UC-NRLF 1 REESE LIBRARY ^ UNIVERSITY OF CALIFORNIA. %eceiveJ ^ 16 1893 ,^^ (Accessions No.-^^ O 3 ^ Class No. CAPITAL, CUllRENCY, AND BANKING. CAPITAL, CURRENCY, AND BANKING; A COLLECTION OF A SERIES OF ARTICLES PUBLISHED IN THE " ECONOMIST IN 1845, ON THE PRINCIPLES OF THE BANK ACT OF 1844, AND IN 1847, ON THE RECENT MONET ARIAL AND COMMERCIAL CRISIS ; CONCtUDING WITH A P L A N SECURE AND ECONOMICAL CURRENCY. APPENDIX, CONTAINING THE WEEKLY AND MONTHLY ACCOUNTS OF THE BANK OP ENGLAND, AND OF THE GENERAL CIRCULATION OF THE UNITED KINGDOM, SINCE THE PASSING OF THE ACTS OF 1844 AND 1845 ; ALSO, EXTRACTS FROM THE EVIDENCE TAKEN BEFORE THE LATE BANKING COM- MITTEE, BEARING UPON THE POINTS DISCUSSED. The Right Honourable JAMES WILSON, AL'THOR OF "THE INFLUENCES OF THE CORN LAWS;" "FLUCTUATIONS OF CURRENCI COMMERCE, AND MANUFACTURES;" "THE REVENUE, OR WHAT SHOULD THE CHANCELLOR DO?" ETC., ETC. •■r^ or TMi SECOND EDITION. Price 7s. fid. UNIVERSITl ^^ LONDON; PUBLISHED BY D. M. AIRD, "ECONOMIST" OFFICE, 340, STRAND. 1859. ^ %"< ^%6 6 'J-'O ^ "/ o CONTENTS. Paqob. Introduction i PREFACE. Extent of Railways constructed and projected in the world.— Annual Accumulation of Capital.— Extent of Present Liabili- ties for Railways.— Power of Railways to increase wealth. —Effect of Railway Investment (foreign and home Railways) on the Money Market.— Oct 4, 1845 ARTICLE I. The Bank Act of 1844.— System of Barter.— A Standard of Value. —Introduction of Money.— What is a Pound?— Banks of Deposit.— March 8, 1845 1 ARTICLE II. The Bank Act of 1844 (continued) :— What is Meant by a Con- tract to Pay a Specific Sum ? — Difference between Capital and Currency or Circulation.— Confusion by not Observing the Distinction.— Effects of the Efllux or Influx of Bullion upon the Circulation. — Parallel Effects upon a Purely Metallic Currency, and one Mixed of Convertible Paper and Coin.— March 15, 1845 ARTICLE IIL The Bank .Act of 1844 (continued) : — A Consideration of the General Principles Applied to Banking, as it Existed prior to 1844. — The Fundamental and Essential Principles on which the Success of Banking Depends. — Deposits.— The same in Country Banking,— Banking in Scotland.— Economy of the Currency.— March 22, 1845 18 ARTICLE IV. The Bank Act of 1844 (continued) : — The Character of a Banker's Business.— The Essential Character of Securities which Bankers hold. — Bills of Exchange. — ^Advances on Merchan- dise. — Personal Loans. — Remarks on a Mixed Currency of Bank Notes and Coin. — On Inconvertible Paper.— On Con- vertible Paper.— March 29, 1845 26 CONTENTS. ARTICLE V. The Bank Act of 1844 (continued) :— The Circumstances which led to this Measure.— Five Assumptions upon which the ex- pediency of that bill was defended.— Can convertible paper be depreciated ? — Conformity of a Mixed Cun-ency with the variations of a Metallic Currency.— April 5, 1845 . . 33 ARTICLE VI. The Bank Act of 1844 (continued) :— The Contraction and Ex- pansion of the Currency at pleasure considered ; first, under an adverse exchange ; second, under a favourable ex- change ;— showing that no such Power is possessed by the Bank.— April 12, 1845 47 ARTICLE VII. The Bank Act of 1844 (continued): — Influence of Currency on prices.— The Effect of the Discovery of the American Mines. — The Effect of an Expansion or Contraction of an Incon- vertible Paper Currency on Prices. — The changes produced merely nominal. — The Impossibility of Increasing or De- creasing the Quantity of Paper in Circulation, when Con- vertible, so as to Act on Prices. — April 19, 1845 . . 63 ARTICLE VIII. The Bank Act of 1844 (continued) :— The Theory of Regulating the Foreign Exchanges by an Action on Prices. — Great Dis- turbing Influences from other Causes affecting Prices.— The Difference of the Causes which Influence the Import of Coin and other Commodities.— The Bill of 1844 Calculated to Aggravate a Drain of Gold by Discouraging Purchases of Goods, until the Exchanges have shown Evidences of being Corrected.— April 26, 1845 61 ARTICLE IX. The Bank Act of 1844 (continued) :— Proposal of Sir Robert Peel to Assimilate the Scotch Banking to the system established by that Act. — No good ground for such an attempt. — Uniformity of System in the two Countries desirable. — The most Imperfect System should be Assimilated to the most Perfect, and not the Perfect to the Imperfect — The Scotch System of Banking contrasted with the English System. — The application of the principle of the Act of 1844 to Scotland and Ireland calculated greatly to aggravate the difficulties of the Bank of England under a drain.— April 26, 1845 . 67 ARTICLE X. The Bank Act of 1844 (continued):— The Experience of the First Year of its Operation.- The Expected Effects Falsified by the Events.— Did not Prevent or Check Speculation.— Mr. Lloyd's Defence of the Act examined.— May 17, 1846 . 73 CONTENTS. ARTICLE XI. THK CRISIS. — THE MONEY MAHKET. Reasons for Special Attention to the Questions of Capital and Currency at this time.— Confusion of Terms. — What Really Constitutes Capital? — What Constitutes the Difference between Fixed and Floating Capital?— January 23, 1847 . 82 ARTICLE XTI. What constitutes the difference between Capital and Money, Currency or Circulation ?— The state of Barter.— The Origin and Use of Money.— The Economy of Capital by the intro- duction of Paper Money. — Commodities the Basis of Credit. —The effect of Banks upon Credit. — Banks Deposits, &c., &c. —February 6, 1847 90 ARTICLE XIII. Extent of Railway Investments and Liabilities. — Effects of Railways on the Capital of the Country. — The Distinction betAveen Floating and Fixed Capital. — Causes which have led to the present Crisis.— Great increase of Imports caused by Railway Expenditure.— Effect of Railways in Economising Capital.— Our Present Position and Future Prospects. — April 10, 1847 ... 101 ARTICLE XIV. The Crisis not referable to Undue Speculations in Trade. — In- direct Effects of Railway Expenditure upon Commerce. — Comparison between the Crisis of 1825 and 1847.— Excess of Speculation in Commodities in 1825. — Sudden Increase of Imports. — Great Fluctuations of Prices. — The different Characteristics of the Pressure of the Present Year. — April 17, 1847 115 ARTICLE XV. The Bank of England and the American Exchanges.— The Gold Mines in Orel and Siberia 124 ARTICLE XVI. The Crisis.— Its Character.- The Present Condition of the Bank of England, and how it is affected by the present Crisis. — Blay 1, 1847 129 ARTICLE XVII. The Crisis.— Its Character and Remedy. — The Nature of Capital and Functions of Money.— The Operation of a Purely Metallic Currency. — How can the Currency be Economised ?— The Currency of Hamburgh.— The Currency of France.— The Currency of Russia, and its curious effects on the recent transactions of the Russian Government.— The Scotch System of Banking.— The State of the Currency in England. — The Proposed Remedy for the Present Scarcity of Capital. — The Substitution of Convertible One-pound Notes for a Gold Circulation.— May 8, 1847 141 CONTENTS. ARTICLE XVIII. Reply to certain Objections to the proposal erf substituting One- pound Notes for Gold.— May 16, 1847 174 ARTICLE XIX. Reply to further Objections and Remarks on the same Proposal. May 22, 1847 179 ARTICLE XX. Plan for a secure Paper Currency, in accordance with the Principles laid down in the Three preceding Articles.— Free Competi- tion in Banking. — A National Bank of Issue considered. — By means of the Bank of England considered.— May 29, 1847 193 APPENDIX. The Evidence of the Governor of the Bank of England, taken before the Select Committee on the Bank Acts ... 3 An account of the number of Private and Joint Stock Banks authorised to issue notes, and the amount of their issues, as fixed by the Acts of 1844 and 1846 71 The General Circulation of the United Kingdom, together with the Bullion in the Bank of England, and Banks in Ireland and Scotland, from Sept. 14, 1844, to July 30, 1869 . . 72 An account showing the amount of the circulation of Bank of England Notes ; the amount of Deposits ; of Securities ; of Bullion ; and of the Reserve of Notes held each week by the Bank, from Sept. 7, 1846, to Aug. 13, 1859. Also, showing the Minimum Bank Rate of Discount during that period . 79 NIVEBSITY j CAPITAL, CURRENCY, BANKING INTRODUCTION. The articles upon Capital, Currency, and Banking, which have appeared in the Economist during the last two years, having been written chiefly in a connected series, and with the view of fairly discussing the general principles upon which the Bank Act of 1 844, as applied to England, and that of 1 845 as applied to Scot- land and Ireland, were founded, their republication, in the more convenient form of the present volume, has been suggested as a useful mode of again bringing them before the public at a mo- ment when these subjects have acquired a wider and more in- tense interest than at any former time. Although the whole of the articles now reprinted consist mainly of discussions proceeding upon general principles, and are, there- fore, as much applicable to one period as to another, yet the par- ticular events which elicited them from time to time, are necessa- rily referred to, and it became a question whether or not it would not be better so far to alter them, as to have no special relation to the events of the moment, so as to give them more the appear- ance and character of permanent essays. On fully considering this question, it has been deemed best to reprint them in the precise form in which they were originally published — first, be- cause the temporary events to which they allude are still compa- ratively new, and must be fresh in the recollection of the reader, and most of which have a lesser or greater relation to those of the present day — and secondly, because, looking at the work in a more permanent light, the events referred to will not only be va- luable as historical facts, but will serve well to illustrate the principles which it is sought to maintain. In the Table of Con- tents, we have, therefore, indicated