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degree supplied, in such countries as had preserved credit, the place of coin. Trade and civilization must have been extinguished wherever confidence was destroyed, if the demand for the precious metals had been great in England. And yet the annals of none of the German states show any derangement in the prices of produce traceable to the sudden influx of gold and silver from France and England, or to the re-actions that caused them to return; while in England very small fluctuations in price, and often fluctuations of contrary tendencies, were exaggerated by clamorous writers into national calamities, for which the trifling addition to the Bank issues during the restriction was made responsible. In spite, therefore, of the apparent wisdom of the observations so frequently made upon the absurdity of regarding a piece of stamped paper as an equivalent for a stamped sovereign of gold, it appears that paper at the epoch we have been considering actually did perform the service that gold usually does. The gold had diminished in quantity, the activity of trade had increased, and the facilitation of exchanges was effected to a great extent by means of paper.

It may be imagined that, though the supply and distribution of the precious metals are beyond our control, still the actual possession of a valuable commodity secures the owner from the risks to which persons who keep deposits in banks under the present system are liable. It may not be generally known, that the history of our own country affords curious experience as to the risk attending metallic banks, if we may be allowed the expression. Previous to 1640 it was customary for those who had large sums of coin on hand to deposit them at the king's Mint in the Tower for security. In that year Charles I. having thought proper to make free with the deposits, the practice was of course discontinued*. Money was then lodged with goldsmiths, who added to their other business that of jobbing in coins and speculating upon exchanges. In 1667, however, when the Dutch sailed up to Chatham and burnt the town, the panic that ensued caused a run upon the goldsmiths and ruined their credit. In 1672, Charles II., who had contracted a loan with the bankers of London at nearly eight

The Bank Restriction Act is a parallel case as far as deposits are concerned.

per cent. interest, chose to declare himself irresponsible for the conditions of the agreement, and to refuse to pay either principal or interest. The public discontent forced him to agree after some time to pay six per cent. interest; but the capital was never refunded, and was finally subscribed into the South Sea stock in 1720.

In order to remedy the want of such an institution in England, the Bank of England was chartered by William and Mary in 1694; the original capital, 1,200,000l., being lent to Government at nearly eight per cent. Previous to 1759 no notes were issued for less sums than 207.: in that year 10%. notes were issued. These notes, however, circulated largely, the amount being 6,758,0707. in 1778 and 9,685,7207. in 1787. In 1793, 51. notes were issued, and 17. and 27. notes in 1797. The circulation in 1800 was 15,047,1801., of which sum 8,551,8301. were upon private securities. The advances on other accounts in that year were therefore 6,500,000l., a sum which they never equalled during the ten following years. Yet in 1800 the value of notes and of gold was at par, while in 1802 notes were at a discount of 81. 7s. 8d., and in 1803 of 71. 5s. 10d. per cent. During the following years the excess of issues above the discounts was, in 1814, 15,000,000l., and in 1817 it reached 24,000,000l. The most recent returns show the circulation of the Bank to be 21,828,000l.; but the private are no longer distinguished in the returns from the public securities, and thus the utility of these returns to the public is destroyed.

Having given the amount of paper money now circulating in different countries, we must add M. Berghaus's estimate of the distribution of gold and silver in Europe and America for the year 1835. He supposes that there were in

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This does not include the platina money of Russia, of which

67,389 marks were in circulation in 1832, at a value of
5215 to 1 in proportion to silver.

If we take this division as approximately correct for the year 1835, and add 40,000,000l. for our paper circulation, we find that the metallic and paper currency of Great Britain together amounted in that year to 105,500,000l. How far this sum is from sufficing for the commercial wants of the kingdom, may be seen from the estimate of the sums daily exchanged in account at the clearing-house of the London bankers, which is said to amount to 4,500,000l.* On some days the sums exchanged at the clearing-house, being the amount of bills and checques payable in London alone, are 13,000,000l., for the arrangement of which only 200,000l. in notes and specie are required as balances. The substitute for money afforded by bills and checques is a circulating medium that cannot be controlled by the legislature. It can swell to any amount that the state of credit will allow. Were the current coin in a trading country suddenly diminished, a remedy would to a certain extent be found by the trader in this power which he himself possesses. Even in the middle ages and in antiquity, before the use of bank-notes was known, we see that money-orders were customary in nations carrying on extensive trade. Every man, as far as his credit goes, is his own banker, and keeps his own mint. It would be a much surer method of enriching the country to teach every trader how to cultivate and direct this source of wealth, than

Amounts passed by the principal Banking-houses of London, at the Clearing-house:-1840.

