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LETTER ro THE CHANCELLOR OF HER MAJESTY'S EXCHEQUER, CONTAINING A NEW PRINCIPLE OF CURRENCY il AND Dlatt tot a ISTatiotial ^vi^tm of ISanifttng* BY A LIVERPOOL MERCHANT. LONDON : PUBLISHED BY EFFINGHAM WILSON, ROYAL EXCHANGE PRINTED BY T. BEAN, CA8TLE-STRBET, LIVERPOOL. 1837. >A IS 37 /S 9^'6 O. t<^ ^J ''/ iV y TO TUR UIIANCELLOR OF HEU MAJESTY'S EXCHEQUER, &c ike. LivRRPOoi,, SOtli JirLY, IS37. Sir, Feeling assured, that Her Majesty's Government must be disposed to consider seriously the existing system of Currency, and the possibility of preventing the periodical return of commer- cial pressure and distress, such as afflicted the country in 1825-6, and again this present year, I take the liberty of proposing for your consideration a nev^r Principle of Currency, which would be effective to prevent the great evils referred to. The Principle of Currency, as actcd i?pon by the Bank of England, is found in- effectual, and cannot be worked out without pressure to produce low prices when her Bullion is too much reduced ; and the Principle promulgated by Col. Torrens and Mr. Samuel Jones Loyd would, I believe, be found in practice to lead, at times, to similar results. You are aware, that the Principle of Currency adopted by the Bank of England is to consider Deposits as though they were circulation or Bank Notes, and to add 'he amount of Deposits to the amount of Notes in circulation, making a total of Liabilities. At a period of what she calls " Full Currency f"" to have a re- serve of Bullion equal to one-third of the amount of her Liabilities, and then to take care, that, as her Reserve of Bullion increases or diminishes, her Liabilities shall increase or diminish an equal amount. B ! 1,1! If iH This system is supposed to operate exactly as thougli the De- posits and all the Notes in circulation were Sovereigns, and that when the Bullion in the cotfers of the Bank of England is dimin- ished one million or five millions, and her Liabilities diminished an equal amount, the effect will be to lower prices, cause a favour- able action upon the Foreign Exchanges, and restore Bullion to her coffers ; and thus admitting of her again increasing her Liabilities ; which, if not increased by Deposits, may be increased by an addi- tional issue of Notes. The error in this system is the treatment of the Deposits as though they were Notes in circulation ; but the increase and de- crease of Deposits do not affect prices in the same manner, or to the same extent, as the increase and decrease of Notes in circulation ; and yet they may cause a great diminution in the Reserve of Bul- lion. The consequence is, that while Bullion by means of Deposits is leaving the Bank coffers in large amounts, no action is produced on prices or Foreign Exchanges, nor is any pressure occasioned which shall lead to an influx of Gold to restore the Full Currency proportion between Bullion and Liabilities. I beg to call your attention to the following statement of the affairs of the Bank of England, on the 1st of October, 1833, from the London Gazette : it was a period of Full Currency, Liabilities. Assets. Circulation £19,823,000 Bullion .. £10,905,000 Deposits .... 1 3,057,000 Securities £32,880,000 And the following statement from the London Gazette^ 1 3th December, 1836 : Liabilities, Assets. Circulation £17,361,000 BulHon . . £4,545,000 Deixjsits .... 1 3,330,000 Securities. ri £30,691,000 Here we see £0,360,000 of Bullion abstracted from the Bank, with a decrease in her Notes in circulation of only £2,462,000. This is the result of working the Deposit account with the Circu- lation, and shows a very insecure position for the Bank to be placed in. Mr. Horsley Palmer, in his Pamphlet in reply to Mr. S. Jones Loyd, makes out, that of the £6,360,000 of Bullion withdrawn from the Bank, £3,700,000 was so withdrawn by the operation of the Deposit accounts, and only £2,660,000 by the Notes in cir- culation, and the amount of the latter having been diminished £2,462,000, the result is the same as though the Circulation had been managed upon the Principles of Col. Torrens and Mr. S. Jones Loyd. \i I vl Mr. Horsley Palmer, in his statement, divides the Bullion in the Bank of England thus : Date. Circulation Department. 