§ MR. MUNTZ rose to move for a Select Committee to inquire how far the present monetary system was in accordance with the requirements of the country, and to consider if it could not be improved and amended. The hon. Member said, that six years had now elapsed since he had last addressed a word to the House on this subject. His reason for remaining silent was, that he wished to see the effect of the recent gold discoveries upon our existing laws; and though he was willing to admit that those discoveries had done something to remedy the evils of our present system, he must affirm that they had not done all that was required. One or two words at the outset were due to himself. He had often been accused in certain journals, whenever he happened to say anything on this subject, of being an advocate of uncontrovertible paper money; but he ventured to challenge any man to show that he had ever, during the forty years he had paid attention to this question, said or written a word which would fairly justify that representation. The late Sir Robert Peel and himself only differed on this question in one point—the rate of convertibility. Sir Robert Peel believed that our old monetary system as it existed previous to 1797 would be restored by his Act of 1844; while he (Mr. Muntz) thought that injustice would be created by recurring in any degree to the state of things which existed before that period. The only manner in which this question could be fairly investigated was by taking a retrospective view of our monetary system. To begin, then, with the reign of William the Conqueror. [Laughter.] Hon. Gentlemen might laugh, but that was almost the only period in which our monetary system was perfectly sound. In the reign of William the Conqueror a pound sterling was a pound weight of silver. There was no difficulty then in answering the question, "What is a pound?" Everybody knew that it was worth exactly a pound's weight of silver. So things continued down to the reign of Edward III., when alterations began to be made, the alterations being 1482 caused partly by the increase of population Further and very considerable changes were made in the time of Henry VIII. That celebrated character was not very nice as to what he did himself, or what I he allowed others to do; and in his reign the coin was so clipped that at last it sank to half the value it had when he first took the matter in hand. Queen Elizabeth was said to have restored the coinage; but he denied the correctness of that statement altogether. Elizabeth did not restore the coin, but she adapted it to the existing state of things, and made the coin of a certain value according to her own laws; but she never restored the coin to its former weight. It was, moreover, just about her time that the precious metals were discovered in South America, one effect of which was so great that the price of wheat was raised from 10s. to 40s. per quarter. Passing on to the reign of William III., large operations took place which materially altered the then existing state of things. The coinage had then become so seriously deteriorated that it became a question between the practical men and the philosophers, what ought to be done; and after long deliberation it was determined to restore the coinage. They called in the coin in circulation, and they recoined the light coin up to the full weight. They had not, however, money enough to carry out the operation to its full extent, there being a deficiency of £1,200,000. In this state of things they established the Bank of England, and borrowed all its capital, amounting to £1,200,000, for the purpose of completing the restoration of the coinage. The money thus borrowed has never been repaid to this time, but the Bank received an annuity of £90.000 on account of it. After the time of William III. the amount of paper circulation increased rapidly. In 1760 it was £4,000,000; in 1785 it was £7,000,000; in 1790 it was £11,000,000; and, in 1797, it was £16,000,000. As might have been expected, this rapid increase was the cause of the panics and misery at various periods, and produced the Bank Restriction Act. In 1810 the attention of Parliament was called to this subject, and the interest which the matter then excited ended in the appointment of the Bullion Committee. That Committee included many clever men; long discussions took place, and among the witnesses examined before it were the Governor and Deputy Governor of the Bank of England, who 1483 displayed a most remarkable ignorance of the first principles of monetary science. It considered the depreciation which had taken and was taking place, and recommended, in order to stop it, that there should be a return to cash payments. But the question at what time that should take place was not so easy to determine. Ultimately they agreed to a Resolution fixing the period for resumption at two years from the date of their Report; but they (the Committee) reported that they thought it might take place in two years; but they were of opinion that in that case it might be necessary to circulate the £5 notes for a few years longer. Experience has shown that if the Bank had attempted to return to cash payments at the time recommended this country would have become a province of France, and Napoleon would have ridden over the world. Fortunately, the recommendation of the Bullion Committee was not carried into effect, and the return to cash payments was suspended for some time. No definite idea, however, as to what ought to be done seems to have entered into the head of anybody, and matters went on in the same absurd manner as before. In 1816, a date was announced at which this return should take place, and the preparations made for it by the Bank of England, added to the effects of a bad harvest, produced such pressure and distress as he (Mr. Muntz) had never since seen equalled. Shortly before the date which had been fixed—and it showed the ignorance which prevailed on the subject—there were issued and circulated 6,000,000 sovereigns of the present standard. The result was, as might have been expected, had people taken the trouble to think and bear in mind the surrounding circumstances, every one of these sovereigns found their way into France, where they were melted down and recoined into French money. After this, the interval to elapse before the resumption of cash payments was extended, the circulation of paper increased, and in 1817 and 1818 there was a temporary prosperity equal to the previous depression. Soon afterwards agitation on the subject commenced, and then came the project of the Bill of 1819. The Bank was forced at once to act upon it, the pressure recommenced, and continued during; the years 1819, 1820, 1821, and 1822. In the last-named year the distress, especially of the agricultural interest, became so great, and the pressure so dangerous, that Lord Castlereagh proposed and carried a continuation 1484 of the circulation of £1 notes for three years to meet the demands of the time. This produced an excess of money, an extraordinary rise of prices, and a temporary prosperity during the years 1823, 1824, and 1825. But at the end of 1825, as might have been foreseen by any man, and as he (Mr. Muntz) foresaw and acted on to a great extent to his own advantage, there was a panic. The quantity of paper in circulation was so great that the price of produce was much higher than the value to be paid in gold; it was impossible that our exports should equal in value our imports; the balance of trade against us became considerable; that had to be paid in the precious metals, and so the panic was produced. After the panic, and the return to a low circulation, there were pressure and low prices from 1826 to 1830. In 1829 and 1830 the pressure was general throughout the kingdom. It produced a great outcry for a better Government and ended in the Reform Bill. Many men, of whom he (Mr. Muntz) was one, joined that agitation, not simply because they cared for a reform in the representative system for the sake of the reform itself, but because they considered it to be a means to an end. If it had been a mere question of reform in the abstract he should have taken no interest in it; but he hoped that that Bill would bring into the House of Commons a larger number of men practically conversant with the affairs of the country, and that thus the legislation of the country would be improved. About the time of which he had been speaking joint-stock banks came into existence, and these, of necessity, had a serious influence upon the monetary system of the country. The practice of circulating bills of exchange, which they introduced, had a considerable effect upon prices, and during the years 1835 and 1836 there was apparent prosperity. Still, however, the law remained in its old position, and there could be no difficulty in foreseeing the result. In the year 1835 he (Mr. Muntz) was examined before a Committee of that House. He then stated that there would be panic, and fixed the time of its occurrence in the last week of October or the first of November, that being the time at which the credits on the exports and imports would expire, and when the balance which there would be against this country would have to be paid in gold. His prognostication had been verified to the letter—the panic came as he had foretold; and he benefited 1485 largely by selling when things were dear, and buying when they were cheap. During the years 1836, 1837, 1838, 1839, and 1840 there was a great deal of pressure throughout the country. In 1840 things in general, the Whigs in particular, were in great distress. They tried every remedy but the right one; and eventually they retired, and Sir Robert Peel came in. The first thing he did was one which nobody expected him to do; he began to fiddle at the corn laws. The right hon. Baronet laboured under the difficulty of having to support two incompatible systems—the corn laws and the monetary laws. One or other he was ultimately obliged to give up; and as of the two he was least pledged to the corn laws, he abandoned these. In 1842 he fiddled at that law. Then came the Bank question of 1844, and the Act of that year, which was to make all things perfect. In his (Mr. Muntz's) opinion that Act was the necessary complement of the Act of 1819. If the Act of 1819 was right, the Act of 1844 was necessary. He could never, however, understand upon what principle the issue of notes without a reserve of bullion was limited to £14,000,000, except that the Government owed that sum to the Bank. That limit had no reference whatever to either the actual or the probable circulation. What was the result of that perfect Act? In 1847 the nation was on the verge of bankruptcy; in that year the Bank of England very narrowly escaped a stoppage of payment. The supporters of the system might say, "Oh, but we never changed the law, and yet the Bank weathered the storm." True the law was not changed; but a letter was written which the House would very well remember, and which in effect abrogated the law. If it had not been for the celebrated letter which did everything, although it was said to do nothing, that stoppage must have taken place. That letter showed people that all the money they had might be used. Things gradually righted themselves, and then men said, "It is not the law; the law has not been altered, only a letter has been written." That letter did all. It set the Bank free, and made people generally use their money, and we paddled on. After that came the railway speculation. Sir Robert Peel was very anxious to have a speculation. He said, "Whatever you do, make direct lines; "and he passed the direct Trent Valley line, which lost the London and North-Western £2,000,000. 1486 Another period of extreme pressure occurred in 1847, and extended over the succeeding years till 1850. Universal alarm prevailed, and, though few were aware of the cause, all were painfully sensible of the effect. But then came the discovery of gold—the greatest god-send ever known in the history of this country. It was one of the most extraordinary circumstances on record. He knew of nothing like it, for it happened at the very moment when the whole of our monetary system was going to blow up, and when nothing short of a miracle could preserve it from destruction. Such was the history of the monetary system of this country. He did not mean to deny that during the last twenty-three years there had been seasons of prosperity in this country; every one was aware that such was the case; but what he complained of was, that under the present system there was no means of insuring the continuance of prosperity for however brief a period. The evil of the present state of things was, that it was beset with uncertainty, and that when trade and commerce had got into a condition of prosperity there was no such thing as keeping them there. It was apparent that these seasons of pressure and disaster arose from the system, and not from purely natural causes, for he could point out periods when such evils had no existence. Hence it was that he asked for this Committee. He wanted an inquiry, whether it might not be possible to find out some rational and honest means by which to avoid those vacillations, panics, and pressures to which our commercial transactions were, to the great injury of all classes of the people, now periodically subjected. What stability could there be for mercantile operations in a country where the rate of discount upon bills was liable to vary from 2 to 10 or 12 per cent, as was not unfrequently the case in Leeds, Manchester, and other great scats of trade and manufacture? Was that a state of justice for the commercial interests? Was it a rational state of society? Was it not rather a system which enabled all the banks without exception to plunder the public? If Ministers were unable to devise a remedy for abuses so flagrant and evils so intolerable, let them resign the reins of government into other hands—that was all about it. Surely, when it was remembered that a century ago, or even half a century ago, such vacillations and vicissitudes as are now of common occurrence 1487 were unknown, it was not too much to conjecture that these modern evils must have some manner of connection with our present monetary system. All he wanted was a well-constituted Committee to examine into these circumstances, and to consider whether it might not be practicable to devise some system that would do justice to all persons and classes, and restore happiness and prosperity to the country.
§ MR. SPOONERseconded the Motion.
§
Motion made, and Question proposed—
That a Select Committee be appointed to inquire how far the present Monetary System is in accordance with the requirements of the Country, and to consider if it cannot be improved and amended.
§ MR. PEACOCKEsaid, he should support the Motion of the hon. Member for Birmingham; but he should do so on grounds very different from those put forward by the hon. Member himself—for he must disclaim being a disciple of the Birmingham school. It appeared to him that that hon. Gentleman had based his arguments upon three fallacies—the first being that the price of gold was fixed. It had been repeatedly demonstrated in that House that the very reverse was the fact. The price of gold was not fixed, while the value of the coin was fixed. For his own part, he regretted that the ounce of gold was not coined into four sovereigns; by that arrangement each sovereign would represent a quarter of an ounce, and the fact that the price was not fixed would be more distinctly fixed in the minds of the people. The next fallacy of the hon. Member was, that the high rate of interest arose from the fact that gold was in demand. High interest did not depend upon the price of gold any more than on that of corn, wool, or any other commodity. What the rate of interest really depended on was, the demand for capital. The rate of interest was low when capital was abundant, and high when it was scarce. One ounce of gold might be equivalent to half a quarter of corn, or to four quarters of corn; but still the rate of interest would be the same. A proof of this was afforded in the fact that, in the reigns of Queen Anne and George I. the relative value of the precious metals was higher and the rate of interest lower, namely, 3 per cent. The third fallacy of the hon Member was, that the Bank, as a bank of deposit, could control the circulation of the country. It had no such power. It might 1488 control the issue of notes, but certainly not that of coin. By the last Bank returns, it appeared that the amount of deposits was £12,964,000 to £13,000,000. Now, suppose that the Bank were to endeavour to contract the issue of notes, the depositors would only go to the Bank and draw out their deposits in bullion, so that in effect the process would only amount to the substitution of a bullion for a note circulation. Such being the fallacies which pervaded the speech of the hon. Member for Birmingham, it was not on the arguments of that hon. Gentleman that he (Mr. Peacocke) should support the Motion, but rather on the very high authority of the hon. Member for Westbury (Mr. J. Wilson). He regarded that hon. Gentleman as the highest authority on finance in the House; and an attentive perusal of his book on this subject would conduct a candid reader to the conclusion that the revision of the Bank Charter Act was highly desirable. One reason why he (Mr. Peacocke) thought the Bank of England Charter Act required some investigation was, because its fundamental principle, namely, that the currency should fluctuate according to the issue of the Bank, had wholly failed. A sufficient proof of Sir R. Peel's principle having entirely failed was afforded by the experience of the first four weeks of the present year. The following figures showed the relation between the increase of the circulation and the decrease of the bullion in the Bank of England in the month of January, 1856—
1st week in January:—Increase of circulation, £272,545; decrease of bullion, £161,602.2nd week of January:—Increase of circulation, £247,077; decrease of bullion, £283,234.3rd week of January:—Increase of circulation, £480,574; decrease of bullion, £119,958.4th week of January:—Decrease of circulation, £34,524; increase of bullion, £8,361.In all these cases, according to Sir Robert Peel's principle, there should have been a decrease of circulation when there was a decrease of bullion; but the contrary had been the fact, and the decrease in bullion had been accompanied by an increase of circulation. These facts distinctly showed that the principle of the Bunk Charter Act of 1844 had, at least so far as that point was concerned, completely broken down. As to the cause of high prices, common reason pointed out that when there was an export of bullion prices would be higher; and when there was a deficient harvest, or when from any other 1489 cause provisions were imported, there would be an export of gold to pay for those imports. The prediction of the hon. Member for Westbury as to the operation of the new Currency Bill, when he warned them of the intense and protracted suffering to which the manufacturing industry of the country would be exposed in the event of a failure in the harvest and the continuation of high prices, had in every respect been realised. Let it not be said that in seeking an inquiry into the working of the Bank Charter Act they were launching into the barren regions of abstract speculation, for they had the practical knowledge of how well the Scotch system of banking had succeeded, founded on the principle of unrestricted competition, with no other limit save the convertibility of the notes—In 1846, the trade of Scotland was carried on by £3,500,000. England and Wales, with a population only six times greater, required between £50,000,000 and £60,000,000. The banks of Scotland had £10,000,000 of capital and £30,000,000 of deposits; while the Bank of England had a capital of £14,500,000, with a deposit of only £10,000,000.One difficulty attending the extension of the principle of unrestricted competition to England, which appeared to have escaped Ricardo, Smith, and other high authorities, arose from the fact that the Bank of England's notes were a legal tender, and bore the nature therefore of a forced currency, men being compelled to accept them all over the kingdom in payment of debts, whether they had faith in the solvency of the Bank of England or not. As long, then, as this condition was upheld, so long we were obliged to provide for the convertibility of the Bank notes. For however able and prudent the management of the Bank of England might be, what was there to exempt it from the precarious accidents to which other banks were subject? In the United States joint-stock banks that were managed as well as ours, and which regularly published their accounts, were seen from time to time to become insolvent; and under the stimulus of a high profit, together with the influence of extensive commercial speculation, the Bank of England might also be led into carrying on transactions beyond the limit of its means, and by this means might become insolvent. Therefore, while our law declaring the Bank's notes a legal tender prevailed, it would not do to leave their convertibility entirely at the discretion of the managers of the Bank; but an extraneous 1490 check must be provided operating in some such manner as the existing restrictions. There was a passage in the Report of 1846 on Commercial Distress, which called for some remark. It was this—The Bank is a public institution possessed of special and exclusive privileges, standing in a peculiar relation to the Government, and exercising from the magnitude of its resources great influence over the general mercantile and monetary transactions of the country. These circumstances impose upon the Bank the duty of a consideration of the public interest, not indeed exacted or defined by law, but which Parliament in its various transactions with the Bank has always recognised, and which the Bank has never disclaimed.He protested strongly against the doctrine that the Bank of England had a duty to perform which did not coincide, but conflicted with its interests as a bank; for if the Report meant anything by this allusion to the duties of that establishment in relation to the "public interest," it meant that it ought to accommodate the public beyond the legitimate limits which its interests, as a Bank, prescribed. If the Bank departed from the ordinary law of supply and demand, and the established rules of political economy, it might, indeed, to some extent, palliate a crisis at its commencement, but must fearfully aggravate its subsequent evils. A deficiency of capital was analogous to a deficiency in the harvest. If, from a sentimental regard to the "public interest," the corndealers were in such a crisis to sell their corn at the ordinary rate, the available stock of food would speedily become exhausted, and unmitigated famine would be the certain consequence. So likewise a deficiency of capital must be met by a rising of the discounts; speculation must be checked, commercial transactions restricted, and accounts called in. If the Bank were to pursue a different course, and allow speculation to go on unlimitedly, there might be a flow of prosperity for a few months, but the monetary system must ere long break down, and panic and ruin would follow. For the reasons he had assigned, although dissenting from the principles of the hon. Gentleman, he would vote for his Motion, believing that some species of inquiry into the Bank Charter Act was imperatively demanded.
