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who are possessed of unemployed capital, whether bankers or not, and who can gain an adequate return by the advance of capital, are enabled to afford, and do afford, that aid which it is supposed by some that banks alone are enabled to afford. In the second place, it may be a question, whether there be any permanent advantage in the maintenance of public or private credit, unless the means of maintaining it are derived from the bonâ fide advance of capital, and not from a temporary increase of promissory notes, issued for a special purpose. Some apprehend that the proposed restriction upon issue will diminish the power of the Bank to act with energy at the period of monetary crisis and commercial alarm and derangement. But the object of the measure IS TO PREVENT (So far as legislation can prevent) the recurrence of those evils from which we suffered in 1825, 1836, and 1839. IT IS BETTER TO PREVENT THE PAROXYSM than to excite it, and trust to desperate remedies for the means of recovery."

Sir Robert Peel, therefore, deliberately took away the power of the Bank to act on extreme occasions, under the impression that his Act would prevent these extreme occasions from arising. We shall see how his hope was fulfilled.

9. Sir Charles Wood followed Sir Robert Peel, travelling over the same ground, and giving the same caricatured description of American banking as he had done; moreover, he also was infected with what is known by the name of the " currency principle"

"It is not enough, then, to enact that the Bank notes shall be convertible. The paper circulation must not only be convertible, but must vary in amount from time to time as a metallic circulation would vary. A system, therefore, of paper circulation is required, which will attain this object, and insure a constant and steady regulation of the issues on this principle. This, and this alone, affords a permanent security for the practical convertibility of the notes at all times, and for the consequent maintenance of the standard."

10. The bill was read a second time, after a feeble opposition, by a majority of 185 to 30. It passed through the House of Lords with a very short debate, and no division. Lord Radnor

alone protested against it, and it received the Royal Assent on the 19th of July, 1844.

11. The chief provisions of this Act are as follows (Statute 1844, c. 32)—

1. That, after the 31st August, 1844, the issue of Bank notes by the Bank of England should be kept wholly distinct from the general banking business, and be conducted by such a committee of the directors as the Court might appoint, under the name of the "Issue Department of the Bank of England."

2. That, on the same day, the Governor and Company should transfer, appropriate, and set apart, to the issue department securities to the value of £14,000,000, of which the debt due by the public to the Bank was to be a part; and also so much of the gold coin and gold and silver bullion as should not be required for the banking department. The issue department was then to deliver over to the banking department an amount of notes exactly equal to the securities, coin, and bullion so deposited with them. The Bank was then forbidden to increase the amount of securities in the issue department; but it might diminish them as much as it pleased, and increase them again to the limit defined, but no further. The banking department was forbidden to issue notes to any person whatever, except in exchange for other notes, or such as they received from the issue department in terms of the Act.

3. The proportion of silver bullion, in the issue department, on which notes were to be issued, was not at any time to exceed one-fourth part of the gold coin and bullion held at the time by the issue department.

4. All persons whatever, from the 31st August, 1844, were to be entitled to demand Bank notes in exchange for standard gold bullion, at the rate of £3 17s. 9d. per ounce.

5. If any banker who, on the 6th May, 1844, was issuing his own notes, should cease to do so, it should be lawful for the Crown, in Council, to authorise the Bank to increase the amount of securities in the issue department to any amount not exceeding two-thirds of the amount of notes withdrawn from circulation.

6. Weekly accounts in a specified form were to be transmitted to Government, and published in the next London Gazette.

7. From the same date the Bank was relieved from all stamp duty on their notes.

8. The annual sum payable by the Bank for their exclusive privileges should be increased from £120,000, as settled in 1833, to £180,000. And all profits derived by the Bank from the increase of their issues above the £14,000,000, as prescribed by the Act, shall go the public.

9. After the passing of the Act, no person other than a banker who was lawfully issuing his own notes on the 6th May, 1844, should issue Bank notes in any part of the United Kingdom.

10. After the passing of the Act, it was forbidden to any banker to draw, accept, make, or issue, in England or Wales, any bill of exchange, or promissory note, or engagement for the payment of money payable to bearer on demand, or to borrow, owe, or take up in England or Wales, any sum or sums of money, on the bills or notes of such banker, payable to bearer on demand, except such bankers as were on the 6th May, 1844, issuing their own Bank notes, who were allowed to continne their issues in such manner, and to such extent, as afterwards provided. The rights of any existing firm were not to be affected by the withdrawal, change, or addition of any partner, provided the whole number did not exceed six persons.