1833 Oct. 1, £6,605,000 1836 Dec. 13, 3,945,000 Deposit Department. £4,300,000 600,000 Total. £10,905,000 4,545,000 Decrease £2,660,000 £3,700,000 £6,360,000 If this statement be admitted to justify the position of the Bank of England as regards the (luautity of Bullion in reserve to neet her Notes in circulation, it shows in what a dangerous situation she had allowed herself to be placed, as regards her Deposits, having only £600,000 on hand to meet the Liabilities, to pay on demand £13,330,000, a large amount of which might be withdrawn and paid by her in Notes to the increasing of her Circulation. This increase, she might assert, she could absorb at once by the Sale of Securities at some price or other. No private Banker would be thought prudent who would ven- ture on a similar risk : nor can the Notes of a Bank be considered secure which are exposed to the consequences of such a method of managing the Deposit accounts. For your information, I have drawn out an analysis of the Bank accounts, as stated by Mr. in (> llorsli'v I'alinor in liis I'ainphlct, iinil added the items necessary ii> make them a-^ree with the statements published in the London (rdzcttc. Tills paper is marked A in the Appendix. During the lirst six months of 18l)(), it was a period o\'ki(jk prices, and yet the Circulation was on the average below .€ I S,()()0,( )()(). During the six months of Uie present year, the Circulation has l)een above i;iS,()()(),()(H), and it has been a period of unparalleled distress, and prices have been 2') to (>() per cent, tower on articles of produce and manufacture dian in the same period in is;)(). Here is evidence, that prices are but little atfected by the mere amount of Circulation unaccompanied by other circumstances. The Mank of England attributes to the int;?ased issues of Joint Stock and I'rivate Banks, that the reduction of her issues from ei 18,304,000 17,321,000 17,899,000 17,361,000 18,178,000 Total. £10,152,000 10,419,000 11,447,000 12,202,196 12,011,697 11,031,363 £28,811,000 28,723,000 28,768,000 30,101,196 29,372,697 29,209,363 l^rices were increasing during 1833, 1834, 1835, and the first six months of 1S36, and yet there was no increase in the (juantity of Faper in circulation until towards June, 1836. I'rices fell in U»e last six months of 1836, and still more in the first direc moudis of 1837, and yet Uie Circulation was greater ihan in 1833, 1834, 1835, and the early part of 1836. Let us suppose, tliat the Bank of England was Uie only Bank of Issue in the country, and that her Circulation department was separ- led bom her Deposit department, and the Principle of Col. Torrens 7 :iii(l Mr. S. Jones Loyd adopted, that the Reserve of (lold heint: fixed at Qnc'thml at a period of Full Currency, the amount of Notts ill circulation should he diiuini^^hed an equal amount with the diminution of Bullion. Assununi,' the Circulation at jEao.OOO.OOO Reserve of Bullion £ l(),0()0,On() Sovereigns in circulation as estimated by Mr. Horsley I'almer, in 1831]; vide M'Culloch's Dictionary, " Coins." . . 3l),0()l),()0l) •l'„tal (Circulation £GU,()0(),Ol)() If £r),()0(M)()() were wididrawn from the cotters of the Bank, tlie state of the Bauk would be thus : Notes in circulation £25.()00,0()() Reserve of Bullion £5,0()(),()()l) Sovereigns in circulation. . , , , 30,()0(),00() Total Circulation £55,0()(),()()() If, at the latter period, there vveie to be a political panic, a bail harvest, a demand from a foreign power for Gold for political ob- jects, or an unfavourable action in the Foreign Ex(.hanges, I con- sider the Bank would be in a weak and dangerous position with only £r),0()(),()()() of Gold to meet £25,0(K),(K)() of Notes in circulation ; and might be compelled to have recourse to the violent measures she has adopted against Commercial Credit since Septem- ber, 183G, with a view to produce an intlux of Gold. Further I contend, that a reduction of the circulation of Notes £5,()()0,000, at a period of general prosperity and commercial con- hdence, would have little effect on prices to produce an alteration in Foreign Fxchanges in our favour, supposing that the £5,0()(),()0U Bullion had been abstracted by the ordinary operations of Ex- change. Having shown you how little the quantity of Notes in circulation, unaccompanied by other circumstances, has to do with prices, I ' I i 8 have I'xtracicd, for your insprction, a TiiMp<»n'oi't'i(»ii KxchsingoH, from January, IH3(), t«) June, IHI17, marked W in the A|)|)cn(lix, toHhow also, how htih- the hitter had to do widi the diminution of HuHion in die coti'irs of the Ikink of England in lH3f). We are told l)y Mr. llorsloy I'ahuer, that none has been withdrawn by th« Fort'i|a[n Exchanges since 1st Se|)teml)er uf diut year, and the rates since then are much the same as in the preceding months. The next point to which I bog to call your attei.tion is to the probal>le cause of th(> attack made by the Hank of F'jtgland on Commercial Credit in Au<;ust, 1836, In that moiidi her Ikillion was, on the average of the three preceding months, only £5,719,()()() : the real amount on hand was less than £o,0(W),0()(), as she began the three n)onths with, at least, £7,000,000 in her coders. In July and August, it appears by the Table B, the Exchanges were less favourable to this country than they had been before or have been since. At that time an