§ MR. DRUMMONDsaid, that it seemed to be the fashion, both in this House and out of it, to recommend examinations to ascertain whether men were competent 1491 for the situations to which they aspired. If that House, in an evil hour, consented to this Motion, he should strongly recommend it to direct an examination of the Members of the Committee to be made to ascertain whether at least they understand the Bullion Report—he asked no more. This question was more difficult of discussion than any other that he knew of, because it was, as nearly as any political subject could be, a question of pure science. It was easy for anybody to bring forward an array of isolated facts and tables showing so much export here and so much want of currency there, which could only serve further to puzzle and perplex an already most abstruse question. Unless they bore in mind that in speaking of values they must always hold the precious metals as a fixed standard, they would be beset on every side with utter confusion. The hon. Gentleman (Mr. Muntz) began, apparently much to the astonishment of the House, by going back to the time of William the Conqueror; but he might have reverted to a yet earlier period, and told them that the first transaction on record was that entered into by Abraham for the purchase of a field for the weight of 400 shekels of silver. Let us call our coin by what name we pleased—be it sovereigns or any other denomination—that coin must be the regulator of all our property, whether in land, in personalty, or in other kinds of possessions. The precious metals must be our sole standard and measure of value. Was it said that it was not so fixed a measure as a foot rule? That was very true, and he would tell them why. Fresh discoveries of gold had of late years been made. Those which were made in South America many years ago did not exercise the smallest influence on Europe until the lapse of more than half a century afterwards. Now, however, that intercourse between remote countries was so much easier than it used to be, the effect of such discoveries was of course much more speedily felt. It was perfectly true that the recent gold discoveries in Australia and elsewhere had acted in the same way as though the Bank of England had issued an enormous mass of paper. And what had been the consequence? "Increased prosperity," it would be answered; but those who said this forgot that the reaction had yet to come, and that their high prices and this prosperity, as it was termed, only encouraged an enormous production 1492 of our manufactures beyond any possible demand which the existing population of the world could create; the necessary effect of which was, that gold went out of the country in order to pay our debts. And in what did all this result? Why, unless the Bank should raise the rate of discount there would be a national bankruptcy; and whenever the Bank did raise the rate of discount people complained of distress. The hon. Member for Birmingham said a philosopher was a great fool. [Mr. MUNTZ: I did not say so.] At all events, the hon. Gentleman said, "Lord have mercy upon a country governed by philosophers," and he (Mr. Drummond) fully concurred in the opinion. The hon. Gentleman said that, upon this question, practical men were the only fit persons to consult. Almost everybody in that House had no doubt read a very amusing romance, called the History of England, by Mr. Macaulay, and they would probably remember the difficulty that was felt at the period of which he wrote upon this very question. There were then living two philosophers, who were supposed to be men of some sense—a certain Sir Isaac Newton and a gentleman named Locke; and they then inculcated the principle which he (Mr. Drummond) was endeavouring to impress upon the House—that to talk of the rise and fall of the metals was downright nonsense. At the time of the Bullion Report—which he was old enough to remember—there was certainly not one hanker or one merchant in the House who did not oppose the doctrines which the Report laid down. Sir Robert Peel was placed upon the Committee by Lord Hawkesbury in order that he might convert the Committee, but he was converted himself. He (Mr. Drummond) remembered that one very eminent banker wrote a book to show that there was no such thing as a pound, but that the currency was founded upon an ideal unit. He would venture to give one recommendation to the House. They could not, by any laws they passed, prevent the precious metals from being the sole measure of value. They might certainly, by Act of Parliament, greatly increase the distress; they might throw it upon one portion of the community, and relieve another; they might aggravate that distress in every way; but he believed the soundest advice he could give to the House was that which Mr. Arthur Young gave to the Convention at Paris, when he was asked what laws 1493 they should pass with reference to the price of corn. Mr. Young's reply was, "The best advice I can give you is, that you should order your clerk to put his inkstand down the throat of the first man who talks about corn." He (Mr. Drummond) thought if the House pursued the same course towards those who began to discuss the currency, they would confer a great benefit upon the country.
§ MR. MALINSsaid, that though he might incur the ridicule of the hon. Member for West Surrey (Mr. Drummond), he felt himself called upon to advise the Government to adopt the course so objectionable in the eyes of the hon. Gentleman. He thought that no man could remain indifferent to what had been passing in this country during the last few months. Great distress had arisen from time to time in consequence of the sudden fluctuations in the value of money; and he was of opinion that it was a subject which called for an immediate inquiry, whether the present law as to the issue of bank notes was founded upon a sound principle? Upon former occasions he had expressed his opinion that the Bill of the late Sir Robert Peel required modification. He did not believe that the question was at all so difficult a one as some persons appeared to think; and if the Members of that House would take the trouble to understand the question thoroughly, it was his impression that the Bill of Sir Robert Peel would not be maintained for one year. What was the state of the law before Sir Robert Peel passed his Bill? He did not mean to discuss the Act of 1819, which was a period of a great financial crisis—that measure might have been wise or unwise—he would not then offer any opinion upon it. From 1819 down to Peel's Bill of 1844 the bank note was by law convertible into gold upon demand. There was, however, this remarkable difference in the law between that period and the period following Sir Robert Peel's Bill. Previous to that measure the Bank was unrestricted as to the amount of notes it should issue—it was loft to the discretion of the governor and directors—but they were bound to pay gold for those notes upon demand. It would be found that under that system, the minimum rate of discount of the Bank of England was never below 4 per cent, and the maximum rate seldom exceeded 5 per cent; and the consequence was that sudden changes were rare, and the rate of discount seldom ruled 1494 high. Now, if there be one subject in which it was important that there should be steadiness, it was that relating to the value of money. In consequence of the discount never going below 4 per cent there were no such fluctuations in the value of money formerly as had, unfortunately, happened since Sir Robert Peel's Bill had become law. The right hon. Baronet by his measure introduced, for the first time, this most extraordinary operation—the discretion to issue as many notes as they pleased was taken away from the Bank of England, and they were bound down by positive law not to issue notes beyond a certain amount. It happened that the Government owed the Bank at that time £14,000,000. Sir Robert Peel divided the Bank into two departments. The one was called the Issue Department, and the other the Banking Department; and upon the day when the Act came into operation the securities representing the £14,000,000 of Government debt was put into the Issue Department, and that department was authorised to issue £14,000,000 of notes to the Banking Department, and as many more notes as represented the amount of gold in their coffers. He would assume that that amount was £10,000,000. The Issue Department accordingly handed over to the Banking Department £24,000,000 of notes. In consequence, however, of the screw that was thus put on the Bank, the amount of notes in circulation according to the last return was only £20,000,000 in round numbers. What was the consequence? the Bank had retained for their own use only £4,000,000, which was called "the reserve," or the unemployed notes. Now, the fallacy of Sir Robert Peel's Bill was this: he said that every note issued by the Bank of England should be convertible into gold upon demand, and he fixed upon the magic sum of £14,000,000, which he allowed them to issue without bullion. The Bank did issue that £14,000,000 of notes, every one of which was payable in gold, but which they had not an ounce of gold to pay with. But the fact was, that £24,000,000 of notes was issued, all of which it was provided should be payable in gold on demand, while the Bank had only £10,000,000 of gold with which to meet them. What was the consequence? In June last the amount of gold held by the Bank of England was more than £18,000,000, and the Bank had, 1495 therefore, the power of issuing notes to the value of £18,000,000 plus £14,000,000, altogether £32,000,000. The public had in use only £20,000,000 or £21,000,000 of notes, so that the Bank had notes unemployed or reserved to the amount of at least £11,000,000. The amount of gold in the hands of the Bank was now reduced to £10,000,000; the Bank, therefore, could issue only £24,000,000 of notes; the public circulation was about £19,000,000, and the unemployed notes amounted to £5,000,000. What was the effect upon the commercial transactions of this country? The bankers, whose purpose this state of the law answered perfectly well, watched the state of the reserve or unemployed notes, and as soon as the amount of gold began to diminish, the "screw," as it was called, was put on; all the commercial transactions of the country were deranged, and the derangement was felt by all classes, from the first merchant in London to the smallest shopkeeper in the kingdom. The operation might be assimilated to that of putting an animal under the receiver of an air-pump, which was being gradually exhausted of the air. The commercial interest of the country was in a similar manner exhausted by the depressing influence of the diminution of the quantity of money in circulation. As he had said, before 1844 the minimum rate of discount was never lower than 4 per cent. From the year 1844 to 1855 there had been no less than forty variations of the minimum rate of discount. During the year 1855, as they would find by looking into the "City article" of The Times, there had been no fewer than eight variations of the minimum rate of discount. When the amount of gold in the Bank was £18,000,000, the minimum rate was 2½ per cent; now, after we had been incurring a great expenditure to carry on the war, the minimum rate of discount for short bills was 6 per cent, and for bills exceeding two months, he believed, 7 per cent. During the last winter the rate of interest had gradually increased, and at present there was no immediate prospect of its being diminished. The error of Sir Robert Peel's Act, he apprehended, was the fixing upon the sum of £14,000,000, which, under any circumstances, the Bank might issue, and requiring their convertibility into gold upon demand. There would be some reason in the measure if Sir Robert Peel said that they should issue notes according to the amount of gold in the Bank; 1496 but it was quite evident that if there was only £10,000,000 of gold in the Bank, and that they could only issue £10,000,000 of notes, the commercial transactions of the country could not be carried on. He could not, however, see any rational principle in fixing upon the sum of £14,000,000 for which notes might be issued, and which could not be convertible into gold, as the Act of Sir Robert Peel required. The hon. Member for Surrey (Mr. Drummond) said this was a difficult question, and that they had better not talk about it, and he recommended that those who discussed the currency should be treated as Arthur Young said should be done to those who wrote about corn—cram their inkstands down their throats. But if it was unsafe to discuss this question now, it must have been equally so in 1844. Now, what took place in 1847 completely illustrated the evils of the system, and gave the country warning of the danger to which it was exposed. He would just say in passing that, but for the accidental absence from a division in the Committee of 1848 of the hon. Gentleman the Member for Huntingdon (Mr. T. Baring) and the late Mr. Herries, Sir Robert Peel's Bill would have been condemned by that Committee, the Members having been twelve for and ten against the measure. In the spring of 1847 the gold in the Bank fell very low, the "reserve" also fell to a very low amount, and the rate of interest rose very high; all the usual consequences of a commercial pressure followed. An improved state of things had subsequently taken place, and it was announced that the difficulty was over. Shortly afterwards, however, the pressure was resumed; the gold in the Bank gradually diminished until it was reduced to about £8,000,000. What then, was the state of the Bank? They had issued £14,000,000 of notes, which it was presumed were convertible into gold, although it was well known that there was no gold in the Bank to pay them. The Bank issued £8,000,000 of notes besides, according to the amount of gold in its coffers—the notes in actual circulation amounting to more than £20,000,000. In the month of October in the same year the unemployed notes amounted to no more than £2,000,000, and the Bank would then have been obliged to stop payment but for the letter issued on the 25th of October, which was signed by the noble Lord the Member for London (Lord J. Russell), who was then the First Lord of the Treasury, 1497 and the right hon. Baronet now at the head of the Admiralty (Sir C. Wood) who was then the Chancellor of the Exchequer. That letter authorised the Bank to go beyond the limit of the law—that was to say, they were no longer restrained to the issue of £14,000,000 plus the quantity of gold, but were authorised to issue any number of notes which they thought the state of the country required. Deputations from the banks in the country and in London were at that period waiting day by day on the Chancellor of the Exchequer, and at length a deputation of bankers and others waited upon the right hon. Gentleman and told him that the financial affairs of the country were in a most alarming state, and that unless something was immediately done to meet the crisis, there would inevitably be a stoppage; they declared that unless some steps were taken to relax the restrictions of Sir Robert Peel's Act, the commercial transactions of the country could not be carried on. Exchequer bills could not be cashed, and a merchant with £60,000 in silver in his possession at that time found himself unable to obtain bank notes for it—silver not being a legal tender—a system of hoarding had been carried on, and the greatest difficulties were experienced in the carrying on of commercial transactions. Well, immediately after the publication of the letter of the Government the pressure ceased; the system of hoarding was given up, money came out freely, bankers were able to accommodate the public, and trade went on prosperously; and all because it was known that the imaginary amount laid down by Sir Robert Peel's Act might be exceeded. It was thus proved by experience that Sir Robert Peel was wrong in fixing the amount to which the Bank might issue notes at £14,000,000, inasmuch as the circulation under such a restrictive system was found to be utterly insufficient to meet the demands of the country; and then at the last moment, the Government were obliged to relax the law. It was a matter of surprise to him that in the face of such facts, and with such experience, the Government had allowed so many years to elapse without making some provision for a permanent relaxation of the law. It was time, he thought, that this question should be fully considered. In looking over the proceedings of the Committee of 1848, he must say he was delighted with the rational views taken by the hon. Member for Westbury (Mr. Wilson), and he 1498 hoped they would have the assistance of that hon. Gentleman in carrying out the; same views now. Just let the House consider the fallacy under which the commercial classes were led to carry out their enterprises. In the month of June last, there were £18,000,000 of gold in the Bank, so that they could issue £32,000,000 of notes. They had unemployed £11,000,000 of notes, and the minimum rate of interest was only 2½ per cent. Everything went on prosperously, and commercial men entered with energy and apparent security into every department of business. The delusion which the Government then held up was, that money was cheap, and by that delusion they induced men to enter into engagements in that same month of June; but when the months of September and October came the gold had dropped down from £18,000,000 to £12,000,000, and the minimum rate of interest, instead of being 2½ per cent, rose to 5½ per cent. Men perfectly solvent, and generally most prudent in their speculations, were caught in the trap laid for them by Act of Parliament, and were ruined, because, before their engagements had come to maturity, the state of things had materially altered for the worse. Well, from June last to the present time gold had decreased from £18,000,000 to £10,000,000; they had no security that it would not continue to decrease, and he would ask the right hon. Gentleman the Chancellor of the Exchequer what he would do if it should go down from £10,000,000 to £6,000,000? Suppose the gold to diminish to £7,000,000, the quantity of notes issued would then be £21,000,000. Now, the country could not do without an average circulation of £20,000,000; and the reserve of unemployed notes would be, therefore, reduced to £1,000,000. What would the right hon. Gentleman do under such circumstances? What would be his position, and what security had he that in three months there would not be a national bankruptcy? Would the First Lord of the Treasury and the Chancellor of the Exchequer again write a letter authorising the Bank of England to violate the law? Well, then, he asked, whether it did not become a great country like this for its Government to be more prudent and far-seeing than they had hitherto shown themselves in respect to its pecuniary affairs; especially when it was now in great peril, and engaged besides in a war of which no man could foresee the termination? Would 1499 the Government have the hardihood to refuse the present Motion, which was one simply asking for an inquiry into this subject? Was it a sound state of things when the minimum rate of interest was 6 per cent, and when it was difficult to obtain money upon any terms? He believed that there was a small increase of £80,000 in gold in the Bank last week, and of £200,000 in the preceding week. Did the Government intend to leave the country exposed to those perils any longer? Will they refuse a Committee of Inquiry at such a time as this, when during the last four months there existed a greater anxiety on the subject than had ever been known before? He asked them to be wise in time, and not to prolong the continuance of such a state of things, until an indignant public shall rise and say, "We will have no more of your money laws—we will have no more of your absurd and ridiculous enactments to hamper our commercial transactions." He asked the Government to appoint a Committee to inquire whether there should not be a relaxation of Sir Robert Peel's Bill. In other words, whether they ought not to do by law that which they had done against the law in 1847, when they took the only course that could have saved the country from national bankruptcy.