the date, as well as the leading character of each article. The first ten articles were written in 1845, and are devoted exclusively to a full consideration and critical examination of the principles on which the Bank Act of 1844 was founded. The remaining articles have been written during the present year, and have a direct reference to the deeply interesting financial events through which the country has so recently passed. As frequent allusion is made, throughout the latter part of this volume, to an article published in October, 1845, in which the full extent of Railway Works, then performed and projected in the United Kingdom, as well as in other countries, is elaborately considered, together with the effects which those works W3re likely to produce upon the capital of the country, it has been thought desirable to reprint that article, as part of the preface to this work, and, more especially, as it contains much information of permanent use and interest. PREFACE. RAILWAYS-PAST, PRESENT, AND FUTURE. We cannot but regard Railways as a grea branch of commerce, standing in regard to our home trade and internal traffic in the same relation as shipping does to our foreign trade. We must, however, most emphatically express the distinction which we make between Railways themselves and stock exchange specu'ation in Railway siiares — they are two things as far apart as things can be, both in their tendencies and utility. The first inquiry ou the subject of Railways, to afford us the means of forming an accurate opinion, not only as to their existing exteni and importance, but also as to our probable means of carry- ing those great internal improvements into effect in the future, is to know what has heen done in the past. 'I he first application to Parliament for a bill to construct a railway was in 1801, called the Surrey Railway, lo be constructed between Wandsworth and Croydon. A bill for that undertaking was passed in the same year. From that time to the end of 1825, acts were obtained for twenty-eight railways, only some of which, however, consisting chiefly of short lines in the coal and iron districts for private use, and the Stockton and Darlington (extending from Stockton to Wit' on park colliery), for which the act was obtained in 1823, were carried into execution. The following shows the number of rail- ways for which acts have been obtained, t » be constructed in Great Britain, and the amount provided i o be raised by those acts for the several works, in each year : — Amotint empowered Actspassed. Number of .ct. ^^ "" ^IJ^aVS!'*' £ 1801 to 1825 Twenty-nine 1,263,100 18^6 Eleven 1,687,653 1827 Six 251,608 1828 Eight 424,000 1829 Nine 9; 4,125 1830 Eight 733,650 1831 Nine 1,799,875 1832 Eight 567,685 1883 Ten 5.525.333 1834 Ten 2,312,053 1835 Sixteen 4,812,833 1836 Thirty-two 22.874,998 1837 Twenty-seven 13,521,799 1838 Ten 2,096,198 1839 Sixteen 6,455,797 1840 Seventeen 2,495,032 1841 Fourteen 3,410,686 1842 Sixteen 5,311,642 1843 Twenty-one 3,861,350 1844 Twenty-six 14,793,994 1845 One hundred and nine 59,613,526 Total, four hundred and twelve acts.... 154,716,937 —Compiled from Parliamentary Returns No 159, 1841, and No. 637, 1845. IV The result of which is, that, up to the end of the last session, the total number of acts passed was four hundred and twelve, for the construction of two hundred and seventy-eight railways, the greater number of acts beint year, will have cost about 10,500,000/, those now far advanced in progress will re- present a further sum of 10,000,000/, and those partially com- menced and projected, will cost 13,000,000/ more, and, reckoning that one-half of the middle class are completed as far as expen- diture goes, it may be said that 15,500,000/ have been invested, and that it will require 18,000,000/ more to complete the entire system as at present determined upon. These do not include any of the numerous projects which have been made during the pre- sent j2ar. In America, up to 1840, the total number of railway companies incorporated was 176, whose lines embraced altogether 9,321 miles, of which 3,000 had been completed at an average cost of 4,800/ pe: mile. By a statement made up to a more recent pe- riod (the end of 1844). we find that 84 lines are opened, embrac- ing 3,688 miles, and have been made at the cost of 17,702,400/, The remaining 5,624 miles, to complete the projects of the com- panies alluded to, part of which are now far advanced, will require a further sum of 26,995,200/, without including any of the new projects of 1844 and 1845. Tne following resume, therefore,, shows the whole amount of capital at )resent invested in com* pleted railways in actual operation, and that required to complete those in progress, and for which acts of the Legislature have been obtained, and exclusive of all the new schemes. Total Capital Invested in Railways. Miles. Amount. Average per mile. £ £ Great Britain 2,069^ 64,238,600 31,048 Belgium 343 5,872,160 17,120 France 552 10,276.000 18,617 S™Son;m:::::::::::: 'i't^ ^^'^«'««« ''''' America 3,688 17,702,400 4,80§ Grand Total 8,650 113,589,160 13,131 Thus, exclusive of the short lines in Holland, and similar unim- portant lines in various countries, showing that the whole com- pleted railways in the world embrace 8,650 miles, made at an aggregate cost of 113,589,160/, and at the rate of 13,131/ per mile. Capital required to compye^e Railways in progress or authori^d by law^ Miles. Amount. Great Britain 3*54a ^.,.. 74,407,520 Under acts obtained in 1844 and 1845, /The eoncessions of the present year ^®'S*^°^ " \ are not included. ^Including 950 miles now constructing,. France ^^.^. 2,410 44,S6S,970 ■{ and the whole system authorised by \ the law of 1842. Germany 1,734 \ vq nnn nnn / Not including any of the projects of Ditto, half of 1,227 6134/ 18.000,000 | ^g^^ America 6,624 26,995,200 Not including any proj.ected in 1845. Total I3,924i 164»269»6yO Showing that the railways now commenced, or for tvhich legisla- tive acts have been passed, embrace 13,924 miles, the estimated cost of which will be 164,269,690/, without including any of the projects in this country which have yet to go to Parliament, and independent of all the projections in America, Belii^ium, and Ger- many, in 1844 and 1845, many of which are either begun or on the eve of being so. This sum, however, includes all the recen con- cessions in France, and the further concessions which will be made ill accordance with the law of 1842. A]!mUAL ACCUMULATION OF CAPITAL. Last year there were 248 railway bills brought before Parlia- ment, all of which had compUed with the standing orders, so far as having, on or before the 30th day of November, lodged their plans, &c., with the Board of Trade. Of these 109 were passed; of the remaining 139 applications, a large number, in various stages of progress, stand over till next session, to be resumed where they left off; a considerable number were lost in conse- quence of non-compliance with standing orders, some few were thrown out altogether, and some few amalgamated with others and withdrew their application. But by ftir the largest number of the 137 applications, remaining over from the session of 1845, will be brought forward again in the session of 1846. Next to these come the schemes of 1844, which were too late for com- pliance with the standmg orders to be brought forward in the last session ; and next come the innumerable propositions of the pre- sent year. To form anything like an accurate estimate of what those will amount to is impossible, until after the 30th < f Nov., when we will see what proportion will have deposited their plans, &c., at the Board of Trade, to put them in a position to go to Par- liament, The deposits upon the new schemes proposed are already estimated to exceed 30,000,000/, and the proposed capital would, therefore, exceed 300,000,000/. But with regard to a very large proportion of these, it is a physical impossibility that the necessary surveys and plans can be made by the 30th of next month, and they will, therefore, be unable to go to Parliament in 1846. There is, however, every probability that, large as was the sum which Parliament empowered the 109 companies, who ob- tained acts in the last session, to raise for the purpose of making railways, acts involving a much larger sum will be passed in the next session. When we consider that already so large a number of the bills of 1845 remain over to be taken up in various stages of progress, and the great number of new applications which will be made, the amounts which will be required to carry out the acts of next session will be beyond all comparison larger than in any preceding year. With such enormous liabilities on the capital of the country to sink in new and permanent investments, it becomes an important and interesting question to solve at waat rate accumulation of capital takes place in this country. On this subject there have been many opinions and conjectures offered, but there are no data on which it can be accurately and certainly determined. The most accurate maans by which any estimate can be made of the annual accumulations, as regards personal property, is from the amount on which legacy duty is paid from year to year. The total capital which became subject to legacy duty in 1814 was only 27,299,806/ ; and the following shows the gradual progress which was made in its amount : — Capital subject to Legacy Duty in each vear. £ 1814 27.299,806 1819 29.411,662 1824 35,852,824 1829 o9 6'i7,277 1834 41,074,6^8 1814 46,533,908 In the Progress of the Nation (section vi, chap. 2), Mr Porter explains a mode the most accurate which we have seen, derived from the proportion of deaths to the whole population in each year, by which the whole amount of the personal property in the coun- try may be estimated in any particular year by the proportion of it which annually becomes subject to the legacy duty ; to which work we refer those of our readers who may wish closely to inves- gate the principle. According to that calculation, Mr Porter esti- mates the