of gold,—we might I think infer from reasoning, without the aid of experience, that an unlimited competition in respect to issue will not afford a security for the proper regulation of the paper currency."
And at a subsequent part of his speech the right hon. Baronet said:—
"I will endeavour to prove to your conviction, from the domestic experience of twenty years, that now is the time when, if you are wise, you will take security against unlimited competition in issues, will increase the control of one superintending Bank, and will prevent alterations and vicissitudes in that medium of exchange which is to regulate the value of every article in this country."
And again, in stating the practical details of the plan, he said:—
"We think it of great importance to increase the controlling power of a single Bank of issue."
The object then of the right hon. Baronet, as declared by him in bringing forward this measure, is to give increased power to one controlling Bank of issue, and thus to obtain security against the results of unlimited competition in the issue of a paper currency. Now I must observe that in my opinion "unlimited competition" does not exist and cannot exist while the principle of convertibility remains established as it is by the Bill of 1819; that that principle eventually prevents unlimited competition; confining a paper circulation if properly applied, within perfectly safe
780
and secure limits, and indeed within its only legitimate limit. If promissory notes payable on demand are convertible into gold at the will of the holder, I contend that so long as such convertibility is maintained and secured by law and practice, there is an adequate and sufficient check upon the issues of bank notes, and I think therefore that it would not be wise, in order to obtain the further and more stringent check proposed, to adopt a measure open to objections so weighty as those which I shall endeavour to lay before the House. But before I proceed further, before I enter into details, I would shortly direct the attention of the House to, and review, the three great occasions (of which I consider the present as one), upon which the monetary system of this country has been brought under the consideration of Parliament. I conceive it necessary to do so in order thoroughly to examine the arguments upon which the plan of the right hon. Baronet is based, and to contrast them with those which were stated to be the grounds of the previous alteration. The first of these great occasions when our monetary system was discussed, and to which I have alluded, took place in 1810 and 1811, when the Report of the Bullion Committee was published, and when the subject was most fully and ably discussed. That Report must of course, be in the recollection of many hon. Members. I do not propose to enter into the subject of it at any length. It will be sufficient shortly to state, in the language of the advocates of that Report, the evils which it traced to the alleged over issues of paper, viz:— that Bank of England paper and country bank paper had been depreciated, that the difference between the mint and the market price of gold was at once the proof and the measure of that depreciation, that the prices of commodities generally were thereby enhanced, and the foreign exchanges turned against us. And it declared, as the result of the investigation, that the only remedy for those evils, was a more limited issue of paper money convertible into coin. It is of importance that the House should notice particularly the results which the report of the Bullion Committee represented as having arisen from an over issue of paper, as I shall endeavour to show to the House that though that Committee undoubtedly adopted the soundest principles for regulating our

781
Currency, they were in error as to the facts from which they deduced those principles. I will endeavour to show that their doctrine though correct, was not based upon a correct statement of facts. I should be justly chargeable with presumption in endeavouring now to convince the House that that report conveyed an erroneous impression of the facts to which it had reference, were I to do so upon my own unsupported opinion; but I believe I shall be able to shew from indisputable authority, that Mr. Horner and the other eminent men who drew up and supported the Bullion Report of 1810, were in error, as to the facts, however sound and unquestionable were the principles they promulgated. The report in question states,
"That there is at present an excess in the paper circulation of this country, of which the most unequivocal symptom is the very high price of bullion, and next to that the low state of the continental exchanges; that this excess is to be ascribed to the want of a sufficient check and control in the issues of paper from the Bank of England; and originally to the suspension of cash payments, which removed the natural and true control."
Mr. Horner said, in introducing his resolutions, founded on the Bullion Report—
"But it is not alone from the extraordinary rise in the market prices of the precious metals in this country; a rise not to be accounted for on the ground of any correspondent rise in the markets of Europe, that the depreciation of our Currency is demonstrable. The equally extraordinary rise in the prices of the necessaries of life, not as compared with the precious metals, but as compared with the actual circulation, affords a clear and convincing proof of its depreciation. The great and paramount standard of all value, Sir, is corn; and in order to enable the Committee to form an estimate of this standard, I shall beg leave to call the attention of gentlemen to the extravagant rise which has, within the last few years, taken place in the prices of that article."
"Reduce the issues," said Mr. Huskisson, "and lower prices, and restore the exchanges,"—and he proceeded to recommend a reduction of the issues of Bank paper as a remedy for the evils which the Bullion Report had so forcibly pointed out. Now, when I mention the Report of 1810, and when it is recollected by whom that Report was drawn up, the House will no doubt be surprised to hear that for a great portion of the statement which I have just quoted there was no foundation
782
in fact—that there was no ground for stating that the prices of commodities, composing our ordinary export trade, were higher in this country than in any other part of the globe. Had we possessed the power of freely exporting those commodities we might at once have restored the exchanges, and recovered our gold; the alleged excess of our paper currency had comparatively but little to do with the question. What were the commodities alluded to? How is it to be proved that their price was higher here than in any other country? The fact was, that sugar and other colonial produce, and such commodities as we usually exported, were at that period cheaper in this, than in another part of the world. What then, was the cause of the high price of gold at that time, the date of the Bullion Report? Not the excess of our paper currency, but those political events which at once stopped the export of goods to the Continent, and compelled the transmission of gold thither—the circumstance altogether independent of the issue of paper. For several years, but particularly from 1808 to 1814, these circumstances continue to operate, and must, under any condition of our paper currency, have produced similar effects. The correctness of this opinion may be doubted, but it does not originate with me. I can adduce in support of it an authority which merits the fullest confidence of the House —the authority of Mr. Deacon Hume, a gentleman with whose name this House is familiar, and whose opinions on every economical subject are entitled to the greatest weight. That gentleman, writing on this subject, in 1834, used these words:—
"Our money at that time, (the period in question), was wholly paper, unchecked by gold as its test or regulator; it was therefore peculiarly fit to be tested by the prices of commodities in countries where money was subjected to the ordeal of the precious metals. Now, I mean to assert, that from this trial of its value our currency of that day will come out triumphant. It is a positive fact that England was the cheapest country in the world during the time when gold was 25 per cent. and upwards, above the mint price."
And again,
"All exportable articles were, in this country, far cheaper, computed even in Bank notes, than they were in the countries of their proper markets in gold."

783
Referring to the conduct of the Bank, he says,
"I defend the Bank up to the end of the war. Their conduct since has been full of blunders, full of faults; but they understand their duty now. They have had lessons of costly experience, and there is ample reason to be satisfied with present arrangements."
These are the words of Mr. Deacon Hume, and I am glad to be enabled to appeal to an authority, so justly regarded as one of weight and importance. It would be impossible, in fact, to have a higher authority than that of Mr. Hume— a public officer of great judgment and experience, intimately acquainted with the trade and commerce of this country, and who long devoted all the energies of a powerful mind to the subject. How, then, did the Committee of 1810 attempt to prove the existence of an excessive issue, and consequent depreciation of paper. Simply by the statement of a difference between the mint price, and the market price of gold. By this, and this only, was the excess of issue said to be indicated; and accordingly this formed the basis of the Report of the Committee, and was subsequently recognised as that of the Bill of 1819. In that year the right hon. Baronet, adopting the views of the Bullion Report, said, that there had been again an excess of commercial speculation in consequence of the over issues of paper, and recommended, as a check upon the issues, the return to a metallic standard of value, conceiving that a return to cash payments would furnish the counteracting principle, and thus prevent, in future, excessive issues of paper. But still no attempt was made, either in 1810, or in 1819, to account for the difference between the mint and the market price of gold, otherwise than by the assertion, that paper had been issued in excess. Now, I admit, that at the period referred to by the Bullion Report, there was a considerable difference between the mint and the market price of gold, but then I ask the right hon. Baronet whether that alone is to be considered a proof of an over issue of paper? But even admitting that it does afford such proof—that such a difference forms the proper indication, and is the measure of an excessive issue of paper, what similar proof have we had of over issues since]819? And if from 1819 to 1844, the proof previously relied
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upon fails, with what new evidence are we furnished in justification of the present Bill? Up to the period when the war terminated, the variations in our exchanges, the high price of gold, and the high price of one class of exportable commodities, can be clearly accounted for without reference to the doctrine of an excessive issue of paper. When it was stated that prices of commodities were high, those commodities alone were adduced, which we were obliged to import, and pay for in gold. But those commodities were overlooked which were abundant and cheap, and which we were unable to export in order to recover gold and restore the exchanges. Gold was scarce, but paper was not therefore depreciated. But let me, since 1819, be furnished with any data whatever for shewing or estimating the supposed over issue and depreciation of our paper currency. If it be attempted to prove it by assertion merely, I might be content to meet it by a counter-assertion; but I will not rest my argument upon assertion only. I hold in my hand a return of the mint prices of gold bullion from 1827 to 1840. In 1827 it was 3l. 17 s. 6d. per oz. In 1824 it was 3l. 17 s. 10½d. and in 1829, 3l. 17 s. 9d.; and for the remainder of the period included in the return it fluctuated only between the two last mentioned prices; except in 1839, during the withdrawal of the light gold from circulation, when it rose to 3l. 18 s. It is clear then that there has been no material variation in the price of gold. A review of the prices of any of the most important articles of commerce concurrently with the variations in the amount of paper currency, since 1819, will also show, that though prices have fluctuated they have fluctuated from causes connected clearly with the laws of supply and demand. The opinion that the variations in our currency have been such as to affect prices, may be attempted to be supported by an occasional coincidence in these variations, but these are far more generally explicable by the variations in supply and demand, than by a reference to the state of the currency. If then there be really no clear and direct proof of any depreciation of the paper currency since 1819, am I not justified in saying that the measure of the right hon. Baronet is not supported by evidence, and

785
that we are now required to consider it rather upon the authority of the right hon. Baronet, than upon any admitted facts? In adopting the measure of 1819 the House proceeded upon a tangible ground — a test was furnished, though a fallacious one,—for if we look at the mint and the market prices of gold, though we find they varied much in different years, we are yet without evidence to trace this difference to an over issue of paper. But in the present instance there is an absence of anything like an attempt to prove an excessive issue, or any depreciation of paper, according to the rule laid down in 1810 and in 1819. And I believe I may safely defy any one to shew that an over issue of convertible paper has ever alone been the cause of a high price of commodities, or that adverse state of our foreign exchanges which is so frequently and so gratuitously attributed to it. Considering the necessity for some such evidence in order to support the theory upon which the present plan rests, I was not surprised to find that a mind so powerful and so profoundly acquainted with the subject as that of Mr. Jones Loyd, seeing the want of some test of the alleged depreciation, had, in his evidence before the Committee on banks of issue in 1840, endeavoured to lay down a new rule by which the depreciation on the excessive issues of paper might be ascertained. Mr. Loyd's rule is this: "Wherever I find that the aggregate circulation of the country has not conformed to the fluctuations of the bullion, I then infer that the aggregate circulation has deviated in its value from the metallic circulation, to the extent indicated by the deviation in the amount." This is Mr. Jones Loyd's rule for ascertaining the supposed depreciation. Its precise terms render it worthy of a careful examination; I will, therefore, presently call the attention of the House to its application. But first, in reference to what has been asserted as to the influence of an over issue of paper currency upon prices, I wish to repeat, that I have nowhere met with any proof of that assertion; I have never seen, although I have diligently searched for something of the kind, any attempt to bring together in the relation of cause and effect, the over issue of convertible paper, and a high price of commodities. Neither the evidence before the Bullion Committee, nor
786
that taken before the Committee on banks of issue, contain any statement of facts in proof of this assertion, nor do I believe that any reasonable evidence in support of it is to be found in any of the various publications which have appeared on the subject; certainly not in the valuable work of Mr. Tooke, (the History of Prices,) a careful perusal of which leads me to a very different conclusion. On the contrary, I have noticed that some of the ablest expositors of the new rule have, when pressed, shrunk from adducing facts in support of their views. I will endeavour to show to the House that the assumed influence of a convertible paper currency upon prices, is not only unsupported by facts, but it is directly negatived by them,—that when there have been great variations in the circulation, there have been no corresponding variations in prices; prices may have varied considerably, but they have varied without the slightest apparent connection with the state of the paper circulation. I cannot but think that those who bring forward and support a plan which recognises such an action of the currency as now established by law, should make some attempt to prove it correct, and I call upon those who maintain this to adduce facts in proof of the assertion, that an increase of Bank notes in circulation convertible at will do produce the alleged effect upon the prices of commodities. And yet, what is the evil that those who bring forward the present plan, propose to guard against? An excessive issue of paper, is the reply. And why is this assumed excess of paper an evil? Again the reply is, because it enhances the prices of commodities, and turns the exchanges against us. But I shall endeavour to shew that a convertible paper currency has not that influence upon prices which has been attributed to it. For this purpose I would call the attention of the House to a statement which I hold in my hand of the aggregate circulation of the Bank of England and the country banks of England and Wales, together with the amount of bullion in the Bank—the rate of discount, and the prices of fifteen of the principle articles of commerce during the ten years from 1834 to 1843. This statement is founded upon a table published in a pamphlet by Mr. Hubbard, but is considerably enlarged. I will now read it to the House:—

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Date.

Circulation of the Bank of England.

Circulation of Country Banks in England and Wales.

Total Bank of England and Country Circulation.

Bullion in the Bank.

Rate of Discount.

Of 15 Articles.

Excess of Notes over Bullion.

Rose in price.

Fell in price.

£

£

£

£

Millions.

1834, March 1st.

18,930,000

10,248,000

29,178,000

9,104,000

2¾

—

—

1835, March 1st.

18,390,000

10,361,000

28,751,000

6,274,000

3¾

7

Cotton.

7

Wool

20.

Silk

Sugar

22.4

1836, March 1st.

18,195,000

10,644,000

28,839,000

7,918,000

3¼

11

Sugar

3

—

20.9

Cotton

Silk

Wool

1837, March 1st.

18,165,000

10,748,000

28,913,000

4,077,000

5

5

Silk

9

Wool

24.8

Cotton

Sugar

1838, March 1st.

18,975,000

10,938,000

29,913,000

10,471,000

2¾

4

Sugar

11

Cotton

19.4

Wool

Silk

1839, Sept. 1st.

17,896,000

11,012,000

28,908,000

2,684,000

6

8

Cotton

5

Silk

26.2

Sugar

Wool

1840, June 1st.

16,703,000

10,521,000

27,224,000

4,571,000

4¾

5

Sugar

9

Cotton

22.6

Silk

Wool

1840, Dec. 1st.

16,118,000

9,749,000

25,867,000

3,642,000

5¾

7

Sugar

6

Silk

22.2

Wool

1841, Dec. 1st.

16,458,000

8,936,000

25,394,000

4,873,000

5

3

—

12

Silk

20.5

Wool

Sugar

1842, Dec. 1st.

18,822,000

8,087,000

26,909,000

10,603,000

2½

2

Silk

13

Cotton

16.3

Wool

Sugar

1843, June 1st.

18,965,000

7,367,000

26,332,000

11,566,000

2¼

1

Sugar

14

Cotton

14.7

Wool

Silk

Let this table be examined—let the fluctuations in the circulation be compared with the variations in the prices of commodities, and it will be utterly out of the power of any one to shew any coincidence or dependence the one upon the other. If tables of this kind fail to satisfy hon. Members, who think that such weighty consequences are to be attributed to every change in the amount of the paper currency, I hope they will devise some more intelligible mode of ascertaining the truth and by further research, shew me some foundation for the principle so broadly laid down, that the prices of commodities are affected by the variations in our paper circulation, and that the effect of these variations has been such as to justify this measure. If they cannot do this, I submit the right hon. Baronet's present scheme is not sustained by evidence, and that it does not rest upon any adequate foundation derived from experience and proved by facts. I will now return to the rule laid down by Mr. Jones Loyd for ascertaining the depreciation of the paper currency. The rule itself is expressed apparently with all the clearness and force which is characteristic of Mr. Loyd's writings, yet when applied to practice, it is scarcely possible to believe that he foresaw its results. I will take the years 1834 and
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1835, in order to shew its operation. I take those years because they were remarkably free from undue speculation, and also from any violent oscillation in the currency. Mr. Tooke, in his work on prices, describes the trade of the country as being in a healthy and progressively prosperous state, during the whole of the years 1834 and 1835. It also appears from the returns, that during the same period, the price of wheat fell, very gradually, and with but slight variations, from 49 s. in January 1834, to 36 s. in December 1835. These circumstances are all favourable to the trial of Mr. Loyd's rule, as subjecting it to the mildest test of which an appeal to actual circumstances will admit. On examining the returns of the state of the paper circulation during the years I have mentioned, I find no evidence of any fluctuation in its amount sufficient to indicate to any accurate observer the existence of anything unsound or unsafe in the currency; nor do I find that to trace any subsequent evil to fluctuations which occurred within this period, any attempt was made. But when I apply Mr. Loyd's rule, I find the variations it indicates in the value of the paper circulation to be very considerable, so considerable as to cast much doubt upon, if not utterly to destroy the value of the

789
rule for any useful purpose. It shews a great depreciation, greater even than has ever, at any period, occurred in this country, when in fact, there was no depreciation whatever. But with the permission of the House, I will state, as shortly as I can, the facts as they occurred within the period I have mentioned. In order to avoid the variations caused by the payment of the dividends, I will take the circulation in each quarter immediately previous to its expansion from that cause. On the 7th of January 1834, the circulation of the Bank of England was 17,422,000 l.; that of the country banks in England and Wales (on the 4th of January) was 7,731,000 l., making the aggregate circulation 25,153,000 l. The bullion then stood at 10,142,000 l. The value of the paper therefore at that period was indicated under Mr. Loyd's rule, by a relation of bullion to paper, nearly equivalent to the relation of ten to twenty-five. On the 8th of April, 1834, the Bank of England circulation was 18,153,000 l.; that of the country banks on the 5th April 8,503,000 l. —total 26,656,000 l. The bullion in the Bank amounted to 8,631,000 l. Now had the aggregate circulation been reduced in conformity with the fall in the bullion, so as to preserve the same relative proportion to it, and consequently the same value according to the rule, as in January, it would have been reduced to about 21,400,000 l. The difference (5,200,000 l.) was an excess, which under Mr. Loyd's rule, would shew a variation in the value of the circulation of about 24 per cent. On the 8th of July 1834, the Bank of England circulation was 18,661,000 l. that of the country banks, 7,873,000 l. total 26,534,000 l., bullion 8,811,000 l. To have preserved the relative proportion of January it should not have exceeded 21,800,000 l.; the deviation being about 4,700,000 l., or about 21 per cent. The variations increase considerably at the subsequent quarterly periods; but of the remaining six included within the period I have taken, it may be sufficient to trouble the House with two, which do not materially differ in their results from the rest. On the 7th of April 1835, the Bank of England circulation was 18,092,000 l.; that of the country banks, 8,855,000 l.; aggregate 26,947,000 l. The bullion was 6,205,000 l. Had the circulation on this conformed to the fluctuations in the bullion, it would have been about 15,400,000 l.
790
The excess (11,500,000 l.), should have been accompanied by a variation in the value of the circulation (as compared with that of January 1834) of about 74 per cent. Again, on the 6th of October 1835, the Bank of England circulation was 17,111,000 l., that of the country banks, 9,097,000 l. making the aggregate, 26,208,000 l. The bullion amounted to 6,177,000 l. By the standard of January 1834, the aggregate circulation should have been about 15,100,000 l., the excess indicating a variation in its value of about 73 per cent. I am aware it may be objected that these results afford in themselves sufficient evidence that the terms in which Mr. Loyd gave expression to his rule did not correctly express his meaning; but that in using the term bullion, he probably meant to signify the basis of the circulation as represented by bullion and securities which are convertible into bullion at need. But even allowing this objection, and modifying the terms of Mr. Loyd's rule by importing into it a direct reference to the plan now proposed, it is obvious that the results of applying the rule, even so modified, are quite inconsistent with the facts. The calculation I have already given of the variation in April 1835, instead of exhibiting a variation of 74 per cent. would still shew one of 28 per cent. And I would ask—is it possible? can it be supposed, for one moment, that any such variation in the value of our paper currency did really take place? The great weight generally attached to the opinions of Mr. Loyd upon this subject must be my apology for so long detaining the House upon these details—but I think it must be admitted that this rule affords no additional evidence in support of the views of the right hon. Baronet. From the constant reference made to the value of a metallic circulation, and the propriety of making our paper circulation conform to its standard as nearly as possible, the right hon. Baronet and those who think with him, would appear to suppose, that with a circulation purely metallic, we should be safe from any depreciation of our currency, as we should no longer be liable to the fluctuations now to be guarded against. But how is that opinion borne out by the evidence of Mr. Jones Loyd himself? I find that on the 17th of July 1840, in answer to the question No. 2675, he says—
"It is perfectly possible that credit, and the