§ MR. POLLARD-URQUHARTSir, I am aware how much I, as a country gentleman—and representative of an Irish county—and belonging, therefore, to a class who are supposed to be more familiar with potatoes and poor rates than with banking and bullion—require the indulgence of the House in attempting to address it on the subject brought forward by the hon. Member for Birmingham; but in doing so, I beg to assure them that I shall adhere to my usual attribute of brevity.
Sir, the hon. Member for Wallingford has said that he will support the Motion, because Sir R. Peel's Act of 1844 requires revision. Sir, the Motion of the hon. Member for Birmingham seems to me to contain a great deal more than the revision of the Act of 1844; the question now before the House appears to me to amount to this—shall we, or shall we not, consent to any Motion which would even lead to the appearance, or in any way give rise to the impression out of doors, that we had any the slightest intention of tampering with our monetary system, either by altering the standard of 1500 value, or diminishing the security which the public have for the immediate and sure convertibility of the bank-notes? For depend upon it, whatever assurances may be made to the contrary, these things will be associated in the minds of the public with the proposition of the hon. Member for Birmingham; and should the House consent to it, rest assured that the idea will go abroad that we do not regard either of these events with as holy a horror as we ought; and this would be tantamount to a confession that we were no longer as jealously and scrupulously careful about maintaining our credit as we had formerly been—an impression which would be at all times injurious to us, and which could not but inflict immediate material damage on us, by diminishing our credit, and so raising the rate of interest, when the necessity of meeting the bills thrown upon us by the war shall compel us to have recourse to another loan. And, Sir, as I think that nothing should induce us to reopen the currency question at this moment, so I think it would be more especially inexpedient—I had almost said more especially dangerous—to do so after the speech of the hon. Member for Birmingham, as our consenting to his Motion would, in some degree, appear as if we had been convinced by his reasoning, or adopted his principles.
Sir, the hon. Member for Birmingham has dwelt at some length, and with considerable pathos, on the disasters that accrued to this country by the return to cash payments in 1819. I fully admit that the shock caused to a great many interests by that return was great, and the damages and losses resulting there from were severe; yet retaining my own opinion that, all these circumstances considered, the Act was nevertheless a just, wise, and salutary measure, I admit that the question n whether, even for the sake of maintaining our good faith with the national creditor, and for the sake of the many material advantages that are always the reward of good faith, we were wise in encountering all the difficulties and dangers with which it was certain to be followed, might still be a fail subject for discussion in a historic or politico-economic Society; yet I think that almost every assembly of men brought together for practical legislation will agree in the expediency of abiding by an Act passed thirty-seven years ago, regulating the standard of currency, and will allow that the lowering it now would inflict upon one 1501 class of people as much injury as restoring it to its former value in 1819 did inflict upon another class. But wore than that, I think that a very little consideration of the question, will show that any inclination on the part of the Legislature of a desire to tamper with the currency, or any indifference about maintaining the standard of value, will now be attended with more injury than benefit to the very classes whom it is designed to assist—I mean those classes upon whom the Act of 1819, for a time, pressed most severely—the owners of land subject to mortgages or family settlements, all men trading with borrowed capital, and, to a certain extent also, all payers of taxes. For, I think, it will be allowed that all these classes are now benefiting by the lower rate of interest that has, generally speaking, for the last twenty years or more prevailed in the country; and any one who has given any consideration to the causes which regulate the interest of money will allow that the strict maintenance of our national credit, is one reason why we have been able to effect such a lowering of the interest of our debt since 1819. Everybody allows that high interest and bad security on the one hand, and on the other low interest and good security, always go together; in short, other things remaining the same, the interest of money varies merely as the credit of the borrower, whether that borrower be an individual or a nation; and depend upon it the interest of our debt has been kept down by the same causes which would have enabled any private individual to lower the interest of the debts due by himself. Sir, it was, if I recollect right, in the year 1822, the third year after the return to cash payments, that English credit rose so high, that the then Chancellor of the Exchequer, Mr. Vansittart, was enabled to reduce the interest of our 5 per cent stock to 3½ per cent—in itself no small relief to the taxpayers of the nation, and I think that at the same time the interest of all money lent on private securities underwent a corresponding reduction. I believe that the interest of most mortgages at that time fell from 5 to 4 per cent, and that all advances for the purposes of trade or accommodation underwent a proportionate diminution. That was no small relief to those upon whom the Act of 1819 pressed most severely—the fall in the interest of money from 5 to 4 per cent reduced the pressure of their obligations by exactly 20 per cent, a reduction which I think must have fully 1502 compensated for the nominal depreciation in the value of real property and of stock in trade, caused by the return to cash payments a few years previously. Will anybody maintain that this fall in the interest of money lent on private security could have taken place, if the Government had not already been able to effect a reduction of the interest of public securities? Could this reduction have been effected if England had not shown herself scrupulously (in the opinion of some I know overscrupulously) careful of her credit in 1819—if, for instance, she had followed the suggestions made, I believe, by Lord Lauderdale, of coining guineas equal in value to 18s. or 19s.? Suppose that the experience of the preceding twenty years had shown cosmopolitan capitalists and dealers in bullion, that in any future time of error or difficulty they might be compelled, after for a time receiving their interest for the money they had lent England in inconvertible paper notes, to have the standard by which their original loan was measured lowered 10 or 15 per cent, or in other words to compound for their debt at 17s. or 18s. in the pound, they would not have been so eager to invest in English securities as to pay such a considerable premium for the 5 per cent stock, that enabled the Chancellor of the Exchequer to effect his operations. In short, we know that other countries have attempted to compound with their creditors in the manner suggested by Lord Lauderdale. After that the paper currency of Austria had become depreciated, she coined florins equal to the then market value of the paper florin, which was only two-fifths of the silver florin, as I am sure is well known to many gentlemen, who in travelling through Austria, have at first been sorely puzzled to know whether they are to pay their bills in "Schein geld," or in "Müntz geld." Russia also, in similar circumstances, coined roubles equivalent in value to the paper roubles, which had then sunk to two-sevenths of the value of the silver rouble. Can it be supposed that if free England had tampered with her currency in 1819, as these great imperial States did then with their currency, that we should now have been able to have reduced the interest of our debt to 3 per cent, that the heavy charges entailed by the wars of the last century and the beginning of this century would not have exceeded an annuity of £24,000,000 per annum, or, to take another instance, the practical 1503 fruits of which were last Session brought before the House. Recent circumstances have, I have no doubt, made many Gentlemen acquainted with the Turkish piastre, a round coin of the circumference of a Spanish dollar, containing, however, a large admixture of tin—and worth from 2d. to 2½d. of our money. Are Gentlemen aware that this coin was originally of the same value as the Spanish dollar, which also goes by the name of piastre throughout a great part of the Mediterranean; but that to meet the exigencies of the Turkish State, alloys of tin were put into it at different times, after the manner practised by our Sovereigns in former times and which has been so highly commended by the hon. Member for Birmingham, till its value was reduced from that of the Spanish dollar, equal to about 4s. 4d. of our money to its present value—equal, as I said before, to something between 2d. and 2½d. of our money? Well, and is Turkey substantially the richer for this gross cheating of her creditors by debasing the currency? So far from being in a better position for it, she probably would have been unable to procure the supplies necessary to defend herself against her powerful neighbour if her loan had not been guaranteed by her ally, who, less wise in her generation, as was thought, returned to cash payment in 1819. And look at the credit of the other States, namely, Austria and Russia, compared with ours at this instant. Though their taxes do not press near so heavily upon their population as ours do, and though debt does not bear anything like the same proportion to their ordinary revenue that our debt does, yet we know that Russia has been brought to a standstill partly from want of means to carry on the war; and I doubt very much if Austria could at this instant obtain a loan at a lower rate than 5 per cent, while we were able to borrow the other day at a rate that virtually did not exceed 3⅓ per cent. Sir, when all these things are considered, when it is evident that we, as a reward for our good faith, are now enjoying the benefit of an unprecedented low rate of interest, few, I think, will be inclined to agree with the sentiment expressed by the noble Lord the Member for London, in one of his earlier productions, that the only reward England derived from the Act of 1819 was, "the satisfaction of having given an example of good faith, rare at all times among nations, but rarer still at the present time among the nations of Europe." 1504 For. Sir, if England has given an example of good faith rare among nations, but rarer still among nations at the present time, is it not owing to this instance of good faith that she is able, at any time, to command the capital of the world at a rate of interest lower than any nation of the present day? Is it not owing to this good faith that she has so often verified the position so beautifully described by Mr. Canning, of keeping down the contending passions of European nations as king Æolus kept in the winds in his vast cave? Is it not owing, also, to her good faith and credit that the tide of conquest of an Eastern despot has been stopped? Is it not owing to this good faith that she, a little island on the west of Europe, is able to say to the autocrat of the vast extent of territory comprised in All the Russias, "Thus far shalt thou go, but no further?" Is it not owing to this same good credit that we have so far been able to lessen the pressure of the obligations contracted in the last war for the freedom of Europe as to have given to the labouring man cheap tea, cheap coffee, and cheap sugar? Is it not owing to this same instance of national good faith that every landowner can obtain money to discharge his incumbrances, or to improve his estate, at a rate so much lower than on the Continent? Is it not also owing to this same good faith that every honest trader can get banking accommodation at a much lower rate here than in other countries of Europe—no small assistance to those who have to compete with untaxed continental rivals? Is it not mainly owing to this good faith that we, a highly-taxed nation, have been able to carry on this competition with untaxed rivals? Shall we now do anything to risk the solid advantages of this good faith, purchased, it may be, by some sacrifice in 1819? Shall we, at the time that our credit is no small source of strength in our negotiations, deprive ourselves of this great source of strength and authority? Shall we now put it in the power of our adversaries to say, "England is no longer formidable; the pre-eminence of her credit is gone; she is not able to obtain money at a lower rate than any other nation, as she used?" Depend upon it, all this will take place if we now consent to a proceeding that is likely to injure our good name. And depend upon it, if we do acquiesce in the Motion of the hon. Member for Birmingham, depend upon it that a notion will get 1505 abroad that this Motion will be followed by a suspension of cash payments, as in 1797, to be succeeded by God knows what amount of depreciation or debasement of standard.
Sir, I feel that I have already detained the House too long; but I would entreat all who are interested in preserving the good faith of the nation, every taxpayer who wishes to see the fixed obligations of the country kept down at the lowest possible amount—every landowner who does not wish to have the interest of money raised to 5 or 6 per cent—every person who wishes to ward off the commercial embarrassments usually caused by a permanent rise in interest—every one who thinks national good credit and good faith the very soul of our commercial greatness—every one who wishes for the rapid removal of the taxes which press most on the poorer classes, and cripple the industry, and restrain the employment in the country, to refuse their assent to the Motion of the hon. Member for Birmingham.