unfavourable harvest was either universally announced or prognosticated. Alarmed at her position, with so little Bullion to meet her Circulation, an expected demand from falling Exchanges, and an anticipated importation of corn, she wished to lower prices. She saw that prices had risen, while the amount of Notes in circulation had been nearly stationary for three years, and her Bullion had been gradually leaving her, and, therefore, she had no other means to reduce prices than by attack- ing Commercial Credit ; which she did by rejecting various classes of bills offered for diseount. The result has been most disastrous. Gold returns very slowly : prices have fallen abroad for our manu- factures : the demand has ceased. Our machinery and our work- men are at a stand ; the produce of the industry of the country is diminished some millions : so that four or five millions of Gold, which were wanted in her cofters, and would have cost only five or ten per cent, premium and charges if imported, will cost twenty or thirty niillions sterhng, by the suspension of labour, machinery, foreign bad debts, &c. &c. I I {) The conclusions wliich I draw from the prprcdiny facts arc— 1st. That the Deposit accounts of the Bank of England oujjht to be entirely separated from the nianagemcnt of the circulation of ^otes ; as has been ably shown by Col. Tprrens and Mr. S. Jones Loyd. 2nd. That prices do not so much depend upon the quantity of Notea in circulation, as upon the state of Commercial Credit. 3rd. That while the circulation of Notes by the Bank of England is based upon Bullion equal to one-third the amount of Notes in a time of Full Currency, and there is a circulation of Bankers* Notes based upon those of the Bunk of England^ the Principle of Currency adopted by her, and sanctioned by Government, that the Notes shall be diminished an equal amount with the diminution of Bullion in her coffers, is not a safe Principle. 4th. That even were the Bank of England the sole Issuer of Notes, there is sufficient data to induce a belief, that the proportJo- of one-third BulHor h ♦ me of Full Currency, and the circula- tion of Notes to be diminished an equal amuunt with the diminution of Bullion, would not be a safe Principle, nor prevent the recurrence, at periods of her Bullion being so reduced in amount as to occasion anxiety and a fear of a still further reduction, which might put in jeopardy the power of the Bank to satisfy all demands upon her in Gold, and, therefore, compel her to attack Commercial Credit, as a means to lower prices, influence foreign Exchanges, and bring Gold into her coffers. 5th. That this is more evident, from the fact, that Gold is abstracted from her cofl'ers for exportation, to a large amount, by other means than unfavourable Exchanges. This appears from the state of the Exchanges during 1836 ; from the evidence of Mr. Rothschild on the Renewal of the Bank Charter ; and from the fact, that, in 1836, the Bullion shipped to the United States was at a loss on the Exchange, the object of the importers in the United States not being a profit on the Bullion, but to found new Banks and make a large issue of Paper Money. ^ !(■ 10 Also, that Bullion islial)loto hcvvitlulrawii from her cofiers, to a large amount, in times of banking and commercial distress, and of political panic, which events are more likely to occur when the amount she holds is small than v'^en the amount is large. ()th. That if the Princi|)le of Currency, as adopted by the Bank, or recommended by Colonel Torrens and Mr. S. Jones Loyd, is to be continued, (thnt is, the Principle of a diminution of Notes in circulation cquul in amount to, and no more, than the diminution of Bullion in the Bank,) then the Reserve of Bullion ought to be one-half the Circulation, instead of one-third, and there ought to be a Double Standard of Gold ... . ^ and Silver in circulation, and an ^yio allowed on either, as recommended by Lord Ashburton and in Mr. Morrison's Pamphlet. 7\\u That the present system of Paper Money being issued by the Bank of England, Joint Stock and Private Banks, might be continued with safety, and so as to avoid all anxiety, pro- vided the Reserve of Bullion being fixed at one-third, or even at one-fourth of the amount of Notes in circulation, that proportioa were preserved inviolate, and the machinery of our Monetary System so arranged, that, on every abstraction of a sum from the Reserve of Bullion, there should follow, as a necessity or consequence, the reduction or withdrawal from circulation of three or four times that sum of Notes, or Paper Money. I l)eg to submit my views of certain principles and opinions which are popular on the sul)ject of Paper Money, and which appear to have led to the adoption of the Principle of Currency professed by the Bank of England, and which was sanctioned by His Majesty's Government at the Renewal of the Charter : 1st. The Principle professed as the grand one in the management of the Currency was, that its action should be the same as though it were all Metallic. ^ This I hold to be essentially wrong, because a Metallic and a Paper Currency are essentially different in their nature. V 11 TliP Motallic is, in itself, safe or secure, bocause intrinsically valuable. The Paper can only be made "quasi," safe, or secure, being valuable in proporiion as it is easily and certainly convertible iito the Metallic. 