791
consequences which sometimes result from credit, viz. over-banking in all its forms, and the over-issue of Bills of Exchange, which is one important form of over-banking, may arise with a purely metallic currency."
But the plan of the right hon. Baronet has for its object the making our paper circulation fluctuate as nearly as possible in the same manner as a metallic circulation would fluctuate. This, supposing it could be accomplished, would still leave the causes of speculation and overtrading described by Mr. Loyd untouched, and would afford no security against commercial crises. A purely metallic currency we cannot have, and if we could, I for one should not desire it. Let it be remembered that a mixed form of currency has considerable advantages. With it, a portion of the ordinary circulating medium may be withdrawn for a time, and sent to foreign countries to meet a temporary demand for gold, without pressing unduly on the money market. Mr. Ricardo, in reference to this point, observed:—
"Whenever merchants have a want of confidence in each other, which disinclines them to deal on credit, or to accept in payment each other's cheques, notes, or bills, more money is in demand; and the advantage of a paper circulation, when established on correct principles is, that this additional quantity can be presently supplied without occasioning any variation in the value of the whole currency, either as compared with bullion or with any other commodity; whereas, with a system of metallic currency, this additional quantity cannot be so readily supplied."
But the plan of the right hon. Baronet would tend to make money more scarce at such a period, and to prevent any such addition, however urgent the necessity for it. So that whilst it will afford no additional safeguard whatever against over-speculation, revulsions, and commercial distress, it will take away the only means by which such calamities are mitigated, if not prevented. Reference has been made to periods at which great drains of bullion have taken place, and when the Bank has failed to act with that promptitude and decision which was in her power, and which might have the effect of stopping such drains at an earlier stage; and it is said that it is necessary to surround the principle of convertibility with fresh safeguards in order to prevent a recurrence of these events. But here I have to repeat that no proof whatever has been given that the evils alluded to sprang from over-issues of
792
paper. As to the mode in which the Bank has thought fit to act on such occasions, I am not prepared to say that the Bank of England has never been guilty of indiscretion, but this I do say, that no man who considers the whole tenor of its conduct, especially in its relation to the Government of this country, and frequently under the must trying circumstances, can doubt that, upon the whole, that great establishment has discharged its duty to the public with integrity and ability. The restrictions, however, now proposed to be placed upon the Bank, must entirely fail of their object, unless the evils to be prevented have arisen from the conduct of the Bank, and this has clearly not been proved. The Bank has had lessons of costly experience, and the result will necessarily produce an improvement in her mode of action; but the present interference is intended to control causes over which we have no control, and which, if even we had the power, it may be doubted whether it would be wise to exercise it. In support of the view I am taking, I will refer to France, where there is a circulation almost wholly metallic. That country has been subjected to overtrading and its consequences, commercial pressure and distress, to an extent, within the last ten years, quite as great as we have suffered in this country. It was only in 1840 that the charter of the Bank of France was renewed, and in the course of the discussion which preceded its renewal, M. Thiers remarked that the Bank of France was the most solid and best conducted establishment that ever existed. Yet, notwithstanding that in France they have, as nearly as possible, a metallic currency, and no notes under 20 l., and the bullion in the coffers of the Bank usually exceeds the amount of notes out, the crisis of 1837 and that of 1839, were felt there as well as in this country, and in the latter case with still greater severity, as is apparent from the increase in the number of bankruptcies in the two countries: —

England.

Paris.

1835

959

318

1836

890

405

1837

1462

541

1838

956

437

1839

930

1003

It is clear, therefore, that it is not to the controlling power of a bank of issue, or to any other artificial restriction, that

793
we must look for security against commercial convulsions,—but to the progressive wisdom of the commercial world, gathered as it must be from its own eventful experience. It is to this, and to this only, that we can look for commercial safety in a country possessing the spirit of enterprise, the energy and the widely-extended commerce of England. Independently of the reference to the drains of bullion which have taken place in this country, allusion has been made to the American system of banking, and its attendant evils, as affording abundant evidence of the danger of a free competition in the issue of Bank paper. But it is impossible to establish any analogy between the banking system of America and that of this country. Not only were notes issued there for very small amounts, but in some cases the State Legislatures had interfered, and suspended cash payments. The jobbing and speculation of banks, was shared and fostered by the jobbing and speculation of State Legislatures. And this was so far sanctioned by public opinion, that it was a general practice to resist the conversion of paper, and to expose to public odium the man who attempted it. But how can a system such as this be compared to that in operation in this country? We have no notes under 5l., and those we have, since 1819, are convertible; but in America they were low enough in amount to enter into the smallest transactions; dollar and half-dollar notes were in circulation, and took the place of coin in the purchase of every description of article. A large portion of our paper, moreover, is of a purely banking character, and frequently returns to the banker without passing into general circulation at all. It is the mere vehicle of credit. If we had notes for such sums as 5s. we might reasonably apprehend danger to its convertibility. [Sir R. Peel: Convertibility, then, is not a security against excess.] The right hon. Gentleman says convertibility is not a security against excess—but I repeat that in America the circumstances were peculiar, and were not such as have existed, or are likely to exist, in this country. Both the banks and the public were adverse to payment in specie. They were mad with speculation. They overlooked alike morality and honesty; and actually by a common consent, for purely trading and speculative ends, suspended cash payments. There was a widely circulated and
794
small paper currency taking the place of specie, and a gambling connection between the State Legislatures and the banks. Mr. Gallatin fully confirms this statement, in proof of which I may quote from the Appendix to his work a passage from the Report of Delegates appointed to represent the banks of the city of New York in the General Bank Convention in November, 1837:—
"It is but too well known, that a general suspension of specie payments by the banks is not confined to them alone, but extends instantaneously to the whole community. As they had substituted their paper for the metallic currency, and as even the portion of specie which still circulated, disappears at once, when the general bank suspension takes place, the depreciated bank paper currency alone remains, both as the only medium of payment, and, by a necessary consequence, as the practical standard of value. Thus, by a strange anomaly, whilst the courts of law can consider nothing but gold or silver as the legal payment of debts, every individual, without exception, who is not compelled by process of law, and who does not resort to the tribunals for redress, pays all his debts with, and receives nothing in payment but an irredeemable, depreciated currency. A general usage, openly at war with law, usurps its place; and the few cases where the laws are enforced, are only exceptions to the universal practice. Instead of the permanent and uniform standard of value provided by the constitution, and by which all contracts are intended to be regulated, we have at once fifty different and fluctuating standards, agreeing only in one respect, that of impairing the sanctity of contracts. Even restrictive and general laws are openly and daily violated with impunity, by everybody, in circulating notes forbidden by law. It is impossible that such a state of things should not gradually demoralise the whole community; that a general relaxation in the punctual and honourable fulfilment of obligations and contracts should not take place; that that which operates as a general relief law, should not be attended with the same baneful effects which have always attended positive laws of the same character; and that, if the present illegal system be much longer continued, the commercial credit and prosperity of the country, and more particularly of this city, should not be deeply and permanently injured."
At a subsequent period the small paper currency was abolished, the banks resumed payment in specie, and under a system improved simply by requiring and enforcing convertibility by law the currency was restored. In fact they had only to introduce and enforce the principle of our Bill of 1819, and their currency

795
was brought back to its proper standard. And here I may quote the words of Mr. Gallatin; he says:—
"It cannot be denied that the banking system of the state of New York, since it has been Subject to these regulations, has proved superior to most, and inferior to none, of the plans adopted in the other states. The banks, though they did suspend, were the first to resume and have ever since maintained specie payments. Since the year 1830, only two banks, subject to the regulations, have been dissolved. One of these, having a capital of 100,000 dollars, was, for some irregularity, dissolved by act of the Legislature. It paid all its debts, and the whole of its capital to the stockholders. The other (the City Bank of Buffalo) was dissolved by process of law; and its entire capital of 400,000 dollars is sunk. During the same period of ten years, and under a regimen, till lately much less severe, not less than nine banks in Boston, with a capital of 3,600,000 dollars have failed, or been dissolved; but in five of those cases, the creditors suffered no ultimate loss.
"The provisions which define and limit the legitimate operations of the banks, as well as those which ensure the actual payment of the capital, or are intended to preserve it entire, have proved efficient, and do not seem to require any alteration. It has been often suggested, and instances have been adduced to prove, that provisions for insuring the actual payment of capital might be evaded. The instances adduced have occurred when the provisions were inadequate. None has taken place amongst the New York banks, subject to the present system."
In my endeavours to follow the right hon. Baronet in his observations upon the mismanagement of the issues of the country banks I have found some difficulty, which I have reason to believe has arisen from the right hon. Gentleman having used averages in stating the amounts of the circulation and the bullion instead of the actual items furnished by the returns before us. However, whatever may be the fairness or the weight of the charges brought forward against the country banks, I am of opinion that under the operation of the proposed plan, the limit to be put upon the amount of promissory notes of banks of issue will tend rather to increase than to diminish the amount of paper credit in use—that bills of exchange for small amounts will take the place of such promissory notes, and that thus we shall only exchange the present for a less secure form of paper currency. It is charged against the country bankers, that they disregard the
796
state of the foreign exchanges, and thus frequently extend their issues at a time when they should restrict them. But it must not be overlooked that the periodical expansions of the country circulation are not entirely under the control of the country bankers; and it is not to be denied that they generally have regard to the state of the money market, and govern their issues accordingly. It is true that their issues are sometimes larger than at others; but I am not prepared to admit that this is necessarily an evil, or that it has any tendency to foster injurious speculation, or to raise prices. The right hon. Baronet has stated that they pay no attention to the state of the exchanges; but if they govern themselves by the state of the money market, which is itself governed by the exchanges, it cannot be said that they are entirely regardless of the state of the exchanges. Some remarkable evidence, bearing upon this part of the subject, was given before the Committee of 1841, and perhaps I might fairly claim the vote of the right hon. Gentleman the Secretary of State for the Home Department, on the score of the opinions he clearly holds, as shewn by the course of his examination of the witnesses on that occasion. The right hon. Baronet took a prominent part in the examination of some of the country bankers, and it was obvious that he was at that time decidedly adverse to any reduction of the circulation of the country Banks. I will read to the House a portion of the examination of Mr. Rodwell on the 16th March, 1841:—
"863. SIR JAMES GRAHAM.—Small bills of exchange, the circulation in your neighbourhood being full, are almost unknown at present?—They are.
"864. If a limitation were put upon the circulation of local paper payable to bearer, have you a strong opinion that any legislative power whatever could prevent the circulation of credit in some other shape, such as small bills of exchange?—I think that no legislative interference could, by any possibility, prevent it in a much more objectionable form than it is now.
"865. Therefore it does not follow that if local credit ceases to circulate to its present extent, further capital must be introduced into the neighbourhood; it would be quite possible that credit in another shape should circulate, and fill up the vacuum caused by the withdrawal of the notes?—Undoubtedly."
Can anything be more abvious than the interference to be drawn from such

797
questions as these? Is it possible to doubt that the right hon. Gentleman saw most clearly the evil consequences which every practical man, acquainted with the subject, anticipates from that portion of the present plan which restricts within a fixed amount the issues of the country bankers? But this is not the only instance. I will quote one or two other examples of the difference of opinion upon this point between the right hon. Gentleman and the right hon. Baronet the First Lord of the Treasury. I again quote from the evidence of Mr. Rodwell:—
"888. SIR JAMES GRAHAM:—You have staled that a vacuum being created, forcibly, by a diminution or withdrawal of local notes payable to bearer, the country bankers would not be the issuers of the small bills of exchange, but that their customers, from credits ceasing to circulate, would become the drawers and acceptors of those bills; would not the effect of that be, that the issuers of credit paper would be a much larger body than the present issuers, and not so responsible a body? —Certainly, it would be a transaction between man and man.
"889. So far then from diminishing any evil arising from the present system of credit, it would greatly aggravate that evil?—Yes."
These interrogatories shew, beyond a doubt, what were the opinions of the right hon. Gentleman, in reference to a very important part of the right hon. Baronet's plan. I find also, in the same evidence, an opinion of Mr. Gilbart upon the same point. He says,
"I think the effect of that forced reduction would be, that you would have a bill circulation instead of a note circulation; for supposing the trade of the country to remain the same, the people would require some circulation or other; and it would be the interest of the bankers to supply a bill circulation, instead of a note circulation, if they were restricted by authority from increasing their notes beyond a certain amount."
So far as my acquaintance with the subject extends, and from the result of the communications I have had with country bankers, I entirely concur in those opinions. I have not the slightest hesitation in declaring, that in my opinion, if the notes of the country banks are limited to the amount proposed, the result will be, to introduce as a substitute for the bank notes suppressed, a currency of small bills of exchange. The ordinary operations of commerce, in which these notes are now used, will still be carried on— and if the usual medium of exchange is
798
withdrawn—if bankers are not permitted to afford the required facilities in their present shape—some other form of accommodation will inevitably take its place. At present, the paper circulation, consisting of the notes of established and responsible banks, is under some control, and is based upon the credit and property of the issuer, but the paper credit, which will, under the system proposed, be forced into existence, will be of a less trustworthy character, without the name and credit of the banker, and beyond the control of the State. The right hon. Baronet, at the head of the Government, has laid down some very broad principles, and has anticipated the future. Though he does not at present touch the paper circulation of Scotland, or of Ireland, he has pointed very significantly to what he intends hereafter. It is obvious that the right hon. Gentleman, in his view of future legislation, anticipates the establishment of a single bank of issue. But here, again, I may quote against him the opinions of his right hon. Colleague, the Secretary of State for the Home Department. The passage I quote is from the examination of Mr. Rodwell by the right hon. Baronet.
"809. If you could contemplate the difficulties and the detail [of establishing a single bank of issue] overcome, and such a measure forced by legislative enactment, would it be a great wrench to the system on which the whole of the affairs of country bankers are conducted?—It would be an entire sacrifice of the present system.
"810. Do you think it would be a great shock to credit?—I think its proposal would be a great shock to credit, and I think the period of transition, from one system to another would be a period of inappreciable difficulty and danger in all monetary transactions.
"811. Affecting both bankers and their customers generally?—Affecting bankers and their customers; it would be attended with as great distress and difficulty in the unsettling of all arrangements and contracts as any measure that the Legislature could suggest.
" 812 You give that as the result of your experience, coupled with reflection upon that plan?—I do."
And again, immediately afterwards:—
"825. In times of political excitement, the' credit of the country banker remaining unshaken, the local circulation is not affected?— No.
"826 It remains perfectly undisturbed?— Yes.
"827. You have great apprehension, that

799
if there were only one bank of issue, and that in close connexion with the Government, the circulation would be very much disturbed?— I am sure it would; assuming that this Government paper is, as I assume it certainly would be, convertible into gold, there would be a great disturbance of it, to the extent of political influence and political partizanship."
It is impossible, after reading this examination, to doubt what the opinions of the right hon. Gentleman are upon this part of the scheme—or that they are entirely at variance with those of the right hon. Baronet at the head of the Government. In an able speech of the hon. Member for Shrewsbury, he told us that it was the duty, and the proud distinction of a great statesman, to triumph over all difficulties in the accomplishment of great objects, to suffer nothing to stand between him and the attainment of objects which a course of duty pointed out; and I think I may here fairly congratulate the right hon. Gentleman upon having overcome one of the greatest of difficulties—one so often found utterly insurmountable—in having surmounted even all his own cherished opinions upon commerce and banking, and upon his resignation, without reserve, to the judgment and experience of his right hon. Colleague, the First Lord of the Treasury. I will now, before drawing my observations to a close, say a few words on what I conceive will be the practical operation of this measure. For this purpose it will be necessary to refer to some of its details. And here I would beg leave again to repeat, that it is not to the principle upon which the plan rests—to the principle of immediate convertibility— that I object, but to this particular application of it. In opposing the present plan, I am happy to feel that I have the concurrence of a very weighty authority—that of Mr. Tooke, than whom no man would more rigidly adhere to the principle of a metallic currency, as established by the immediate convertibility of paper into specie, under the Act of 1819. My objection is, shortly, to any further interference, of the nature and character of that proposed. I think no case has been made out to justify it. No tangible proof, whatever, has been adduced, of an excess of issues, or of a depreciation of the paper circulation; nor has any injurious result been traced to the operation of the present system which can be shewn to be within the reach of legislation or which may not
800
be more safely left to be corrected by the results of increased intelligence and experience. At the same time I cannot doubt, that while the proposed restrictions are unnecessary, they will be productive of evils greater than those sought to be remedied—that in the attempt to secure ourselves against occasions of commercial pressure, we shall only aggravate their evils when they do, as they will, occur. My hon. Friend (Mr. C. Wood) who has spoken in favour of the measure, must allow me to say, that he has fallen I think into some errors in his anticipations of what may be its practical effects. He has called the attention of the House to the crisis of 1839, and has referred to the published accounts of the Bank for the purpose of shewing that the Bank has the power, even while diminishing her circulation, of greatly increasing her accommodation to the public. But there cannot be anything more fallacious than such an inference from the accounts referred to by my hon. Friend. It is true that the amount of "bills discounted" was increased between April and December of that year from 3,400,000 l. to 8,500,000 l.—but this is no proof, as my hon. Friend has stated it, of an increase to that amount of the actual accommodation to the public. The fact was, that the apparent increase arose chiefly from one of the ordinary measures of the Bank at such periods, that of refusing advances upon any other security than Bills of Exchange. The result, in that instance, was the transfer of about 2,000,000 l., from the advances on other private securities to those made on Bills of Exchange. Concurrently with this, there happened to be a withdrawal of about 4,400,000 l.. from public securities, and the result was, that the Bank was enabled in that instance to increase the advances on Bills of Exchange, at the same time that she also reduced her circulation. It was not, as supposed by my hon. Friend, a development of any extraordinary resources of the Bank, but merely the result of a favourable concurrence of circumstances. If it be supposed, that under the plan now proposed, the Bank will be enabled, as she has hitherto done, to use any such discretion in meeting a sudden commercial pressure, it is a great error. By adopting the present plan, we may obtain a fancied additional security for the maintenance of our currency on a par with the value of gold—we may make an effort to check

801
speculation—over which we have no control—but whenever serious commercial pressure shall occur, and the proposed system is enforced, the reaction upon public credit will be violent and unmitigated—and whoever has been accustomed to watch the proceedings of the Bank of England, and of the London bankers, at such times, will readily anticipate that what we saw in 1825 or 1839, will be trifling in comparison with what may then take place. I am aware that it is extremely difficult in discussion to deal with details involving a constant reference to figures, but the experience we have derived from former occasions of difficulty, enables us to state with tolerable clearness the course through which the Bank, on the occurrence of a drain of bullion, must be

Circulation at a Minimum.

Bullion.

Securities.

Deposits.

Circulation.

Price of Wheat.

Bank Rate of Interest, 3 per Cent.

1833.

£.

£.

£.

£.

s.

d.

Jan. 1st

10,026,000

21,947,000

12,725,000

17,076.000

52

6

March 19th

10,160,000

21,956,000

11,230,000

18,664,000

52

10

June 11th

11,116,000

21,318,000

11,707,000

18,494,000

52

9

Sept. 24th

10,821,000

21,755,000

11,826,000

18,837,000

53

0

Dec. 3rd

9,961,000

22,467,000

12,414,000

17,812,000

49

8

1834.

March 11th

8,907,000

24,623,000

12,576,000

18,580,000

47

8

June 10th

8,879,000

26,317,000

14,426,000

18,478,000

47

10

21 st. Aug.—Bank Rate of Interest 3½ per Cent.

Sept. 23rd.

6,986,000

26,241,000

12,516,000

18,186,000

43

7

Dec. 2nd.

6,860,000

24,115,000

10,913,000

17,691,000

41

11

4th. Dec—Bank Rate of Interest 4 per Cent.

1835.

March 24th

6,327,000

23,715,000

9,562,000

17,698,000

40

0

June 9th

6,416,000

24,450,000

10,431,000

17,792,000

40

1

5th. August.—Bank Rate of Interest 3½ per Cent.