§ MR. WILKINSONsaid, that he did not know whether they were to have this inquiry, but as it seemed to be supported on totally opposite grounds, it was difficult to see the reason why. Great error arose, on this question, from a confusion of terms, and the habit of mistaking currency for capital. The hon. Member for Maldon (Mr. Peacocke) had, very properly, said that the interest of money depended upon the abundance or scarcity of capital, and not upon the abundance or scarcity of currency. But his hon. and learned Friend the Member for Wallingford (Mr. Malins), who had, he must say, laid down the law upon this subject with all the air of a professor, had complained of the Act of Sir Robert Peel, by which he (Mr. Wilkinson) presumed he meant the Act of 1844, which his hon. and learned Friend said had cramped the action of the Bank, and been the cause of great commercial distress. He contrasted the state of affairs since the Act of 1844 unfavourably with that which existed when the issue of notes was left to the discretion of the Bank of England. Did his hon. and learned Friend remember what had been the result of the exercise of that discretion?—That, upon an occasion previous to the Act of 1844, when a panic had occurred, the bullion in the Bank was allowed to sink down to £2,000,000, and that there was great danger of a suspension of bullion payments? Now it was on this account that the Act of 1844 was passed. It was found 1506 not to be safe, always, to trust to the discretion of the Bank of England. And what was the Act of 1844 intended to do? It was intended to secure the convertibility of the bank note, a matter of paramount importance, and that it had effectually secured, because, as his hon. and learned Friend had said, during the panic which ensued in 1847, the bullion in the Bank had never fallen below £8,000,000. But it had not prevented that panic! No—it was not intended to prevent panics, which no legislation upon the currency could prevent: these depended, he believed, upon the great extent of credit in this country, and not upon the amount of the currency; and he did not think that any measure which the wisdom of Parliament could devise would put an end to them. If, in a country like this, from any cause, every man were, at the same moment, to claim all that was due to him, no banks, no system of currency, could meet such claims, and the result must, necessarily, be a panic. His hon. and learned Friend had attributed the panic of 1847 to a deficiency of the currency, occasioned by the Act of 1844, which, he said, had been remedied by a letter of the noble Lord the Member for London (Lord J. Russell), then First Lord of the Treasury, authorising the Bank to issue notes beyond the limit of the law. But everybody knew that no more notes were issued. That letter had not the effect of adding one shilling to the currency:—what it did do was, to restore confidence and the credit of the country, which had been undermined. His hon. and learned Friend had expressed great concern at the diminution of the reserve of notes, and had asked the Chancellor of the Exchequer what he would do if the reserve of notes fell to £1,000,000, and said that the country could not do without a circulation of £20,000,000 of notes. Well, now, suppose there were no notes at all in circulation. Did the hon. and learned Gentleman mean to say that the business of the country could not be carried on without bank notes? True, they were very convenient things; but, if there were none in existence, bullion, bills of exchange, bankers' cheques, and other promissory notes, not payable to bearer, would be resorted to in their place, and all we should lose by the absence of a bank-note circulation altogether would be its convenience and economy. The Bank of England could not control the amount of bullion which would flow into the country, 1507 any more than it could regulate, the rate of interest, or do many other things which it was supposed to be able to effect. One of the complaints made to night was, that the Government and the Bank together had been enabled, or compelled, to fix the price of gold. The hon. Member for Birmingham (Mr. Muntz) had told them tonight that the price of gold was fixed, and yet, in the same breath, he said that commodities had risen twenty or thirty per cent. "Other things moved," said the hon. Member, "gold could not." Why, did he not know that, to say that commodities, measured by gold, had risen in price, was tantamount to saying that gold, measured by commodities, had fallen in price? that they were, in fact, convertible terms? This mistake, however, had no doubt arisen, like many others, from a confusion of terms. He (Mr. Wilkinson) had always regarded it as unfortunate, that, in speaking of the law which rendered it imperative on the Bank to exchange its notes for gold, and vice versâ, at a given rate, the terms "buy and sell" gold should have been made use of. We say that the Bank is compelled to buy gold at £3 17s. 9d. per ounce, but to buy it with what? With its paper, which is intrinsically worthless—not with commodities—and not, therefore, in the usual acceptation of the term. The law says, merely, that the Bank shall exchange its notes for gold at £3 17s. 10½d., and gold for its notes at £3 17s. 2d. per ounce; and is intended, and in fact does, regulate the price, not of gold, but of the paper which is issued in exchange for it. But if the Act of 1844 had preserved the convertibility of the note, which he thought the event had shown, and which was all it was intended to do, and if the fluctuation of the rate of interest which had been deprecated did not depend upon the amount of the currency, and, therefore, not upon the Act of 1844, as had been, likewise, shown, what became of the complaint of his hon. and learned Friend against that Act—which complaint was that it had cramped the action of the Bank, and prevented a due supply of currency? His hon. Friend asked what magic there was in the amount of £14,000,000, which is the fixed amount of notes which the Bank is allowed to issue without a deposit of bullion. There was no magic, that he (Mr. Wilkinson) knew of, in this number, but he concluded it was fixed upon, as some amount must be fixed upon, as likely to be a sum which, in all probability, and in 1508 almost any circumstances, would not be drawn upon. But suppose this amount had been fixed at sixteen, or eighteen, or twenty millions—to what extent would it have benefited his hon. Friend's case? He apprehended, not to any. For his own part, he thought the proposed inquiry would result in nothing but a waste of time and labour.
§ MR. H. BAILLIEsaid, he thought it would be generally admitted that when Sir Robert Peel passed the Bank Charter Act, the intention of that right hon. Gentleman was, that after the expiration of ten years an inquiry should take place into its operation, and in the event of that inquiry proving favourable, that the restriction should be carried still further, by withdrawing from the private banks all right to issue paper. It was evident, he thought, that such was the intention of Sir Robert Peel. A few days ago, he (Mr. Baillie) put a question to the Chancellor of the Exchequer with respect to the issues of private banks; and he had since received letters from different banks throughout the country which assured him that the answer of the right hon. Gentleman was very favourably regarded; for although it was not very decided, yet at the same time it expressed the right hon. Gentleman's opinion as to what he thought the justice of the case; and they (the bankers) had great confidence that that being the case, the Bank of England would entertain a similar opinion. As to the Motion before the House, he felt with the Government so far, that he did not think the present the most favourable time for entering into the question; but nevertheless he did think that a time must come hereafter, when it would be advisable to submit the consideration of the question to a Select Committee. There were very many causes now in operation which must render such an investigation necessary. Amongst others, he might mention one which had escaped observation in the course of this discussion, namely, that, within the last three or four years, the balance of trade with India had been so unfavourable to this country that no less than £7,000,000 sterling had been annually sent to India in the precious metals and had never returned. This was a serious consideration, for it was evident that if the resources of India were to be developed by means of railroads, and if, as the hon. Member for Birmingham hoped, that country was to send ns hereafter our chief supplies of cotton, we should have to pay for both in gold, because the people of 1509 India did not want our manufactures, and the quantity of cotton goods we sent thither was comparatively trifling. It was obvious, therefore, that if such an amount of specie continued to be sent to India without any return, it would consume nearly the whole amount of what we might receive from Australia. That might afford important matter for consideration hereafter; but he confessed he did not see that it was desirable to have a Committee on the subject at present.
§ MR. GLYNagreed that this question was one which well deserved the consideration of the House; but he felt that if he adopted the course proposed by the hon. Member for Birmingham he should render himself liable to the imputation of desiring lightly and prematurely to re-open the discussion of the laws which regulate our standard of currency and the general circulation of the country. For his own part he was satisfied by the answer which he had received early in the Session from the Chancellor of the Exchequer, that an inquiry would be instituted by the Government before the expiration of the existing Bank Charter Act. He could not concur with his hon. Friend the Member for Lambeth (Mr. Wilkinson) either in his construction of the Act of 1844, or in his statement of its effect in producing the financial panic of 1847. The panic which occurred in the autumn of that year was entirely removed, as was stated by the hon. and learned Member for Wallingford (Mr. Malins) by the operation of the letter of indemnity, but without the addition of a single bank note to the circulation. He (Mr. Glyn) admitted that fact; for if they looked to the evidence taken before the Committees of both Houses, it was impossible not to admit that the panic in the autumn of 1847 was caused not by any fear of the convertibility of the bank note, which was never for one moment thought to be in danger, but by that which always operated under similar circumstances, a knowledge on the part of those having ample property that there was a fixed amount, beyond which the Bank could not issue notes, except upon the security of bullion in their coffers—that amount being £14,000,000. People walked up and down the City, knowing that though they had in their pockets ample security of the very best character, the time was approaching when they could not convert it into that which was the representative of value in this country—the bank note. 1510 This induced the idea that people of property would not have the means, under the Act of 1844, of converting their property into negotiable value; and that was the cause of the panic. And how was it cured? By the letter, which, just at the proper moment, was issued by the Government, the effect of which was as instantaneous as though £5,000,000 of bank notes had been issued. The effect was brought about in this way—when the letter appeared, those persons who had, under the apprehensions created by the Act of 1844, been hoarding their notes, when they saw that further issues would be made by the Bank if the pressure continued, brought them forward; they were thrown into the market, and caused the immediate cessation of the difficulty. He thought it would be a very fit subject for inquiry by any Committee, whether this fixed amount of £14,000,000 was the proper limit, or whether there should be any limit at all—and whether by dealing with the currency in the way indicated by the Act of 1844, they did not, after all, expose the country to an unnecessarily expensive mode of operating, which might be avoided. He saw no reason why £14,000,000 should, under all circumstances, be the limit; because if you had £20,000,000 of gold in the country and £20,000,000 of notes based upon it, the £14,000,000 of issues on securities would not be required; while, on the other hand, when the quantity of bullion was reduced to a very low amount, the necessity for extending the issues on securities under certain circumstances rendered the £14,000,000 limit inconvenient. Why should they continue a system which gave them a superabundant circulation when they did not want it, and occasioned a deficiency when there was a period of pressure? He thought also that that part of the Act of 1844 which regulated the country bank circulation—one of the most important features of the Act—ought to be inquired into. He did not quite agree with the hon. Member who last spoke (Mr. Baillie), that when the Act was passed it was intended at the end of ten years to deprive the country banks of the power of issuing notes—though he considered the system established by the Act was one that in the end would get rid of the country bank circulation. He thought that one of the inquiries that ought to be made was, whether some system could not be devised whereby, without being driven to withdraw their circulation suddenly and violently, private 1511 banks might be induced to do so gradually and easily. Another point which must be considered, and one which was at present engaging much attention in the country was, whether the profit and responsibility of the management of the circulation ought not to be vested in public bands. These; were all important points; and before they renewed the Bank Charter for another ten years he hoped they would receive consideration. He hoped, therefore, that the right hon. Gentleman (the Chancellor of the Exchequer) would, before the expiration of the Session, appoint a Committee on the subject. The Directors of the Bank of England had a most difficult duty to perform under the existing Act, with very cramped machinery, and he was anxious to tender to them his bumble meed of approbation for the course they had pursued during the last few months. Their conduct had been admirable, and they had steered successfully through difficulties of a very formidable character in a way that reflected upon them the highest credit. It was the fashion, when there was a pressure upon the money market, and the rate of discount was enhanced, to say, "This is all done by the Bank;" but the Bank had really nothing to do with producing the effects complained of. The Directors acted as a matter of necessity only, most unwillingly, and in some cases with perhaps a little too much leaning in favour of the commercial interest. They had, however, had a most difficult task to perform; and he must say they had done it right well.