personal property of the country to have been, in — £ 1814 1,200,000,000 1824 1,500.000,000 1834 1,800,000,000 and a similar calculation will make it for 1844, 2,250,000,000/. This shows that the accumulations of the country in the last ten years, from 1834 to 1844, amounted to 450,000,000/, or at the rate of forty-five millions annually. But this is only the accumulation which appears under the head of " personal property." Beyond this a very large sum must be annually accumulated in the form of real property. In 1815, the last year of the old income tax, the income from real property, chargeable with that tax in England only, was 49,660,728/, and in 1843 the same was 80,519,084/, being an increase of more than 62 per cent. — (See Economist, July 20, 1 844.) If, then, we take the real property of England, rather less than one-half consisting of land, at only twenty years' pur- chase, that would show a total value in 1815 of 993,214,560', and in 1843 of 1,610,381,680/; the accumulation between the two periods being 617,167,120/, or something more than ttveniy millions annually during the whole period. This enormous increased value has no doubt taken place chiefly by the application of capital to improvements of land, the opening of mines, to the extensive im- provements which have taken place in towns, and to buildings of every class. In the two great divisions of personal and real pro- perty, as thus explained, the annual accumulations appear to be 65,000,000/ ; but from this sum a considerable deduction must be made, from the fact that what appears as the income from real property includes also the interest of mortgages and other sums borrowed on real property for the purposes of effecting improve- ments or otherwise, and which monies will, in the event of death, appear as personal property, and subject to the legacy duty, and, therefore, included in the calculation of accumulations under that head. Making a sufficient allowance for this consideration, we would estimate the average annual accumulations of the country at sixty millions sterling at least ; nor does this appear a very large sum, when we consider that it is little more than the annual taxes of the country, and not equal to 21 5s to each person of the whole population. But, though this estimate may be quite true, and we are inclined to think it rather below than above the actual average yearly accu-? mulations of property in this country, and especially so at a period when all branches of productive industry are in active operation, yet it must be borne in mind, that by far the largest proportion of those annual savings are required in the numerous branches of industry for their improvement and extensi )n, and for the in- creased capital necessary to conduct the increasing business of the country. For example, the annual rental of real property in- creased from 1815 to 1843 by the sum of 30,858,356/. Now, this increase is not derived from the same number of houses, nor the same number of mines, and though from the same surface of land, yet not the same condition of that surface. The increased value has arisen chiefly, if not wholly, from the expenditure of a portion of the annual savings of the country, whether those of the parties tliemselves or borrowed from others, in improving cities, building houses, enlarging factories, draining, planting, and improving land, opening up new mines, &c., and thus far the increased annual in- come derived from real property so improved, has formed an in^ creasing source of wealth, by the annual absorption of the savings of the country, and in which we have already seen that railways have participated during the last twelve years to the extent of Jive millions annually. But there is another very important and equally urgent way in which the annual savings of the country are in- vested. The greatest accumulation necessarily takes place among the manufacturing, mercantile, and trading community. But with a rapidly increasing population, and the trade and general resources of a country being rapidly developed, as a general rule people in business require their own accumulations for the extension of their own business, as rapidly as they are made. It is the nature of business when done best to extend fastest. And, therefore, where most money is made most is frequently required to be added an- nually to the existing capital. And certain it is* that as long as a trader can employ his own accumulations in his own business, he will never find any other means of investment half so profitable. We do not speak of temporary speculations, which may make a fortune this year and bring ruin next. We speak of what is, happily in this country, the prevailing habit, in usual times, of the majority, and to which the country owes its greatness. For ex- ample, the whole of the shipping belonging to the United Kingdom in 1820 was 2,648,593 tons, and at the commencement of last year it had increased to 3,588,387 tons, notwithstanding all the ships which during that twenty-Jour years had been worn out or lost at sea. Again, we had cotton factories in 1820 capable of working up 151,000,000 lbs of cotton wool, and now we have extended them so, that last year we worked up more than 700,000,000 lbs. In 1820 we had woollen factories capable of working up 7,691,000 lbs of foreign sheep's wool, and now we have increased them till they consumed last year 69,493,000 lbs of foreign wool, independent of the increase which has in the meantime taken place in the home growth ; the silk, linen, and other manufacturing pursuits have extended in a similar way. But this has all been done by the an- nual investment of the savings of the country, either in absolute extensions of mills, or in improvements in the productive power of machinery. Again, the declared value of our exports in 1 820 was 35,568,000/, and the official value of our imports 31,484,000/, but last year our exports had risen to 58,584,000/, and our imports to 75,441,555/; and the additional foreign credits, which our mer- chants have been able to give on our goods exported, and advances on those imported, have been by applying the accumulations of capital to the increase of their business, — and thus it is with every class of traders ; and, at this time, when trade is in so excited a state, when the mining, manufacturing, shipping, and commercial resources of the country are so greatly increasing, there cannot be a doubt that a more rapid absorption of capital is now going on than at any former period in all these regular and uniform chan- nels of private employment ; all, no doubt, calculated materially to increase the income and means of accumulation of future years. So that, even admitting the annual accumulation of the country to be equal to sixty or sevcnfi/ millions sterling, when it is considered that they are divided over a population of more than twenty-seven millions of people, that the great bulk of accumulators have pur- poses of their own to which they can more profitably, than in any other way, apply their savings, it is a most exaggerated view to suppose that such accumulations are wholly, or even in a great part, applicable to the construction of railways or any other public work. The most extraordinary drain upon the capital and annual ac- cumulations of the country which ever took place, was in the beginning of the present century, during the continental war. We do not refer to this for the purpose of comparing that waste- ful and unprofitable expenditure with the investment in useful and profitable national undertakings, in their ultimate conse- quences, but merely to see what amount of abstraction was pos- sible from the usual channels of employment, and what its effect was. By a parliamentary report we find that, from 1802 to 1816, the annual expenditure averaged 75,696,669/; and, further, we find that in the five years between 1810 and 1816, we expended 477,548,714/, or a yearly sum of 95,509,743/. Taking our pre- sent average annual expenditure at 45,500,000/, we find that in those five years, 1810 to 1816, it exceeded that of five years now by the enormous sum of two hundred and fifty millions sterling, and that in a way which was absolutely sunk, and was for ever unproductive. This took place at a time when the resources of this country were infinitely less than they are now. But that abstraction of capital did not take place without exerting an enormous influence on the value of money. The suspension of cash payments at the time, the unlimited issue of paper, the depreciaiion of the currency, and the existence of the usury laws, render it somewhat difficult popularly to explain those effects. But one direct and obvious consequence will be easily under- stood — towards the close of the period capital became so scarce, tliaf, though the Government continued to borrow at a compara- tive low nommal rate of interest, yet the average price, from 1803 to 1816, at which the sums were borrowed from which that extraordinary expenditure was supplied, was 60/ 7s 6d for every 100/ of stock chargeable with interest; so that, in truth, the Government had really to pay an interest far above the legal rate, but accomplished in an indirect way. And while this temporary excitement, which arose out of an expenditure of the capita/ instead of the income of the country, gave a flourishing appearance to the country, yet the reaction which immediately followed was severely felt for many years afterwards. There can, however, be no doubt that, had that expenditure taken place in improvements which would afterwards have developed the resources of the country, and ministered in all ways to its productivenes, the temporary effects would soon have passed away, and permanent benefit would have ensued; but it is difficult to conceive any improve- ments which would have paid the individuals concerned to have borrowed money, receiving QOl 7s 6d for every 100/ of debt con- tracted. Nothing short of the most urgent state necessity could have justified such a system. EXTENT OF PRESENT LIABILITIES FOR