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This statement does not include the bills and checques either of the Bank of England, of the joint-stock banking companies, or of the bankers of Westminster.

to lead him to think that his fate depends upon eitheir miners or bank-directors in town or country. Where the trader is true to himself, there can be no over-issuing even of notes. In fact what may be called the voluntary currency already far exceeds that of the sovereign and of the banks taken together. For this we have Mr. Senior's authority :—

"It is obvious indeed that, as money is a substitute for credit, credit must be a substitute for money; and it is well known that international commerce is carried on by means of bills-of-exchange, which are in fact merely an exchange of equal credits, with very little transmission of money. .....It is probable that not one-thousandth of the daily exchanges in London, in which the value of the property on either side exceeds forty shillings, are performed by means of money."-Senior, on the Transmission, etc., p.19.

We can therefore as little pretend to fix a limit to the currency of a country by restricting the issue of notes, as we can insure a sufficient supply of bullion, at any given time, from lands that work their mines according to the prospects of profit that present themselves, and not according to our pleasure or convenience.

The pressure occasioned by an abstraction of notes or money from the trading public, would, in a healthy state of trade, be attended with little or no inconvenience. Even the wellknown prudential measure adopted by the Bank, and commonly designated "putting on the screw," if often repeated, would only ultimately divert the commercial world from a long-accustomed channel of discounts. Whoever can show property, as security, need be in no fear of wanting credit, which answers the purpose of money; and there is every prospect of our ultimately being forced, by the pressure of competition, to adopt a system of checques and notes from motives of economy. Indeed, were there no mode of escaping from the tyranny of the propounders of currency systems, what would be the trading prospects of the nation?

We have seen that the imports of articles chiefly consumed by our manufacturers increased in a rapid proportion between 1810 and 1835: the increase was again great in 1843. The exports of the country had of course augmented in a similar proportion. As the population has rapidly increased, while the agricultural production and demand for manufactured goods keep pace with it, the home trade must in the

same interval have likewise been augmented. But we find no trace of all this in the Bank issues, which are now less than in 1839. It would however be ridiculous to assert, that so vast an increase of trade could be carried on without an additional command of some circulating medium*. The inference therefore must be, that commercial men and bankers have improved their private arrangements, and that extensive money transactions are carried on without the intervention of coined metal or even of bank-notes.

Let us now suppose that judicious treaties had been made with foreign powers in Europe and America, before the inefficient attempts, with which the trading world has for the last ten years been tantalized, rendered such arrangements difficult; what would have been the inevitable result? An immense addition to the commercial business of Europe would have strained the monetary resources of this quarter of the globe, perhaps too suddenly for the growth of credit abroad. The trade of England, whose commercial routine is excellent, would probably under these circumstances have doubled. Could such a change take place without an addition to our circulating medium? What arrangements would this desirable event render necessary? A larger proportion of bullion than is now lying idle in the coffers of the Bank could not then be abstracted from circulation except at a high price. Would it be necessary then to prohibit the Bank from issuing more paper than it now does, because it could not conveniently obtain gold enough to meet a sudden run in a case of panic?

But the increase of trade which has formed the basis of our reasoning is no phantom, to substantiate which we must wait until foreign courts are more friendly, or foreign political economists more enlightened, than they now are. We have the power in our own hands to realize at once all the benefits that would accrue from the most unlimited extension of

"If the prices of commodities were regulated solely by the quantity of the circulating medium, as the latter in the twenty years had declined, at the rate of 13 per cent., we might calculate that the fall on the former would be at the same rate. If, as we know to be the fact, the mass of commodities had been greatly increased in the period, whilst the circulating medium had diminished, we should find an additional decline in the prices of commodities. But that decline would be subject to counteraction from several causes, which might give additional power to the circulating medium."-Jacob, ii. 373.

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