§ MR. NEWDEGATEfelt some diffidence in following so high an authority on the subjects connected with money and commerce as the hon. Member (Mr. Glyn) who had just sat down, but he hoped that he might claim the indulgence of the House, since in 1844 he had foreseen the inconvenience and evils likely to ensue from the Bank Act then under discussion. He then refused to follow the late Sir Robert Peel on this subject, although he had shown him (Mr. Newdegate) much personal kindness. That was the first occasion on which he had taken any part in the discussions of the House, and he had then moved that, instead of limiting the issue of the Bank of England upon securities to the sum of £14,000,000, the Bank should be allowed to issue £22,000,000 on securities, being the average of its issues on securities for twenty-four years previous to the year 1844. He felt the full force of what the 1512 hon. Member for Kendal stated when he said any absolute limit fixed by law was liable to inconvenience when that limit was approached. One thing, however, was certain, and that was, that the limit to £14,000,000 issue on securities, by the Bank of England was calculated to entail such a panic as had been experienced in 1847. What happened in that year? The bullion in the Bank of England was reduced by the necessity which existed for having to pay for importation of foreign corn to about £8,000,000. £8,000,000 issued upon bullion, and £14,000,000 upon security, gave a total issue of bank notes of £22,000,000. That was the point where the power to issue for the purposes of active circulation under the Act of 1844, totally ceased. It was what was commonly termed the "sticking point;" and the commercial public now perfectly well knew that as the bullion in the Bank sunk towards the point of £8,000,000, it approached the point where they would be exposed to the same difficulties that they suffered in 1847; and he was sure no commercial man in that House need be reminded of the dreadful sacrifices of capital that were then experienced; of the instances in which good paper was discounted at 10, 12, 14, and 16 per cent; and at last the arrival of that crisis when Mr. Gurney, having obtained money at the Bank at 9 per cent, went to the Chairman of the Bank Directors on Monday morning, the 25th of October, 1847, and stated his need of further accommodation, to which he had an absolute claim, and was requested not to press his demands for an hour or two, and refrained, because, if he had not, the Directors would either have to refuse him, which would have led to a withdrawal of deposits from the Bank of England, or to violate the Act of Parliament; and in the event of a withdrawal of the deposits under the Act of 1844, the Bank of England, with £8,000,000 in its coffers, would have become positively insolvent. He (Mr. Newdegate) agreed that there would be some inconvenience in Dressing the inquiry proposed at the present moment; but let the House consider his, that the Bank of England had not much more than £10,000,000 in its coffers, and that if that £10,000,000 should be diminished by only £2,000,000, the experience of 1847 showed that the Government would then again have to interfere by a letter similar to that of 1847, and thus to restore confidence; or that a 1513 panic and evils similar to those of 1847 would be still further exaggerated than they were in that year. And what did it matter whether the Government actually interfered with the Act, or gave an assurance that a competent authority should interfere with it under certain circumstances? Why, it was just the same thing. It restored confidence. And it was the loss of confidence—the destruction of confidence—in 1847 that caused an internal demand for gold by persons who were perfectly solvent—hy such persons, for instance, as the hon. Member for, Huntingdon (Mr. T. Baring), who, with £60,000's worth of silver in his chest, found it was of no more value than so much lead in obtaining the circulating medium of the country. No wonder, then, that a panic set in. No wonder that the letter of the Government, which contravened the law that had created the panic, relieved the panic, for it rendered capital of value, as essential throughout the world as gold, available to procure money; but he prayed the attention of the House to this, that from the moment relief was given the depreciation which had existed in the value of all descriptions of produce and property began to cease—that the price of all property began to rise. The effect of the issue of that letter was this, that by an act of the Government which was beyond the law, either threatening to alter, or actually altering, the limit of the issue, the value of every man's property in the country was changed—and he (Mr. Newdegate) asked if it were reasonable or safe to leave the value of every man's property in the country dependent upon the action of the Government of the day, contrary to the law, and independent of any previous sanction of Parliament? Much had been said about the Act of 1844. What was the change then made? It was this. The Bank of England was deprived of the payment which had previously been made by the country for the management of the circulation, and the compensation which the Directors received was their being empowered to trade with the reserved notes—notes which were issued, but which were not absolutely required for the immediate demands of active circulation, that is, were not drawn out of the Bank by the public. By this means the Directors were empowered and required to go into the money or discount market and trade with public capital, which gave them a great command of the market and of the rate of interest; but the accommodation 1514 which the Directors thus dealt in and afforded, on the faith of these reserved notes, depended entirely on the bullion in the Bank, for, beyond the £14,000,000 issued on securities, the notes represented bullion possessed at the time of issue by the Bank, while all the notes were convertible that was payable in gold on demand. The consequence was, that the Directors, who were most unjustly accused of acting in a harsh and an arbitrary manner towards the commercial public, must at any cost withdraw the accommodation they had given if the bullion in the Bank sunk in quantity; and they must do it by raising the rate of interest from 2 to 3, 5, and 6 per cent, or any amount that would suffice, by creating a commercial pressure, to withdraw the accommodation they had given. They could not help it; they were bound to do it under the Act. He had heard it said and seen it written —"What had currency to do with credit?" Credit depended upon the supply of capital; he hoped he had shown how. Under the Act of 1844, Parliament had given the Bank of England an absolute command of credit, and bound them to make the rate of discount they demanded vary precisely with the bullion. It was thus that the value of all property was affected, and was made to vary inversely with the variations in the value of money. Then it was said, "Oh, but we have an immutable standard in the pound sterling; the value of the sovereign never varies." The pound sterling contains "123 grains of pure gold; the value of that never varies." True, the price of the pound sterling was fixed by Act of Parliament, for in 1816 it was enacted that gold should be taken by the Bank of England whenever offered at £3 17s. 9d. an ounce—that is at 77¾ shillings per ounce; but what was a shilling? Why a shilling was a coin that had been depreciated 10 per cent below the value of silver at that period, and had, therefore, a conventional value of 10 per cent above the silver it contained; yet it was by this conventional value of 77s. 9d. that the price of gold was fixed. There was, therefore, 10 per cent in the shilling less silver than the value fixed upon the shilling by law in 1816. That was the reason why there was never an exportation of the silver currency. The discovery of gold, however, had redressed the value of the shilling, the value of the silver bullion contained in which had risen, and there was now little more than 4 or 5 per cent difference between its 1515 intrinsic value and the value it represented by law; and it was this abundance, and this consequent cheapening of gold, as compared with silver, which had given such ease during the last two years—since the arrival of gold from California and Australia. The price of gold was fixed by the Act of 1816; but the real variations in the value of the precious metals could not be fixed, but were to be deduced from the rates of discount charged by the Bank of England. The Bank of England traded on its reserves of notes, which depended upon the stock of gold in its coffers; bullion would be move or less valuable in proportion to its supply, and the supply of notes in the reserve of the Bank was made to tally with the bullion; and the rates of discount exacted by the Bank were made to vary with the supply and value of the bullion; hence the variations in the supply and value of the bullion, that is, of money, were expressed by the rate of discount. Some hon. Members who had spoken on the subject did not seem to have read the three Acts of Parliament on which the currency was founded, namely, the Act of 1816, that of 1819, and that of 1844. His (Mr. New-degate's) own opinion was, that the Government should take warning by what happened in 1847. He did not think it safe that every man's commercial security should depend upon the interference of the Executive; and if the hon. Member for Birmingham divided the House, he (Mr. Newdegate) would divide with him, because the Motion only pledged the House to seek the means of avoiding a recurrence of what happened in 1847. He (Mr. Newdegate) asked the Government if the credit of the country would have been saved in 1847, if the noble Lord then at the head of affairs and the First Lord of the Admiralty, who was then Chancellor of the Exchequer, had not had the courage to revert to the old system in the moment of emergency? As regarded convertibility he (Mr. Newdegate) did not believe it rested upon the Act of 1844, or merely upon the possession of a comparatively large amount of bullion, but upon the confidence which might be felt by the country in the wise and prudent management of its monetary affairs; and he fully believed that this confidence would be as great were the Bank of England unfettered, as it was now that the Bank of England was fettered by the Act of 1844. In the great war in which this country was now engaged, her high credit was one of the mightiest weapons she possessed. And as 1516 the stock of bullion in the Bank was now down to within £2,000,000 of the sum at which the Act of 1844 must operate to the destruction of confidence and credit as it had done in 1847, he thought that the Government would do well to see if something could not be done to avoid any recurrence of the calamitous contingency of 1847. If a panic arose, and a demand was made for gold, there was not more bullion in the banks of issue than would meet one-third of the notes in circulation; the other two-thirds would not, therefore, be convertible; and as convertibility depended upon public confidence, he thought the panic of 1847 had proved that the stern rule by which the Bank was regulated had a tendency to destroy that confidence, and, therefore, endangered convertibility. If the Government would not consent to inquiry, he hoped that they would at least endeavour to prevent the recurrence of such a contingency as that of 1847, by the same means, however unconstitutional, as were then used. He thought, however, that an Act was self-condemned which was only rendered tolerable by its suspension during periods of difficulty, and such was the Act of 1844. Let the House consider the differences of opinion which had existed, and did exist, upon this monetary system. The first Sir Robert Peel had differed upon this subject with the late Sir Robert Peel; the late Mr. Jones Lloyd differed with the present Lord Overstone; the late Sir John Gladstone differed from the right hon. Member for the University of Oxford; the Committee of the House of Lords, appointed in 1848 to consider the operation of the Act of 1844, differed from the report of the Commons, which was only carried by a majority of two. The Act of 1844 was condemned by the late Lord Ashburton; by the hon. Member for Huntingdon (Mr. T. Baring); by Mr. Gurney; by the hon. Member for Kendal (Mr. Glyn); by Mr. Kinnear and the Scotch bankers; by Mr. Fullarton; by Mr. Took; by the Chambers of Commerce generally. Considering these differences, and this weight of opinion against the present system, he trusted that the House would not refuse, or the Government oppose, the inquiry sought by the hon. Member for Birmingham.
§ SIR WILLIAM CLAYsaid, that no other speaker had advocated the appointment of a Committee on the grounds laid for its adoption by the hon. Member for Birmingham. They had one and all disclaimed all disposition to tamper with the 1517 great settlement of 1819, or to inquire whether it would be right to alter the standard of value then established:—they had confined themselves entirely to the operation of the Act of 1844. The effect of that Act was said to be to limit the amount of the currency, to make consequently a tight money market as it was called and to raise the rate of interest—but money was scarce and the rate of interest high in every country in the world, and he (Sir W. Clay) believed that it was not possible by any legislative enactment to maintain money in this kingdom on a different level from that which prevailed in other countries, or to preclude a rise in the rate of interest, as the hon. and learned Member for Wallingford (Mr. Malins) supposed, for money was preserved at an equable rate by the operations of commerce, and, like all other commodities, obeyed the law of supply and demand: to seek to maintain its value by artificial means by paper issues not based on specie would result in the departure of every sovereign from the country, and the reverting to an inconvertible paper currency. He (Sir W. Clay) was not like the hon. Member for Warwickshire, surprised at the present rate of interest; on the contrary, he was only surprised that it was not higher looking to the loans raised by Sardinia, Turkey, France, as well as this Government, the shortness of the harvest and the drain for the East. Money sent abroad to supply the pay and provision of the armies at the seat of war was not the same as goods exported, for it went without any equivalent in return, and was so far an absolute deduction from the capital of the country. He was quite satisfied that the Bank Act of 1844 had not produced those phenomena which at present existed. The hon. Member for Kendal (Mr. Glyn) thought that there should be some means of relaxing that Act short of the direct intervention of the Government; but he (Sir W. Clay) recollected hearing the late Sir Robert Peel say that it was the very fact, that the relaxation could only take place by the interposition of Government—that rendered the possibility of such interposition harmless. Were any discretion given by the Act itself to relax the limitation, it would shortly become equivalent to no limitation at all. In that opinion, he (Sir W. Clay) agreed and thought it was bettor therefore to let the Act remain as it was. In reference to the statement of the hon. Member for Warwickshire, that the recent discoveries of gold had altered the relation 1518 of gold to silver—[Mr. NEWDEGATE: Five per cent]—the fact no doubt was so, but he (Sir W. Clay) did not see what bearing it had on the question before the House, namely, whether the Act of 1844 had had any share in producing the present state of the money market. The pound troy of silver was, in 1816, when the late Lord Liverpool reformed the coinage, directed to be coined into 66s. instead of 60s. as formerly, thus making the silver coins pass for more than their intrinsic value, making them in fact mere tokens to represent the twentieth part of a sovereign, for the sake of avoiding the inconvenience of a double standard, under which France was now suffering. The standard of this country was gold, and the discoveries of California and Australia could only tend to make moneymore plentiful here, cheaper, that is to say, with reference to other commodities; but as yet, at all events, the mint relation of the gold to the silver coinage could have no effect on the greater or less abundance of money. The hon. Member concluded by expressing his determination to vote against the Motion, unless the Chancellor of the Exchequer should declare on the part of the Government that he had no objection to the appointment of the Committee, limiting at the same time the scope of its inquiries.
§ MR. CAYLEY* confessed his surprise that no Member of the Government had yet risen to give an opinion on this subject. If, however, the debate was not summarily cut short, as had very nearly happened a few moments ago, perhaps the House would yet be favoured with an exposition of the views of the First Lord of the Admiralty, who had taken a very active part on this question in 1847 and 1848, when it was considered by Select Committees. It was desirable, also, that they should be enlightened by the Secretary to the Treasury (Mr. Wilson), who had written able publications on this subject, and whose opinions were supposed not entirely to accord with those of the rest of his colleagues. He (Mr. Cayley) agreed with the hon. Member for Surrey (Mr. Drummond), that the question was a very difficult one, intricate and complex in its nature; and the difficulty attending the discussion of it in that House resembled that which would be experienced by any man who should attempt to solve an abstruse mathematical problem on Covent Garden hustings. The task was hard enough of execution in the quiet of one's own closet, free from the distractions and excitement inseparable from a large public 1519 assembly. For its right solution the calm concentration of all their powers of intellect exclusively upon this one subject was indispensable; but at present the public mind was divided between the absorbing negotiations for peace now going on in Paris, and, it might be, the heavy rate of discount which traders were paying. He would, therefore, recommend the hon. Member for Birmingham not to press for a division, as the thinness of the attendance at that hour would prevent any decision now come to from being a fair criterion of the general sentiment of the House. Moreover, the subject was one which would more fitly be referred to a Commission consisting of three competent men than to a mixed Committee of Members of that Assembly. The riddle was, where to find the competent men. The Committee which inquired into it in 1848 was a complete juggle—was a packed Committee—seemingly fair—but adroitly packed—the Members of which were induced to vote in accordance with the views of the Government, but in the teeth of the evidence. Only four out of the seventeen witnesses then examined, comprising the heads of the most important commercial firms in London, had a word to say in favour of the Act of 1844. All the rest of the witnesses, namely, thirteen out of the seventeen, concurred in tracing the panic of 1847 to the Act of 1844, as its proximate cause. And yet in spite of this—in spite of this preponderance of evidence—and although the four witnesses (Mr. Jones Lloyd, the author of the scheme, Mr. Cotton, the Governor of the Bank, at the time the Act of 1844 passed, and the Governor and Deputy Governors of the Bank in 1847)—were all therefore more or less implicated in the creation of the system or its working—in spite of all this, the Committee voted smack in the face of the evidence before them. The Act was intended to prevent the violent oscillations in the value of money that had led to the commercial disasters of the last twenty years. Sir Robert Peel so expressed himself when he introduced the measure. It was to preserve more uniform the value of money, and to save the commercial interest from that murderous destruction of their property which periodically befel it. Had that been the effect of the measure? Had not these oscillations been more violent since the Act of 1844 was passed? Between 1844 and 1848 there were twelve changes in the Bank rate of discount. Between 1848 and the present time there 1520 had been twenty-four changes in the rate. In all, thirty-six changes in the Bank rate of discount between 1844 and 1855, or at the rate of three changes per annum. Why, during a whole century—at least up to the year 1819—the Bank never altered its rate of discount. Dating from that time, coupled