2nd. It has been assumed, that prices depend upon the quantity or amount of Money in circulation. This is not the fact : prices depend upon Opinion. It has been assumed, that Money is abundant when there is a large amount in circulation, and scarce when there is a small amount in circulation. This is not the case. It is the ra- pidity or sluggishness of circulation rather than the amount which makes Money abundant or scarce. A smaller amount of the Circulating Medium, in times of confidence, will circulate rapidly, produce a rise of prices, and make Money appear plentiful. A large amount, in times of distrust and panic, will circulate slowly and partially, and the effect will be to lower prices and make Money scarce. 3rd. It has been assumed, that the Bank of England can at all times regulate the amount of Paper in circulation. It is doubtful whether she can, because, 1st. She has thirteen millions permanently out, as the cost of the Dead Weight, Mortgages, &c. 2nd. She is compelled to issue about fifty millions a year for the Government Service. 3rd. She is compelled to issue on her Deposit accounts. Notes once issued do not return at the will of the issuer, but at the will of the holder, and the latter may keep them or return them, according to his inclination and ability. A Bank that issues Notes merely on Discount of Com- mercial Paper or Bills of Exchange, would have a greater control over the amount in circulation than the Bank of England has, because, if she ceased to discount, as the bills she held fell due, they would absorb rill the Notes issued, or the amount in Gold, which was not paid her in Notes. c IM 12 ii 4tli. A proportion of one-third Bullion of the quantity of Notes in circulation, in time of Full Currencijy was assumed as the proportion of security, that is to say, of convertibility, and yet it was assumed, that, although the sum of each should be reduced an equal amount, an equal security would attach to the Notes remaining in circulation, although the proportion of Bullion to Notes was materially altered. For example : Notes 12 Bullion. ... ^d or 4 Diminution . . 2 An equal amount , . 2 Remaining .... 10 Bullion 2 or only ^th This was an unreasonable assumption, and experience has shown it to be a dangerous one. It appears much more reasonable to believe, that whatever proportion be assumed as the proportion of security in a period of Full Currency, the same proportion being observed under every circumstance of increase or decrease, the security would always be the same in degree. If these views be sound, they are worthy of the serious considera- tion of Her Majesty's Government, of the Bank of England, and the whole Community. This new Principle may be called the Principle of Proportion, in contradistinction of the Principle hitherto assumed as the correct one, and which may be called the Principle of Diminution in equal umounts. I beg to submit a Plan for the practical working out of this Prin- ciple. It is drawn up to suit the present circumstances of Paper Money being issued by the Bank of England, Joint Stock and Pri- vate Banks. At the same time, it does not interfere with the exclu- sive privilesjes of the Bank of England, (for 65 miles round Lon- don,) nor would it prevent her practice of supplying other Banks with her Paper at a low Rate of Interest. Were Her Majesty's Government to determine, that the Bank of England should be the only Bank of Issue, the Principle and Plan submitted are equally applicable, with merely the necessary modi- fications of detail. 