Sept. 22nd

6,297,000

27,123,000

13,419,000

17,318,000

37

7

Dec. 15th

7,588,000

31,643,000

20,008,000

16,637,000

36

6

It is obvious, therefore, that in reducing the circulation, the Bank must throw the pressure upon deposits; and this would, as the pressure proceeded, be gradually extended to the deposits of all the banks in the country, wherever the pressure was felt. The Bank must not only diminish her advances, but would be forced to realise securities in order to make
forced by a rigid adherence to the plan of the right hon. Baronet. It will compel an immediate pressure upon securities, as the only means of reducing the circulation. Now the pressure upon securities must, as soon as it affects the circulation in the hands of the public, produce a corresponding pressure upon deposits. This is strikingly illustrated throughout the whole course of the Bank's operations during the last twelve years—but particularly by the operations of 1833, 1834, and 1835. I have selected these years as free from many causes of variation, which more or less affected the currency in other years; and I find the following changes to have taken place simultaneously at the quarterly periods, when the Bank circulation is at its minimum:—
good her reserve against the deposits. Take the drain of 1839 as an instance of this. Between the 1st of January and the 3rd of September in that year, bullion was reduced by a continuous drain from 9,048,000 l. to 2,406,000 l. — a fall of 6,642,000 l. in eight months. The Bank, in the interim, adopted the only remedy in her power, though not to the extent to

803
which she might have applied it—and raised the rate of interest gradually from 3½ to 5½ per cent. producing a considerable pressure upon the money-market. Yet the circulation was not at all diminished. On the 1st of January it was 17,529,000 l. and on the 3rd of September 17,896,000 l. Now, I will assume that the Bank had, from the 1st of January 1839, acted strictly under the proposed plan; and by raising her rate of interest had reduced her securities (as the only medium open to her for acting on the circulation) exactly as the bullion fell, and that, from the first, she threw one-fourth of the weight of the drain upon the actual circulation, and gradually reduced it to that extent, and that only two-thirds of the amount withdrawn from securities was made good out of deposits. The highest amount reached by the private deposits during the period I have taken was 6,171,000 l. and we may estimate the available reserve at 2,000,000 l. Applying the restrictions of the proposed plan, it follows that the Bank must, by the 26th of March 1839, have so raised her rate of interest as to have withdrawn from the actual circulation about 800,000 l. — to have reduced her securities by 3,500,000 l. and to have brought her private deposit down to little more than a million. What the rise in the rate of interest must have been, which, in three short months, would have produced such an effect, I will leave to be estimated by hon. Members, who are acquainted with the operations of the English money-market. And let it not be forgotten that at this time a demand for nearly 4,000,000 l. of bullion would still have been unsatisfied. And let me ask the right hon. Baroner whether under such circumstances he will leave the banking department any other course than to close its doors, and leave the remainder of the struggle to be decided between individual money-lenders and the mercantile world? Such will be the price at which we must purchase the advantages offered by the scheme of the right hon. Baronet. Am I not then justified in asking for some evidence of the necessity for such a measure, some proof of the advantages, if there be any, to be expected from its adoption? And let it be remembered also, from what the great drains, which have been so frequently alluded to, mainly had their origin. Have they not usually been at least aided and aggravated by the necessity
804
of paying in gold for large and sudden imports of foreign corn? The right hon. Baronet has distinguished himself as an advocate and supporter of the Corn Laws. But if we are to have so strict—so rigid a system of circulation—if we are not to have those occasional expansions of the circulating medium which the right hon. Baronet thinks are so exclusively connected with excessive trading—if every such occasion is to bring with it a sudden and ruinous revulsion; with what justice can he maintain laws which are generally admitted to be one great cause of the disturbance of the currency of this country. If that which is so fertile a cause in creating and exacerbating commercial distress be retained in conjunction with the present scheme, I can only hope that it will serve to strengthen the opposition to those laws, and render it impossible that they can be maintained. It is for the country Gentlemen opposite to consider this, and ask themselves whether they can afford to weaken still further the ground on which those laws are upheld. If the Government is determined to have this new plan of banking—and to place the currency under these new restrictions, why not say at once, "We wish to put the banking system of the country upon a sounder footing. There is one great cause of disturbance, and we will begin by removing that." Another feature of the right hon. Baronet's scheme, and to which I have already had occasion to allude, is its tendency to the establishment of a single Bank of issue, to which I conceive there are insuperable objections. Anything that tends to connect the state with banking has always been productive of disastrous consequences. If we permit banking to become mixed up with party politics, we shall have all the evils which resulted from such a course in America—evils which we have hitherto escaped altogether. No man now thinks of asking whether a bank director is a Whig or Tory; but this will cease to be so if the right hon. Baronet should succeed in his project of a single bank of issue. Any such bank must be ruled by the Government of the day, seeing how extensive would be its influence and operations, and that would inevitably tend to the introduction of party politics in its management, a state of things which could not fail to be highly injurious to the commercial interests of the country. I wish, therefore, to be un-

805
derstood emphatically to protest beforehand against the establishment of a single bank of issue. The right hon. Baronet appears to think that I am chargeable with inconsistency in professing my adherence to the principle of the Act of 1819, and at the same time objecting to his plan for more strictly enforcing that principle. But I cannot think that I am liable to any such charge. I have distinctly avowed and repeated my concurrence in the opinions of those who deem immediate convertibility essential to the preservation of a paper currency; but I see no ground for the additional safeguards to convertibility now proposed. I have already supported my views by reference to authorities of acknowledged eminence; but in favour of the combination of self-control with convertibility, I cannot refer to a higher authority than the right hon. Baronet himself. In 1819 he said, "That the excess of commercial speculations which led to such evils was the consequence of an over-issue of paper currency, was a fact not to be disputed, A check upon that issue was the only cure that could be applied; and it must be applied by the establishment of a metallic standard of value." And again, in the course of his speech on introducing the present measure, "If gold coin be in any country the common medium of exchange; or if promissory notes, which perform in part the functions of gold coin, are at all limes, and under all circumstances, of equal value with gold, and are instantly convertible into gold; there are causes in operation, which, without any interference on our part, will confine within known and just limits, the extent to which gold can be exported." Relying then upon the authority of the right hon. Baronet himself, I believe the proposed measure to be unnecessary. I believe I am also supported in that opinion by a large number of the London bankers, as, if report speak truly, no fewer than thirty of them have addressed the right hon. Baronet, pointing out objections to an essential portion of his measure. I believe I am right also in stating that the country bankers look upon the plan with great apprehension, and have very strong objections to that portion of it immediately applicable to themselves, as well as to the general principles propounded by the Government as to the course of future legislation. Upon all these grounds which I have
806
endeavoured to state to the House as succinctly as the nature of the subject would admit—upon the broad ground that no case has been established which can justify the proposed interference—for that the issues of the Bank of England and the country banks have been the causes of these calamitous periods of overtrading and commercial convulsion is unsupported by any clear and decisive evidence — and finally, that the proposed plan must, in its operation, produce evils of its own, greater even than those it is proposed to prevent—I object to the further progress of this Bill. I believe that the derangements in our monetary and commercial system, which have been so frequently alluded to as furnishing occasion for this measure, have arisen from many causes, and are not confined to one, the chief of which are beyond the reach of legislation,—and that it is not therefore by operating upon one of these causes, if even it were proved to be one, that we can hope to rectify the evils in question. These are the grounds upon which I have ventured to bring forward the present Motion—and I shall now, therefore, beg leave to conclude by moving, in the words of the notice I have given, "That no sufficient evidence has been laid before this House to justify the proposed interference with banks of issue in the management of their circulation."
Mr. Hastieseconded the Amendment. He had never heard in that House a speech more full of truth and correct observation as to what had occurred, and what must occur, if this measure were carried. He entirely concurred in the principle that all promissory notes payable to the bearer ought to be instantly convertible, and with that compulsion upon all banks, he thought there was no necessity for interference to prevent over issue. If this plan were to come suddenly into operation, after a period of increased prices, the ruin which it would bring upon the whole country would be a thousand times greater than in 1825 or 1839. Let it then be supposed that there were 14,000,000 l. in securities, and 8,000,000 l. in bullion, and that there were in this country an occurrence similar to that of 1839, that in the course of nine months there were 7,000,000 l. in bullion taken out of the country, what then would be the effect of the proposed law? There would be such an utter collapse in so short a period, that it must be

807
plain to every man of experience that no bank in London could stand it; no merchant in London could stand it. The banks then must become so fearful, and there would be such a distrust amongst all foreigners, that bullion should be transmitted, though it cost 12 per cent. There had been various convulsions in trade experienced since 1825, that in any plan that was laid before them, the causes of these panics, which had been ruinous to so many, ought to have been fully explained to them. However, that had not been done, and the right hon. Baronet, in adopting his scheme, had never told them how it was to affect those evils that had been formerly experienced, nor how it was to meet such causes as led to panics upon former occasions. It would have been a great satisfaction to them if the right hon. Baronet had done this when he called upon them to consider his measure. This, he again observed, had not been done by the right hon. Baronet, and he must say that he saw in his plan more elements for future panics, and more elements for future distress, than in that system that he now sought to destroy. This subject was intimately connected with their system for regulating the importations of foreign corn. If they went back to the years 1834, 1835, and 1836, they found no importation of corn; but when the dearth arose in 1839, then they had an enormous exportation of bullion to purchase foreign corn. That demand must arise again, and if it did so, and with the proposed plan in operation, it must have the most baneful effects.
The Chancellor of the Exchequerwas certainly not prepared by the notice of the hon. Gentleman opposite, for the speech which the hon. Gentleman had made to the House; for, as he understood the speech, it was not an objection to any particular detail of the plan submitted to the House; but it was an objection fatal to the whole plan itself, and would require, if the hon. Gentleman were consistent in his opposition, to propose that this Bill be read a second time that day six months. The effect of the hon. Gentleman's Motion, if not to reject the Bill before the House, was to throw suspicion upon it when it should pass, and to operate to its prejudice. He thought that the manly course of proceeding in the hon. Gentleman, would
808
have been to have called upon the House, notwithstanding it had agreed to the resolution upon which the Bill was founded, to have rejected it altogether. The hon. Gentleman, it seemed, however, approved of the principle, although he objected to that plan by which it was proposed to carry it into effect. The hon. Gentleman agreed with the principles laid down by the Bullion Committee; but then he did not agree with them in their opinions respecting prices. He referred to the price of sugar, at the time the Bullion Committee made its report, for the purpose of showing that the Paper circulation at that time was not in excess. Let them, he said, see what was the price of sugar at that time. But he never considered the special circumstances which affected the price of that particular article. In consequence of the naval predominance of England at that very time, all the sugar of the world was collected in this country. The price here was low, while on the Continent it was excessive. To show this, he need but refer to the fact, that at the time the English army entered into France, the cry of the people was, " The English and cheap sugar!" The hon. Gentleman had declared that an inconvertible Paper Currency, when limited, did not necessarily raise the price of articles. Admitting that to be correct, still the objection to such a Paper currency was, that there was an invariable tendency in it to increase and by a dangerous redundancy, to affect the prices of different articles. It was true at the time that the suspension of the Bank took place, there was not at first a perceptible rise in prices; it came gradually on; but at length the value of gold, from the redundancy of the paper circulation, rose in price; so that, instead of its being 3l. 17 s. 10 d. per ounce, it was at last above 5l. The hon. Gentleman next proceeded to observe, upon the measure of his right hon. Friend in 1819. The hon. Gentleman also entirely approved of the principle of that measure. The hon. Gentleman thought it right that paper should be convertible on demand into gold; but, nevertheless, he was prepared to maintain that that convertibility being declared by law, the thing should be left to its own operation, and that we were not to profit by our subsequent experience. It would appear as if the hon. Gentleman had forgotten all the transactions that had occurred since 1819, and how numerous

809
were the difficulties to contend against in maintaining that convertibility. In 1825, it was stated by Mr. Huskisson in that House, that the country had nearly been reduced to a state of barter. Had the hon. Gentleman forgotten the misfortunes that had occurred in 1839? (by what mismanagement of the Paper Currency he did not now inquire); but when the Bank of England bullion was so reduced, that but for foreign assistance, it was doubtful whether its notes could have been paid in gold. If they then preserved convertibility, it was only by recurrence to measures of an extraordinary character, and by pressing severely upon various interests in this country. Were they not, then, bound to consider whether, they could not devise measures to prevent the recurrence of similar misfortunes? Then, as to the measure submitted to the House; the hon. Gentleman said, he had no objection to the principle, but to the details; that they had taken no evidence on this subject, and the seconder of the Motion agreed with him in thinking so. Both stated that there had been no information as to the nature of the evils with which they were going to deal, nor how this measure was calculated to avert them. Why, what had the House been doing for two years? Was it not inquiring into the operation of the banks of issue? In the evidence that they had taken upon this subject, the fullest means for judging that ever were given to a Parliament was before them, and to those who could not be instructed by such a body of evidence, he must despair of ever being able to convey information. The measure of his right hon. Friend was based upon the information that had been derived from that Committee, and it had consequently met with the concurrence of those who had attended to the Committee, who had heard all the objections that could be urged against it, and had heard all the advantages that might be expected from it. It would, he admitted, be vain to expect from this, or from any other measure like it, that it could secure at all times an uniformity of prices throughout the country. They must have fluctuations in prices from time to time; they would take place with an entirely metallic currency; the currency would also fluctuate; the deficiency would be supplied by gold flowing into the country, and excess would be guarded against by gold flowing out. For
810
the purposes of convenience and economy, a certain amount of paper was necessary, and what was to be desired was, that with that paper the currency of the country should still be established on a solid footing. The principle of this measure was, to make the currency, consisting of a certain proportion of paper and gold, fluctuate precisely as if the currency were entirely metallic; to make it gradually conform itself to the prices of articles, and to take care that the fluctuation should be gradual, and that the prices should never rise or fall so suddenly as to involve individuals in ruin, or to cast into danger the most important interests of the country. That, then, was the principle which the hon. Gentleman in his speech objected to, though, in his Motion, he did not put himself in direct opposition to it. The hon. Gentleman had told them that the rise and the fall in price had nothing to do with the expansion of the currency, and he had endeavoured to prove that position by a reference to the prices of articles. The hon. Gentlemen had taken the prices of fifteen articles at a particular period, when there was a contraction of the currency, and showed that three of these had not been affected by that contraction. When so many and such different circumstances affected the prices of articles, he should be surprised if, amongst so many articles, a few had not escaped from that which generally affected others. Then, the hon. Gentleman said, that commercial distress was not to be imputed to changes in the circulation of the currency. He did not deny the fact that a number of causes must operate to produce great commercial distress. All he contended for was this—that a principal cause of distress was the undue extension of the currency when it ought to be contracted, and it was no answer to him to say, that when he had removed one cause, others might still remain. But how did the hon. Gentleman prove his case? By that which he thought ought to be fatal to the principle for which the hon. Gentleman contended, by referring to the state of the banks in the United States. In that country the paper was convertible into coin on demand. Still, in consequence of competition, there was an excess of issue, and this though there was a perfect publicity as to accounts, a rigid inspection by the Government, and a rigorous control; and yet from

811
the competition of issue, the issuers of paper had reduced the country to that state, that as the hon. Gentleman himself had said, they had overlooked morality and suspended cash payments. There was no want of a convertibility of paper enforced by law: but the competition of issues defied all law, and made every man in the community anxious to increase the circulation, in order that he might be able to promote his own wild speculations. The hon. Gentleman said that he objected to a single bank of issue. Now, he admitted that the basis and the principle of the present measure was, that there should be a single bank of issue; but that was not the proposal in the present Bill; the proposal was, that the Bank of England should be able to calculate precisely what was the amount of notes issued by other bodies in the country, so as to limit the operations by which the exchanges were to be regulated. The hon. Gentleman had made an objection as to the Government having a control over the Bank. Now, if there was one thing more than another guarded against in this measure, it was, that the Government should have no control over the Bank. He would contend against any such proposition as strongly as the hon. Gentleman. No such power was given to the Government by the Bill. The Government could not have the means of secretly exercising such power, for they were to have, not monthly or quarterly returns, but returns from week to week; and these were to be open not to Parliament merely, but to every man conversant with banking affairs; so that there could be no interference but what must be known in a moment, if anything like influence were used on the part of the Government. The hon. Gentleman had next referred to the address of the London bankers to his right hon. Friend: but their views on this subject did not correspond with those of the hon. Gentleman, who had, indeed, said that there was nothing in the evidence before the House to justify the proposed interference with banks of issue in the management of their circulation. But this was beside the question. If he were satisfied that the plan was conducive to the interests of the country, and that it was desirable to effect a change in the circulation of the country, it was not necessary for him to show that there had been great mismanage-
812
ment in the conducting of a different system. He had only to prove that the system itself had necessarily led to evil consequences, and that this plan would secure them against a renewal of those evils. They had evidence of the mode of conducting banking business, and on that evidence it was plain that a change was necessary. The proprietors of country banks of issue admitted before the Committee that they did not profess to have any regard to the state of the foreign exchanges in the regulation of their issues. They said that they generally regulated them by a consideration of prices in their respective neighbourhoods; that when prices were high they put out their issues, and when they were low they contracted them. The Bank of England, paying regard to foreign exchanges, when they saw gold going out of the country, contracted their issues; but the object of doing so was constantly defeated by the country banks of issue acting upon a totally different principle. The hon. Gentleman opposite said that the country banks of issue looked to the state of pressure on the money market in London as an ingredient in the regulation of their issues; but he feared that they did so too late to avert or mitigate a catastrophe, or to apply a remedy to the mischief in progress. They waited till the Bank made such a pressure upon the money market that it was impossible to go on any longer as heretofore, or to extricate themselves from the mischief of their own acts, and then followed bankruptcies and sudden stoppages of speculations, involving serious loss, and in many cases utter ruin to all the parties connected with them. He did not wish to do any injustice to the gentlemen connected with these establishments. He did not impute to them all the blame of these unfortunate occurrences. Although there had been some cases in which great iniquity was proved to be chargeable, he believed that the real fact was, that in a majority of cases, these gentlemen had not been masters of their own conduct; nor able successfully to resist the competition to which they were exposed by their less honest, perhaps, certainly by their more incautious, neighbours; and that going with the stream they had come inevitably to the same disastrous fate. But however brought about, there could be no doubt that the tendency of the present system

813
was, to increase the circulation unduly, when it ought to be contracted, and so to lead to a false position of commercial affairs. This was the charge which was made against the country banks of issue, and he thought that that charge being substantiated, he had good grounds to ask the House to agree to the remedy which was now proposed to them. The hon. Gentleman who seconded the Amendment said, that if they imposed upon the circulation of the country the restrictions proposed by the present Bill, the consequence might be in a moment of panic or difficulty most disastrous, for which it would be difficult to find a remedy. The hon. Gentleman suggested a case, and said—suppose that in the course of nine months seven millions of bullion should be withdrawn from a limited amount lying in the Bank; what a predicament would the Bank and the commercial interests of the country be placed in, if there be not a power to issue an additional quantity of notes? His answer to this supposition was, that if the principle of the present measure be a just and sound one, its operation upon the exchanges and prices would be so gradual that these sudden diminutions of the stock of specie, which the hon. Gentleman contemplated, would not be likely to occur. Specie being the basis of the circulating medium of the country, would itself be controlled by the demands of the currency in a way which would prevent any undue efflux of the precious metals. But the principles upon which this measure was founded had been so fully argued by his right hon. Friend near him, and by the right hon. Gentleman opposite on a former occasion, that he felt it would be impossible to go over the same ground again without in some measure weakening the force of arguments with which the House was already acquainted. He would, therefore, not trespass further upon the time of the House, than to express a hope that they would not acquiesce in the proposition of the hon. Gentleman. He trusted the House would not impair the efficacy of the measure when it should pass into law by entertaining a preliminary objection of this kind, which, though ostensibly levelled against a minor point in it, was virtually directed against the whole measure.
Sir William Claysaid, that in one respect he rejoiced to have heard the speech of his hon. Friend the Member for Lam-
814
beth, as, knowing the industry and ability of his hon. Friend, he was quite sure he should hear from him well stated whatever objections existed to the measure of the right hon. Gentleman. He was not surprised, however, that they were so few and weak. The right hon. Gentleman the Chancellor of the Exchequer had replied to much that had fallen from his hon. Friend; he should himself, before sitting down, make some observations on what had fallen from his hon. Friend—at present he should apply himself to the Bill before them. He was of opinion that in some of its details it was perhaps susceptible of improvement, but as a whole it had his cordial approbation, and the principles on which it was based his entire assent. The principles of the measure were what they had to deal with on the present occasion. Reserving, then, for the time when the Bill should be in Committee, whatever comments he had to make on the details of the arrangements by which the plan was to be carried into effect, he should merely now state concisely the grounds on which he considered the Bill to be entitled to the concurrence and support of the House. The principles involved in the measure he took to be these—First, that the paper money of the country should fluctuate in amount only as the metallic money for which it was the substitute would have fluctuated; and secondly, in order that it might do so, that its issue should be under the regulation and control of the State. Those principles he believed to be demonstrably sound and true; he believed also that it was essential to the well-being of the community that they should be brought into practical operation; and it was because the aim and tendency of the measure before them was to give effect to those principles that it should have his zealous support. The first great principle of the measure, then, was, that the paper money of the country should fluctuate in amount no otherwise than as the metallic money, for which it was the substitute, would have fluctuated. Why was that necessary? Because on no other supposition, and by no other means, could it be certainly and permanently maintained at an equality of value with metallic money. If its amount were permitted to vary on any other principle—if, while the precious metals were flowing out of the country the paper money were maintained at an equal or greater