11. Any banker who ceased to issue his own notes from any reason whatever, after the Act, was not to resume such issues.

12. All existing banks of issue were forthwith to certify to the commissioners of stamps and taxes, the place, and name, and firm, at and under which they issued notes during the twelve weeks next preceding the 27th April, 1844. The commissioners were then to ascertain the average amount of each bank's issues, and it should be lawful for such banker to continue his issues to that amount, provided that on an average of four weeks they were not to exceed the average so ascertained.

13. If any two or more banks of issue had become united during that twelve weeks, the united bank might issue notes to the aggregate amount of each separate bank.

14. The commissioners were to issue in the London Gazette a statement of the authorised issues of each bank.

15. If two or more banks afterwards become united, each of less than six partners, then the commissioners might authorise them to issue notes to the amount of their separate issues. But

if the number of the United Bank exceeded six, their privilege of issuing notes was to cease.

16. If any banker exceeded his authorised issues he was to forfeit the excess.

17. Every bank of issue was to send a weekly account of its issues, which was to be published in the London Gazette.

18. The mode of taking the average was laid down, and bankers were to permit their books of account to be inspected by a Government officer properly appointed, and to make a return to Government once every year, within the first fortnight in January.

19. The Bank of England was allowed to compound with private banks of issue, to withdraw their own notes, and issue Bank of England notes, for a sum not exceeding one per cent. per annum, up to the 1st August, 1856.

20. All banks whatever in London, or within 65 miles of it, were allowed after the passing of the Act, to draw, accept, or indorse bills of exchange, not being payable to bearer on demand.

21. The privileges of the Bank were to continue till twelve months' notice, to be given after the 1st August, 1855; and repayment of the public debts, and all other debts whatever.

12. Such are the leading provisions of Sir Robert Peel's Act, which was meant to carry out a particular theory of currency, which we have no hesitation in affirming is one of the most stupendous delusions on the subject that any one ever conceived. A theory as opposed as possible to the opinions of all the greatest authorities on the subject, during the great discussions on the currency in 1804, 1811, and 1819, which we have already abundantly quoted in the former part of this volume. But the most remarkable circumstance is that the Act authorises the most flagrant violation of the principle it is intended to enforce; for the issuing of notes upon the public funds is the most vicious principle possible. It is the theory of John Law, which we shall more fully consider in a subsequent chapter. Indeed, so utterly blind was one of the most distinguished advocates of this theory to the true nature of monetary science, that he boasted that, "practically considered, fluctuations in the rate of interest, and in the state of commercial credit, so far as

they can result from alteration in the value of the currency, may, under the operation of the proposed system, be taken at nihil."1

13. The avowed object of the Act of 1844 was to take the regulation of the currency out of the hands, or even the power, of the directors of the Bank of England. The incorrigible mismanagement of that body had, in the opinion of every body, aggravated every crisis. The authors of the Act of 1844 flattered themselves that for every five sovereigns that left the country, a five-pound note must be withdrawn from circulation. We shall see hereafter how this expectation was fulfilled. In the meantime, Sir Robert Peel himself and all the supporters of the Act, gave out that it was the complement of the Act of 1819, though we confess we do not clearly see the meaning of the phrase. If, however, they mean to say that it was in the spirit of the Act of 1819, or of the statesmen of that period, we wholly deny such to be the fact, and to suppose so, only argues the most profound ignorance of the doctrines of the authors of the Act of 1819.

14. The issues of notes, then, of the Bank of England, are founded upon two of the most fatal delusions that ever prevailed on the subject of the paper currency; the one the theory of John Law, and the other the "Currency Principle," which came into fashion about thirty years ago.

15. We have observed, in the last chapter, that, owing to the good harvests of 1842-3-4, the Bullion in the Bank accumulated very rapidly during these years, and a very large quantity of money, which the nation must otherwise have spent in food, was set free for commercial purposes. Other circumstances occurred at the same time to liberate a large quantity of the capital of the country from its accustomed use, and to render it applicable to commercial purposes, which have been very clearly and ably pointed out by Mr. James Wilson. He shews that the rapidity and certainty of conveyance reduces very greatly the amount of stock it is necessary at all times to keep on hand when communications are slow and uncertain. That the amount of Tooke's Hist. of Prices, Vol. IV., p. 282.

Col. Torrens.

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