4 13 PLAN ron TUK I'UACTICAI, WORKINO OUT OK U M^^ Wji'infrJ^U i^fi €utmmr^§. The Notes now existing in Circulation to be reissuable for six monthst and no longer, after the passing of an Act of Parliament for carrying this Plan into effect. No new Notes to be issued by the Bank of England, Joint Stock, or Private Banks after one month from the passing of such Act of Parliament, excepting on the following conditions : Any Bank, including the Bank of England, wishing to issue a given amount of Notes, to pay into the Mint one-third of that amount in Sovereigns, to be held as a Reserve, and the Bank to re- ceive from the Mint an equal amount in Notes of every denomina- tion from £5 to £1,000, which Notes are to be a Legal Tender, and to be called « Mint Notes." The other two-thirds of the amount the Bank proposes to issue to be presented to the Mint in its own Notes, signed and ready for circulation. These Notes to be then stamped by the Mint and re- turned to the Bank, to be called "Bankers' Notes," and to be pay- a!)le on demand at the Bankers' (-'ounter in Gold or Mint Notes. After receiving the Mint Stamp, the Bank may put these Notes into circulation, and not before. When any of the Mint Notes are worn or defaced, they are to l)e exchanged at the Mint for new ones, and the old ones to be can- celled. When any of the Bankers' Notes are worn or defaced, the Bank whose name they bear to send them to the Mint, with an equal amount of its own new Notes, unstamped : the old ones to be can- celled and the new Notes to be returned to the Bank, with the Mint stamp or mark upon them. Al'icr six. montks from the passing of ^! ! iv h. I' 14 the Act, the Hank of England and all Joint Stock and Private Banks not to be allowed to issue any other Notes than Mint Notes, and Bankers' Notes, bearing the Mint stamp or mark upon them. Any Bank wishing to diminish its issues and cancel any part or the whole of its Notes must take them to the Mint, with half the amount, besides, in Mint Notes ; that is to say, of the amount in Notes J- resented to the Mint, one-third must be Mint Notes and two- thirds its own Notes. The Mint to cancel the Bankers' Notes, and to pay the Bank Sovereigns for the sum of Mint Notes so presented . — (Case Seco7idt Appendix C.J Any person wishing for Sovereigns in exchange for Notes, either for exportation or any other purpose, may take to the Mint the amount in Notes of the Sovereigns he wishes to receive. Of die Notes thus taken to the Mint, one-third must be Mint Notes and two-thirds Bankers' Notes. At the end of ten days he may receive the whole amount in Sovereigns. — (Case Third, Appendix C.J On receiving the Notes of any Bank, the Mint to give no- tice to such Bank and to demand payment of the same in Sove- reigns. If the Bank bring an amount of Sovereigns equal to the amount of its own Notes and one-half more, it will receive its own Notes for two-thirds the amount of Sovereigns, and Mint Notes for the remaining one-third. — (Case Third, .Appendix C.J If the Bank brings into the Mint only Sovereigns e(jual in amount to its own Notes, then its own Notes will be cancelled ; be- cause die Mint will have paid away Uiat proportion of the Reserve of Sovereigns upon the deposit of which the Bank, whose Notes are cancelled, was allowed to issue them by obtaining upon them the Mint stamp. — (Case Third, Appendix C.J If any Bank cannot bring Sovereigns to discharge its Notes, it must present to the Mint an equal sum in other Notes, consisting of one-third ot Mint Notes and two-thirds of Bankers' Notes. The Bank having thus discharged the demand of the Mint, its Notes will be cancelled. — (Case Fourth, ./Appendix Cj By such processes die amount of Bankers' Notes created or can- ( elled by the Mint will always be double the amount of Mint Notes issued to the Banks or returned to the Mint, and the amount of 15 Mint Notes returned to the Mint will always be the exact amount of the Sovereigns abstracted from the Reserve in the Mint. It is not necessary for the working of this Plan, that the proportion of the Reserve of Bullion be one-third. Any other proportion may be established by Government; but, whatever be the proportion fixed upon, the Mint is only to issue or to pay Notes in that mixed proportion. 1 do not enter into the detail of regulations, in the event of any Bank being unable to take up its Notes, owing to a suspension of payments, as it would only make complexity in the Plan, and such details must be entirely decided by Government and its Law Orticers. A Plan founded upon the same Principle, and similiar to the preceding, I submitted to the attention of His Majesty's Govern- ment and the Liverpool Public in 1H32, at the time of the inves- tigation into the aftairs of the Bank of England, prior to the Renewal of its Charter. rive years have not elapsed since the Charter was renewed and the dangerous Principles of the Bank of England received the sanction of His Majesty's Government. That year (1832) was a period of Full Currency ^ and the Bank held £10,000,000 of Bullion. In about four years oJ" great commercial prosperity, by her management and the action of her erroneous Principles of Currency, her stuck of Bullion be( ame re- duced below £4,000,000. To save herself and the nation from the fearful consequences of a suspension of her payments, she attacked Commercial Credit, as the only means, according to the Principles her action is regulated by, to bring back Gold to her coti'ers. This has produced ruin and distress throughout our commercial and