RAILWAYS. However free we are to admit the advantages of railways as a means of investing the accumulations of the country, it is never theless a most essential thing that we should not attempt to carry out those improvements faster than the capital of the country will permit, and perhaps as much so in order that the construction of lines m useful and beneficial positions should not be prevented or rendered impossible for a long period, by the attempt to con- struct a great many lines in inferior and less important situations. Looking to the development of the system so far, it would be dif- ficult indeed to say in what situation a railway would not be a great benefit, and where it might not ultimately be profitable. But it must be obvious that what would be desirable for an indivi- dual to do, if he had sufficient capital, is one thing, and what it is prudent to attempt or possible to do without it, is another thing altogether. So it is exactly with the nation. Much may be de- sirable that is not possible ; and an attempt to do all that even on good grounds appears desirable may prevent even the best part being accomplished ; or may so far derange the application of the capital of the country in other more important and regu- lar channels, as to do much temporary mischief for which even the permanent advantage of railways will not compensate ; and which, from the same cause, may prove ruinous to those under- takings themselves — for they cannot injure the public with- out more immediately injuring the promoters. In the last twelve years we have been able to apply five millions annually to the construction of railways, and, therefore, the xu aggi'6gate sum so expended has been in that time 60,000,000/ in Great Britain, and in the same period, including Belgium, France, Germany, and America, the aggregate sum expended on railways has been 1 13,589, 160Z. At this moment in Great Britain railways have either been commenced, or are about to be so, which will cost 74,407,520/, and including those other coun- tries, 164,269,690/; altogether exclusive of the proposals origi- nating this year. With regard to the period which will be occu- pied in constructing these railways in foreign countries, we are unable to speak, but in this country, with the improved methods, and better knowledge which now prevails, the construction of a railway is a matter of rapid accomplishment compared with what it was a iew years ago. This is a fact, however, which lias a double bearing on the question, as to the extent of undertakings for which capital can be found within a given time. If they are rapidly made, then is the capital more quickly required, and may press more .severely upon the money marker, and interfere more with its application to other purposes. On the other hand, the more quickly they are completed the sooner do they become productive, and begin to replace the sunk capital, as well as being a source of income to the proprietors, and of convenience and economy to the public. The desirableness, however, of these advantages must be sub- servient to the possibility of carrying out their cause. The whole of the Acts passed by Parliament for railwavs, up to the end of 1843, provided for the outlay of 80,309,417/;' of this 64,238,600/ was expended in constructing, during the whole of that period, 2,069 miles. We have at this moment in progress, and to com- mence, a distance of 3,543 miles, and to provide 74,407,520/ for those objects. Now, we believe it would be taking a very er- roneous view of the power which the country has to accomplish this new work, to judge, even by the experience of the past twelve years, what we can in future accomplish. If we did, we should require to look forward at least fifteen years for the ac- complishment of the lines for which Acts are obtained. We are, however, free to admit that there are numerous considerations which will induce to a much more rapid progress of these under- takings. In the first place, the accumulations attributable to the completed railways themselves are at this moment greater than at any previous time, and rapidly increasing — we do not mean from speculation, for that is no addition to the capital of the country, but by the increased economy and facilities afforded to trade and industry in every possible way. In the next place, during the period we have referred to, railways had to struggle against all the prejudices, doubts, and fears, which always at- tach to new systems; now their real value to the country, and their ultimate profit to the promoters, have been tested by expe- rience, and have become universally admitted. Instead, there- fore, of the unwillingness to embark capital in railways, which existed some years since, a stronger feeling prevails now in their favour than ever did for any other channel of investment, and we now only allude to the bona fide employment of capital. It is. xiii therefore, certain that a much larger proportion of the annual accumulation will, for a long time to come, be thus invested than has hitherto been the case. And when to these considera- tions we add the greater' facilities of accomplishing the work it- self, as well as the great economy, we must be prepared to see railways constructed wiih a rapidity in future which past expe- rience would hardly entitle us to have expected. The manufac- turing and factory undertakings of the country have been a won- derful example of the power which all systems have to expand which have within themselves a constant tendency to increased economy and reproduction of wealths But while we admit the truth and force of the analogyj we must not forget that in its progress, so miraculously rapid as it has been, the factory system has suffered reactions of the most ruinous and intense character. Calculating) however, that the most important parts of those lines, comprising 3,543 miles, leaving out minor branches which may be constructed aftervvardsj should be completed within the next four years, we mUst look forward to an annual expenditure of capital, on their account alone, of fifteen millions at least, and for the first two years of even a larger proportion, altogether in- dependent of foreign railways and new under.akuigs. POWER OF RAILWAYS TO INCREASE WEALTH. Before proceeding to consider the immediate effect of the liabili- ties under which the country is now placed to complete works in pro- gress, and for which acts have actually been obtained, which, it will be seen, amount in this country alone to 74,407,520/, and in others with which we are intimately connected to the sum of 89,862,170/ more, we would shortly refer to two circumstances which of late years have set at liberty an enormous amount of capital for the extension of commerce and other profitable undertakings. The first is, the far more perfect banking system which has been in- troduced of late years, and its extension more generally through- out the country. By this means an incalculable amount of capital, which was formerly dispersed among the community generally in moderate sums, has of late, by the practice, now almost universal, of keeping banking accounts, and making payments merely by transfers from one banker to another by the use of cheques, been brought together, and a large sum rendered productive which was formerly idle. The other cause to which we refer, is the extraordinary effects of railways them- selves, and other means now used to facilitate the transit of goods and save the time of travellers. There is no other means by which the resources of a country can be so well developed, and its wealth so much increased, as by facilities of communica- tion by which interchange is rendered easy and cheap, and when communication is once established, by facilitating it as much as possible. This effect is rendered most apparent when we consider how much both internal and external communica- tion, when rendered more certain and expeditious, as by the use of steam boats, railways, &c., tend to decrease the amount of capital required to carry on any given amount of trade. In the first place, the rapidity and certain ty of conveyance reduces very greatly the amount of stock of goods and produce which it is necessary at all times to keep on hand when communication is slow and uncertain, in order to do a given amount ot business ; and in the next place, the amount of goods in transit is enor- mously greater with a slow than a quick conveyance. The amount of capital absorbed in merchandise of all kinds, which was merely in transit, thirty years ago, when our continental and coasting trade was all carried on by slow and uncertain sailing packets, and our internal trade by canals and stage wagons, compared with what the same now is, when conveyed by steam boats and railways, must be very great. For example, suppose Manchester and Leeds are supplied with colonial pro- duce from London. When it took seven days to convey those goods by canal, there must always have been, on an average, seven days' consumption on the road. If now the same thing is accomplished by railway in one day, it is quite clear that the capital representing six days' consumption, which was formerly so locked up, is set at liberty for other uses ; and when we look to the enormous extent to which this economy has taken place, not only in this country, but on the continent of" Europe as well as in America, both by railways and steam boats, the total amount of capital thus liberated must have been very great in- deed. But the same remarks are equally, or even more appli- cable, to the economy of time which they effect to mankind. A man can accomplish now in a day what he could not do thirty years ago in three or four days. The labour, therefore, of the whole population is thus rendered infinitely more productive, and is so far exactly in effect what it would be if we increased enormously the productive population of the country without in- creasing its number of consumers. When a man has a railway or a new machine, which enables him to perform double the work he did before, the effect