with the change to the single standard of gold in 1816, an entire change had taken place in the money system of England, which for a thousand years previous had been based on a different principle; and more and more frequent commercial disasters had occurred in the last forty years, commencing with the preparation for cash payments in 1815, than had occurred perhaps in the whole of our history besides. The hon. Member for Kendal (Mr. Glyn) had suggested that in any future arrangement with the Bank of England there should be reserved to the country some portion of the profit derived from the paper circulation. In a limited sense that might be true. But let us beware of driving hard terms with the Bank, and so driving them in turn to rush into a headlong competition in the discount market, which tended to alter the value of every man's property. He (Mr. Cayley) believed one reason why the currency system had not worked so satisfactorily as it might have done was, that any Gentleman who filled the office of Chancellor of the Exchequer always seemed to entertain the idea that he was making a capital bargain with the Bank of England. But what signified whether it was £100,000, or £200,000, or £300,000, they gave to the Bank for managing the currency, compared with the £200,000,000 or £300,000,000 mercantile wealth of this country which they sacrificed every five or ten years? But in support of the suggestion of his hon. Friend (Mr. Glyn), that the public should have the benefit of the profit on the circulation, it was a fact, he (Mr. Cayley) believed, that the Exchequer-bill circulation in the sixty years between 1780 and 1840, had run almost pari passu with the banknote circulation, the circulation of notes being virtually a mere substitute for Exchequer bills. Down to the middle of the last century Exchequer notes were issued for £20, £10, and at one time are said to have been as low as £5: and the reason the system was abandoned was, that a nephew of Sir R. Walpole, who was an auditor or teller of the Exchequer, and whose duty it was to sign these notes, found it inconvenient to discharge the duty. The circulation of country bank 1521 notes from that time began to grow in importance, and in some measure to replace the small Exchequer notes which were withdrawn, but with nothing like the same efficacy; for these Exchequer notes were a legal payment for taxes, and formed together, with the coin of the realm, the basis of our circulation—a circulation on a basis not such as our present one—evanescent and shifting—now here and now there—according to every slight variation in the accidental price of a metal—but always at home, and one on which the mercantile and agricultural body could rely as a means of liquidating their credit transactions. In this sense, therefore, he could agree with his hon. Friend (Mr. Glyn) that the country should have the profit of the circulation, for with an average of £20,000,000 or £21,000,000 of this species of circulation, payable in taxes, and never varying in consequence of an adverse balance in trade, the commercial interests of this country would be entirely saved from those prostrations of commerce and of credit of which we had had such melancholy experience in the last forty years. The Bank might still be the place of deposit for bullion—for purposes of foreign trade—but no one had ever discredited the Bank of England notes, even in 1797. Neither would Exchequer notes be illimitable in quantity. It was not the note which fell in value in a panic—but that gold for foreign purposes rose—for at that very moment the note was preferred to the most solid of all property, namely, land. What he (Mr. Cayley) contended for was, a constant supply of a medium of exchange to such a limited extent as experience had proved was required for the purposes of trade, namely, about £20,000,000 notes. The hon. Baronet who last spoke had referred to the "recommendations" of the hon. Member for Birmingham; but, although that hon. Gentleman had complained of the practical result of the system of currency adopted in this country, he (Mr. Cayley) was not aware that he had made any recommendations. For the opinions of that hon. Member he was in no degree responsible. He thought the present an inopportune moment for the discussion, because, pending the negotiations for peace, it would be imprudent to refer to all the prospective evils of the present system if war continued. At the same time, if the hon. Mover persisted in dividing, he would divide with him. He (Mr. Cayley) had never been favourable to the Act of 1819, which established a new 1522 system in the place of the old principle, that the currency was convertible into the coin of the realm. The old law operated as a protection to the circulation, and prevented the coin directly and indirectly escaping from the country; but the system of legislation commenced in 1816 had had a different effect. The difference consisted in this, that under the old system the note was convertible into coin without relation to its specific weight—it was convertible into gold or silver at the option of the Bank—it was highly penal to export the coin, it was seldom, however, that there was not coin enough for convertibility—because the coin being for the most part greatly worn, it was worth more in this country as coin, than abroad as bullion, unless the exchange against this country happened to be adverse to a greater extent than the wearing and clipping of the coin. All this operated in favour of a stability and uniformity in the circulation. More than this was beyond the contract with the public creditor. And if the coin did leave this country to a considerable extent—up to a very late period in our history—Exchequer notes receivable in taxes served the purpose of a medium of exchange. The present system since 1819 was wholly different. The note was convertible into coin of a definite weight and fineness, and was not a legal tender, except at that absolute degree of fineness and weight. The consequence was, that every slight variation in the price of gold abroad (for now we had not the option to pay in silver) either drove gold to the Continent, or invited it back again. Hence a constant oscillation in the value of money, on which the price of all commodities depended. When the gold went, a pressure was felt by the country, they knew the cord was round their neck, and that the bank was pulling it tighter and tighter, and that before the Bank was strangled by the Act of Parliament, the Bank had the power of strangling the public. This was the cause of that intense alarm ending in panic, which was felt by the commercial classes when the Bank began to put on the screw. But the present system required this. It was no fault of the Bank. Before the Committee of 1848, on this subject, he had examined the Governor of the Bank of England, and had put the matter to him pretty broadly in the following manner:—"By your regulations, by your increasing the rate of discount, and diminishing the period of discount, you intend to throw down prices, you intend, in order to throw down 1523 prices, to ruin the mercantile body; your mode of restoring bullion to the Bank is by producing such ruin; if you ruin the manufacturer and the merchant you cause a great number of forced sales, which occasion a great fall in prices; foreigners then come here for goods instead of for gold, and that is the process by which you now get back your gold." After shifting and evasion for some time, the Governor had admitted that that was in effect the way the system worked—although when it was suggested to him, he could not deny that there was a natural tendency in an adverse exchange to right itself; because the very circumstance of high prices here, which caused increased imports, and an efflux of gold, had the effect, of course, of diminishing the export of British goods—that threw down prices—caused less labour to be employed—and less consumption to take place—and so diminished imports also—which rectified the exchange. This rectification was, however, more gradual. But then Mr. Jones Lloyd had boasted of the very gradual way in which the Act of 1844 operated. This was the system which had been pursued ever since the peace; the prosperity arising from cheap money caused gold to leave the country, and the only means of getting it back were by producing ruin. If this was the only mode in which the present currency system enabled them to get back gold, he could only say that a more rude, barbarous, he had almost said brutal, system, could not be imagined. It was some consolation that it was not a natural or necessary system, and therefore might be altered, and those periodical visitations of disaster almost, if not entirely, prevented. The hon. Member for Birmingham had stated that, with regard to a system of currency of intrinsic value, the philosophers were all on one side, and the practical men on the other; but was it true that all philosophers did entertain the some opinions? He would ask the Chancellor of the Exchequer, who was deeply versed in classic lore, whether the philosophers with whose writings he was familiar were favourable to a system of currency of intrinsic value? What was the opinion of Plato? He had especially devoted himself to the consideration of this question, and unequivocally decided in favour of a token as contradistinguished from a coin of intrinsic value, because it would not leave the country. Aristotle argued most ably on the subject, and was of opinion that money might as well be without value as with, since it was a creation of law. And Bishop Berkeley, 1524 who was, perhaps, the most subtle thinker of modern days, showed in his remarkable queries, that he was, like Plato, in favour of a symbolic in preference to an intrinsic money. But then such money must be sustained in value by a limitation of its quantity. The hon. Member for Birmingham had said that the mercantile affairs of this country were, to a great extent, carried on by credit, and no one who did not examine the subject very minutely could have any idea of the extent to which that system of credit existed. Would any extreme bullionist contend that, if the mercantile operations of the country were carried on by bullion alone, they could be so extensive as they were? Had the Chancellor of the Exchequer ever considered the daily amount of transactions which took place at the Clearing-house in this city? He (Mr. Cayley) had the other day asked the hon. Member for Kendal, who was chairman of the Clearing-house, what was the amount of those transactions, and whether it was true that a return was made to Parliament some twenty years ago, which showed that at that time the daily transactions were upwards of £5,000,000; but the hon. Gentleman informed him that no such return had been made, and that the transactions at the Clearing-house were entirely private, and that a return would not be made. He (Mr. Cayley) lamented this much; for it was quite plain that a return in cypher might be made which would show no individual transaction or return. Since then the result of inquiries which he (Mr. Cayley) had made was, that the bank transactions of London, exclusive of the west-end banks, amounted to somewhere about £15,000,000 daily. This sum, multiplied by 300, gave £4,500,000,000 as the transactions represented in the clearinghouses of London in the course of the year. Who could contemplate this amount without amazement, coupled with apprehension, when they were told of a metallic basis as the ground of these mercantile transactions of only, at the present moment, £9,000,000 or £10,000,000 of gold? As that gold receded, all these transactions became imperilled. And yet these were not the entire transactions of the United Kingdom, although they might constitute half or two-thirds. What an anxiety for those whose interests were involved excl; What a responsibility on those who had to carry out such a system excl; How only £20,000,000 of bank notes served to liquidate this mighty amount of transactions was a philosophical mystery which he (Mr. Cayley) 1525 hoped another time to elucidate; for it did not lessen the mystery—that, in the present pressure for money, when the Chancellor of the Exchequer lately advertised for a loan of £5,000,000, £30,000,000 were said to have been tendered. But for the mercantile body to feel a constant possibility of the entire base of the circulation being withdrawn, and of the medium of exchange ceasing to exist, while all these transactions were legally convertible into the medium of exchange, was gratuitous torture to that body. It was that evil he (Mr. Cayley) was most anxious to remedy, by permitting the Bank, or some other public institution, to maintain at all times such an amount of the medium of exchange as experience showed that commerce required. He wanted no depreciation of paper, but a medium of exchange of uniform value and limited amount, on which the mercantile interest could at all times rely. That amount by the experience of the last ten years seemed to be somewhere between £18,000,000 and £24,000,000. But in his (Mr. Cayley's) opinion, £20,000,000 or £21,000,000 would be ample, if credit were not periodically paralysed by a system like the present. The certainty of means of convertibility for the immense amount of commercial transactions in this country into some medium of exchange or other, was in his opinion of more importance than inopportune and ruinous attempts to convert the bank note, which no one distrusted, and which took away gold only for the benefit of the bullion dealer and the foreign merchant, whose dealings abroad were not in currency but barter. He was glad to observe the different tone at the present day in the House on this question: twenty-four or twenty-five years ago, when any one ventured to open his mouth on the subject of the currency in contradiction of the ultra bullion theory, he was met by clamour; and that evening the hon. Member for Surrey (Mr. Drummond) had deprecated the discussion of this question, not without some of his accustomed jokes; but it was no joke for the commercial interests of this country to be subjected to a system which made them the victims of those periodical panics which we were accustomed to see in this country. Let no one say those visitations were the natural results of reaction. The commercial panics experienced from time to time had no more to do with nature than fainting from starvation became natural to an empty stomach. It was our artificial system 1526 alone that produced them; and so long as that system lasted he believed that, unless the evils of the system were counteracted by the influx of gold from Australia and California, the country would be liable to those periodical panics in all time to come. As he had just said, he did not think the convertibility of notes in this country of credit was of so much importance as preserving a uniform and certain medium of exchange. He should like to see the public made certain of the stability of that amount of the medium of exchange which was found by experience to be necessary to carry on our commercial transactions. He thought the Bank of England ought rather to be the moderator and manager of the currency than a competitor for discounts, and, with this view, to be constantly varying its rate of discount. He would rather see in that establishment a nearly fixed rate of discount—oscillating perhaps between 4 and 5 per cent; but he thought the Bank should be amply rewarded for managing the currency—so amply rewarded that it should not require to go into the market to compete with other discount houses in order to get a profit to its proprietors. A large amount of the capital of the Bank might then be employed in regulating the exchanges, by investment in foreign securities, for the supply of bullion in time of need. For any losses by such a proceeding, they should be compensated in other ways. When he used the word capital, he did not mean it in the sense in which it was employed by the hon. Member who spoke second in the debate, who said that the rate of interest depended not on the price of gold, but on the price of capital. What on earth he meant, he (Mr. Cayley) was at a loss to divine. It sounded like the jargon of the ultra bullionists, whose dogma seemed to be that gold was the only capital in existence. Why, land was capital; the table before him was capital; that House was capital. [Sir C. WOOD: Hear.] The right hon. Gentleman the First Lord of the Admiralty, cheered that statement. He (Mr. Cayley) was quite aware of the distinction to be drawn between fixed and floating capital. In 1847, his right hon. Friend had stated that all the capital had gone away with the gold. [Sir C. WOOD had certainly never said that capital meant gold.] No; but the right hon. Gentleman argued, in the midst of the pressures and panics of 1847, that it was the capital that was gone. Whereas, from the fact of the panic ceasing, in consequence 1527 of the Government letter, in October, 1847—and thus bringing currency out of hoard—it was clear to demonstration that it was not capital but currency that had been wanting. And therefore it was plain that the right bon. Baronet had confounded the one with the other. According to the bullion theory, if all the gold were withdrawn from the country, we should have no capital left; but this was a view of the case which no man of common sense would stake his reputation upon. In conclusion, he would repeat that what we wanted in a country like this, where credit was so firmly established, was not so much the certainty of convertibility of the note—the real value of which no one really had disputed for a century and a half—but uniformity and certainty in the amount of the medium of exchange. Money was an instrument for diminishing the inconveniences of barter. It was invented and adopted as a servant to facilitate the operations of commerce. From a servant it had risen to be a master, from a master to a tyrant. His (Mr. Cayley's) desire was, that it should be deposed from its tyranny, and resume its subservience to the end for which it was created. That end was, to keep a sufficient and steady supply of circulating medium, proportioned to the scope and energies of trade. So that the gigantic stakes of commerce should not be periodically forfeited by the counters being filched away in the very midst of the game.
§ MR. HEYWORTHsaid, he was satisfied that panics had their origin in the law of nature and nothing else. If there was a superabundance of food, food would be cheap, and this would allow individuals to have money in their pockets to lay out for other purposes. The millions of people first raised the price of articles, next stimulated the price of production, and then came panics; the merchant and the manufacturer ran to the bankers for discount, not being able to sell their goods; they were obliged to pay a large interest, and it was this large interest that stopped production, allowed large stocks to be sold off, and matters eventually to right themselves. The monetary system had nothing more to do with panics than the mercury in the thermometer; it was a symptom, not the cause. In his opinion, the conditions of the Bank Charter were very plain and intelligible. The Directors of the Bank were allowed to issue £14,000,000 of notes, because there was security for that amount provided by Act of Parliament, 1528 and they were also allowed to issue notes to an amount equal to the gold which they should have in their possession. Why was this done? It was to prevent the evil consequences of an over-issue of notes; or else it might happen that some day, under a reckless manager, an unlimited amount of notes would be issued which nobody could liquidate. This precaution was taken in 1844, because about that time a great many of the country banks, which had been in the habit of improvidently issuing too large an amount of notes, failed, and left thousands of poor people with their valueless paper on their hands. To obviate that evil, the issue of notes by those country banks was limited; and to prevent its occurrence upon a larger scale, the same principle was applied to the Bank of England. The intention of the Act was, to secure that everybody should always be able to have an ounce of gold for the sum of £3 17s. 10½d. represented by each £1 of his bank note. It was not pretended by this to fix the value of the gold; for whenever there was a scarcity of gold, and we wanted gold to send it abroad, we must buy it, like corn or any other commodity, at the price for which it could be procured. The requirements of commerce would always adjust themselves naturally, if we let the matter alone.