815
amount, then one of two things must happen—either there must be a suspension of cash payments, and two prices of commodities—one in paper and the other in coin—or that calamity must be averted by a contraction of the whole circulating medium, and a general fall of prices tenfold more distressing and ruinous in effect than would have been necessary had the amount of the paper money never been allowed to diverge from the limit prescribed by the principle to which he had referred. There might be persons in whose apprehension the former alternative, the suspension of cash payments namely, would be matter rather for rejoicing than regret. The same school of philosophers the Birmingham school—who still talked of the ruinous effects of the measure of 1819, would hail with delight the advent of a paper millennium, and see in an inexhaustible supply of inconvertible one pound notes, a panacea for every ill. With such reasoners it was fortunately not necessary to deal. Their tenets were generally repudiated by the good sense of the people of England; and few, indeed, could be found—except the disciples of the Birmingham school—who believed that the national wealth could be increased, or the national prosperity secured by stamping an indefinite number of pieces of paper, and calling them money. But it was not from those alone who disapproved of the Act of 1819, and consistently, therefore, objected to the present Bill as its necessary sequel and complement, that the measure now before them had to encounter opposition. It was to be opposed by some, it would seem, who being prepared to maintain the convertibility of our paper money, yet thought the present Bill either unnecessary for that purpose, or too stringent in its operation. Of the views of one section of such opponents, his hon. Friend the Member for Lambeth had undertaken to be the expositor. That the opposition of his hon. Friend and others proceeded from erroneous views— from the not having examined with sufficient care the sources of risk to which a paper currency was exposed, would not, lie thought, be difficult to show. The great principle of the Bill, as he had already staled—that which all its provisions were framed to carry into effect, was, that the amount of paper currency should henceforth fluctuate solely with the influx and efflux of the precious metals.
816
To this object the provisions relating to the Bank of England and the country circulation were directed. Now, in what sense, or under what circumstances, could it be said that such a regulation was inconveniently stringent. The existing amount of notes, whether country or Bank of England, was left undiminished—that amount was larger than for some previous years. There was, therefore, no pretence for saying that the measure would, at the present moment, cramp the circulation. That which it would do was, that it would, in the first place, prevent an increase of the present amount of paper money not arising from an influx of the precious metals; and secondly, in the event of an efflux of the precious metals, it would prevent the void in the note circulation occasioned by the abstraction being filled up by fresh issues. Were either of these results to be deplored? on the contrary, they were both essential to the security of our monetary system, and the well being of the community. There was one important principle, or rather perhaps it might be said, one great elementary truth, laid at the very root of the whole question —a truth which once distinctly perceived did, as it appeared to him, alike tend to clear away the theoretical difficulties and intricacies of the subject, and to remove all doubt as to the course which, practically, they were called on to pursue. The principle to which he referred was, that it was not possible safely to combine the operations and results of two incongruous systems—a system of convertible, and a system of inconvertible paper currency. They must elect between the two. If they were tempted by the prospects of a paper millennium, if they could be deluded by a vain appearance of national prosperity, always to be produced by the expansion of that false credit which was strength in the beginning but weakness in the end, then they would do well to adopt some Birmingham standard of value, and not require the payment in gold of these issues of paper, against the excesses of which they refused to guard. But if they chose, as in fact, by the great measure of 1819, they had already chosen the path equally of justice and of wisdom—if they would admit of no compromise with the standard of value, would tolerate no paper money not of equal value with the metallic money it professed to represent; then they must take that system with all its

817
consequences, and surround it with what ever regulations and restrictions reasoning and experience showed to be necessary to preserve its integrity. To preserve paper money at all times on an exact level of value with metallic money, it must never exceed the amount of metallic money which would have existed in the country had there been no paper money, and that amount could be ascertained by no other test than the influx and efflux of the precious metals. That test would show at all times, with unerring accuracy, whether England was in possession of that share of the whole money of the world to which she was entitled, and could retain agreeably to the laws by which the precious metals were distributed through the several countries. He need not trouble the House with a definition or analysis of those laws; he would merely say, that every country must always have such a share of the general stock of the precious metals as could be used as money, without raising the prices of commodities above the general level of prices throughout the world. The moment prices rose above that level, goods would be imported and specie would be exported, until the equilibrium was restored. Her full share of the general stock of precious metals England would be always sure to possess, because she produced, beyond all other countries, those things which mankind were desirous to obtain, and in payment for which, in addition to the goods she was disposed to take in exchange, the precious metals would always have a tendency to flow into this country. The late Mr. Rothschild, a most competent witness, was so struck by this tendency, which beyond most other people he had had the opportunity to observe, that in his examination before the Bank Charter Renewal Committee of 1832, he said, that but for a bad harvest now and then, foreign loans, or mining speculations, the wealth of the whole world would centre in England. Her full share, therefore, of the money of the world England would always possess, but more than that share, whether in the shape of coin, or of notes legally convertible into coin, they must not hope to retain; nor, as the corollary of that proposition, to maintain a scale of prices higher than the level of the rest of the world. They might rest assured that either the one attempt or the other was incompatible with the safe use of a convertible paper currency. Such a
818
state of things must prevail—must of necessity be the permanent, the normal state under any system which maintained convertibility; the difference between a good and a bad system would be, that under a good system—a system which permitted the amount of the currency to fluctuate only with the influx and reflux of the precious metals—such a state of things would exist equably and securely. Under a bad system, such as the present, where the issue of notes was left to the mere caprice of the issuers, the amount of the circulating medium, and the prices of commodities would equally revert to the level prescribed by that law of universal operation to which he had referred, and from the operation of which there was no escape; but it would be after violent and disastrous fluctuations. If a drain of the precious metals from this to any other country once set in, no matter from what cause arising—whether to pay for corn in the case of a deficient harvest, or because a rise in the prices of commodities had taken place in this country—if from any cause or combination of causes there was a tendency to efflux of the precious metals, there was but one path of safety and security to pursue, and that was for the circulating medium to contract in exact conformity, and at the same moment, with the abstracted treasure. If this principle were neglected, if the issuers of paper money, whilst they extinguished notes in return for specie with one hand, were permitted to issue them against securities on the other, thus delaying that reduction of the prices of commodities below the level in other countries which checked importation and encouraged exportation, specie would be sent out until the last disposable guinea was gone, and a suspension of cash payments was inevitable. Now, under which system would this fall of prices, which could not be averted, take place the more safely and with the least suffering?—under one where the circulating medium began to contract with the departure of the first ounce of gold, or one which maintained the currency at the same amount, until contraction was inevitable—if suspension of cash payments was to be averted? Was it necessary to answer the question, and could it be doubted that the keeping up of the amount of money, by fresh issues of notes, during a long-continued drain of bullion, rendered that fall of prices of

819
commodities, which it delayed, but could not avert, doubly destructive, and added immeasurably to individual suffering and national danger? But if this were true, did they need further proof of the necessity of the present measure? Under its provisions, they could never witness the absurd and dangerous anomaly of a diminution of the precious metals, and an increase of the note circulation taking place at the same time: under the present system, reasoning and experience equally showed that it was certain periodically to recur. When the issue of paper money was entrusted to those who profited by the operation, there would of necessity be a tendency to excess, and experience had shown, beyond the possibility of a doubt, that neither competition among issuing bodies, nor the dread of consequences, which at moments of excitement always appeared doubtful or remote, afforded any efficient safeguard against that tendency. Of the soundness of the conclusions to be drawn from the considerations to which he had called the attention of the House —sufficiently apparent, as he thought, on à priori reasoning—the experience of the last quarter of a century afforded the most ample proof and illustration. He would not weary the House with statements of figures—in truth it was unnecessary—the main facts on which their judgment must be formed being undenied, as they were undeniable. During the last twenty-five years, it would be seen—on reference to those documents which contained a record of the administration of the currency (and for the last half of that period they were in possession of very accurate statements)—that at no period had the amount of the paper currency varied on sound or intelligible principles, in accordance that was with the influx and efflux of the precious metals. The agents in the emission of the country circulation—the private and joint-stock bankers did not generally profess to regulate their issues with any reference to the exchanges, the Directors of the Bank of England had stated their opinion of the necessity of looking to them and permitting their circulation, to be regulated in its amount by the ebb and flow of specie; but by both, and almost equally, was this consideration substantially disregarded. A reference to the accounts would show, year by year, fluctuations in the amount of the aggregate circulation of the King-
820
dom, in every direction but the right one —the circulation remaining undiminished, or increasing during a drain of bullion, diminishing during an influx. Sometimes the Bank of England maintaining or increasing its issues for months when it ought to have diminished them—sometimes its efforts at diminution neutralized by increased issues on the part of other issuers. Between these respective parties there had been much accusation and recrimination—charges, vehemently made on either side, of grievous mal-administration. He had listened to, and weighed with the utmost care, the case brought forward by either disputant, and had come to the conclusion that both were successful in their accusations, and neither in their defence. Nothing in fact, could well be worse, unless, indeed, it were the case of America, than the administration for the last quarter of a century of our system of banking and currency. But did he blame the Directors of the Bank of England, or the country bankers for the errors which had been committed? Assuredly not: their own legislation was to blame; and it was the merest drivelling to affect surprise at what had occurred under the system they had suffered to prevail. When the issue of paper money was left in the hands of those who profited by every pound they issued—when, again, those issuers were exposed to the importunities of those among whom they dwelt—of that mercantile and enterprising community of which they commonly formed a part, with the feelings of which they of necessity sympathised; an excess of issue was not only probable—it was certain. And what was the result? Why, that during the last twenty years they had experienced monetary convulsions of the most formidable character. His hon. Friend the Member for Lambeth said, this measure was justified by no facts. No facts! Why in 1825, it had been said on high authority that we had been within forty-eight hours of barter. In 1830 and 1837; and again in 1838 and 1839; periods of very great difficulty and distress had occurred in the commercial world, and great disturbance in the monetary system of the country. At all those periods there had been great national difficulties; suspension of commercial and manufacturing enterprise; consequent want of employment for the labouring classes,

821
and wide spread individual loss, suffering and ruin. It would be absurd, as was truly said by his hon. Friend, to attribute all those disturbances of our commercial and manufacturing interests, all these sufferings, to a faulty monetary system; but it would be equally absurd to assert that those disturbances were not in all cases enhanced and prolonged by a system which admitted of factitious expansions of the currency, and rendered necessary as violent contractions. The case of America was yet more striking and pregnant with instruction, inasmuch as in the United States the same elements which have here produced much inconvenience and danger there by their unrestrained operation, convulsed society to its very centre, produced the complete suspension of cash payments, and by the unanimous testimony of all parties and all observers, inflicted on the community sufferings unparalleled in extent and duration. That in England the result of the working of the defective elements of the monetary system had stopped short of the calamities in America, was to be attributed, he was satisfied, to two causes alone; the first, the salutary measure of 1826 for the suppression of the small notes; the second, the control over the circulation exercised by the Bank of England—a control which, though not always exercised with the soundest wisdom, had yet greatly tempered the excesses to which a system of currency issued by banks of equal power and pretensions, and controlled only by competition, was liable. He participated, he must confess, in the astonishment expressed by the right hon. Gentleman, that his hon. Friend should have ventured to allude to the case of America in corroboration of his argument—for if ever there were a case which afforded the most complete proof of the insufficiency of mere legal convertibility, to guard against excess in the issues of paper money, that case was to be found in the United States. His hon. Friend was mistaken in supposing that there was any law in America legalising the suspension of cash payments. The attempt had been once made in the state of Kentucky, where the legislature. had passed a law declaring bank notes a legal tender; but that law had been declared null, and refused to be recognized by the Courts of Law, as being opposed to a fundamental article of the Constitution of the United States. It was true
822
that in spite of the law, cash payments had, in 1837, been suspended in every state of the Union, for the law could not effect impossibilities, but was it possible that a stronger argument against the views of his hon. Friend could exist than the fact that a great and wealthy community had to submit, through the whole length and breadth of the land, to the calamity of a suspension of cash payments, in the very teeth of stringent laws, because they had not taken any precautions, not even such as in this country had already been taken, to guard against excessive issues. Against the evils and inconveniences England had sustained, against the danger of the heavier calamities which America had undergone, the Bill before them provided the best, the only remedy, and to that Bill what were the objections stated? It was said, that it would limit inconveniently the power of bankers, whether the Bank of England or the country banker, to afford accommodation to their customers. Let them consider, first, the case of the Bank of England. What was the opinion of Mr. Loyd and Mr. Norman, gentlemen whom it was only necessary to name to secure for their opinions the respectful consideration of the House? Those gentlemen both stated, in their examination before the Banks of Issue Committee, in 1840, their opinion in the strongest terms. That the system which was called "supporting commercial credit" was false and empirical in principle and dangerous in practice, inducing parties to neglect precautions which they might otherwise have taken. That—
"It was a remarkable phenomenon attending the drains of specie, that they always go on for some length of time before prices, and speculation, and over-trading, and over-banking, have reached their maximum; and that the last stage of a drain is always characterized by the springing up of internal alarm."
That—
"Contraction applied in the early stages of a drain, could be borne without inconvenience to the community, and would check in their early growth those tendencies to overtrading and excessive rise of prices, which, by their undue expansion under our present system, and the consequent violence of their subsequent collapse, produce the extreme intensity which characterises the commercial crises of this country."
But the country bankers might say, would not the measure lessen their power of granting accommodation? The power of a bank to grant accommodation

823
must consist of its capital—the funds entrusted to its care by depositors, and the mean or ordinary amount of its circulation. Whatever it lends beyond these— whatever accommodation it affords by increased issues, must be unsound in principle, and so sure to be withdrawn on the first symptoms of pressure on the money market, as to be injurious rather than beneficial to those to whom it was afforded. The measure before them would not, of necessity, diminish by a single pound the present amount of circulating medium—it would not prevent its being enlarged—it would provide only that no other increase should take place than that arising from an influx of the precious metals into the country, an increase from which no danger was to be apprehended. It could not be too often repeated or too clearly understood that, under the proposed system, the mean or average amount of the circulating medium would not be less than at present. Now, the amount of the circulating medium must conform, in the long run, to the level prescribed by those laws to which he had adverted, laws of unfailing operation—the only difference would be that it would conform to that level invariably, neither rising above nor falling below it. Under which system could the surplus capital of the country be brought more securely in aid of its enterprize? Under which system could the farmer, the merchant, or the manufacturer rely on the more steady and safe accommodation? What then were the conclusions to which the considerations he had stated led. Briefly these—that the establishing by law the convertibility of notes into coin at the will of the holder, was not a sufficient safeguard against the abuses to which a paper currency was liable—that to confide the charge of issuing notes to those who profited by the operation, was to render it certain that there would exist the tendency to issue them to excess—that against such tendency competition among issuers afforded no efficient check; and that such check was only to be found in subjecting the issue of paper money to the control of the State, and regulating it in accordance with laws of unfailing and salutary operation. It was because the Bill before them effected these objects, that it had his warm support. The measure did not yet go so far as he could have wished, and as beyond all doubt it must ultimately be car-
824
ried; but it was a most important step in the right direction, it was one of the greatest advances ever made by any Government in the application of the best principles of monetary science. He was perfectly certain it would never be retraced, but would be followed out and completed in this country, and imitated by others; and he could not refrain from adding, that for introducing such a measure, the right hon. Gentleman deserved the best thanks of the House and of the country.
Mr. Newdegate: Mr. Speaker, in the first words I utter, let me acknowledge the kind and liberal manner in which the right hon. Baronet, at the head of Her Majesty's Government, replied to a question which I lately felt it my duty to put to him on this most important subject; and whilst I thus acknowledge that proof of his kindness and liberality, I would beg the House to believe that I do not understand the expressions of the right hon. Baronet with respect to myself, as anything further than as an acknowledgment of a sincere desire, evinced on my part, to frame and put that question in a form as little troublesome and annoying to the right hon. Baronet as possible. In that sense, I deserve the kind expressions he made use of, and in that sense I cordially accept them. I most sincerely regret that the right hon. Baronet has not answered the latter part of the question I put to him so fully as I anticipated; he admits that the operation of this Measure may, for a time, effect a limitation of prices, and, so far, his answer to the first part of my question is complete, and his opinion appears to accord with that expressed by Mr. Pitt, as well as with that of Mr. Hume, who stated that the interval between a decrease of the circulating medium, and the adjustment of prices to a lower level, is always pernicious, in a peculiar degree, to industry; but the difference between the right hon. Baronet and Mr. Hume is, that the latter attributes this depressing effect directly to a state of transition in prices to a lower level; now, the hon. Baronet evidently contemplates such a transition, though he does not so distinctly admit it, for, in the next sentence to his admission of the temporary debasement of prices, he mentions a state of prices (which we must conclude he considers the present) that are raised to what he considers an unnatural height by an excess of paper circulation. Now, my fear is, that not only will prices sink in

825
proportion to the actual restriction of paper issue, which this Measure will effect, but owing to the limited basis of our Currency, and the additional restraints imposed by this Measure against its possible relaxation, that prices will progressively fall to the Continental level as their production increases, and that, ultimately, the share of those prices, which will fall to the home producer of this country, will be further diminished to him, in proportion as his taxation exceeds that of his foreign competitor. Sir, had I been satisfied, that the effect of the present Measure upon prices, would be merely that of a temporary limitation, I might have doubted whether the temporary distress, however severe, which that limitation would have effected, might not have been counterbalanced by the security in monetary and commercial transactions which the right hon. Baronet hopes to ensure by the enactment of this Measure. But if this is but a step towards a permanent and increasing depression of prices, which I fear it is, I can only say that nothing shall induce me to give my humble support to such an Enactment. Independent, however, of these most serious considerations, I do not believe this Measure can have the effect of preventing fluctuations in our circulating medium, unless by a contraction of it to an amount so small as will be totally disproportionate to the increasing production and consequent requirement of this country. I believe that the fluctuations in our currency, and the consequent derangement of commercial transactions, of which the right hon. Baronet complains, may in great degree be attributed to the narrow and fluctuating basis of our Currency, as established by the Acts of 1816 and 1819, for if you have fluctuation in the basis of any superstructure, and that basis is too narrow in proportion to the superstructure it supports, the fluctuation in the superstructure will be great in the ratio of its disproportion to its basis. The value of our currency was fixed, and the amount of it was limited by the Acts of 1816 and 1819, and our currency now is not larger than it was after the Act of 1819 came into operation; and if we consider the increase of population and of production in this country since that period, and how much in consequence the value of money has been raised by that subsequent increase, owing to the quantity of it (money) having remained the same, whilst the quantity of commodities has so greatly increased; I cannot think, that it is either wise or just
826
further to contract the quantity or enhance the value of money at the present time, as proposed by the Measure now before the House. The effect of the high value of our Currency, as established, has, I think, been fairly argued by a relative of mine, Mr. Boucherett, in a pamphlet he published on this subject, and from which, if the House will permit me, I will quote the following passage:—
[A Few Observations on Corn and Currency, by Ayscoghe Boucherett.] "The difficulties in which the commercial and banking interests have been so frequently involved, and the continual recurrence of manufacturing and agricultural distress, are attributed by many persons, and I think justly, to the high value of the currency. There are, however, others who insist that it cannot by possibility produce the evils complained of, and who have attributed them, at different times, to a variety of causes, such as,
"A transition from war to peace—a plea no longer available.
"Exclusion of foreign corn by the Corn Laws.
"Importation of foreign corn, and a succession of bad harvests.
"Over-trading and over-issue of one-pound notes.
Peel's Bill, and the withdrawal of one-pound notes.
"The monopoly of the Bank of England.
"The establishment of Joint Stock Banks, and a want of command over them by the Bank of England.
"The improvident issues of the Bank of England, affording encouragement to undue speculation.
"A want of liberality on the part of the Bank of England, whose duty it is said to be to support credit.
"It is perfectly true that difficulties have arisen under each of these circumstances, but they have also occurred under circumstances opposite to each, for they are opposed to each other; each, then, having been present when difficulties have occurred, acquits its opposite of being the cause. To what then shall we attribute these difficulties, but to that which has been present under each period of distress, and whose opposite has never been present— the high value of the Currency established in 1816."
The writer then goes on to recommend a depreciation of the Currency, and shews good grounds for considering it a matter of justice, but I do not go so far as that; I merely pray, that you will not, by this Enactment, still further raise its value by still further limiting its quantity. This Measure proposes to limit the circulation of the Bank of England to a certain ratio upon the bullion in her coffers, and 14,000,000 of