upon the country is the same as if each man had a stranger who came and gave him his labour without any remunera- tion, or without consuming any part of the produce. Railways and steam boats are, therefore, great new machines by which both the capital and labour of the country has been economised, and each rendered wonderfully more productive ; and it is this gr( at ad- vantage experienced by the community individually, which leads to the extensive traffic and the high rates of profit which they have made, and which, in fact, is the best indication of their public utility. The best, nay, the only true criterion of the utility of any given outlay of capital, is the extent to which the public find it their interest to use it, and consequently the profit which it cre- ates. Thus, all undertakings which afibrd the largest profits to individuals (which are not monopolies) are also the most advan- tageous to the community. The profit is the result and evidence of the usefulness. We are, therefore, at once free to admit, that there has not l)een any purpose to which the spare capital of the country has ever been employed, or to which it can in future be employed, so well calculated to promote all the great interests of commerce, industry, social improvement, political stability, and general happiness, as railroads, or which is so well calculated ra- pidly to reproduce in many ways the national capital absorbed in their construction. And, moreover, they are peculiarly so, when compared with steam navigation with other coun ries, because in our internal traffic we are happily released from the short-sighted jealousies w )ich exist between different countries, which mar and interrupt all he great benefits which would otherwise arise from the facilities of communication under a free and uninterrupted in- tercourse. EFFECT OF RAILWAY INVESTMENT (FOREIGN AND HOME RAILWAYS) ON THE. MONEY MARKET. In considering how this expenditure is to he provided for, and the effect it will have on the money market, it is necessary first to glance at the foreign railways as to their influence. A great dis- tinction is made in the public mind as to foreign and home rail- ways. In many respects, no doubt, the distinction is great. It is so, as far as regards the em,iloyment which home railways affords to our population, and as far as, where they are finished, they tend to develop the resources of our own country, and, if equally pro- fitable, as an investment of capital are, therefore, preferable. But in the distinction, which is chiefly made as to the effect upon ti e money market, the common impression we believe to be erroneous, and is one likely to lead to great mistakes on the part of bankers and others. We will, therefore, according to our promise, take some pains to explain our views, and the fallacies which we appre- hend exist. In the first place, people seem to apprehend an in- fluence on our money market from foreign railways, only in pro- portion as they are made with English capital, which they see will be required in that case to go out of the country. On the other hand, they entertain no difficulty as to our power to make rail- ways to any extent within the physical means of the country to accomplish, without any effect being produced on the money mar- ket, because they think that the capital will merely change hands, and be transferred from one person to another, or from one banker's account to another. In both these ideas we believe there lurks a dangerous fallacy. First : With regard to the effect of foreign railways. Many esti- mates have been made with respect to the amount of English capi- tal engaged for Ibreign railways; but the slightest consideration will show that no such estimate can be of any value, for whatever is the state of the case to-day, it may be altogether changed by the sale or purchase of shares to-morrow. These shares, like the go- vernment stock of different countries, are now general securities, which are equally dealt in on our own Stock Exchange here and on the continent ; and, like government stock, are another meatus by which the value of money will be equalised in this and other countries. It is not, therefore, a question as to who undertakes a continental railway, but as to who holds the stock, either en- tirely or partially paid up, and subject to future calls ; and even though, at any particular time, the people of this country held no French shares, if a pressure were felt in Paris from the difficulty of paying up the calls, and the interest of money were to rise, the effect would immediately be, that either railway shares or some other stock saleable on our Exchange would be sent from Paris for sale here, and our market in this country would imme- diately sympathise with that of Paris. Therefore, as far as the effect upon the capital of this country and the value of money, it makes little difference to us who makes the continental lines. The chief countries in Europe may be termed one money market, for they all immediately act upon each other. If money be wanted in Paris to pay calls on railways, the interest will rise and the price of stock will fall, and if the shares are not sent to London for sale, English, or French, or Spanish, or some other stock which will pay best, will be sent and sold on our market, and English capi- tal thus abstracted to pay up the calls of French shareholders ; or the contrary may be the case ; and, therefore, looking to the future effects on the value of money, it is quite as needful that we should consider what is to be done in the continental countries by the na- tives themselves as if first undertaken by us. Then as to the construction of railways at home. The error to which we have referred has arisen from the almost universal con- fusion between capital and money as a mere instrument of exchange. People see the same money pass from hand to hand without diminishing in quantity by any internal work, and they, therefore, conclude that the whole matter is a mere transfer of capital from one to another.- So many millions are paid for iron, but the iron-master receives it : the money passes from the banker of the company to that of the iron-master. True, the iron-master then again uses it in his trade, but he only pays it to the coal- owner, or for the royalty of his mines, or distributes it among his workpeople, who again pay it to shopkeepers, into whose bankers it is paid ; and thus the whole amount paid in co structing a rail- way is in fact only putting so much money into circulation to perform a rapid revolution among iron-masters, timber-dealers, labourers, bakers, grocers, farmers, &c., and out of one bank into another, but actually never suffering any diminution. The money is merely invested by one class of persons, and as far as they are concerned it is sunk, but it has all gone into the hands of others, and, as far as the country is concerned, it makes no dif- ference. Such is the view commonly taken on this subject, and urged every hour in the day, to show that railways may just as easily be constructed to the extent of 300,000,000/, as now pro- jected, as to the extent of one- tenth, as long as they are all m the country. There is one part of the construction of every railway, whether English or French, which, as far as capital is concerned, has no effect — and it is an important part — the purchase of the land. This is simply and only a transfer of capital from one security to another. Consols are sold by one class of capitalists to invest in a railway — they purchase a quantity of land, and if the landowner does not spend the money, and so make himself poorer, but invests it in consols or other securities, the capital of the country is just as it was. It is a mere change of investment. But with regard to all the rest, except such portions aa are actually saved h}' the various parties to whom it is paid, and which go into the general accumulation for the year, it is as absolutely sunk and taken out of the capital of the country as if it had been all sent abroad, or sunk in the sea. Do not let us be misunderstood : we now speak of the first effects upon the capital of the country, as to its power to accomplish works ; we do not refer to the future effects of such investment, or to its power of ultimately replacing itself by future profits : that we have already explained. In order to explain this clearly, it is necessary that we should bear in mind that all capital employed in production of any kind, in order not to be diminished, must be replaced by the sale of tlic commodity ; and that it is only that portion which the producer receives over and above his outlay of capital in wages, &c., that constitutes his profit, which he can expend, to preserve the capital entire. No doubt all commodites are produced to be consumed either at home or abroad. The way in which the capital sunk in our goods exported is replaced, is easily understood. The source from which the capital sunk in the various products consumed at home is replaced, can only be from the expenditure of income ; and as long as no more than the income of the year is expended in railways or otherwise, no reduction of capital would take place, but the moment more than the income is spent, whether for private use or public works, to that extent the capital is diminished, and actually sunk until it becomes productive, and even then it is changed from floating to fixed capital. Suppose a railway com- pany spend 100,000? on iron : true the iron -master receives it, but, except the profit, it only replaces his capital, which has already been expended ; and if he proceeds to distribute it in wages, which are paid to bakers and grocers and drapers, it only replaces (except the profit) the capital which these various parties have already expended on their various commodities ; and so on through every branch of trade, it only (with the exception of profits forming the annual income) replaces capital already represented in the com- modities given for it. But it is not replaced to the railway com- pany ; it may