THE CHANCELLOR OF THE EXCHEQUERI can assure my hon. Friend the Member for the North Riding (Mr. Cayley), that it was not from any feeling of disrespect to the House that I abstained from presenting myself to their notice at an earlier part of the debate. The object of this discussion is, to determine whether or no the House ought to appoint a Select Committee to inquire into the subject of the currency. Before I ventured to express any opinion as to the expediency of appointing such a Committee, I was desirous of ascertaining the opinions of different Members, and of knowing the generally prevailing opinion of this House upon the question. The Motion submitted to the House by my hon. Friend is for the appointment of a Select Committee to inquire how far the present monetary system is in accordance with the requirements of the country, and to consider whether it cannot be improved and amended. Owing to the great familiarity with the subject of the currency, which, as we all know, my hon. Friend possesses, he has been able to illustrate it by a long historical dissertation, beginning with William the Conqueror, descending to Elizabeth, and ending 1529 with the Acts of 1819 and 1844; he has exemplified it by numerous instances, ancient and modern, and he has delivered his opinion upon the defects which he thinks the present system labours under. But I do not precisely understand what is the nature of the inquiry which he proposes that the Committee, if it be appointed, should undertake. Before he sat down he stated that it would have to inquire into the means of preventing those fluctuations in prices and in the rates of discount which take place to the injury of all classes except the class of bankers, and that the object he had in view was to give happiness, power, and prosperity to the country. That is a very extensive subject of inquiry, and the object held out as the aim of that inquiry is very lofty and exalted; but I really would put it to the judgment of the House whether fifteen hon. Members, acting as a Select Committee, would be competent to conduct a speculative theoretical inquiry of that nature? My hon. Friend the Member for the North Biding (Mr. Cayley) says, that discussing the question of currency in this House is like attempting to solve a mathematical problem on the hustings at Covent Garden. I presume that in a Select Committee there would be none of those disturbing influences by which the House is affected, but that the fifteen philosophers would sit down to investigate the subject as if they were in the Academy of Laputa, that they would call before them persons who had examined the science and theory of currency, and that they would, as far as their leisure permitted, read all the abstruse and difficult volumes which have been written on the subject. I remember a speech of Mr. Canning upon a Motion for a Committee to inquire into the Catholic question, in which he drew a most formidable picture of the numbers of volumes of the works of the Fathers, the Councils, and the polemical writers, which the members of such a Committee would have to study before they could come to any safe conclusion. I do not know whether my hon. Friend proposes that the Committee he moves for should undertake such a speculative inquiry. If that be his object, I think that this House will hardly agree to the appointment of a Committee to inquire generally into the whole state of our monetary system, with the view of seeing whether or not it may be improved. Assuming, therefore, that no such general inquiry will be undertaken by a Committee appointed by this House, we come to the 1530 consideration of what is the practical question which a Committee would have to inquire into. The hon. and learned Gentleman the Member for Wallingford (Mr. Malins) has argued, in a speech in which he expressed his views on the subject with great force and clearness, as if the subject which he wished the Committee to inquire into was the operation of the Bank Act of 1844. The hon. and learned Gentleman did not throw out the proposal for a general speculative inquiry such as the hon. Member for Birmingham seems to desire; but he said plainly, "we wish to know what has been the operation of the Bank Act of 1844 and we wish to have a Committee to inquire into it." Well, Sir, that is a simple question, and one upon which the House is perfectly competent to come to a conclusion; but if it be supposed that a Committee ought to be appointed to inquire into the operation of that Act, why do not hon. Members who are of that opinion move for a Committee to make that inquiry, instead of bringing forward a Motion like the present, couched in vague and abstract terms? A Motion for a Committee to inquire into the Bank Act of 1844 would be at least intelligible, and the House could readily come to a conclusion with regard to it. I will assume that that is the object of the present motion, and the question upon which the House will have to vote, and will proceed to the consideration of its expediency. Upon that subject I can only repeat a statement which I made at the beginning of the Session, in answer to a question put to me by an hon. Member opposite (Mr. Glyn). I stated then, that in my opinion the present moment was not peculiarly well adapted for instituting an inquiry into the Bank Act of 1844; that the circumstances were, to a considerable extent, exceptional and extraordinary; that we were entering upon the second year of a war which had occasioned a great draw upon the reserve of bullion in the Bank for shipment to foreign countries; and I say now, that if a Committee were appointed such as that moved for by the hon. Gentleman, it would necessarily proceed to inquire into the extraordinary circumstances of last autumn, and not into the generally prevailing state of things occasioned by the operation of the Act of 1844. Again, the present financial state of the country is not such as to render it a time in which we could most fittingly engage in an inquiry which would render it necessary to investigate all the various operations in which the Bank is 1531 concerned. It appears to me, therefore, that if it be proposed to institute a general inquiry of the nature which I have described, the House will not be inclined to entertain that proposition; and, on the other hand, I think that if it is proposed that we should confine the researches of the Committee to the practical question of the operation of the Bank Act of 1844, the present moment is not well suited for instituting any such inquiry. The hon. and learned Member for Wallingford (Mr. Malins) appears to me to entertain a strong feeling of alarm as to the present prospects of the country. He has, in fact, in the course of his speech threatened us with a national bankruptcy, and seemed to think that such an event, if not imminent, was by no means improbable, or at any rate was more than possible. The hon. and learned Gentleman asked me what course the Government propose to take in case of the Bank not being able to meet the demands made upon it. Now, Sir, in answer to that inquiry, I say that the appointment of this Committee would at all events be a very imperfect remedy against the danger of a national bankruptcy. If we are threatened with some great and possibly immediate danger affecting the solvency of the Bank of England, it is obvious that to appoint a Select Committee of the House of Commons, the Members of which would probably entertain very discordant opinions upon the subject of the currency, to hear opinions probably still more discordant, and which would probably, by the end of the Session, have made very slight progress—for the last Committee which inquired into the Bank charter occupied two whole Sessions in its investigation—would not be to provide a very efficient security. Now, what is the present state of the Bank of England? I will not trouble the House with any long statement of figures, but I will merely state the circulation and the bullion of the Bank on the 23rd of February last. The circulation for the week was £19,254,000, while the bullion amounted to £10,575,392, which was considerably more than half the circulation. Surely that state of things was not calculated to cause much alarm. The amount of the notes issued was £24,390,330, of which the notes in reserve amounted to £5,848,810—not a very precarious condition for the Bank of England to be in. I find that in the course of this discussion there has been a striking absence from the speech of hon. Gentlemen of all practical 1532 suggestions for the improvement of the Act of 1844. Much hostile criticism has been bestowed on what has been called the arbitrary character of that Act, and more especially on the limit of £14,000,000, or as it now is £14,500,000 added to the amount of bullion, fixed by it, and it is said that no reason can be assigned for selecting that rather than any other amount. Now, I believe the ground upon which that number of millions was taken was, that it was believed to be the lowest point to which the circulation could ever descend. But, assuming that objections can be made to that or any other amount, the question is, whether anybody is prepared to propose some substitute, as preferable to the fixing of an arbitrary amount? Most Gentlemen who take any interest in the subject of the currency have probably read the recent pamphlet of Mr. Tooke, whose opinions are of the highest authority; for even at the time of the Bullion Committee he had begun to write upon these questions, and now, at a very advanced age, he continues to treat them with remarkable knowledge and vigour. Mr. Tooke may be taken as the most favourable representative of the opponents of the Act of 1844; and what is the substitute which he proposed for the present limit of £14,000,000? He would remove that restriction, and would fix his minimum of the bullion at the Bank, at not less than £12,000,000. Mr. Tooke, it appears, does not think it desirable that the limit should be fixed by Act of Parliament, but he proposes that there should be an understanding between the Directors of the Bank of England and the Government, and that matters should rest upon that understanding. Now, I will ask the House whether, if a distinct understanding, which must necessarily be reduced to writing, be entered into between the Directors of the Bank and the Executive Government, that under no circumstances they will allow their reserve of bullion to sink below £12,000,000, the Bank would not feel as much bound by such an agreement as if it were embodied in an Act of Parliament? Would Gentlemen in the position of those Directors, with such a responsibility resting upon them, feel themselves safe in allowing the bullion to sink below £12,000,000, when they had entered into an engagement that it should never be less than that amount? Here, then, we have the oldest and one of the foremost writers upon that side of the question, who, when he comes to approach 1533 a practical suggestion, has nothing to offer but that which has been described—a regulation which, as everybody must see, would in certain eases be more restrictive on the Bank than the limit which is fixed by the present Act. For these reasons, if the hon. Member for Birmingham should press his Motion, I shall feel bound to vote against the appointment of a Select Committee, at the present moment, to inquire into this subject. I nevertheless fully admit that the operation of the Act of 1844 is a fit and proper subject for an investigation by a Committee of this House when the proper time shall arrive, and when the circumstances shall appear favourable for the prosecution of such an inquiry. I quite admit that there are many parts of its operation which not only deserve, but require, full inquiry before a competent authority, and I shall be quite willing when the proper period arrives to assent to the appointment of a Committee. I trust, however, that the object of my hon. Friend, which seems to me, so far as I can judge from the terms of the Motion, to be rather speculative than practical, has been to a great extent satisfied by the discussion which the subject has undergone to-night, and that he will not think it necessary to press his Motion to a division. Before I sit down I will notice a remark of the hon. Member for Inverness-shire (Mr. H. Baillie), with respect to a provision of the Act of 1844, which expires in August next. My hon. Friend seems to think that the answer which I gave the previous evening was reserved. I will now state that the Bank of England has no objection to the continuance of the provision in question, and that I shall therefore be prepared, at the proper time, to introduce a Bill for that purpose. An hon. Member opposite (Mr. Cayley) has truly remarked that steadiness in the quantity of money and the rate of discount are objects highly desirable. I will make another remark in connection with that point, which is, that steadiness in legislation with respect to so delicate a matter as the currency is also highly desirable—and that it is important that this House should not, without having a distinct practical object in view, interfere with the operation of the currency. I trust that the House will not take any step which can, by any misconstruction, be thought to sanction an idea that there is any party in this House which entertains any doubt of the sanctity of the 1534 principle of the convertibility of the currency, and as to the necessity of maintaining, under all circumstances and in all conjunctures, the immutability of the standard of value.
§ MR. SPOONERsaid, that if anything had been wanting to confirm him in the opinion that inquiry was necessary into the operation of the Bank Act of 1844, it had been supplied by the meagre answer which the Chancellor of the Exchequer had given to the Motion of his hon. Friend the Member for Birmingham. The right hon. Gentleman, in the first place, had treated the Motion as if it were merely of a speculative character, although it contained a decided opinion that the present state of the currency was not adequate to the wants of the country. Such was the opinion which had been expressed by the hon. Mover, and he (Mr. Spooner) hesitated not to say that the same opinion was entertained by a very large majority of the commercial men of the country. The right hon. Gentleman admitted that to a certain extent inquiry was necessary—he said that the present was not the time for it, but he gave no reason for that opinion. He (Mr. Spooner) denied that there was anything speculative in the Motion, but he thought that the hon. Member for Birmingham had exercised a wise discretion in not limiting his Motion to the mere effects of the Act of 1844; because if he had done so he would have been tied down strictly to that in the Committee, and could not have touched upon the general state of the monetary system. The right hon. Gentleman had complained that the hon. Member for Birmingham had propounded nothing, and had asked what there was to inquire into. He replied that the question which the Committee would have to consider was, had the Act of 1844 served the purpose for which it was intended? According to the statements of Sir Robert Peel, that Act was passed to prevent commercial panics and oscillations in the value of money, and to remedy the defects of the Act of 1819. Was it not fair to inquire whether the Act had really prevented those panics and oscillations? Would it be believed that in 1855 there were no fewer than eight alterations in the rate of discount charged by the Bank of England—beginning at 2½ per cent, and mounting up to 5, 6, and 7 per cent? There was a severe panic in 1825, but a much worse one occurred in 1847; and it would be found that the Act of 1844, so far from lessening, had greatly increased 1535 panics and violent changes in the value of money. It had been said by the hon. Member for Derby, that those panics and oscillations were owing to a law of nature, and that nothing could prevent them. He knew of no such law of nature. It was the law of that House. He traced the evil to the operation of the present monetary system. By the Act of 1844 the Bank of England was compelled to buy gold, whether they wanted it or not, at a given price, and then to sell it at a given price. What was the effect of that provision? To purchase gold, the Bank was obliged to issue notes, whether these notes were required by the wants of the country or not. This increased the circulating medium, and led to a reduction of the general rate of interest. Thus people were encouraged to enter into all sorts of speculations, and the price of every commodity was increased beyond the level which would range with gold at the price at which the Act compelled the Bank to provide it. An immediate stop was thus put to our export of our goods, and instead thereof gold vanished, and the only course which the Bank could adopt to bring the precious metal back involved all that distress which was the consequence of forcing down prices to a level ranging with, gold at the price fixed by the Act. The large issues of notes consequent on the Act led to a hollow prosperity; while the steps which the Bank was compelled to take in order to make every marketable commodity range with gold produced ruinous panics and oscillations, deteriorating property, embarrassing credit, and destroying profit; so that, since 1844, very few men could make any sound calculation with respect to the mode of carrying on their business. Such were some of the facts which the Committee would have to consider. All that the hon. Member for Birmingham asked was, that there should be an inquiry. The Motion did not pledge them to any theory as to whether there should be a convertible or an inconvertible currency. That was a question which he would not argue at present, because few hon. Members had taken the trouble to understand it; but surely there could be no objection to the appointment of a Committee, by whom the whole subject might be considered calmly and deliberately as a matter of business, and whose Report might guide the House to a proper remedy for the existing evils. It had been said that the law was not touched in 1847. Why, the 1536 letter from the Treasury had the effect of suspending the Act, and what was the consequence? The instant it became known that the Bank was no longer compelled to limit its issues by the amount of bullion in its coffers, confidence was restored, large sums which men had hoarded to meet their engagements were brought forth, and in a short time the evil was entirely removed. Was it right, he asked, that the Bank should be compelled by an Act of Parliament to take such measures as could not fail to produce all the misery he had described, and then that a Chancellor of the Exchequer should have power to suspend by a letter the law of the land, coming afterwards to that House for a Bill of indemnity? That statement alone, unless there was something behind which he did not understand, should induce any Government which felt its responsibility to institute an inquiry with the view of putting an end to so monstrous a system. He regretted that he did not see the Secretary of the Treasury in his place, but he would advise every hon. Member who heard him to purchase Wilson's Capital, Currency, and Banking, published in 1847, where would be found the strongest possible arguments against the Act of 1844. The book consisted almost entirely of articles reprinted from a weekly publication with which the Secretary of the Treasury was said to be connected; and in the same publication he found, as recently as December last, the following remarkable paragraph, in which he thought he recognised the style of the hon. Secretary. It began thus:—
The two grounds upon which the Bank Act was defended have proved, not alone by argument, but by the test of experience, to have been equally fallacious.Those two grounds were the prevention of panics, and the maintenance of level rates of interest. The article went on to say—And there remain none of the arguments upon which it was founded, as a necessary 'complement' of the Act of 1819, to be answered. That it is calculated at particular times to be of serious mischief and inconvenience, no one will deny; and if it be proved that the only advantages expected from it prove to have been based upon error, it will not be difficult hereafter to show that such an Act should not be left upon the Statute-book in its present shape.He agreed in those opinions, which he assumed to proceed from the quarter he had just referred to, and he asked whether anything had fallen from the Chancellor of the Exchequer to induce the House to refuse an inquiry into the consequences of an 1537 Act so graphically described and denounced by the Secretary to the Treasury? The Chancellor of the Exchequer treated the question as one entirely of time; but the hon. and learned Member for Wallingford had shown good grounds for an immediate inquiry; for he had proved by documents that, during the last six or seven months the bullion in the Bank had decreased nearly £8,000,000, and that they were now within £2,000,000 of the point where they were in 1847. Before, then, they arrived at that point, would it not be better, instead of waiting until it was too late, to inquire into the subject calmly and quietly, and in such a way as to carry with them the respect and confidence of the country, and not be driven to act on the emergency of the moment without such inquiry? Things supposed to be very secret would occasionally creep out; and what had crept out had excited his suspicion that the Chancellor of the Exchequer was more for inquiry than he openly professed to be; that he met with difficulties in a quarter where his influence ought to bear down the difficulties; and that owing to those difficulties the country was to be debarred from entering into a needful investigation. He (Mr. Spooner) laid down this plain general principle, that by the law the Bank of England was obliged at times to extend its currency in a way uncalled for and un-required, and thereby created a vast hollow prosperity, raising prices and taking the gold out of the country, and then the Bank was obliged to take steps to bring the gold back by measures which entailed distress and ruin on many, and upset all commercial calculations. He referred hon. Members to the very important evidence elicited from the Governor and Deputy-Governor of the Bank of England, before the Committee on Commercial Distress in 1848, by his hon. Friend the Member for the North Riding of Yorkshire, completely proving the allegation he (Mr. Spooner) had made. An hon. Member had said that the price of gold was not fixed, but that hon. Gentleman confounded price with value. By law they could fix the price, but they could not fix the value. A proof of this was, that if gold were taken to the Bank of England the Bank was obliged to measure out a certain number of notes for the gold offered. Could anything be clearer, then, than that they had fixed the price of gold? They had, indeed, thereby attempted to fix its value; but that they could not do. This plan of obliging the Bank to exchange notes for gold, when it 1538 did not want to do so, was, he believed, one of the greatest mistakes ever committed. Let it not be supposed that he was blaming the Bank of England. He believed that its managers executed their duties in an exemplary way, and that all the difficulty which had arisen had been occasioned by the fetters imposed on the Bank. His hon. and learned Friend behind him had used the expression that the Bank had been on the eve of bankruptcy; but he was sure that all his hon. and learned Friend meant was, that it had been on the eve of having its bullion exhausted, and being thereby crippled in its operations; for it was out of the question to speak of the insolvency of the Bank while a debt was due from the nation to that establishment of £14,000,000. The hon. Member for East Surrey stated that this was a difficult question, impossible to be dealt with in the House, and therefore he rather strangely concluded that it should not be dealt with at all; but it was on this very ground that it could not be dealt with in the House that the hon. Member for Birmingham proposed to deal with it in a Committee. He asked, supposing that there had not been an enormous importation of gold into this country and into Europe generally, owing to the providential discoveries of vast quantities of that precious metal, could any one believe that the present monetary system would not have been long ago abolished? He had not a shadow of a doubt that if a Committee were granted, a plan might be produced which would establish a good sound circulating medium equal to all the wants of the community. That such a plan could be produced, he knew; but as it would not be right to put it to the hazard of a general public discussion, he should not now further allude to it. Currency was not capital, but the representative of capital; and if the power of representing capital and commercial transactions were taken away from the currency, the energies of the country would be materially cramped, and its prosperity checked. The question, however, was one of such vital and undoubted national importance, that he trusted the House would agree to the appointment of a Committee. The object of such Committee would be to inquire into the existing system, and to devise a circulating medium safe and sufficient for the exchange of the vast, varied, and increasing productions of the country, capable of calling out and sustaining the power and greatness of the 1539 empire, and of maintaining the high rank it has hitherto sustained among nations.