827
securities; and to judge rightly of its future operation, we should base our opinion upon the experience, gained from the history of the monetary policy and condition of this country during past years, particularly those since 1819; and if we do so, I do not think we can fairly calculate, that the share of the precious metals which will hereafter form the basis of the circulating medium of this country, as taken from the whole quantity which form the circulating medium of the world, will hereafter greatly exceed the average of past years, if calculated upon a considerable period. Now the annual average of bullion in the Bank, in each year, from 1819 till last year, falls very far short of the amount of bullion at present, which greatly exceeds any amount of bullion to be found in the returns at any period before last year. I think we may therefore fairly consider it, at all events, a larger quantity than we ought to count on for the future average of our bullion. For many years the supply of these precious metals, as compared with the consumption of them in the world, has been nearly stationary, rather decreasing. It is true, that last year the yield of the Russian mines greatly exceeded their general produce; but shall we build our hopes and legislation on that exception, in defiance of all past experience. No man that has ever watched the uncertainty of mining production will be so wanton—and I think we should also consider that this extraordinary and exceptional increase has taken place in a country which has an even smaller convertible currency than our own, as compared to the relative production of commodities in each of the two countries. Russia therefore needs her gold, and may, probably will, by fiscal regulations, prevent our drawing it, at all events rapidly; for if a country will not admit our exports on advantageous terms, we cannot draw her bullion, except at an enormous sacrifice. Since, then, we can only procure and retain bullion sufficient for the Currency of this country through the medium of foreign exchanges in return for exports, it is evident that our foreign commercial relations must have a material bearing on this matter, and that to judge rightly of it, we must consider what is the present character of them. Have our advances towards free-trade been met by reciprocal relaxation of import duties on the part of foreign states? Is it not notorious, that the general tendency of their commercial policy is the reverse; that they have generally met our advances
828
towards free-trade by imposing additional import duties for the protection of their native industry. How, then, can we increase our bullion, but by sacrificing our native industry? I say, that this system of one-sided free-trade, combined with a contraction of the Currency, is incompatible with the welfare of this country, and will produce a state of distress and misery among us that I cannot contemplate. I do not wish to quarrel with the principle upon which our monetary system was established by the Act of 1819. I say, that in the abstract, it is a good plan, but I say this of it, that if the continuance or enforcement of that system renders the proposed contraction of the Currency necessary, it is inapplicable to the present condition of this country. There is a striking similarity, with regard to prices between the periods selected for the introduction of the Measures of 1816 and 1819, and the present. Previous to 1816 and 1819, prices had fallen very low; then, say the advocates of those Measures, you must not attribute to them the fall of prices, which was previous. They have a colour for their reasoning, for the fact is, those Measures did as much to keep down, as to depress prices: and so will the present Measure do as much to keep down, as further to depress our present low prices. Let us for a moment consider what are the characteristics of our present commercial policy. Is not the system of free-trade insisted upon, advocated, or adopted in a greater or less degree by the great majority of those who form the Legislative Councils of the Empire? Have not our measures of late years been characterized by this tendency? Is there not every prospect of a further adoption of this policy? And what is its avowed effect in this country? Depression of prices; and now Her Majesty's Government come down upon us with this Measure to enforce a contraction of the Currency; which, if there be any faith in the fundamental rules of monetary policy, as I have read them, must cause an additional depression of prices. I do entreat the House to consider, how grievous will be the pressure which the combination of these two causes will produce upon the capital permanently invested in the means of production, and upon the industrious classes of this country. Are hon. Members prepared to go down to their homes, and to tell their constituents "We have passed a Measure, which will place the monetary transactions of this country upon a secure basis; but the operation of which upon you,

829
the productive classes of this country, will be to diminish your profits and your wages, whilst it retains the same, aye, increases the weight and pressure of those payments under which you are already abouring?" Sir, when I have thought upon free-trade, whilst I admit its advantages in a merely monetary and commercial point of view, if practicable; I have ever thought that its adoption in this highly-taxed country must lead eventually to an adjustment of contracts, as an indispensable measure of justice. And the only means to enact that measure of justice effectually, and without overthrowing the relations of society, and the institutions of this country, has ever appeared to me an extensive relaxation of the Currency, of which the operation of this Measure will be the reverse. Sir, if I am not grossly mistaken in my comprehension of this Measure, and in my apprehension of its effects, it will render the protection, at present extended to the productive capital, and the operatives of this country, totally inadequate. I might now, Sir, enter into details to prove the extent of the contraction of the Currency, which will be caused by the enactment of the Bill now before the House; but I think such details are rather matters for the Committee, when I fully believe it will be found, that the proposed contraction is much greater than is generally anticipated: I will now, however, content myself with the admissions of the right hon. Baronet, and take the contraction to amount to about 18 or 20 per cent., as estimated by those whom I have consulted, as best able to form a correct opinion after having investigated this Measure. Such a reduction of prices as must be the consequence of a contraction of the Currency to the extent at which I take it, will press most heavily on the industrious classes of this country, for upon them will its heaviest pressure ultimately devolve. Now, a reduction of prices in this country may be anticipated from three principal and probable causes, namely, abundant harvests, further adoption of the system of free-trade, a contraction of the Currency. A reduction of prices, caused by the first of these, namely, abundant harvests, is a blessing to the people of this country, for God gives the increase, and it is divided among the people of this country. A reduction of prices originating in the second of these causes, namely, free-trade, that is the unrestricted competition of foreigners, is an evil to the working people of this country, for what
830
they lose is a bonus to their foreign competitors. But a reduction of prices caused by a contraction of the Currency must ever be the most detrimental to our industrious classes, for to them it is a sheer loss without the shadow of an equivalent; but on the contrary is accompanied by an addition to their burthens. Shall we, then, combine these two last causes of depression, and leave the people of this country to labour under their infliction; whilst we, occupied in the pursuit of theories, forget their sufferings, and turn a deaf ear to their complaints. I trust, we shall not incur the chance of the results I fear will follow the hasty adoption of this Measure, without far more mature deliberation than we have yet generally given it, or have had the opportunity to give it. I can honestly say, that since its introduction, aye, that since its specific announcement, I have given this Measure the best consideration, my other business, my time, and my faculties allowed. It is not a subject totally novel to me, for my thoughts have been for some years turned towards it, previous to my connexion with my present constituents. Not that I am ashamed in the least of my present connexion with Birmingham, which on account of the doctrines held by some of its leading inhabitants, some would seem to consider a very Nazareth of political economists. These doctrines are, in many respects, identical with my own. I have ever admired the boldness and honesty, with which my hon. Friend, the Member for Birmingham, has told free-traders, that unrestricted free-trade is incompatible with a just regard for existing interests, in a country with so small and restricted a circulating medium as England. And this leads me to the consideration of an argument, used by the hon. Member for the Tower Hamlets, who drew a comparison between the financial condition of this country, and that of the United States previous to the disastrous failure of her banking establishments, and who quoted Mr. Webster's opinions with regard to the state of currency in America, in favour of our adoption of the present measure for this country. I know it is commonly argued, that the failure of the American banks is a strong instance of commercial disaster, produced by over-issue of notes even under a system of immediate convertibility, which many political economists deem a sufficient safeguard against an excess of paper currency. Hence a comparison is instituted between the present

831
monetary condition of this country and America. Now it happens that I was in the United States not long after the first failure of the banks, and had the advantage of hearing a most eloquent and able speech from Mr. Webster on this very subject at Saratoga. I fully appreciated his arguments in favour of restriction, as applied to America, but there is a striking difference between the then financial condition of the United States and that of England at present, which is of itself sufficient to break up any reasoning by comparison between the two cases; and it is this, that whilst the convertible currency of England is smaller in proportion to her annual productions than that of almost any other country except Russia, the currency of the United States, previous to the failure of the banks, was, from fictitious causes, as much too large in proportion to her developed resources and annual productions, as that of England will be too small for her natural requirements, if the present Measure be enacted. Com plaints have been made of imprudence, and unjustifiable speculation on the part of country bankers, and this Measure is said to be chiefly aimed by limiting their privilege of issue at removing that which is considered a temptation to gambling in public credit. Now, I cannot think that this Measure will very effectually check speculation among those bankers who are addicted to it, but that it will rather induce them to conceal their proceedings, by confining their speculations to the more strictly banking part of their business, whilst the publication of their issues will serve as a blind to the unwary. If you attempt, by legislation, to reduce the legal currency below the natural requirements of this country, the necessity for a circulating medium of some kind will prove too strong for your legislation, and will lead to a system of dealing in small bills and acceptances objectionable enough where drawn and accepted by firms of reputed soundness, far more so if it degenerate into the transfer of such paper, drawn upon private individuals, to be backed by others equally unknown; and if the necessity for money be severely felt, I have no doubt that this kind of paper will eventually supply the void in Currency you may make by attempting to limit its amount below that which bears a due proportion to the production of the country. The absence of banks of issue in the more remote districts of Scotland has been found to have the effect I have described; and of the rascality, failures,
832
and misery thus produced, you may have ample evidence from witnesses acquainted with those districts. I have been told, and I believe it is true, that in this metropolis, a society has been formed, at all events individuals maintain themselves, by affording information with respect to firms in various parts of the kingdom, whose hills come into the market. Now, if information is so valuable in commercial transactions, even now, when only the bills of houses comparatively well-known are generally dealt in; may we not justly infer, that there is danger in secrecy. If so, let us beware, lest by attempting too stringent regulations, we merely cast a veil over, instead of checking fraud and speculation, and thus set a trap for the unwary. I believe, you can no more prevent speculation than you can smuggling by legislative enactments, if the temptation be too great; and I think this Measure will tend to enhance the temptation. I do sincerely trust, that the right hon. Baronet, at the head of the Government, and that this House will give due weight to the suggestions and remonstrances of the country and London bankers, whose opinion, from their intimate acquaintance with the local circumstances, the commercial transactions, and the financial necessities of this country, are eminently entitled to respect. Lastly, let us glance at the probable political effects of that system, of which this present Measure is a part—it will be the construction of an aristocracy of mere wealth, by raising the value of money above other capital, to the extinction of the present mixed aristocracy. Now there are three kinds of aristocracy, which may be distinguished by the elements from which they spring, and these are an aristocracy purely hereditary (of birth)—an aristocracy of talent, and an aristocracy of wealth; and the characteristics of these three different kinds of aristocracy, are as distinct as the elements of their origin—an aristocracy of birth, are indolent and overhearing, but they are generous—an aristocracy of talent, are the most intolerant, but the most energetic—an aristocracy of wealth is the most oppressive, for it is the most absolute, and is but too apt to consider those below it mere units of production. The governing class of this country is at present composed of these three; and it is a happy combination, for the evil propensities of each are counterbalanced by the others, and their better qualities are elicited by the action of public opinion. Thus,

833
owing to the fact, that the elements from which the governing class of this country is drawn, being the same whence public opinion emanates, even where not elected, as in the case of the House of Peers, they represent the whole community. Shall we then, by the adoption of this and similar Measures, allow one of the three component elements of our present aristocracy to overhear and absorb the other two. If this happen, public opinion will be stifled in our councils. In this respect let us take warning by the example of Democratic States: see how even they guard against the oppression of accumulated wealth; they are governed by a spurious aristocracy of talent, an aristocracy of demagogues; but they provide for the distribution of wealth, lest it swamp their councils. For one, Sir, if this danger threatens, I will join those who would arm the people of this country with an extended suffrage, rather than that they should succumb to such oppression. Sir, if this House has maturely weighed the various and conflicting considerations, which should form the basis of a sound opinion on a momentous step in the political career of this country, such as this Measure, and are satisfied that it is for the benefit of all classes, and the stability of the Empire, let them confirm the principles of this monetary system; but if with me they doubt of the result, is it not their duty, at least, to pause and to enquire? So far as I can understand this mighty question, I have feebly endeavoured to express my conviction of its tendency; and I warn this House, that this Measure will again still higher raise the golden standard of our Currency above a sinking people. If ye are content, proceed; but if my fears are just; when the many troubles gather round ye, that this Measure will entail, and ye turn to gaze upon this standard, as the Israelites did upon the Brazen Serpent in the Wilderness, ye will find it has less healing influences.
Mr. Humeassured the hon. Gentleman that he need be under no alarm as to the consequences which he seemed to anticipate from the Government measure. The hon. Gentleman's arguments proceeded on the fallacy that the amount of the precious metals was limited. He thought the present amount of bullion in the Bank of England was a sufficient answer to that. It was a known fact, that the Bank had so much bullion in their coffers, that they knew not what to do with it.
834
Upon looking at the Bill before the House, he found that it did not carry out the speech by which it had been introduced by the right hon. Baronet. He admitted the importance of separating the two departments of the Bank, but he thought the principle of convertibility, upon which the right hon. Baronet's speech had proceeded, had not been preserved in the Bill. There were forty millions of notes in circulation, twenty of which only would be convertible by this measure; the other twenty millions which were circulating in Yorkshire and other places, would be met, not by gold, but by paper—that was by Bank of England notes. Whenever bank notes were issued there ought to be gold to meet them, but the measure of the Government contained the same legal tender Clause which had been improperly (as he thought) introduced into the previous Currency Bill. The measure was imperfect, therefore, because it did not ensure in ail cases immediate convertibility. As the Government had the charge of the metallic currency, he contended that they should have the same charge with respect to paper currency. For his own part, he should prefer a mixed currency—paper and metal —as being more convenient and generally desirable. But the great objection which he entertained to the present plan was the restrictions which it proposed to impose upon the issue of country banks. As to the regulation of the currency, he defied any legislation to regulate it. The operations of commerce must be its natural regulators, and, therefore, these restrictions upon the issues of private banks were impolitic and unnecessary. Let them once secure the general principle of convertibility, let that principle be universally applied, and then they might safely allow unlimited issue—convertibility being a sufficient check. They were told to look at the banks of the United States; but he contended that their fate by no means constituted a case in point. The bankers of the United States had not, in fact, regulated their conductor conducted their business upon banking principles; they had been merchants as well as bankers, and failed in the one capacity rather than in the other. Let them look to Scotland, and see what had been there the result of competition in banking. In Scotland there was no restriction, and the system worked well. It was a mistake to suppose that the quantity of the circulation de-

835
pended upon the number of banks. It had not increased in Scotland with the growth of banking establishments, but was divided among them, and its extent regulated by the natural demands of the country. As Mr. Blair said, in his evidence, no one in Scotland had any inducement to keep notes in his pocket. The currency in this country had been very much contracted by the establishment of savings banks. Joint-stock banks had also tended to produce the same effect, by taking money out of general circulation by, in many instances, offering interest for its use. He thought the country ought not to be led away by the attacks of the right hon. Baronet at the head of the Government, and reiterated to-night by the hon. Member for the Tower Hamlets, respecting the abuses of private banking. It was most unfair to judge, by the strict rules of banking, of establishments which had not been conducted upon those principles. The failures among these establishments, cited by the right hon. Baronet, could not be traced to over issues. The great failure of Wright's bank was an instance of this. The mere question, therefore, of the issues of private banks had no bearing whatever upon the general question of circulation and currency; and, in point of fact, he could distinctly show that the allegation of the right hon. Baronet as to the misconduct of the country banks with regard to over-issues of paper was not founded in justice, for Mr. Kennedy, before the Banking Committee, distinctly asserted that the provincial private banks had not acted so badly as they were accused of having done. Instances of a prudent system of banking could be plentifully supplied from Scotland, and therefore it was not fair to class all private banks of issue in the mode proposed by the right hon. Baronet. He contended that no proof whatever had been offered to the House, justifying or showing the necessity for the proposed restrictions; and, on the other side of the question, he would assert that those restrictions were not called for; nor would he go so far as America, in order to show this, but would content himself by referring to Scotland, and even Ireland. Neither was it true, as had been asserted, that when the Bank of England decreased its issues the country banks increased theirs proportionately. In point of fact, the Bank of England itself was the most flagrant offender of the two
836
in this respect. In fact when the right hon. Baronet stated, on a former evening, that the reason why he had proposed the present plan was, because of the amount of fluctuations in the issues of paper money that had taken place. But he had referred to the private banks alone, and not to the Bank of England, and this he considered was a most unfair proceeding. The right hon. Baronet had also referred to the great panics that had occured in the monetary circles; but he denied altogether that the private banks had occasined them, or had anything to do with them. Indeed, he could show that the Bank of England itself was alone to be blamed for those great convulsions; it was clear to him that the sudden disappearance of bullion was occasioned by the great fluctuations in the Bank issues, and by the consequent depreciation of the currency. When a mixed currency of paper and gold prevailed, as in this country, one of the consequences of any sudden issue of paper was to depreciate the value of the currency, and also that of food and labour; the gold, therefore, becoming cheaper, was exported to the Continent, and disappeared from the circulation. In the year 1819 there was an amount of 15,000,000 l. circulating in country bank notes, while there was 31,000,000 l. of Bank of England notes. The Committee which reported on the subject at that time recommended the Bank of England to reduce the amount of its circulation, and, in the following year (1820) the issue was brought down to 23,000,000 l., whilst the bullion had increased from 5,000,000 l. to 8,000,000 l. In 1822, the Bank of England had reduced its issue to 16,000,000 l., and its stock of bullion had risen in value to 11,000,000 l., thus showing a decrease in amount of its circulation between 1820 1822, of 15,767,000 l., and a corresponding increase in the amount of bullion in its coffers of 7,500,000 l. On the other hand, the decrease of the country circulation during the same period was from 15,000,000 l. to 7,200,000 l., showing a withdrawal of paper money in this quarter fully equal in proportion to that effected by the Bank of England. And what was the consequence of this change in the currency? Why, that instead of the Bank of England postponing to the full limits of time assigned the resumption of cash payments, it was actually paying its one pound notes in gold at the end of 1822, and it was en-

837
abled to do this because the rise in the value of the currency brought back the gold from the Continent, and enabled the Bank to meet the demands upon it. In the year 1823 the Bank of England again increased its issues to 18,500,000 l.; in 1825 they swelled to 24,000,000 l., whilst in 1826 the amount of its notes in circulation was 32,900,000 l., or 16,000,000 l. more than it had been in 1822. During the whole of this period the whole of the changes in the amount of circulation of country bank-notes did not exceed 2,000,000 l., a convincing proof of his assertion that the fluctuations of the country bank notes, so far from exceeding those created by the Bank of England, did not approach them within the vast amount of 14,000,000 l. These enormous fluctuations in the paper circulation of the country necessitated an equal amount of variation in the quantities of bullion in the Bank coffers, and accordingly it would be found that during this period no less than 13,000,000 l. of bullion was drawn from the Bank coffers. One of the consequences of fluctuation and of the depreciation in the currency was to raise the price of the public securities, and ultimately to enable the Government to pay off the Five per Cents. But this could never have taken place if competition had been permitted to the other banks of issue; and, therefore, as those banks were wholly guiltless of all participation in these fluctuations, the evils arising from them ought not to be charged to them, but ought to be laid at the right door. In fact they had no connection whatever with the matter; and he thought he had fully made out his case. For his own part he saw no reason why the Bank of England should enjoy a monopoly of the paper currency for sixty-live miles round London. If the Government would limit the circulation of bank notes to 40,000,000 l., there ought to be one-third of that amount in bullion always available in the Bank coffers, which would compel the Bank to have always about 13,000,000 l. of gold coin lying in the vaults; and it could not be doubted that this involved a great mistake in point of regulating the circulating medium; whereas, if the clause respecting the legal tender were repealed, and it should thus be rendered compulsory upon all bankers to pay notes of every denomination in cash upon presentation, then the amount of bullion would be scattered over the
838
whole country, instead of being centred all in one spot. The Bill of the right hon. Baronet, if it should pass into a law, would certainly have the beneficial effect of restricting the unbounded issues of paper money, and it would thereby prevent all similar castatrophes to those of 1825, 1837, and other periods of distress and panic; but, at the same time, it gave a preference to the Bank of England over its monetary competitors, and that was not fair. He was, however, ready to admit, that the Bill was an improvement upon the present state of banking; but so long as the Corn Laws were maintained on their present footing, and so long as a drain upon the metallic currency of the empire was kept up, year after year, by the necessity of paying foreign nations for their grain, not in manufactures but in gold, so long, he contended, it was useless to hope that the circulating medium could be preserved from occasional and even dangerous fluctuations in value and amount.
Mr. Wodehousesaid, he came from a part of the country where the banks were well regulated, where their security was ample, and where the people were perfectly well satisfied with their management, and as this measure seemed ultimately to lead to the removal of country banks altogether, he must, however reluctantly, vote with the hon. Member for Lambeth. He was reminded on the present occasion of an expression used by Mr. Huskisson —a man whom most of them knew, and all lamented—in a pamphlet which he wrote in 1810, relative to securities from country bankers, he said:—
"This is a part of the subject which it is material should be well understood, because many persons witnessing the great multiplication of country banks within the last few years, are disposed at first view to think that in them is the root of the evil. Let the parent stock be restored to its natural, healthy, and sound state, and the country will have nothing to apprehend from those ramifications of credit and circulation. No special interference with them would, in my opinion, be either requisite or beneficial."
He did not wish to extend the evils which had arisen in this as well as in other countries from too great a facility of credit being granted; but the evils arising from too great a contraction of credit were those which it was the duty of Parliament now more especially to consider. He hoped he should be excused for reading a passage from the Minutes of the Proceed-