at some future time yield a good profit and facilitate increased production, but in the mean time it is absolutely sunk. It is the difference between a merchant buying 1,000? worth of commodities, which he sells again and is repaid with a profit, and one who with 1,000Z builds a house, which, though it ultimately pays him a good interest, is absolutely sunk and abstracted from capital, for all those who received the 1,000?, only did so to replace their own capital and profit. But there is another view, which will perhaps make this matter clearer, and show the way in which such an abstraction of capital first is felt in our money market ; and which will show clearly that a very large portion of the money expended on our railways really does go out of the country. Let us suppose manufacturers in Lancashire paying five millions of pounds in wages ; that money is expended in provisions, clothing. Sec, by their work people ; and a very large portion in commodities produced abroad ; such as the sugar, tea, coffee, a great part of the material of their clothes, &c. : but all these commadities are paid for, by a portion of their labour, exported in the form of cotton goods. But on the other hand, suppose Jive millions paid for wages on railways ; the same portion goes for the consumption of imported commodities, tea, sugar, coffee, materials of clothing, &c. ; but no portion whatever of their produce is exported, or can be so to pay for those commo- dities. Again, with respect to the money paid for iron ; the demand for this article increases the quantity made, which is all absorbed in these undertakings, but the largest portion of the price goes to pay wages, which are again to a great extent expended in articles of foreign import, while no equivalent of export is pro - duced against them, so that a large portion of the whole money expended in railways is actually paid for imported commodities, while no equivalent of export is produced. Now, this state of things acts in two ways on the commerce of the country, next upon the exchanges, and quickly upon the money-market. The extraordinary expenditure at home increases very much the con- sumption of all commodities, both of foreign import and home production, and raises their price, as is the case at this time. The high price of foreign commodities induces to a large importation ; the high price and home demand for domestic produce cause a decreased export. The exchanges are thus turned against us, and we must remit money for the payment of that balance created by the use of those foreign commodities consumed in this country by those, no part of whose produce had been exported to represent their consumption. One of the most certain symptoms that can be shown of an undue absorption of capital going forward in internal investments, is when we see our imports increasing more rapidly than our exports, or when the former are increasing and the latter are diminishing. This is a point which cannot be too closely watched by all parties engaged in commerce, and especially by bankers. These symptoms have already made their appearance. Our imports are rapidly increasing, and up to the end of last year the exports increased equally much. Thus, not only is the capital employed in constructing home railways, as absolutely absorbed as ii' it were used to construct French railways, as far as the monej^- market is concerned, but in reality a large portion actually does go abroad in payment of commodities used by those who construct the railway and provide its materials. CNIVEB8IIT CURRENCY AND BANKING. ARTICLE I. We think it will be generally conceded that Sir Robert Peel's currency measure of last year, was not subjected to that discus- sion, either in Parliament or by the press, that we might fairly have expected, considering its vital importance to the country at large, as well as the powerful private interests which it was calculated immediately to affect. This probably arose from the fact, that the abstract principles of currency and banking had really at- tracted the consideration of a very small number of individuals. It was equally apparent in the House of Commons, and in the country at large, when the Minister produced his measure, that men generally were totally unprepared to give any intelligible assent to, or dissent from, the fundamental principles on which it was based. This was evident in a remarkable degree in the House of Commons. Sir Robert Peel himself, and most members who spoke in those debates, and some who, on the occasion, " rushed into print" supported the measure by views so palpably erroneous, as to prove, beyond any doubt, that they had a very imperfect notion of the fundamental principles on which they were proceeding. The discussions of last year, however, have at least had the effect of drawing a considerable degree of attention to the subject in the interval ; and though we fear no very great progress has yet been made in clearing away the popular errors and mystifica- tions in which the subject was enveloped, yet we believe there is more disposition to admit that the principles on which Sir Robert Peel proceeded last year, almost by acclamation, are yet fairly debateable, and many have already a very strong conviction that the whole superstructure proceeded upon hypotheses groundless and unsupported by facts. As a further application of the same principles to banking in Scotland and Ireland is about to be proposed to Parliament, when occasion will again arise for discussing the fundamental grounds on which the Minister has proceeded, as well as their suitableness to the new cases to which they are to be ap- plied, we think it worth while to enter into the subject more at large than the scope of a weekly periodical wiU usually admit of to any one subject. It has been intimated by Sir Robert Peel, that he does not intend to introduce any measure in regard to the banking of Scotland and Ireland till after Easter, and we, therefore, propose to consider, in this and following numbers, in 2 as concise and popular a way as lies in our power : — First, The fundamental principles on which currency and banking are based, and by which they are regulated. Second, The appli- cation thereof to the currency and practice of banking in past times in England. Third, The application thereof under the' bill of last session. And, fourth, Their application to the Scotch and Irish systems of banking, including a consideration of any differ- ences which exist between them and the banks in England, in any necessary connexion with the working of the new bill here. The chief practical and immediate object which we have in view has relation to the threatened legislative interference with the bankers of Scotland and Ireland. In the former country a strong excitement has prevailed on the subject for some months back, but we have purposely reserved our observations thereon until this time, when it acquires a practical and legislative importance. We cannot, however, avoid remarking, in the outset, that if the claim of the Scotch system of banking rested only on the reasonings adduced in its favour in the numerous speeches and documents which have come before us during the last six months, it would have as little chance, as indeed it would have a just right, for any consideration on the part of the Government. The mass of ab- surd exaggeration which has been spoken and written, in some of the newspapers particularly, has only been exceeded by the incre- dible folly that has been vented against it. We beheve, after the most careful and most earnest investigation, that the Scotch bank- ing system is founded on the most correct principles both of science and practice, and it has grieved us beyond measure to see so much ignorance and exaggeration pressed into its support as it has been our lot to read of late. These may no doubt be looked upon as the result of a sort of instinctive regard for a system, the prac- tical operation of which had been found highly and generally be- neficial — of a system which had acquired the attachment, almost veneration, due to ancient institutions, which have diffused almost unmixed good ; but it must not be a matter of surprise, when the question comes to be tested in debate in the House of Com- mons, if Sir Robert Peel, with his great adroitness in discussion, is found making an apparently strong case, by confining himself to combat the numerous and flagrant errors which have been put forth, and leaving altogether untouched the more substantial arguments and principles involved. From these remarks we would, however, exclude the clear and intelligible resolutions published by the Chambers of Commerce of Glasgow and Dundee, and some other documents. With this explanation of our object, we will proceed to a consideration of, First, The fundamental principles on which currency and banking are based, and by which they are regulated. In treating this subject throughout, we will assume a perfect agreement as to the necessity of paper issues being at all times and immediately convertible into the coin they represent, and we will therefore not feel it a duty to go out of our way to prove the necessity of this principle being steadfastly adhered to as the only security for a safe currency ; though, incidental to some of our other illustrations, arguments and reasons may be derived in favour 3 of that princi])le. In doinp^ so, it is not that we wish to pass any slight upon those who hold a different opinion, but that we do not wish to encumber this discussion with that question. Further, we will cojicede to Sir Robert Peel, in the most unqualified terms^ an agreement with him, when he said last year — " We should infer, certainly, from reasoning, that free compe- tition in the supply of any given article will probably ensure us the most abundant supply of that article at the cheapest rate. But we do not want an abundant supply of cheap promissory paper. We trant only a certam quantity of paper, not, indeed, fixed and de- finite in nominal amount, hut just such a quantity of paper , and that only, as shall he equivalent in point of value to the coin it represents. If the paper he cheaper than the coin, it is an evil and not an ad- vantay ." With the opinions expressed in the latter half of this quotation in italics, we perfectly agree, and w ith the former half also, if such a supply is referred to as could possibly destroy the essential qua- lity represented in the latter. In the general inquiry before us we will not travel back to con- sider the necessities which first led to the use of money to facilitate exchanges. We will commence when the practice of barter ended, and the necessity presented itself of determining upon some com- modity as a common standard of value, in relation to which that of all other articles should be referred. During a state of barter, and before any common standard was fixed, the relative value for which all commodities would exchange would be deter- mined immediately by the proportion of the supply and demand of the various articles, but idtimately, and in the long run, by the ac- tual cost of labour in producing each. It might cost exactly the same labour to produce a quartern of wheat, an ounce of gold, a ton of iron, and a load of timber. But, by some accidental circum- stance, a greater demand for wheat and iron might arise than usual, and the immediate demand for these two articles might cause a quarter of the one and a ton of the other to exchange for an ounce and a half of gold and a load and a half of timher ; but if the labour required for their production continued still the same, a greater portion would be applied to the production of those most in demand, until again similar quantities of all would exchange for each other. Thus, in the state of barter, supply and demand are the immediate regulators of exchangeable value, and cost of production, the ultimate. And when the inconvenience of the barter system led to the fixing of a common standard of value, this principle was in no way altered. In fixing upon any one commodity as the common standard in relation to which the value of all others should be expressed and determined, for obvious reasons it was desirable to select that which varied least in its cost of production, which presented in any given weight or bulk the greatest value, in order to render it most portable, and afforded the facility of an easy subdivision into dif- ferent sized parts to represent various quantities of other commo- dities. For all these purposes the precious metals presented the most favourable combination. We accordingly selected gold as our standard. The necessity for selecting only one article, a single standard, will be apparent, when we consider that, virtually, the system of barter though nominally abandoned, was still as much as ever practised, with this difference, that instead of « ton of iron, a quarter of wheat, and a load of timber being exchanged for each other, each became exchanged for its equivalent in gold, the standard in respect to which the value oJP each was expressed. Still, however, the actual relation of cost was preserved between the standard of value and other commodities. As in a state of barter, the value of every article still varied in proportion to its cost and the cost of gold, or the quantity of labour necessary to produce them. But if a double standard, say of gold and silver, were adopted, as these two commodities would vary from time to time in relation to each other in the cost of their production, no other commodity could at all times be expressed by any fixed rela- tion to both. If silver became more plentiful, a quarter of wheat would exchange for a greater quantity of silver, while it would exchange for no more gold. It is, therefore, essential, whatever standard be adopted, that it shall be of a single value, though that value may fluctuate like other commodities, but the less so the more convenient will it be as a standard. Having fixed the commodity by Avhich the value of all others should be expressed, and which should be used as a medium of exchanging all such other commodities, it became necessary to test the weight and ^neness of the metal so used in exchanging, as well as to subdivide it into convenient quantities to represent the different portions of other commodities required to be ex- changed. For this purpose gold was subdivided into certain pieces of uniform weight and quality ; and as a guarantee to the public that each piece did contain the professed weight, and was of the proper fineness of the standard, the Government affixed a mark, which constituted the coin or money in which value be- came expressed, and accounts kept, and which coin corresponds now with the denomination "pound." But it was found, in practice, that we required smaller subdivi- sions, or coins, than gold could be conveniently made to answer, and we were obliged, for lower denominations, to have recourse to cheaper metals. Silver and copper were accordingly adopted, and coined in their relative value to gold into shillings and pence. But as we have before shown, that although these metals might be at the time, when the weight of each denomination of coin was fixed, in exact relation to their actual respective values, yet that they are exposed to a change in that relative value inconsistent with their being considered any standard of value in themselves. To prevent any inconvenience, therefore, from their use as money bearing a uniform relation to the gold coin, it is enacted that they shall only be a fegal tender of payment, to a given sum — silver to the extent of forty shillings ; so that any slight variation which, may take place, between the intrinsic value of gold and silver as commodities, can never disturb the value of our coinage to a greater extent in any one payment than that slight variation amounts to in forty shillings. We adopted the term pound, for reasons unnecessary noAv to re- fer to, as our chief money in account ; and the first step in our 5 coinage was, therefore, to determine what quantity of gold each of these pieces representing a pound should contain. This was fixed so that one ounce of gold shall make three of such coins, and a portion of a fourth equal to 17s lO^d, of the subsidiary coins. Thus, if 100 ounces of gold are coined, they will produce 100 times 3/ 17s lO^d, or 389 sovereigns, with a fraction worth 7s 6d left over • — that is 389/ 7s 6d. It is thus that gold is said to have a fixed price of 3/ I7s lO^d the ounce, which, however, leads many into great error on this subject, by supposing that the value of gold is fixed, while it is only that the weight of the coin is fixed. It is not strictly correct to say that 3/ 1 7s 1 O^d is the price of an ounce of gold. It would be more correct to say that an ounce of gold coins into 3Z 17s lO^d, while, however, each coin, or the ounce itself, wiU vary in value in relation to all other commodities, by the common law of supply and demand. A pound does not vary in its relation to an ounce of gold, nor does the ounce vary in its relation to the pound ; in fact, the effect of the whole, on which so much mys- tification has existed, is simply to determine the weight of the coin called a pound, but has nothing to do with its value. It is, however, essential to bear in mind, that neither the adop- tion of gold as the standard of value, nor its being cohied into mo- ney, has the effect of altering its intrinsic relative value to all other commodities, and to each, nor the original laws which determined the changes m that value. Gold, as the standard of value, and as a coin, is exactly what gold was when a rude and simple commodity of barter ; the only difference being that all changes of value are now ex- pressed in the one commodity of which the coin consists. There are four simple ways in which two articles can fluctuate in their respective values. For example, take wheat and gold, and suppose onex[uarter of the one exactly equal to one ounce of the other. First, Wheat might become very scarce, and double in value, while gold was stationary ; and thus, one quarter of wheat would become worth two ounces of gold ; or. Second, Gold might become very plentiful by increased supplies from the mines, and of half the value, while wheat remained sta- tionary ; and thus, also, one quarter of wheat would become worth two ounces of gold. Third, Wheat might become very abundant, and worth only half its former value, while gold was stationary, and thus one ounce of gold would become worth two quarters of wheat ; or, Fourth, Gold might become very scarce, and worth double its former value, while wheat was stationary ; and thus, again, one ounce of gold would become worth two quarters of wheat. The same effect may take place in the relative or exchangeable va- lue of two commodities, either by the increased supply and lower va- lue of the one, or by the diminished supply and higher value of the other. This was the case with an ounce of gold in its original simple state as an article of barter. It is still the same in its new state, coined into 3Z 17s lO^d of money. The only difference be- ing that, in the former case we should have said indifferently, " an ounce of gold is vjorth two quarters of wheat, or two quarters of wheat are worth an ounce of gold," whereas, since we adopted gold as the common standard or measure of all value, we now invariably 6 express all fluctuations of value in that standard, or the coin repre- senting it; and we say two quarters of wheat are worth 3/ 17s lO^d, or 38s 11 Id the quarter. If gold, as a commodity, becomes scarce, the values of all other articles are expressed by smaller amounts of coin, and become nominally cheaper. If gold becomes more plentiful, the values of all other articles are expressed by larger amounts of coin, and become nominally dearer. Or, if any one commodity becomes more or less plentiful, its price in coin varies accordingly, and the relative prices of any number of articles ac- curately describe the various changes which take place in their in- trinsic relative values from time to time. But