manufacturing population, and an entire breaking up and an- nihilation of the commercial and banking community of the Unit- ed States. Such are the conse<|uences of the present system of Currency, und similar consequences would, no doubt, sooner or later, result from the Principle of Diminution of Paper and Ciold in equal amounts^ even wi're the Circulation Department of the Bank of England separated from her Deposit or Banking Department, un- less the Reserve of Bullion were onc'half the amount of Paper Money, and we had a Double Standard of Gold and Silver, with an allowed Agio. By the adoption of the Principle of Proportion and the Plan I have here submitted, the Currency vould expand and contract accordinir to the wants and wishes of the Public, and no attack on Commercial Credit would ever be required to bring Gject, as one of vital importance to the Industrious Clasaes of the Conununity, [ have the honour to be. Sir, Your most obedient very humble servant, JOHN HALL. To the li ii/ht tlithotirnhic Tlimintk Sjniiii/ Uivi\ Clianccllof of Her Miijculi/n h'jvhci/ucr. 17 APPENDIX. '^^ (A) ASSETS AND LIABILITIES OF THE BANK OF ENGLAND, On ]st Oct., 1833, /row the London Gazette. LIABILITIES. Circulation £19,823,000 Deposits 13,057,000 32,880,000 Rest, or undivided Capital 2,269,000 £35,149,000 ASSETS. Securities £24,244,000 Bullion 10,905,000 £35,149,000 Divided by Mr. J. Horsley Palmer in his Reply to Mr. Samuel Jones Loyd as follows : CIRCULATION DEPARTMENT. Issues £19,823,000 Permanent Secu- rities as Dead Weight, Mort- gages, London Bridge, &c. . . 13,700,000 Bullion 6,605,000 £20,305,000 BANKING DEPARTMENT. Deposits 13,057,000 Securities conver- tible 10,544,000 32,880,000 Bullion 4,300,000 Rest, or undivided Capital 2,269,000 £35,149,000 £35,149,000 ■i i < » !': i 1 ^ Ill 111 18 (A) ASSETS AND LIABILITIES OF THE BANK OF ENGLAND, On \2th Dec.y 1836, from the London Gazette. LIABILITIES. ASSETS. Circulation 17.361,000 Securities ^8,97 1,000 Deposits 13,330,000 Bullion 4,54.),OOU 30,691,000 Rest, or undivided Capital 2,825,000 rniTe.OOO £33,516.000 Divided by Mr. J. Horsley Palmer, in his Reply to Mr. Samuel Jones Loyd, as follows : CIRCULATION DEPARTMENT. Circulation. . .... 17.361.000 .^eajrife, ^Dcad ^^^^^^^^ Do. temporary . . 300,000 Bullion. 3,945,000 £17.945.000 BANKING DEPARTMENT. nor>AsUER MORE THAN THRICE THE AMOUNT OF BULLION IN RESERVE. f ,1 October, 1833. Circulation £ 1 9,800,000 Bullion £6,000,000 December, 1836. Decrease three times Decrease of Bul- the decrease of Bullion £7,980,000 lion 2,660,000 Circulation 11,820,000 Bullion 3,940,000 Instead of 17,361,000 D '■:i I I 20 (B) FOREIGN EXCHANGES. Qiiotntinn/i from the LniuJnv Xcw Price Current, ]^',]G, part 1837. DATE. IRM. .Tnn. 12. Feb. !). Mar. 8. Apri .'). May 3. Alay 31. June 28. July 2fi. AUR. 23. Sep. 20. Oct. 18. Nov. 15. Dee. 13. 1837. Jan. 14. Feb. 7. 3[ar. 7. April 4. May 4. May 30. June 27. nullion in till" n.ink of F.nKliiiiil. DaTK, 183(1. Jan. .') Feb. 2. Mar. 1 April 1 May a June 3 July 1 Aup. 2. Sep. 2. 5,719,000 Sep. 20. 5,257,000,Oct. 4 4,033,000 Nov. 1 4,545,000 Dec. 2 1837. 7,070,000 7,471,000 7,701,000 7,801,000 7,782,000 7,()G3,000 7,3G2,000 G,92fi,000 6,325,000 I'All OK E.XCHANOG. Antwerp. 12 Florlin por f Sti-rliniJ. F. (Us 12 I 7 12 r,h 12 Oh j 12 i fi 12 5.J 12 I 5 4,287,000 'Jan. 3, 4,032,O0OFcb. 7. 4,048,000 Mar. 3. 4,071,000April 4. 4,100,000 May 2. 4,423,000 4,750,000 May 30. June 27. 12 5i 12 12 i 6 12 ; 5i FranUfort. tlalzon. 153 153 1.53 A 155 154 llnml)ur);h. 1,1 Mnrkd U SrhpllliiR naiico. I'.irii. atzen. M. 153 13 153] 13 13 154 13 ... 13 1523 13 152.i ... 152 13 13 13 13 13 13 13 14 S. 14.i \H 14 14.J 14 13 14 13 12.J m 14 13.J 2.'i I>anr« 40 (;fiUs. Vicnnn. 10 Florlni per f Sterling. F. 20 25 26 25 25 25 13.^ i 25 25 25 25 25 25 26 25 26 CtB. F. 05 10 .05 10 ... 10 00 10 05 ... 00 10 80 10 75 ... ... 10 85 10 80 ... 90 10 05 10 80 10 85 10 05 10 10 00 10 05 10 K. 12 13 14 12 • • II 10 11 12 14 If! 17 10 17 22 18 20 I-- 21 n 10 11 12 14 17 IC 17 •22 18 20 ( t' ) STATEMFSNT SHOWING TIIK KKKECTS THAT WO.JM. H K IMLUirCIl) <>N IMi: AMOUNT OV TllK Ciai-Ul.A rlN »J''"N » 'IK MINT KOK UOLU IN KAtllANUlC KOll NUTES. WHCTIIKH KOH KXI'OIITATION (Mi OTIl K i;»VISK, UNDKU THK PROPOSKU PLAN KOll TIIK PIIACTICAI, W(HIKING OF ^ NfU) DrtiicipU of iffurifiuiN CALI.KU THE PRINCIPLE OF PIlOl'OiniON. Let us estimate the Circulating Mediuni to l»e as follows : Notes— Mint Notes, 1(),<)()(),(H)0 Reserve of Clold bankers' Notes,. .20,000,000 in the Mint,. . |0,00i>,()0i» 30,000,000 Say, Bank of England, ..18,000,000 Joint Stock and Private Banks 12,000,000 Sovereigns in circulation. . 