839
ngs of Government as to the Unfunded Debt in 1815, which was drawn up by Lord Bexley when Chancellor of the Exchequer. The passage he referred to was this:—
"It is quite clear that in the state of distress pervading in 1816, the agricultural and commercial classes of the country, a loan could not have been contracted, except upon the most disadvantageous terms, and with great additional pressure on the public. The Government, had, therefore, no other alternative than to add to the unfunded debt, and this was done on that occasion by direct advances from the Bank, specially authorised by Parliament, and not in consequence of any private arrangement between Government and the Bank. The state of public distress continued during the whole of the year 1816, and existed at the opening of Parliament in 1817; the funds were then at 63, and Parliament at its opening immediately applied itself to measures for the purpose of relieving the general distress; and among other proceedings resorted to the expedient of an issue of Exchequer Bills for the relief of the poor, and the encouragement of public works. Any attempt, under these circumstances, to contract for a loan, would, for reasons similar to those in the preceding year, have counteracted the intentions of Parliament in the measures they were pursuing; and it appeared to be the less necessary as the foreign exchanges were favourable to this country, and as the Bank were progressively accumulating a large treasure in gold, though their circulation was between 27,000,000 l. and 29,000,000 l. In the spring and summer of the year 1817, a great improvement occurred in the internal situation of the country. The funds, which had been 63 at the beginning of the year, rose about the month of August to 81, and in October to 82 and upwards. In the summer and autumn of 1817 the exchanges became again unfavourable, and became more so towards Christmas, as was supposed at the time, in consequence of the transactions in the money markets abroad, and more particularly of the large loan to be negotiated for the French Government by English contractors."
The celebrated remonstrance on the part of the Bank in 1819 declared that they were ready to carry the Bill of that year into execution, but it was utterly impossible to do so without inflicting the most serious distress on the country. On which Lord Greenville remarked, "What business has the Bank to trouble us with any expression of opinion as to the distress of the country?" The hon. Gentleman quoted extracts from the King's speeches, in 1819,1820, 1821, and 1822, relative to the distress which existed at those periods, and adduced the authority of Lord Liverpool to prove that agricultural dis-
840
tress in 1822 was chiefly owing to the want of a sufficiently extended circulation in the country. It seemed to be the intention of the present Government on this question, to bind rather than to give further relaxation, and he deeply regretted it. The carrying out of this measure in that part of the country from which he came would be productive of serious injury, and he therefore felt at greater liberty to canvass the authorities on which it was founded. One of the principal witnesses examined before the Committee on Banks of Issue was Mr. Jones Loyd, of whose abilities and character no man was less disposed than he to speak disparagingly. He recollected, before the Committee was appointed, having once talked to him on the subject of currency and banking, and, happening to express an opinion that it was a most intricate and complicated question, "Oh!" said Mr. Jones Loyd, "it is only complicated because you make it so. Let me have have a Committee, and with the single assistance of the Member for Bridport, now for Kendal (Mr. Warburton), I will undertake that, in the course of a few weeks, a report shall be issued which he that runs may read, and to which universal consent must be given." Now, when it was reflected that this was a subject of special consideration with the greatest statesmen and philosophers which England had produced, including Burleigh, Bacon, and Newton, and that at a time when it was not clouded by a complicated system of taxation and paper money, how any man now could say that he could lay down rules respecting it which no one could object to, staggered him, and he naturally exclaimed,
"Hear this, ye gods, and wonder how you may."
It forcibly reminded him of the driver of an omnibus, who said, "I am ready to go over everything and everybody if I can only have my own cattle and the cad cries out "all right." He certainly would rather vote with, than against, the Government; but he had no alternative. He thought the measure fraught with great danger to the country, and therefore he should vote against it.
Mr. C. Buller: As he had the honour of aiding his hon. Friend in drawing up his Motion, he hoped he might be permitted to observe that he was much surprised at the nature of the objections

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taken to it. His hon. Friend the Member for Montrose stated he could not vote for it, though it seemed exactly to express the objections which he urged. The hon. Member for Norfolk, if he understood him (always an important preliminary), objected to an interference with the present banks; and why he should not vote for the Motion he could not comprehend. The only way to secure his vote in future would be first to find out what he meant, and then propose a resolution to directly the contrary. It seemed there was no pleasing anybody with regard to his resolution. The Chancellor of the Exchequer had recourse to a favourite taunt of Government, and said it would be more manly to have moved that the Bill be read a second time that day six months. But his hon. Friend expressed his meaning better than the Chancellor of the Exchequer did for him. It was not to the renewal of the Bank Charter, which was the main object of the Bill, that his hon. Friend objected. If he moved that the second reading be taken that day six months, it would have implied that he was opposed to that renewal. But when the objection went merely to that part of the Bill which interfered with the issue of Bank paper, his hon. Friend took the most straightforward and intelligent course by framing and proposing his resolution. It was not his intention to enter at large into this discussion, but as it was his misfortune to differ on the present occasion from those to whose opinions he was in the habit of attaching great weight on matters of political economy, he was anxious to state the reasons why he was extremely averse from the general principle laid down in this Bill as to the issue of Bank paper. It was the misfortune of those debates (though the question was asked very frequently), never to have had laid down by any competent authority what was the practical object of the proposed interference. Some gentlemen confined it simply to one object. They said there were large issues made by country banks, and those issues endangered the convertibility of the paper of the Bank of England. He could understand that; and it seemed to him that in favour of such a ground of objection there was much to be said. But if we looked at the phraseology of the right hon. Baronet at the head of the Government, this Bill was to put an end to all the evils which were the result of our
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large commercial system. The right hon. Baronet said it would check improvident speculation. The right hon. Baronet went further, for, by reading a list of the private banks which failed (of which he should presently show the inaccuracy), and coupling with it the probable consequences of the present measure, the right hon. Baronet produced an impression on the public mind that he was about to provide a sufficient remedy for those undue speculations which had led to such deplorable calamities. It seemed to him that the law, as it now stood, did all that legislation could do to place the circulation on a sound footing. And let the House understand that on the subject of the legislative measures passed since the war, he did not differ from those who passed them. He approved of the Bill of 1819, as being dictated by honesty and common sense. It put an end to a lie by Act of Parliament, and amounted to this, that Bank notes issued on a promise to pay, should be construed in the same was as if they conveyed any other promise. He approved of the legislation which put an end to the 1l. notes. He thought the Legislature rightly interfered not to regulate the amount in circulation, but to guard the poor and ignorant from frauds to which they were peculiarly liable. They had interfered to prevent the poor man from running up scores at public-houses. On the same ground, and on that only, it was right to prevent the circulation of small notes, because they went into the hands of the poorest classes, on whom fell the consequences of failures of banks without their having the necessary intelligence to judge of the solvency of the bankers. He thought a proper distinction had been drawn between the American system of banking and ours. He could not say that anything he had heard in that House or out of it, had proved that the disasters in America arose mainly from a bad system of banking. It was the consequence of a very wide system of speculation in all departments of trade. No doubt, the evils of this state of things were aggravated by the removal of the monopoly of the States bank, and the substitution of a system of banking, the best which human wit could devise, for ensuring perfect impunity to fraud in the circulation of small notes. There were not only dollar notes issued, but shin-plasters amounting only to half a dollar. These were circulated all over the country, it

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being impossible to know the stability of the bank that issued them, and every evil of the worst system of banking was the result. He also thought Parliament had acted perfectly right on the last occasion of their interference, in 1833, when the Bank Charter was renewed, and when the establishment of joint-stock banks was guaranteed. It seemed to him that nothing was more absurd than to limit the number of those engaged in banking. Surely the object of a good system of banking was to provide as widely as possible for the solvency of the bankers. To limit the numbers was exactly the way to prevent this: but when the law authorised those large associations of persons, and made all responsible for the debts of the firm, it took a good precaution against the evils of insolvency, and one which he believed had fully answered its purpose; for whatever were the evils of joint-stock banks, since the estates of the parties became liable for their notes, there was always sufficient to guard the public against the evil of their not being paid. He believed there was no instance of the failure of a joint-stock bank where their notes had not been all paid. As he understood the proposal of the right hon. Baronet, he contemplated a still further change in the banking system. To ensure the solvency of bankers, and the convertibility of their notes, used to be the sole object at which the Legislature aimed; but the right hon. Gentleman wished to check an uncontrolled power of issue, and to limit the fluctuation of the currency as if it were entirely metallic. For this purpose, the right hon. Baronet proposed to effect a separation between the banking and the issuing departments of the Bank, and that beyond a certain amount no notes should be issued, except on the security of gold actually in the coffers of the Bank; and on the same principle, the right hon. Baronet proposed to do that which he (Mr. Buller) thought the most objectionable part of his plan, to do away with the issue of notes by private banks, sooner or later, altogether. For no man could doubt, that the right i hon. Gentleman intended ultimately to put an end to all issues of notes by private banks, though as yet he had said nothing about the Scotch or Irish banks, knowing, perhaps, that these would be not unlikely to combine in formidable opposition. Let them rely upon it, however, that the right
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hon. Baronet merely postponed dealing with them in order that he might break the bundle of sticks to pieces in detail. He was taking the English banks first; when these were disposed of, then would come the turn of the Irish and Scotch banks. It appeared to him to be a most unsound principle to attempt to limit speculation by limiting a particular form of credit; the only effect of that attempt would be, that people would have recourse to some other form of credit, in all probability of a much less secure character. There was a phrase very generally made use of in discussions on this subject, which appeared to him to be the source, on all occasions, of very considerable error: he meant the phrase "paper money." It seemed to him that the term paper money was inconsistent with the proper meaning of the word money; because so far as he understood the word money, it meant some particular commodity, possessing intrinsic value in itself, which mankind, by common consent, had adopted as a medium of exchange. In this country gold had been adopted as the standard, because gold had an intrinsic value in itself; but the term money could hardly be deliberatively applied to anything which did not possess intrinsic value. Paper was merely a form of credit, highly useful because tangible, and easily transmissable, but still only a form of credit. It seemed to him that this was not a distinction without importance, because it distinguished the case of bank paper from the circumstances which lowered the value of money. Gold and silver money, like any other commodity, depended, in the first place, for its value on the cost of producing it, and secondly on the proportion of supply and demand. If you double the quantity of gold and silver in countries where they are the standard of exchange, you lessen their value proportionably. But paper money, having no intrinsic value in itself, depended for its value entirely on the gold or silver which it represented, and must be taken on precisely the same footing as bills of exchange, or checks on your banker, as simplified forms of credit and account. He did not understand how it could be imagined that by checking the issue of bank notes in the country you did anything beyond checking that particular form of credit; and it was clear to him that by checking that particular form of credit you in no degree

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checked the disposition to speculate and give credit; all you did was to drive people to resort to some other form of credit. Really, to hear some hon. Gentlemen, any one would suppose that all the great speculations in this country had been carried on simply and solely by means of bank notes, and that all that was needed to stop speculation was to stop the issue of notes, whereas bank notes formed but a very small part of the paper circulation of the country. He had in his hand an account of the quantity of bills of exchange in circulation at a particular period of several successive years, derived from a work of very great accuracy and authority, and he found that while in the year 1839, for example, the amount of bank paper in this country was between 26,000,000 l., and 27,000,000 l., the amount of bills of exchange in circulation at one time, in the same year, was 132,123,000 l., or five times the amount of the bank notes. It was, therefore quite absurd to talk of bank notes as being the circulating medium, the fluctuations of which were the sole occasion of the fluctuation of prices, or to lay it down so decisively as it was laid down, that prices could be kept steady by keeping bank notes within a certain limit. He would repeat, that the only effect of checking the issues of notes in the way proposed and intended, would be, that the people would have recourse to some other form of credit, to bills of exchange, and which could hardly be checked by the Legislature or by Government. You hear of 3,000,000 being done in one day at the clearing house, and of only 200,000 l., of this being actually passed; this at once showed what proportion bank notes bear to the circulation. Suppose you were to put an end altogether to English country notes, and Irish and Scotch, depend upon it there was something in the credit system, in the speculative transactions of this great country, which had its roots deeper than any Legislature or any Government could reach. The whole matter depended upon the simple question of supply and demand; upon the disposition of mankind to speculate; and so long as seasons remained uncertain, so long as various circumstances continued from time to time to arise, interfering between supply and demand, so long as some men were fools enough to speculate unwisely, and others were fools enough to give credit unwisely, so long would all the disad-
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vantages and evils of unwise speculation and unwise credit, and commercial crises continue to be experienced, without being at all obviated, as some hon. Gentlemen seemed to think, by putting down country bank notes. What did they expect to get by substituting one form of credit for another? It appeared to him, that of all forms of credit, bank notes were beyond question the safest. In bills of exchange you were much more liable to be deceived as to the solvency of the parties. He did not mean in the regular transactions carried on in this, and other great commercial places, where, in the usual course of business, such bills only passed, for the most part, among parties conversant with the character of each other; but, certainly, in the country towns to substitute bills of exchange for the notes of known banks, would be to substitute a form of credit of a much less substantial and secure description than that which now prevailed. Suppose that you, in the manner proposed, prevent a man in a country town from getting the accommodation he has heretofore obtained from the town banker, say 1,000 l., for some purpose, you do not any the more check speculation, you only introduce another form of credit of a far less safe description, extending over a great number of persons, extending even to wages; whereas, as the matter now stands, it is simplified into a question of the solvency of the particular bank. The right hon. Gentleman did not in this Bill propose to interfere with the banking system of the private banks; all he applied himself to was what he called the great evil of country banks issuing notes of their own. The right hon. Baronet had given a list of eighty-one banks, which had failed in a certain period, of which twenty-nine were banks of issue. It was unfortunate that the right hon. Baronet had not given fuller details on the latter point. He found, from careful inquiries, that, since 1838, there had been only twenty-three bankruptcies of banks of issue. The others were London banks, which, not issuing notes of their own, could not be charged with having occasioned the evils attributed to over issue; he had also in his band a list of bankers who had failed in consequence of their losses from other speculations unconnected with the banks, and who were only registered as bankers, because they held shares in joint stock banks. It appeared to him that nothing could be

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more clear, from the whole evidence before the Committee of 1841, than the fact that the circulation of the country banks did not in any way add to undue speculation. Gentlemen seemed to imagine, that if a person in the country wanted to speculate, he had nothing to do but go to the country banker and ask him to lend him as much money as he wanted, and that the country banker was always exceedingly glad to accommodate his customer, and get interest upon the loan, by issuing as many notes as were wanted. Now, there was much overwhelming and decisive evidence from the country bankers of England and Scotland, that it was utterly impossible for any country banker at his pleasure to increase to any extent the amount of notes regularly circulating in his district. He could not coin money in this way at his mere discretion, or to any extent increase the local circulation; for all the bankers agreed in stating, that any banker who issued a quantity of notes that were not wanted for the circulation of the district, would have them returned to him by some other banker, or by his own customers, in a very few days, and he must supply cash to meet them. The fact was, that in this, as in all other commercial questions more especially, Gentlemen would take into consideration the various circumstances influencing supply and demand in order to account for results to which their attention was called; but seizing upon some one supposed prime agent, made use of it to account in full for all the phenomena that had presented themselves. He objected to this plan because it was a delusive plan, as purporting to guarantee the country against evils which no legislature, no government could guard it against. He objected to it still more because he considered, that as far as it could be operative at all, it would operate most injuriously by substituting an unsafe for a safe form of credit. He did not conceive the House was justified in interring with private interests, unless some decided public advantage could be shown. He did not see why the country banks should be branded as public enemies, or even as public officers. Parliament had never treated them as such, had never secured them a certain income, or given them salaries, and, therefore, unless some great public advantage were to be gained thereby, the House would not be justified in cutting down
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their profits. And what principle did the right hon. Gentleman adopt in limiting the circulation of the country notes? He had taken the average of the two years in which the circulation of these banks had been notoriously the smallest, and he had said that they should not henceforth carry their circulation beyond that point. Now, he had taken great pains to go through the lists in the Report of the Committee on Banks of Issue, and he found that the average amount of notes of country banks in circulation during the five or six years ending 1840, had been 11,000,000, whereas the average selected by the right hon. Baronet was only 8,000,000; so that he was going to cut down the circulation of these banks in this summary manner, to the extent of no less than 3,000,000, and the reduction would be even greater. . When hon. Gentlemen gravely talked about the commercial crisis, the great trading failures of this country, being attributable to the issue of country notes, they had need to be told, as they had been told by his hon. Friend, that in France, where circulation is almost entirely metallic, the amount of bankruptcies is far greater in any given period than in this country. Further, let him ask, were there no parts of the country in which country notes did not circulate? Was there not the district within the monopoly of the Bank of England, extending sixty-five miles round the metropolis? Was there not Lancashire, in which no banks of issue existed? Were there not these we large districts, in which only Bank of England notes circulated, and had no bankruptcies taken place in these two large districts? He would answer the question. In Lancashire, free though it was from the alleged ruinous increase of country notes, 1,300 bankruptcies had occurred out of the entire number of 7,800 bankruptcies which had taken place in six years. In these 1,300 cases it could not be said that country notes were the source of the evil, and in these districts it was clear speculation was as rife as in any other part of the country. He could not sit down without complimenting the Government on the liberal disposition, which they had shown in preparing and supporting this Bill, to derive information and council from the hitherto scouted Economists. It was highly satisfactory to see Government now throw aside that tone of contempt which heretofore was

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indulged in by men in authority in this country towards men of science; to see that they were at last ready to take counsel with the great authorities in political economy, and not only to listen to their suggestions, but even to adopt their plans as Acts of Parliament. The very plan before the House, which the right hon. Baronet had so ably explained and commented upon, which doubtless would become the law of the land, and which the Government deserved the greatest credit for having brought forward, was the invention and plan, not of the Government, but of Messrs. Jones Loyd and Norman. He would, however, venture to suggest to the right hon. Baronet, that as he was thus disposed to adopt the views of the Political Economy Club, he would have done well to have begun with adopting those opinions on which that Club was unanimously agreed, instead of the present proposition, on which there prevailed among the Members of the Club considerable differences of opinion, and which the Government appeared to have adopted without mature consideration of those different views, seeing that the proposition involved several features which were new in political science. If the Government was really desirous of taking advice from the Economy Club, let them take their opinion on a subject on which they were perfectly unanimous, on which men of all schools in political science among them were entirely in accord; let them take their opinion on the Corn Laws, and thus begin at the right end.
Mr. Mastermanwas disposed to assent to the second reading of the Bill, but he must say he thought there was an injustice proposed in reference to the country bankers, which he hoped would be remedied in Committee. The average of the two years selected by the right hon. Baronet was notoriously much below the fair average of their circulation, and he trusted, therefore, that a higher average, extending, say over five years, would be taken. A memorial had been presented to the right hon. Baronet the First Lord of the Treasury on the part of the London bankers, which had in view the object of obtaining a power of expansion on certain occasions when it became requisite, but he feared from a communication which he had that the head of the Government could not agree to that power of expansion. He hoped, however, that a little further time
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would be given to consider the request which had been made, for it was one of very great importance. He thought it was a difficult point to settle that fourteen millions was to be the exact amount of money required at any particular period, or under any circumstances. Now, all that the bankers who signed the memorial asked, was, that the public mind might be set at ease, by granting a power of expansion to meet a particular crisis; and he could assure the House that the signatures to the memorial were attached to it from the most honest and correct feelings for the public advantage.
Mr. Warburtonsaid it had been asked what was the object of the Bill? It was not to prevent speculation, for no Bill could prevent that—it was not to prevent bankruptcy, no Bill could effect that; but it was to insure convertibility. It appeared, from the evidence before the Committee, and from the statement of the hon. Member for Warwickshire, that the country bankers did not conform to the exchanges in their issues, thus omitting that which all the advocates of convertibility held to be indispensable. Now, the only objection which could be maintained against the measure was an objection having reference to that, and it was said, that as the Bank of England were to contract and expand its issues with the stock of bullion, there was not the same power given as regarded the country circulation. Now, he approved of the measure, although it did not give the same power to country paper to contract and expand as it gave to the issues of the Bank of England. It had been asked what would be the effect of appointing a maximum? The only consequence was, that in this great and wealthy country, the circulation of which was adequate for all its purposes, a small restriction was to be made, which was to be substituted by gold, and was it to be supposed that a country which could support an expenditure of 100,000,000 l., in a year during the war could not meet that necessity, and that in order to provide for that restriction it could not provide once for all the small amount of gold that would be necessary in consequence of the diminution of paper currency? During the last year of the war the country endured an expense of 120,000,000 l., and could it then be imagined that there could be any difficulty in its providing three or