§ SIR CHARLES WOODSir, I will detain the House but a very few minutes while I reply to two or three observations that have been made in reference to transactions in which I bore a part. I entirely concur in the last observation of the hon. Gentleman who has just sat down, that the capital of a country and its currency or circulation are not the same thing; but, with regard to the rest of his speech, I must say that, great as has been the confusion in the majority of the speeches delivered this evening between capital and currency, in none has it been more complete than in the speech of the hon. Gentleman. The hon. Gentleman maintained that one of the objects of the Act of 1844 was to prevent alterations in the rate of interest—an assertion which shows the confusion existing in his mind between capital and currency. The Act of 1844 only professed to deal with the circulation of bank notes, and I thought that every body who had ever thought on this subject was aware that the rate of interest does not depend upon the amount of the circulation, but upon the facility of obtaining capital. At the time when the Act of 1844 was passed this was stated most distinctly by Sir Robert Peel, and by most of those who supported the measure; and I remember perfectly well at least half a dozen periods when the circulation has been high and the rate of interest high too, and vice versâ; though, if the position of the hon. Member were true, we should necessarily have a low rate of interest with a high circulation, and a high rate of interest with a low circulation. That I call a confusion between capital and currency, and I think the hon. Member for Maldon (Mr. Peacocke), who spoke in favour of the Motion, showed by his speech that he would agree with me in so calling it. Various and discordant as have been the arguments urged in support of this Committee, I certainly was surprised to find such a singular discrepancy between the Mover and Seconder of it. The hon. Gentleman who has just sat down attributes all the panics which have occurred to the operation of the Act of 1844; quite forgetting the historical summary of panics from 1797 downwards, given us by the hon. Member for Birmingham, in which it was shown that previous to 1844 an undue increase of paper circulation had often led 1540 to an undue extension of speculation, to a subsequent panic, and then to a pressure. Panics have happened before 1844, and therefore it is only reasonable to suppose that those of 1846 and 1847 arose from what the hon. Member for Derby called natural causes, such as over speculation, and not from the operation of the Act. In fact, neither that Act, nor any other Act of the Legislature, can prevent them. Let hon. Members call to mind what appeared upon the inquiry into the affairs of several of the largest houses which failed in 1847, that they had been insolvent for years; let them recollect the system of drawing bills in the Indian and Mauritius trade which was disclosed before the Committee of 1847–8, and it will be clear enough that there was over speculation and fictitious credit to an extent more than sufficient to cause all the disasters of that year. My hon. Friend will have it that that Act fixes the price of gold. It is made very clear to my mind, by the different speeches, made by those hon. Members who have supported this Motion, that it is a great misfortune that the vocabulary of monetary science is not hotter agreed on. A vast amount of discussion would have been saved if hon. Gentlemen had only a clear notion of the definitions of things about which they are talking. I am convinced that more confusion than enough has arisen from the abuse of those words, "the price of gold." How much useless discussion there has been as to the value of a pound! My hon. Friend opposite (Mr. Spooner) will shake his head when I tell him what a pound is. A pound is simply a given quantity of standard gold; 123 grains and a fraction of standard gold is a pound; and what the Bank is bound to do when gold is deposited there is, to give a £5 note for five times the quantity of 123 grains of standard gold. The consequence is, the £5 bank note actually represents five times the standard pound—five times 123 grains of gold. This is the whole process which is described in a roundabout way as buying gold at a certain price, and issuing notes upon the security of the bullion. A bank note is only valuable inasmuch as it is issued on the deposit of a given quantity of gold. To speak of £3 17s. 10½d. as the price or value of an ounce of gold, though the common expression, has certainly, in my opinion, very much tended to confuse the question, and that confusion would be altogether avoided by 1541 bearing in mind the true meaning of the term "a pound sterling." My hon. Friend the Member for Yorkshire (Mr. Cayley) attributed to me an opinion which I never entertained, namely, that the only capital in this country is gold. I agree with him that this table may be capital, that corn and any other commodity is capital; and I am sure that I never said anything which would warrant the hon. Gentleman in attributing to me such nonsense as he has put into my mouth. He also said that we packed the Committee of 1848 in order to obtain a majority, and almost in the same breath that, had it not been for the accidental absence of two Members, we should have been in a minority. Which of these opinions is true I will not say, but they seem to me to be quite irreconcilable. I believe that the Committee was very fairly constituted. It inquired into the matter with great diligence and assiduity; and I, having been one of the majority of two, think that the decision at which it arrived was perfectly correct. At all events, I am certain that it cannot fairly be said to have been packed. I do hope that, although at some future time there may be an inquiry into this question—and I am far from saying that such inquiry is undesirable—the House will abstain from sanctioning the appointment of a Committee moved, as this has been proposed, by the hon. Member for Birmingham. In considering the effect upon men's minds of the appointment of any Committee, you must take into account the object with which the Committee is appointed, and remember that the country will take the purport of the vote very much from the opinions expressed by the hon. Member who moves for it. This Committee is moved by the hon. Member for Birmingham. That hon. Gentleman says that he wishes to upset the Act of 1844, which, however, he admits to be necessary if you are to maintain the Act of 1819. It, therefore, comes to this, that the object of the hon. Gentleman in moving for this Committee is to repeal the Acts of 1819 and 1844, to destroy your standard, and leave you without any standard at all—to throw open the question, "what is a pound?" and to bring back such a state of things, which some Gentlemen seem to-night to think perfect, but which from the time at which it existed to the present day has been thought to be the most dangerous state of things possible—a 1542 state of things in which the transactions of the country from the highest to the lowest amount, the quantity of paper put into circulation, and the value of everything, should depend upon the discretion, of the Directors of the Bank of England. I believe the principle laid down in the Act of 1819, and sanctioned by that of 1844—which I conceive to have been in its main feature the necessary supplement to the Act of 1819, and needed to make it a perfect measure—to be the best rule for the circulation; infinitely better and much less stringent than that recently proposed by one of the principal opponents of the measure. In his late publication, Mr. Tooke proposes that the Bank of England should be compelled always to have £12,000,000 of gold in its coffers. But if it were necessary that the Bank of England should always have £12,000,000 of gold, what would have been the state of things in 1847, and what would it be now? The Bank would have had to do a great deal more than it has yet done, to have had recourse to far more stringent measures than any we have yet seen, in order to maintain the necessary reserve of gold; and such a criterion for regulating the circulation would therefore be much more stringent than that provided by the Act of 1844. Remembering the proposition of my hon. Friend Mr. Muntz, that the Acts of 1819 and 1844 are necessarily linked together, and ought both to be got rid of, I hope the House will resist the appointment of the Committee, because I think it is of the greatest importance that we should maintain, unimpaired, the standard of value by which all transactions, great and small, must be regulated, and the disturbance of which would entail misery upon all classes of the community. My hon. Friend the Member for West Surrey (Mr. Drummond) referred to the last two-published volumes of the History of England by Mr. Macaulay. Let Gentlemen who have read the account there given of the distress and misery in every class of society, occasioned by the disturbance of the silver circulation, take warning by that, and abstain from throwing the country into a similar state of confusion by disturbing the standard of gold. I cannot but think that if the hon. Member should succeed in his object the rights of property would be unsettled, the value of everything great and small would be changed, uncertainty would be introduced 1543 into every transaction of trade and commerce, and the country would be plunged into the deepest distress.
§ MR. MUNTZthought he had a right to complain of the manner in which the debate had been conducted. Not a single Member had spoken without misrepresenting him; and the right hon. Baronet (Sir C. Wood) was the worst of all. Nor did he wonder at that. The right hon. Baronet had so long been in the habit of speaking on this subject in precisely the same set strain, that he believed that if an angel were to come from heaven and make a speech upon it he would, irrespective of all argument, get up and make over again the speech they had just heard. He (Mr. Muntz) never said that he wished to repeal the Acts of 1844 and 1819. What he said was, that the Act of 1844 had not answered the object for which it was intended. So far from having produced a regular circulation, and a steady and rational range of prices, it had done everything but that. The variations that took place in the quantity of money in circulation, and the rate of discount, were destructive to all extensive manufacturing concerns; and no iniquity or fraud had ever been committed equal to what had within a comparatively short period resulted from the operation of that Act. Therefore it was that he (Mr. Muntz) said that inquiry ought to be made with the view of seeing if anything could be done. Another hon. Member (Mr. Drummond) had recommended that an inkpot should be rammed down the throat of any one who got up to speak upon the monetary question in that House. It was not every man who could swallow an inkpot. He (Mr. Muntz) did not wish to make other men swallow inkpots, and he would not swallow one himself. He was an independent man, sent to Parliament by independent men, and so long as he was a Member of that House he would bring forward what Motions he thought proper. He had not asked the House to pledge itself to anything. He was not himself pledged to any line of conduct. All he asked the House to do was, to appoint a Committee to find out some means of putting an end to the extraordinary variations in money. How that was to be done he did not pretend to say; but, if the Government did not know, it was time they should find out. The right hon. Gentleman the Chancellor of the Exchequer had used a most extraordinary argument for 1544 resisting the Motion. He said that the inquiry would be a very long one, and, therefore, he recommended the House to put it off. He (Mr. Muntz) thought that its probable length was, on the contrary, a reason for commencing the inquiry at once. The right hon. Baronet (Sir C. Wood) had made the philosophical statement that, when money was very plentiful, it was very dear; and that when it was very scarce it was very cheap. Political economists were of opinion that the very reverse was the case. All that he (Mr. Muntz sought for was an inquiry, and he hoped that the House would agree to the appointment of the Committee.
§ The House divided:—Ayes 68; Noes 115: Majority 47.
| List of the AYES. | |
| Alexander, J. | Knight, F. W. |
| Anderson, Sir J. | Laslett, W. |
| Bailey, Sir J. | Lindsay, W. S. |
| Ball, E. | Lockhart, W. |
| Bankes, rt. hon. G. | Mac Evoy, E. |
| Barrington, Visct. | MacGregor, James |
| Barrow, W. H. | Malins, R. |
| Bentinck, G. W. P. | Meagher, T. |
| Biggs, W. | Morris, D. |
| Blgnold, Sir S. | Mundy, W. |
| Bond, J. W. M'G. | Murrough, J. P. |
| Bruce, Major | Newdegate, C. N. |
| Buck, Col. | Oakes, J. H. P. |
| Bunbury, W. B. M'C. | Packe, C. W. |
| Cayley, E. S. | Paxton, Sir J. |
| Child, S. | Peacocke, G. M. W. |
| Cholmondeley, Lord H. | Robertson, P. F. |
| Cobbold, J. C. | Smijth, Sir W. |
| Cole, hon. H. A. | Steel, J. |
| Cowan, C. | Stracey, Sir H. J. |
| Crook, J. | Stuart, Capt. |
| Davies, D. A. S. | Thompson, G. |
| Davison, R. | Tite, W. |
| Dillwyn, L. L. | Tollemache, J. |
| Dunne, Col. | Verner, Sir W. |
| Fergusson, Sir J. | Vernon, L. V. |
| Fitzgerald, W. R. S. | Warner, E. |
| Greene, J. | Warren, S. |
| Guinness, R. S. | Whiteside, J. |
| Gwyn, H. | Whitmore, H. |
| Hastie, Alexander | Willoughby, Sir H. |
| Heywood, J. | Wise, J. A. |
| Holford, R. S. | |
| Jones, D. | TELLERS. |
| Kendall, N. | Muntz, G. F. |
| Kennedy, T. | Spooner, R. |