30,000,000 (iO,000,000 CASK FIRST. Suppose £1,500,000 was exported without api)lying to the Mint . RESULT : Wotesas above 30,000,000 Reserve ofCloUl,. . . . KVOtV't'O Sovereigns 28,500,000 58,500,000 Reduction, 1,500,000 Exported, 1,500,000 The effect the same as though all the Circulation were Meiallit . CASE SECOND. Suppose the Bankers found they had too many Notes, and wi-^u cd to draw in their Circulation : they go to the Mint for 500,OOn of Gold, and present 500,000 of Muit Notes, and i;i,000,t)(>i» A their own Notes to l)e cancelled : 2i iiKsn/r ll i W '< l\ Notes— Mint, 9,r)()0,()(K) H.mkcrs . . . . I(),(),()(U> Sovi'iei^ns, 30,001 ),()()() Mjsti acted from the Mint r)00,000 •28,500,000 (lold 10,000,000 Ucturncd tu hank- ers 500,000 lii'servc f),r)00,000 ■30,600,000 5q,000,000 lieHudion, 1,000,000 Tlu ort'oct is no more tlian a Reduction of Circulation t'(|ual to two- thirds the amount of I 'apcr cancelled, or e(|ual to the whole amount of Rankers' Taper cancelled, which is the class of Paper ;)resumed to he in excess. CASE THIUI). Suppose the Public apply to the Mini for .€l,oOO,()00 of Gold lor exportation, taking 500,000 of Mint Notes and 1,000,000 of [Jankers' Notes, and suppose the Bankers, on l)eing applied to, pay into the Mint 1,5')'),000 in Soverei<,500,000 Reduction 1,500,000 Kxported 1,500,000 I'heetl'ect being as if the Circulation had been Metallic. But sup- pose the Bankers could only raise 1,000,000 to meet their own N'otos, and, consecpiently, not having redeemed the 500,000 of Mint Notes, the whole 1,500,000 must be cancelled : I L '2'A %Mt('s— Mint, |(VK)0,0()(» ( aiict'llfd r>(>(),(KK) U/iOl »,()()() (iohl, lo.iioiMtoo liankers' . .2<),0{)(),()0() Cancelled l,00(),0(M) Kx|M»rtc.l l,r)()(),0(H) 1 !),0( )( ),( )()( ) Renlated by lljel!ai.krrs |,0()(),0()0 28,.')(H ),()(>(> .OdO.COO Reserve, y,5()i),(K)() Sovereigns, . .3n,<)U0,()(M) Taken by Bnnk- erstotheMint, l,()0(),()0() -2!J,<)()(>,0(M) Kednction, 2,500,OI>0 r)7,5()0,<)a() Here the action un the Currency is more than if it had been all Metallic, viz. : £|,5()0,()0n (iold exported 50(),0()() of wirth is taken from the Reserve, and |,O()(),()0() taken out of Circr'uion, 50(),()()0 Mint Notes cane ' ed, tiie lleserve having been diminished fiOO.OOO, 1,()00,0()() Hankers' Notes canceiled to make up the amount of Paper diminished e(|uul to thriie the dimniu- tion in the Reserve of (Iold. '2,r)i)o,()0() \ CASK FOMUTJI. Suppose the Bankers could not raise (Iold to meet a demand upon them of l,5()(),0(>0 from the Mint, and, therefore, each Hank- er determined to meet the demand upon him by a corresponding demand upon die Mint : for this purpose, whatever demand was made against a Banker for payment of his own Notes, he would meet that demand by taking an ecjual amount to the Mint in Paper ; say, one- Uiird Mint Notes and two-thirds Bankers' Notes. 'I he 1,500,000 of (Iold laken out of the Mint might be li(|uidated with a small payment in Sovereigns as shown in the following Statement of Account. ■iff 24 5 iCS L^ «<9 V *> •* H s: ii. u ^ <^s 2 ^ '2 vi 5 '-■' CI •O tC 1- 'O » M «5 1^ 1;^ c-otcic-. ?oeo«:«(N'--' 35 c w^ C^-— -^ i a »- cl 'i s CJ •> CI •* y Cl C5 CI OS ^ rf ■«J< t^ ,^ ^^ p^ ^. 'O - "> Ul i/3 M = n t-; ca 'C 5 f^'^ r-i i4 s •..' ^ x »~" — ^— N : » =^111 i w X IHl H ES-rtocsccocooooc;j !I g.i^W2 -ig o-^f-so-ostcoosog. p 0^ "x ^cj-fcic-. f^^iorjci"^ ~ i /— s H o«c=;o'9'CJ"'-< ''^ ■"it ® - — ^ CJ (— ■— » *<^ *^ . — ' •— ^ *-v '^ '^ '-C '-C ^' '-0 ^ 1-' X o-^-fjij^^Cin — — .-^ti^ 1^ 2:, 0. - %= -C Tl -0 -^^l- 'O ii^O ^S^iC !-;_ •c ■^ ■^ ^-4 cT -^^ -T -o i>^ — r-1 co"cf xr'i>r^'i>r 1« i^ — -rf C-, Ci M SC 'O ?~ ~J — •— ' OS H S2 'O r)« 01 — ' ^ CI Z i2 _-- ' I .0 ot -M cc '0 M 'C « rt 'O i; « 'C Qj j^Ti-ric-TOiiio^i^co'O ?. 0: O rooi — 1>.=S CC ?l 'O O'O t^so CI CI W 2: S SCCl W X 'C ft C. Ci M CO <0 M C ?^ Tl ■* CV — ■* Sl>— ^- CI V. £ c 'O 0^ CI — rr H i ^* -^ i : _, „ „^„„c.i_ »-(c »o 'O 5: » ^^ t-^ tXj l-~. l~» l^ l^ 1 .Xr »* •■ r. s t^ 1^ 1^ 5 s 1 r 0" ec ■y; F— ' 1 ^H ;ti: ^-" — . 1 • S S£ .b : J : -"S ,/ i> I ! ! I 1 ■ '-i -JfX C 7* : 1.1—1 P .-o_*^ t' ■ ■-'•' S ? sccecccec; ■ ^ 7! :; c ^ :J il s i o"^'^ ^ cd 1 ^^ •- '^ 1 25 RESULT : Notes 10,000,000 IMint. Reserve of Gold, 10,000,000 1,492,285 Returned. 8,507,715 Exported, 1 ,500,000 20,000,000 Bankers. Paid in,.. 7,715 2,984,570 Cancelled. 17,015,400 Soverei^s,30,0U0,000 Paid into the Mint, 7.715 25,523,145. 1,492,28/ Reserve, 8,507,715 59,992,285 55,515,430 Reduction, 4,484,570 Exported, 1,500,000 Here the abstraction from the Reserve of Gold of £1,492,285, the result of an exportation of £ 1 ,500,000 of Gold, diminishes the Circulating Medium not quite thrice the sum exported, but exactly thrice the 1,492,285 abstracted from the Reserve, say, 4,476,85r) and also the sum taken from the Sovereigns previously in Circulation paid into the Mint, ^'^^'^ Total, 4,484,570 1 4 \i IMl f '26 ADVANTzVGIilS OF THE SYSTEM. 