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four millions of gold to make up for that restriction? He thought that the hon. Member for Warwickshire had exaggerated the effect of this measure in contracting the currency. Another statement of the hon. Member for Warwickshire was, that a great deal of gold was expected to be obtained by Russia from newly discovered mines, but that Russia was jealous of our power, and therefore Russia would not allow the gold to come to this country, but would keep all the gold to itself. Why, gold would pass over all obstacles, and when our army wanted supplies at Toulouse, Mr. Rothschild conveyed the necessary funds to them through the French lines. It was absurd to say that the comparatively poor country of Russia could lock up all the gold of its mines, and prevent us having it if we wanted it. With regard to the hon. Member for Lambeth, he had created a giant, and then he slew him. He had misrepresented the object of the present Bill. He said that its object was to prevent speculation and bankruptcies. Now, the Bill would do this, and did not profess to do this; and no one who was the advocate of it as increasing convertibility could say that it was intended to produce that effect. It was intended to ensure convertibility, and that it would ensure. With respect to the effect of additional credit in raising prices, it might be true that it did not produce a permanent rise of prices, but it produced a rise of prices for a time. It did not follow that because a depreciation was not permanent, it was, therefore, not the result of certain circumstances for a time; but it was quite evident, that giving additional credit—giving additional power to purchase, must have the effect of raising prices for a time. He was glad that the Government had refused the application of the London bankers to grant a power of expansion in times of peculiar pressure —he was glad they refused it, for agreeing to such a proposal would be quite fatal to the Government plan. It would be introducing the principle of expansion in the very time when the greatest difficulty would attend its introduction, and would be, so far as it went, opposed to the principle of convertibility in the plan of the Government. The only sound principle of convertibility appeared to be to take a fixed amount of gold and securities, and to allow the issue to contract and expand accordingly. He was of opinion, that the
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plan of the Government ought to be adopted, and that Ministers deserved the thanks of the country for it.
Mr. Darbysaid, that if the plan which was proposed to be adopted with regard to the Bank of England were confined solely to it, and not extended to the country bankers, it would produce a great deal of difficulty in the commercial transactions of those who had commercial transactions with country bankers. It was impossible to say what difficulties might ensue, if they left one portion untouched, whilst they touched upon another. The country bankers only demanded a power of expansion to meet the circumstances that might arise, and that the average should be taken for five years. At present the plan was placed on too limited a basis, and the country bankers complained of that, as it would be calculated to place those who received accommodation from country bankers in a difficult position. It had been stated before the Committee that a large amount of mercantile transactions and the business of manufacturing was effected by bills of exchange, and they ought to consider how those parties who used those bills of exchange were to be effected by the plan that was proposed by the Government. He had taken the trouble to ascertain the opinions of country bankers on this point, and they all agreed in anticipating great difficulty from the proposed plan, if there were no alterations. He admitted that the country bankers might often, at particular periods, formerly have made over issues, but within the last few years they had contracted their issues, and had been particular in avoiding any over issue. He had listened with attention to the plan of the Government, and to the debate on it, and he was of opinion that there ought to be in certain cases such an expansion as would meet the wants of the public. The wants of the public might be questionable in some cases as to its meaning, for instance, an individual carrying on any speculation might, in order to extend his operations, require more accommodation, and yet it could not be said that the public required it; but there were, notwithstanding, particular periods in which the wants of the public, without reference to speculation, required additional extension, and whether the refusal to grant it would produce great difficulty and inconvenience, and cause persons to contract their regular commercial opera-

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tions. He had many communications with country bankers, and he was bound to state that they did not agree with the hon. Member for Lambeth in his views. The hon. Member for Lambeth said that the advantages of a mixed currency was, that when gold flowed out of the country, the mixed currency would not be affected by it. Now, that was as much as to say, that the less gold the more notes, and the more gold the less notes, which was not, in his opinion, a sound principle. The country banks admitted that, if there was a restriction as regarded the Bank of England, there ought also to be a restriction as regarded the country banks, but they complained that the maximum fixed for country bankers was not sufficient. If they took away a portion of the accommodation which parties had hitherto received from country bankers, would they desire to see it made up for by small bills of exchange? It was worth considering whether or not they might not super induce greater evils in that respect by their plan than those they sought to remedy. They ought to begin the change which they were about to introduce on a sound basis, and not to take a course that might create great inconvenience. Those who were best acquainted with the subject were anxious that this measure, which was still only an experiment, should be proceeded with in such a manner as would not cause commercial operations to be contracted, or injuriously affect the general commercial interests of the country.
Mr. Gisbornewas opposed to what he considered to be the injudicious course, on the part of the Government and the Legislature, of endeavouring to restrain and direct credit, as regards the commercial transactions of the country, by Act of Parliament. The subject had been covered under a load of blue books, and smothered by Parliamentary Returns; and a vast amount of ingenious discussions had been expended on it at both sides of the House; but if any hon. Member were to bring common sense and a moderate acquaintance with commercial affairs to the discussion of the subject, he would be more likely to come to a proper conclusion with reference to it, than the most subtle disputator, or the most able pamphleteer—whether such pamphleteer were the hon. Member for Halifax or the Tower Hamlets. The question for them to consider was, whether every person in a mer-
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cantile transaction was to trust whomsoever he pleased, and under what circumstances he pleased. The negative of that was the principle of the Bill, but he maintained that every man engaged in mercantile transactions, ought to trust whom and how he pleased. No man could say that generally, and in the abstract, the Legisture ought to control mercantile transactions; but the advocates of one bank of issue, analysed credit to its elements, and said that it ought to be restricted by law. To put a simple case, if A went to B, and said he wanted to buy goods, B not knowing; him, would not credit him. A said that he had the promise of C, whom B knew, to pay in three months, and B then said that if A signed his name on the back of the bill, to indicate that he would pay it in case C did not, then he might have the goods. That was a transaction which went on constantly in this as well as in all other mercantile countries, and it was one of a nature which did not require to be interfered with; and the advocates of interference admitted that it was a perfectly harmless transaction. They said, however, that if the promise of C to pay, instead of being a promise to pay in three months, was a promise to pay whenever he was asked, that then it assumed a character which made it absolutely necessary to interfere. They knew by Returns laid on the Table of the House, that there were immense transactions constantly carried on by that means, and that comparatively a small amount was carried on by promises to pay on demand; and yet the Legislature thought fit to interfere with the smaller proportion of those transactions, whilst they did not interfere with the larger. The next argument was, that the State ought to have credit in its transactions. He was perfectly willing that if the State had credit, it should use it in the same way as any other party. He was willing that his right hon. Friend the Chancellor of the Exchequer, when he had payments to make, should use his credit. He should like to see him cut up his deficiency bills into credits. In that case he would be better off, however, than other parties; for while others would be required to promise to pay, it would only be necessary for him to promise to receive. If he would have written upon shreds of paper, "I promise to receive this for 1l.,. in any payment into the Exchequer," and. sign it "Henry Goulburn,"

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he thought he would find it the most popular form of credit that had been known in the country, and the Government would derive great benefit from it. Of course, this could only be done as far as the recipient was willing to take it, and then there was a security against any depreciation. The next argnment against the permission of issuing bank notes was, that the multiplicity of issues led to excess. That argument was perfectly inconsistent with reason and with the evidence taken before the Committee. What proof was there of excess? Gentlemen spoke as if there were persons disposed to issue notes without a consideration. But no man could get a bank note without either buying it or hiring it, and if both that party and the issuer could make a profit of the transaction, he considered that a proof that the note was wanted, and that there was no excess. It was said again that paper was not only depreciated itself by excess, but that it depreciated the gold. That argument was founded upon just principles, and principles which he thought were at the bottom of this question. The phrase, however, which he should use, was not that the gold was depreciated, but that the paper prevented its appreciation at its due value. It was indisputably true, that every form of credit whether a bank note or a bill of exchange, prevented the appreciation of gold. The right hon. Gentleman when he introduced this measure, gave the House a very clear definition of "a pound." He (Mr. Gisborne) would now give a short definition of "money." Money was simply the instrument by which we effected more barters or exchanges of commodities, which always must be the ultimate result of all commerce and trading. It was impossible to deny that the precious metals were a safer currency than any other; but they were at the same time a more expensive and cumbrous one. If credit were perfect, we could dispense with currency. If men who were trusted by everybody could go to and fro like the precious metals to effect the exchange of commodities, we should dispense with the metals. And this was the whole effect of paper. Another charge against bank notes was, that they would endanger the convertibility of gold in the country, and none had ever said that it was doubtful whether the Bank of England would pay. But it was a mere question of expense. The Bank has always
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been able to pay. Gentlemen had also talked of a national degradation from the Bank of England going to the Bank of France for gold, but the Bank must get gold where it could, and so long as it had anything to give in return, there was no degradation. The only risk of convertibility on the part of the Bank, which we saw, was compelling the Bank to lend 14,000,000 l. to the Government, which it had not power to call in. He contended, that all interference by legislation with the credit between man and man, was mischievous, and had been attended by a series of disasters. In Scotland we had made no law, and had no calamity. We had left the Scotch to decide whom they should trust, and they determined to trust none but safe banks; while England and Ireland we had endeavoured to control the circulation, and the result was too well known. What he contended for was, that the people should be left to judge for themselves. Take off your leading-strings, and the child would soon walk very well, and would have fewer tumbles, and broken heads, and bloody noses than under your guidance. Since the circulation had been taken into the hands of the Government, we had had nothing but a series of calamities, which were made the pretext for further legislation. On these grounds he should support the Motion of the hon. Member for Lambeth.
Sir R. Peelmust say that having listened with great attention to the speeches which had been made in the course of the discussion, he could not reconcile the opinion of any one man who had spoken in favour of the Motion of the hon. Member for Lambeth, with the maintenance of the principle upon which this Bill was founded. They all professed to recognise the great doctrine of a metallic currency —they all admitted that we ought to maintain a metallic standard, but there was not one of them, from the hon. Gentleman who had commenced the debate, to the hon. Gentleman who had just concluded his speech, who did not appear to entertain an opinion—whatever the professions might be—that a metallic standard ought to be abandoned. [Mr. Hawes: "No, no."] The hon. Gentleman had certainly been loud in his professions of adherence to a metallic standard, and to the great principles upon which the Report of the Bullion Committee was founded, but although the commencement of the

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hon. Gentleman's speech was a declaration that the determination of that Committee was right, yet the hon. Gentleman argued that the facts which it had collected led to a different conclusion. The hon. Gentleman said that paper was not depreciated during the suspension of cash payments. That he did not expect to hear, and he had never before heard such a declaration from any one who professed an adherence to the opinions of the Bullion Committee. A declaration more hostile to that Committee than for the hon. Gentleman to state, this night, in the year 1844, that during the suspension of cash payments, inconvertible paper was not depreciated. What then, were all the attacks upon the Bill of 1819, he had never heard, for restoring a gold currency without foundation? Was it untrue that the agricultural produce of the kingdom was raised in price during the war, in consequence of an inconvertible paper currency, and did the return to cash payments make no difference whatever in all the engagements that had been entered into? The hon. Gentleman said you might have sent any quantity of gold to the Continent at any time, and purchased articles as cheap there as in England, and realized as large a profit here, and the hon. Gentleman referred to various articles for the purpose of showing that prices were not affected by the paper being inconvertible. Why, how vain was the discussion as to prices at particular periods, for the purpose of drawing any inference from them as to the state of the currency. Look at the prices of manufactured cotton. That was the argument which the late Mr. Alderman Waithman was continually using. He said, "While you require the same amount of taxes, the price of cotton goods has fallen off." But surely, with the improvements in machinery, with the reduction of the price of the raw material, and with our great command of capital, it would have been marvellous if there had not been a great decrease of price. And what inference did the hon. Gentleman draw from the prices of those particular commodities with respect to the currency? Did the hon. Gentleman know what took place with respect to silver during the Bank Restriction? The hon. Gentleman said, "Oh, you must not estimate the depreciation by the price of gold." But did the hon. Gentleman recollect, during the suspension of cash payments, an attempt
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to issue silver? That was not then a legal tender: it was not the standard of value. Certain dollars, however, were issued for the purpose of supplying the place of gold, and it was discovered that the silver dollars soon followed the gold guineas, and disappeared from circulation. The hon. Gentleman said paper was not depreciated. But as an Order in Council was issued increasing the value of silver, and what had been issued at 4s., the Mint price, was allowed to circulate at 4s. 6d., and this kept the silver currency in circulation. A new value was given to the dollar, according to the depreciated value of the paper; and what you had attempted in vain to circulate at the Mint price, as soon as a new value was placed upon it, according to the depreciated paper, remained in circulation. For the hon. Gentleman to contend that, during the inconvertible paper currency, it was not depreciated, and prices were not affected, was a blow at the Report of the Bullion Committee which he should not have expected from one who professed to adhere to its opinions. It was a contradiction of facts which he thought every man acknowledged. If the doctrine of the hon. Gentleman were correct, he should not have escaped much abuse and calumny for attempting to restore gold currency in 1819. The hon. Gentleman had referred to the United States, and to the pamphlet of M. Galatin, for the purpose of showing that the analogy of the United States was inapplicable to this country. Why should the example of the United States be inapplicable to this country? There were joint-stock banks in the United States— there was a paper currency, nominally convertible into gold on demand. As far as regarded the parties and their property, there was every appearance of a perfect guarantee for solvency; but there was unlimited competition of issue, and the consequence was bankruptcy and general failure. In 1811, there was in the United States the State Bank, in some respects corresponding to the Bank of England— having an imperfect control over the issues, because it was well conducted, and maintained the principle of convertibility; and as the notes of other banks could be turned, by exchange, into notes of the central bank, it possessed some control over the issues of other banks. In 1811, the first central bank was abolished. In three years afterwards there was a uni-

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versal suspension of cash payments, in consequence of that imperfect check having been removed. In a few years afterwards—about 1818, another central bank was established, and it ceased in 1833. Again, in a few years all the batiks of the United States, twice in succession, were found suspending their specie payments. Was not that a strong proof of the advantage of a central bank, and of a complete control over the issues? This was an example of another country of great resources, with a large amount of capital, sufficient to command good banking establishments; and if he showed that on two occasions, within a short period while a central bank existed, that other establishments were preserved, and that after the control of the central bank had been removed by the Government, notwithstanding regulations to ensure solvency, notwithstanding the universal profession of convertibility, there occurred universal bankruptcy, and suspension of cash payments, he thought that was a case perfectly applicable to this country, and a proof of the advantages of central control. He would take the opinions of the two highest authorities in the United States on this subject. He could not name two higher authorities than Mr. Galatin and Mr. Webster. And what said Mr. Galatin, who had been quoted by the hon. Member for Lambeth? He said that
"The creation of new state banks to fill the chasm which was the natural consequence of the dissolution of the bank of the United States, and, as was usual under such circumstances, the expectations of great profits, had led to the establishment of a greater number than were wanted; and as the salutary regulating power of the bank of the United States no longer existed, the issues were increased beyond what circumstances rendered necessary,—that it was his deliberate opinion that the suspension might have been prevented at the time it took place had the former Bank of the United States been in existence—that the exaggerated increase of the state banks occasioned by its dissolution, would not have occurred had that bank still have retained power over those bodies and checked their issues."
If the example of a great country, and the authority of great writers, could have any bearing upon this country, that example and that authority were in favour of his argument. But what said Mr. Webster, in his speech on the Treasury Bill, on the 12th of March 1838, effecting the banking of that country.
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"I lay it down as an unquestionable principle that no paper can be made equal and kept equal to gold and silver but such as is convertible into gold and silver on demand; but I have gone further, and still go further than this, and I contend that even controvertibility, though itself indispensable, is not a certain and unfailing ground of reliance. There is a liability to excessive issues of gold, even while paper is convertible at will. Of this there can be no doubt. Where, then, shall a regulator be found? What principle of prevention do we rely upon?"
Here was a gentleman, not indulging in speculation, but acquainted with the principles of banking in the United States, originally adhering to the doctrines of Adam Smith and Mr. Ricardo, that convertibility on demand was sufficient to check issues, yet, warned by experience, in his own country, acknowledging that with unlimited competition even convertibility on demand was not a security against over issue. If the United States were to be quoted at all, it was in favour of the principles embodied in the present Bill. And what was the case in our own country? Did he propose to disturb any perfect and successful system of currency? He took it for granted that they all adhered to a metallic standard and the principle of convertibility, but it was said, agreeing with those principles that there was not sufficient ground for interference? Why, what was our experience during the last twenty years? In that period had we not many proofs of the necessity of legislative interference to maintain the principle of convertibility. There had been four monetary crises—in 1825, 1832, 1836-1837, and 1839—and there was in each of these, an increase in the issues of country bank paper; in each there was proof that the issues were not made conformable to the exchanges, but that an increase of the country bank paper had taken place, when, if there were truth in the principle for which he contended, there ought to have been a reduction, and thus in each period there had subsequently arisen the necessity for a rapid and ruinous contraction. The hon. Gentleman who had spoken last had said, that the Bank of England was always able to protect itself, and to prevent its notes from being discredited. He knew it was. He knew that when the paroxysm was at its height, and it became the duty of the Bank to make great efforts, it could by means of great sacrifices, save itself and ensure

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continued convertibility. The Bank could always maintain its credit; it could always cover its own notes; but by a tremendous sacrifice of the mercantile and other interests. That was what he wished to prevent, and it was not to do that which had been attributed to him, of leaving the country banks wholly at the mercy of the Bank of England. So far was he from doing that, that he would compel the Bank of England to conform to certain principles, advantageous to the public and to private bankers, which, at certain periods of monetary crises, the Bank had neglected. He wished to prevent the Bank from doing that which it has done—from issuing its notes to meet the demands for deposits. He said to the Bank, there were certain principles laid down, and it must conform to them—that it might issue notes on securities, but to the limited amount of 14,000,000 l.—the whole of the issue above that amount must be based on gold. But then it was said this would be a great restriction upon the issues. Now, they took security against the possibility of there being too great a restriction upon the issues, because if the Bank restricted the issue of its notes till they became more valuable than coin, then every man had a right to take gold to the Bank and get notes for it. That was his answer to the objection; and those who did not admit it to be a good answer, did not admit the principle upon which the measure is founded. The principle is, that as the paper promises to pay in gold, it ought to conform to gold; and he said it would be no accommodation whatever to commerce if bankers were to be allowed to coin their personal credit into money instead of their capital. He said then, that every precaution has been taken on the one hand, that the Bank shall not issue paper beyond the proper amount by compelling the Bank to give notes in exchange for gold. And on the other hand, we take security that the Bank shall not restrict its issues below the necessary amount, by giving to the holder of gold the power of demanding bank notes. But then it was said that restriction imposed upon the issue of private paper would subject the country to the greatest inconvenience. It was said, also, that the only effect of their interference in discrediting the paper issues of the private banks would be to make men invent some other species of paper credit for themselves, to be substituted
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for country notes. Now, if country paper were necessary to agricultural prosperity, why had not that question been answered which he had put before? Why was it that in eight or ten of the greatest agricultural counties the issue of the country paper does not exceed 1,300,000 l.? He had shewn that in Sussex, Middlesex, Kent, Surrey, Cambridgeshire, Oxfordshire, part of Norfolk, and the greatest part of Suffolk, all situated within a radius of sixty-five miles from London,—that in all those counties the necessity of the district were provided for by an issue of country bank paper to the amount of only 1,300,000 l.; and supposing that the country banks were to restrict that issue, do not believe that the Bank of England would refuse to supply its place. Or supposing the country banks should wish to substitute the Bank of England paper for their own—to deal with the Bank of England as no less than sixty banks dealt with it at this moment—the Bank of England would give them its paper and pay a commission of 1 per cent. on the use of it. If the restrictions on the issues of country paper would, as it has been said, lead to the issuing of bills of exchange to supply its place, why, he asked, have they not been issued within the districts to which he had referred? The Bank of England provides a circulation for that district, amounting, I believe, to 6,000,000 l., the remainder 1,300,000 l. being supplied by country bank paper. Why have not bills of exchange been used there? Because the circulation is sufficient, and because there is confidence in the Bank of England. It is said that the inhabitants of that district are accustomed to the use of Bank of England paper, but that there will be a prejudice in other parts of the country against it. Depend upon it, a very little experience would remove that difficulty, and that a very short trial would remove the prejudice which it is supposed exists against the circulation of Bank of England paper, which would soon be found acceptable in the agricultural districts. But would they tell him how it happened that in some of the principal manufacturing districts there are scarcely any banks of issue, and that the whole of their wants are supplied by Bank of England paper. Take Birmingham for example. He apprehended, that no great proportion of the paper used in that town consists of country notes. The Bank of England at

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this moment circulated 621,000 l. in notes in Birmingham, and he doubted if there was 100,000 l. more in country notes. [Mr. Muntz: Not so much.] Then that was the amount of paper circulation in that great manufacturing district. There they contrived to carry on their trade, and yet required only a paper circulation of 700,000 l. and still but 100,000 l. of that was in country notes. Were there any Bills of Exchange issued there to supply the deficiency of the circulation? If there were any apprehension as to the Bank of England paper, there could be a supply of country paper in the district; but the proportions in which they circulated were as had been mentioned. If there were a deficiency, did Bills of Exchange supply it? [Mr. Gisborne believed they did.] He doubted it very much, at least he never heard that the circulation were supplied by Bills of Exchange. Of course there were Bill of Exchange used for the purpose of commerce; but he had never before heard that they had been issued for the purpose of supplying the local circulation of 5l. notes. The circulation of Gloucester was supplied by the Bank of England with notes to the amount of 107,000 l. At Manchester it might be supposed that its great commercial transactions would be supplied by the notes of country banks. The Bank of England supplied it with a circulation of 2,167,000 l. He believed that almost the whole of the circulation of Manchester was supplied by the Bank of England. Now, he had never heard of a want of circulation in Manchester. The notes of the Bank of England were sufficient. They had Bills of Exchange there for carrying on their great transactions, but not for the purpose of supplying in any way a local circulation. In Liverpool the Bank of England supplied the circulation to the extent of 1,000,000 l. They might depend upon it that where a vacuum was felt, notes would be issued consistent with the principle which the maintenance of the standard of value required. They might depend upon it that the Bank of England would be willing to fill up the vacuum, but if the Bank of England were unwilling, then they had not to depend upon its good will, for they had always had it in their power to command the issue of Bank of England notes. Let it be supposed that there was a restriction to the amount of one ninth on the country issue, then the
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country banks and the joint-stock banks would have nothing else to do than to keep in London such an amount of available securities as would enable them to command and ensure Bank of England notes to supply the banks in the country. If the Bank should refuse, which the Bank would not—if it should refuse to issue paper to supply the void, then they did not depend upon the good will of the Bank, they could by a small sacrifice have the void supplied by the exertions of the country bankers. All that was required from them was, not to submit to a restriction which would be an inconvenience. They could, by a deposit of securities, command a supply of paper, and with a small amount of difficulty than under the present regulations. The hon. Gentleman asked him to define what he meant by money? and the hon. Gentleman said that he had not, on a former occasion defined it. Now he had already stated that by money he meant either the coin of the realm or that species of paper credit, named a promissory note, which, passing from hand to hand, and not requiring any personal guarantee beyond the credit of the issuer, supplies the place of money. He stated that he thought there was a clear distinction between a promissory note payable on demand, without any personal guarantee beyond the credit of the issuer, and any other form of public credit; and that he had a strong impression, that if they wanted a meta standard, with a circulating medium supposed to take the place of gold, if could not be maintained upon any other basis than the actual and instant convertibility of the paper in circulation. With that system he thought they might leave without restriction and interference those other forms of paper credit, which are a proper superstructure on the basis of a metallic circulation and a paper circulation equivalent in value to gold. The hon. Gentleman opposite said, that they ought not to interfere with the dealings between man and man; another hon. Gentleman said, that though private banks had failed, there was no instance of misconduct on the part of joint-stock banks. That hon. Gentleman, however, corrected himself by saying, that there were no proofs that in the ultimate winding-up of the affairs of these banks, the notes issued by them had not been paid to the holder. Why that might be true—it might be that

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by calling upon all the unfortunate shareholders in those banks, they had contrived after the lapse of, perhaps four or five years, to pay the holders of notes; but he did not think that the House would be of opinion that that was a satisfactory arrangement. The hon. Gentleman, the Member for Nottingham (Mr. Gisborne) said, that he should vote for the proposition that there was not sufficient evidence to justify an interference with banks of issue—what evidence would the hon. Gentleman have? He had already stated the dividends paid by a number of banks of issue: and he held in his hand a detailed account of the failure of different banks, among which he found the Bank of Manchester, the Northern and Central Bank, the Norfolk and Norwich Joint-stock Bank, the Commercial Bank of England, the Imperial Bank, the Yorkshire Agricultural and Commercial Banking Company, the Isle of Wight Joint Stock Company, the Isle of Man Bank, the Leamington Bank, and several others, which present such details of fraudulent practices in many instances as he had never before heard of. These instances clearly proved the policy of interference to the extent which he proposed, namely, requiring that the original prospectus should be deposited, that the names of partners should be given, and that there should be some provisions, imposing a responsibility on the directors who are to govern the establishments. If he wanted conclusive proofs of the policy of interfering with respect to the future regulations of joint-stock banks, the statement which he held in his hand, would afford that proof. Here for instance, is the Commercial Bank of England, with a nominal capital of 500,000 l., and a paid-up capital of 260,000 l., started in the year 1834, and which by the year 1840 had lost its entire capital, and about 30,000 l. or 40,000 l. in addition. In February 1840, only four months before it came to an end, the directors stated to the proprietors, that "they continued to stand firm in the confidence of the public," and that "the profits of the bank for the previous half-year had been larger than for any similar period since its establishment." This bank had advanced to one man 180,000 l., and one of the directors stated, that that man could not have got credit for 500 l. for two years in the town in which he lived from any other establishment.
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Although these banks acted in this reckless manner, these were all banks of issue, and their notes were freely circulated amongst all classes of society, from the wealthiest down to the very poorest. These parties were all subject to the consequences of these reckless proceedings, and yet the hon. Gentleman said, that Parliament should not interfere with these banks in any way. The hon. Gentleman said, that these banks ought to be left to themselves, to do as they pleased, as was the case in Scotland. But he (Sir R. Peel) said, that when they found these banks establishing themselves in towns, and buying up the private banks, in order to make and extend their connexion; when he saw that the notes issued by these banks were imposed upon all sorts of persons, many of whom had not the power to reject them, he considered that there was an amount of misery entailed upon society which called aloud for the interference of this House. He was not condemning all the joint-stock banks; on the contrary, he believed that many of them had conferred great benefits upon society; but it was by the legitimate application of their capital in advancing loans upon fair interest. But he said it was fair to the respectable establishments, conducted in this manner, to protect them from the injury which must be done to them, in common with the community, by the reckless proceedings of other establishments, which were not conducted with any regard to fair commercial principles. The hon. and learned Member for Liskeard complained, in the course of his speech, that there had been some misapprehension in the returns of the number of failures of bankers since 1838, owing, as he said, to persons who had become bankrupts from other causes, but who happened to be shareholders in joint-stock banks, having been described in their fiats as private bankers, and the hon. and learned Gentleman referred to the highest authority, namely, the returns in the Accountant's Office in the Court of Bankruptcy, in confirmation of what he said. A statement of this kind had come to him (Sir R. Peel) before, and he immediately wrote to Mr. Montague, of that office, requesting him to make some enquiry into the subject. Mr. Montague wrote him a reply, which he would read to the House. Mr. Montague stated—
"It is perfectly true that there had been some persons against whom fiats had been

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taken out, who had been wrongly described as bankers, because they happened to be shareholders in country banks; but that the whole number of these cases was only six out of eighty-six."
So that there had been an error as the ton. and learned Gentleman had stated, but only to a very small amount. He had stated so fully on a former occasion the principal grounds upon which he supported the measure now proposed by Her Majesty's Government, that he would not, at this late hour of the night, detain the House by going any further over the same grounds. He trusted that the House would bear in mind, that during the last twenty years there had been four decisive proofs, at four distinct periods, that under the present system of currency, the principle of convertibility was endangered. The first was in 1825, when the Bank was exposed to the greatest danger, brought on not altogether by the increase of country bank paper, but because there bad been a great increase of the circulation at a time when, if the effects of the exchanges had been properly attended to, there ought to have been a reduction. In 1832, again there was a panic in the commercial world, and the Bank was again endangered; and the circumstances under which the danger was then averted, if he were to enter into an explanation of them, were of such a nature as only to confirm the principles which he was now contending for. In 1837 and 1839, there were fresh panics, attended by similar circumstances. The Manchester Chamber of Commerce declared that those dis. tresses were consequent upon the fluctuations in the circulating medium of the country, and added, that from this cause there had been a loss upon five articles of manufacture, including woollen and hardware, of 40,000,000 l. of capital. The hon. Member for Stockport (Mr. Cobden) gave evidence before the Committee of the enormous amount of loss of capital, and of moral and social misery which had been the result within a very short period of these fluctuations. The hon. Member for Paisley referred to the year 1839, and asked what they could do if such a state of things were to come again, and the bullion in the Bank were reduced from 9,000,000 l. to 2,000,000 l.? Now, to this, he (Sir R. Peel) answered that he hoped that the Bank of England by acting on the principles of this measure, would
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avert the possibility of such an occurrence. In 1839, the Bank of England had to lean for assistance upon the Bank of France, tending to introduce confusion and embarrassment into the monetary affairs of this country. Therefore, in twenty years, proofs had from time to time been afforded that the present system was objectionable. It was the duty of the Government to propose measures which they thought would be effectual for the amendment of that system; and yet taking care not to harm existing interests. They knew the difficulties they might have to contend with, if a combination of personal interests were permitted to prevail, but they had acted from a sense of public duty, and to all the great principles of the measure before the House they steadily adhered. If difficulties were thrown in its way the House must make itself responsible for them, and not the Government, if the present measure failed and a period of increased issue again arrived. If that should happen, and again unwarranted speculation should ensue from that increased issue, Ministers would have the satisfaction of reflecting that they had given the advice, and taken the course which they thought best calculated to avert the evil. They were not wild enough to suppose that this measure would prevent all undue speculation or insure an invariable paper currency; but there was a species of speculation dependent on an undue issue of paper, which they hoped the measure would check. Speculation could not be prevented in a commercial community, but it might be aggravated by a species of paper credit within the power of Parliament; and though Ministers did not hope nor aim at checking legitimate speculation—though they admitted that they could not prevent illegitimate speculation, which was, perhaps, necessarily incident to mercantile enterprise, particularly in a country like this—still they asked Parliament by assenting to this measure, not to aggravate evils it could not control, nor refuse to check those which came properly within its jurisdiction.
Mr. W. Williamsrose amid loud cries of "Divide." He said, that he did not wish the debate to be adjourned because he was opposed to the Bill, for he meant to support it in all its stages, but because it was a measure of great importance, affecting various great interests, and upon which many hon. Members might wish to

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speak. If it were the wish of the House that no adjournment should take place, he was quite ready to avail himself of the opportunity of delivering his sentiments on a future day on the question that the Speaker leave the Chair for the purpose of going into the Committee.
Colonel Sibthorpevindicated country bankers, and maintained that they formed a body of the utmost respectability; if he had 100,000 l. in money he would rather entrust it to country bankers than to the monopolising Bank of England. The two right hon. Baronets (Sir R. Peel and Sir J. Graham) had abandoned the opinions they expressed in 1828, and the hon. Member for Montrose (Mr. Hume) was now opposed to opinions he had formerly delivered.
Mr. Plumptrefelt some apprehension as to the probable bearing and tendency of this Bill. Different shades of feeling prevailed among the private bankers generally with regard to the measure, but he believed that the great proportion of them were strongly opposed to it. At the same time, the majority of the body did not wish to obstruct its present progress. There were, however, certain details which they hoped might be altered while the Bill was passing through Committee. The right hon. Baronet had intimated that he intended to leave the private banks much in the same situation in which he found them, but that could not be the case, when he took as the standard of their issue the average issue of the last two years, those years being periods of great contraction. He thought, at all events, the right hon. Baronet ought to give them the maximum instead of the average issue during that time. His fears with respect to this measure were not so much with reference to the effect it might have upon private bankers, as to its effects on the interests of the country generally. He would not, however, obstruct the progress of the Bill in its present stage.
Mr. Muntzdisagreed entirely with the right hon. Baronet as to the most important point in the Bill—namely, the amount of the Standard of value. He could never carry out the provisions of this Bill, as long as he maintained the present Corn Laws. While the price of corn was 50 per cent higher in England than in the rest of Europe, the price of gold could not be maintained at the same rate. The two
870
measures could never work consistently together. The right hon. Baronet having acknowledged the rate of exchange and the depreciation of silver (which was 5s. 6d. and not 4s. 6d. the dollar); how could he expect effectually to carry out the principle which he now laid down? The official value of our exports in 1815, was 42,000,000 l., and the declared value 51,000,000 l. In 1843, the official value was 117,000,000 l., and the declared value 51,000,000 l. These facts strikingly illustrated the extreme variations which took place in consequence of the variation of the value of money. If this Bill were carried into effect, the pressure would be so great on all classes in this country, that it would be impossible to maintain the Corn Laws. He was not, as had been represented, for fixing the standard of value by the price of corn. He was an advocate of the principle laid down by Adam Smith, who said,
"The best standard of value is the average price of corn, but as the variation in the price of corn, from the change of circumstances and the seasons, makes a vacillation in that, the best standard that can possibly be adopted is the silver standard after it has been originally fixed by the price of corn."
It was on that point, and almost only on that point, that he (Mr. Muntz) differed from the right hon. Baronet. Every measure proposed during the last thirty years for the improvement of the monetary system of this country had been unsuccessful. That was a serious consideration for those who supported the present measure. The name of Mr. Jones Loyd had been brought forward in connection with the present Bill. He was satisfied that the Bill was on the plan recommended by Mr. Loyd; but the right hon. Baronet was not on that account to be found fault with for adopting it. The Gentlemen who usually oppose the Government were now supporting them, simply because the measure was in accordance with Mr. Loyd's views. He could understand that, but he could not understand how Gentlemen who wanted to keep up the value of their property by an artificial law, could consent to the destruction of their property by supporting the present measure.
The House divided on the question that the words proposed to be left out stand part of the question:—Ayes 185; Noes 30: Majority 155.

List of the AYES.

Acland, Sir T. D.

Farnham, E. B.

A'Court, Capt.

Filmer, Sir E.

Acton, Col.

Fitzmaarice, hon. W.

Adderley, C. B.

Flower, Sir J.

Aldam, W.

Forster, M.

Alford, Visct.

Fox, C. R.

Allix, J. P.

Fox, S. L.

Antrobus, E.

Fremantle, rt. hn. Sir T.

Bailey, J.

Gaskell, J. Milnes.

Baillie, Col.

Gladstone, rt. ho. W. E.

Baird, W.

Gladstone, Capt.

Baring, hon. W. B.

Glynne, Sir S. R

Baring, rt. hon. F. T.

Gordon, hon. Capt.

Baring, T.

Gore, M.

Barnard, E. G.

Gore, W.O.

Barneby, J.

Goulburn, rt. hon. H.

Barrington, Visct.

Graham, rt. hon. Sir J.

Baskerville, T. B. M.

Greenall, P.

Beckett, W.

Greene, T.

Bentinck, Lord G.

Grimston, Visct.

Blackburne, J. I.

Grogan, E.

Boldero, H.G.

Hale, R. B.

Bolfield, B.

Halford, Sir H.

Bowles, Adm.

Hanmer, Sir J.

Bowring, Dr.

Harcourt, G. G.

Bramston, T. W.

Hardy, J.

Brisco, M.

Heathcoat, J.

Brotherton, J.

Heathcote, Sir W.

Bruce, Lord E.

Henley, J. W.

Bruges, W. H. L.

Hepburn, Sir T. B.

Buckley, E.

Hill, Lord M.

Buller, Sir J. Y.

Hillsborough, Earl of

Burrell, Sir C. M.

Hodgson, R.

Campbell, Sir H.

Hope, hon. C.

Campbell, J. H.

Howard, P. H.

Cardwell, E.

Howick, Visct.

Chapman, A.

Hughes, W. B.

Clay, Sir W.

Hume, J.

Clayton, R. R.

Hussey, A.

Clerk, Sir G.

Hussey, T.

Cockburn, rt. hn. Sir G.

Ingestre, Visct.

Collett, W. R.

James, W.

Collett, J.

Jermyn, Earl

Colvile, C. R.

Kemble, H.

Corry, rt. hon. H.

Kirk, P.

Courtenay, Lord

Knatchbull, rt. hn. Sir E

Cripps, W.

Knight, H. G.

Currie, R.

Lascelles, hon. W. S.

Darby, G.

Legh, G. C.

Denison, W. J.

Lennox, Lord A.

Denison, E. B.

Liddell, hon. H. T.

Dickinson, F. H.

Lincoln, Earl of

Divett, E.

Lockhart, W.

Duncannon, Visct.

Lyall, G.

Duncombe, hon. A.

Lygon, hon. Gen.

Dundas, D.

McGeachy, F. A.

East, J. B.

Mackenzie, W. F.

Egerton, W. T.

McNeill, D.

Egerton, Sir P.

Mainwaring, T.

Eliot, Lord

Marshall, W.

Elphinstone, H.

Martin, J.

Entwisle, W.

Martin, C. W.

Escott, B.

Masterman, J.

Estcourt, T. G. B.

Meynell, Capt.

Evans, W.

Mildmay, H. St. J.

872

Mitchell, T. A.

Stansfield, W. R. C.

Morgan. O.

Stanton, W. H.

Murray, C. R. S.

Stuart, H.

Neeld, J.

Stock, Mr. Serj.

Nicholl, rt. hon. J.

Strutt, E.

Norreys, Lord

Sutton, hon. H. M.

Packe, C. W.

Thesiger, Sir F.

Palmerston, Visct.

Thornley, T.

Patten, J. W.

Thornhill, G.

Peel, rt. hon. Sir R.

Towneley, J.

Peel, J.

Trench, Sir F. W.

Pennant, hon. Col.

Trevor, hon. G. R.

Philips, M.

Trotter, J.

Pigot, Sir R.

Vernon, G. H.

Plumptre, J. P.

Vesey, hon. T.

Pringle, A.

Vivian. J. H.

Rice, E. R.

Vivian, J. E.

Rolleston, Col.

Waddington, H. S.

Round, J.

Walker, R.

Rous, hon. Capt.

Warburton, H.

Rushbrooke, Col.

Wawn, J. T.

Russell, Lord J.

Whitmore, T. C.

Shaw, rt. hon. F.

Williams, W.

Smith, A.

Wood, C.

Smith, rt. hn. T. B. C.

Wortley, hon. J. S.

Smollett, A.

Yorke. H. R.

Somerset, Lord G.

TELLERS.

Sotheron, T. H. S.

Young, J.

Stanley, Lord

Baring, H.

List of the NOES.

Aglionby, H. A.

Morris, D.

Benett, J.

Newdegate, C. N.

Blewitt, R. J.

Ogle, S. C. H.

Borthwick, P.

Rashleigh, W.

Brocklehurst, J.

Redington, T. N.

Busfeild, W.

Scott, R.

D'Eyncourt, rt. hn. C. T

Sibthorp, Col.

Duncan, G.

Strickland, Sir G.

Fielden, J.

Talbot, C. R. M.

Ferguson, Col.

Trollope, Sir J.

Ferrand, W. B.

Wallace, R.

Forbes, W.

Wodehouse, E.

Gisborne, T.

Worsley, Lord

Hastie, A.

Hoskins, K.

TELLERS.

Johnson, Gen.

Hawes, B.

Mitcalfe, H.

Buller, C.

Bill read a second time.
House adjourned at a quarter before two o'clock.