'I'lip Mint or National Bank could never stop paying in Gold. Before the last Sovereign could be drawn out, the last piece of Paper Money in existence must he cancelled. No Commissioners would he required to regulate the issues of Paper Money. The Bank of England, Joint Stock and Private Banks would issu? as much Paper as they pleased : they would not be likely to issue too much, for, as Mint Notes would be preferred, their own Notes would be returned upon them, if they issued too many. Mint Notes, being only a sub- stitute for Gold deposited, would leave no profit. The Profit of the Banker would depend upon how many of his own Notes he could keep in circulation : if he could not keep in circula- tion the whole of his own Notes, and part of the Mint Notes he received for the Gold he deposited, it would be his interest to cancel a proportion, and get back part of his Deposit from the Mint. The Foreign Exchanges, when unfavourable, would act upon the Gold in circulation and the Reserve in the Mint : the latter would act powerfully upon the Notes in circulation ; and the Diminution of the Circulating Medium would act upon prices and react upon the Foreign Exchanges. There would be no occasion for any direct or violent action upon Commercial Credit ; it would be acted upon naturally and sensibly by the Contraction of the Circulating Medium. The existing System of Currency appears to be founded on two Principles : first, that Gold should never be of more value than Notes ; in other words, that Paper Money should never be depre- ^ 27 riated : and the second, that no continued drain upon llie coflfors of the Bank of England can ever take place, except by an unfavoiu- able state of the Exchanges. As regards the latter, experience has proved it to be erroneous. Demands by foreign powers, for political objects, and by com- munities, for speculative ones, backed by local paiiics and bad harvests, may produce as serious mischief as I'orcign Exchanges. The etYoct of the existiiv:; system is to produce the reverse of the first principle, and really to make Notes of more value than Gold ; for, by the application of pressure, Gold is forced into this country, not to be exchang':>d for Paper at the intrinsic or Mint par of £'.] 1 7s. lO^jd. per oz., and an Agio for the charges of transportation and in- surance, but at the price of £3 17s. 9d. per oz., and the seller bearing all the charge of bringing it over, thus I'aper is made dearer than Gold. Not content with tliis, when we have lost our Gold, we resort to no other means of brin'j-inn: it back but that of makin2; it dearer in this country than any other country in the world, and this by making commodities clieaper. No wonder, then, under the present system of bringing back Gold, and making it clieaper than I'aper, the Commercial and Manufacturins; hiterests are made to suffer the greatest distress ; they must be put under the screws until thoy submit to sell all their commodities for Gold at a lower price than any other nation will sell, and a percentage lower still, say equivalent to the expense of bringing home Gold bou'^ht at par or £3 17s. lO^d. per oz. to sell at £3 1 7s. M. to the Bank of England. The IMonied Interest contribute nothing to this expense : their connnodity becomes of greater value, and they are benefited in proportion as the others suffer. By the system I propose. Gold may he brought back at a less cost to the nation, if not less to individuals. If a Banker pro- cures Gold, he procures to himself a positive advantage ; the pri- vilege of issuing Paper Money. When, therefore, the circulation became low and money scarce, he might find it to his advantage to import Gold at a loss of the charges or even a small percentage mmmmmm mmBmsmm I i'< m 28 more, and pay it into tfie Mint. He secures immediately a Le^jal Tender Paper, of equal amount, and a title to issue double the amount on his own security, if he can find a vacuum to fill up in the Circulation of the country. This done at a time when Money was scarce and Property low in ])rice, miijht afford him a hand- some remuneration, and, at the same time, confer a benefit on the community by mitigating what might otherwise become severe pressure. With a similar view, under the proposed system, the larger Bankins: Establishments would find it expedient, partly for profit and partly for security, to invest sums in Foreign Securities, to be ready to realize and buv Bills of Exclianfre, or Gold, when, by Foreii^n Exchan2;es or other means, there was a dram upon the Mint for Gold. If the drain was the effect of the Exchanges, this would be counteracted by the purchase of Bills on Eno-land ; and, if it were 'the effect of other causes, the contraction of Circulation effected by such drain would be counteracted by the expansion effected by the importation and deposit of Gold in the Mint. ■, k iQ i. u^.-is. (';,i..'Ti-/-, LAjii..i-:)i'.w;tkr, j.iv tHi-om..