there is nothing in all this varying in any one essential point — the original system of indiscriminate barter between gold, wheat, timber, iron, or any other commodities. The ^^prerogative of coming," concerning which such foolish and extravagant notions exist even among intelligent men, is nothing more or less than the simple attaching an authoritative stamp on a given piece of metal, by which it is known to contain a given weight of a given fineness ; and simply to save the great trouble and in- terruption to business which would, arise from the necessity to weigh and assay every piece of gold offered in payment, and to calculate its value in money in account, that is in the proportion which one ounce bears to 3/ I7s lO^d. It is, however, apparent, that when a standard of value was thus agreed upon, and coined into money as the immediate instrument of exchange, it became necessary that the public should furnish themselves with as much of such coin as w as needful to conduct the business of the country, and to form a medium for the in- ternal circulation of commodities. On this point much misunder- standing and ignorance prevails. When we talk of gold being the universal standard of value, by which the price of any other commodity is determined, and into which every money obliga- tion is resolveable, people cannot comprehend how that should be so, seeing there is so small a quantity of gold in proportion to the amount of obligations and commodities. It will, however, be remembered that the great bulk of property consists of commo- dities in stock in the course of conversion from one state to an- other, or waiting to supply the wants of the community, in the stores of the dealers ; and that the only purpose for which money is required is as the simple means of transferring them direct from one hand to another. The same identical coin may be used in one day to transfer its value in commodities a hundred times or oftener. Nor does any one retain more coin in his pos- session, as a common rule, than is needful to conduct his business. A shopkeeper may never have a stock of less value than five thousand pounds ; but he may never have or require a larger amount of coin at any one time than one hundred pounds. So with all book debts and obligations expressed in money. The real objects exchanged, borrowed, or repaid, are various com- modities. Money is merely the instrument by which the act is performed, and in which the account is kept and the relative values calculated. There is, therefore, no other limit but time and individual activity, as to the number of accounts and pay- ments, for the settlement of which the same money may be used. But, though a comparatively small sum of coin was required to conduct the business of the country, yet it is evident that each individual must have as much money at his command as he re- quired for his own daily uses ; and as he could not convert his stock into money at all times when he might require it, without sacrifice, it became necessary that he should accumulate money in his possession from his daily receipts to meet payments falling due on a distant day, or to make further purchases of commodities as he required them. And thus a large amount of money was with- drawn from the circulation, and remained for a time idle and un- profitable, and at a certain risk, in the tills of individual dealers, which could only be a loss to the community at large by so much capital remaining idle, for which the additional profits of business must compensate the dealer. This loss and inconvenience led to the establishment of banks of deposit. A man of known property took all the spare capital of individuals into his possession and keeping, on the condition that he would repay it at any time on demand. The banker took upon himself all the risk of its safe keeping ; he undertook to per- form certain services for his customer in keeping his money ac- counts, and in most cases to pay him a certain rate of interest for the money so deposited. To enable him to do all this, and to be remunerated for the trouble and risk which he took upon himself, the banker was understood to use the deposits of his customers in such a way as yielded him a larger interest than he allowed. But as the banker was under the obligation to return the money so borrowed whenever demanded, he could only lend a certain portion of it, and even that for short periods, or on such securities as were easily again convertible, if he required the money before it was returned to him. In the course of time each banker ob- tained by experience a correct knowledge of what portion of his deposits he could on an average safely invest or lend to others, so as not to endanger his power of meeting all usual demands upon him. But it is quite evident that in this re- spect the experience of any one banker would differ very ma- terially from that of others, according to the nature of his business. A city banker who keeps the money of merchants or stock-brokers, whose object it is never to have more unem- ployed money than is absolutely necessary, but who have large payments to receive and make, and therefore whose balances at their bankers will sometimes be very large, and at others com- paratively as small, would have to follow a very different rule from that which it might be safe for a West End banker to do, who kept the money of noblemen and gentlemen, and which was drawn out gradually for expenditure, and replaced periodically when their rents or incomes are received. No general rule or law could be framed applicable to all cases. Individual prudence, caution, and discretion could alone be relied upon ; not only as to the extent to which balances might be used at all, but also as to the manner in which they could safely be used, in order to enable the banker to meet all demands upon him regularly, and to secure him against insolvency. But one thing is quite evident, — the more profitable, consistent with safety, the use of such deposits could be made to bankers, the more would they be willing to give to the public for the tem- porary use of their spare money, that is, provided the business were open to free competition. By the establishment of banks of deposit, we therefore see that much less money or coin became requisite to conduct business ; for, instead of every individual keeping beside him the necessary funds to meet his future payments, or make his future purchases, each lent them to his banker with the confidence of receiving them back when wanted, and the banker used them in such a manner as to facilitate business and encourage production in other ways. The banker, therefore, became the simple agent between a nume- rous class of lenders, and a numerous class of borrowers,interpos- ing his security to the former, with his superior knowledge of the condition and character of the latter, by which means the capital of the country was so economised, and rendered as much more effective, as if a real addition to its amount to the same extent had taken place. In the further pursuit of this subject it will be more apparent than it may now be, to our readers, how necessary it was to lay this basis for the practical superstructure which we shall rear upon it. ARTICLE II. After having fixed upon gold as our standard of value, and de- termined how much of that metal each coin should contain, it is clear that every contract or transaction, expressed in money, did in reality refer to a certain corresponding quantity of gold. If a person made a purchase of any commodity to the amount of 3/ 17s lO^d, and paid for it in coin, he did in reality exchange one ounce of gold for such commodity. So also, if any person, in making a purchase, stipulated to receive six months' credit upon such purchase, the money value was ascertained at the time, and it became a debt of so much coin or gold, and payable at the ter- mination of the period of credit, in such quantity of coin or its equivalent. If a man contracts a debt or grants an acceptance to be paid in twelve months for 3/ 1 7s lO^d, or 46/ 14s 6d, or 467/ 5s, he really does undertake to pay one ounce, or one pound, or ten pounds of gold for the respective sums named, or their equivalent. It is not, however, necessary that debts should actually be paid in gold, nor is it even probable that they will be so in a society at all advanced in commercial and banking institutions. It is more likely they will be paid by a mere transfer of a credit with a banker, either by means of a cheque or by referring the holder of the acceptance to a banker for payment. Nevertheless, in what- ever form payment takes place, or whatever shape a debt in money assumes, it is still so much gold that is indicated by any sum of money in account. Hence, when governments or mo- narchs interfere with or alter the intrinsic value of money, a practical fraud is committed on all existing creditors if its value is depreciated, and on all existing debtors if its value is appreciated; all new and future transactions would be accommodated there- with ; but in respect to existing liabilities, a fraud would be com- mitted as much as if a portion of gold were forcibly taken from one man and given to another. It is a mere conventional ar- rangement, and matters little how much gold, money in account, originally, is made to contain ; but once determined, and transac- tions entered into in respect thereto, it should be held as inviolable as any just claim between man and man can be. Still, even with the most strict adherence to the valud i)^ the coin, the community is not altogether exempted from fluctuations, favourable to some and unfavourable to others, in so far as the intrinsic value of gold itself^ as the standard of value, may vary. Thus, if, by a sudden increase from the mines, gold becomes more abundant, and 10 its value in relation to other commodities falls, all creditors at such a time suffer that depreciation, and debtors are cor- respondingly benefited ; or, If a sudden extra demand were to arise for gold, for example, totally to displace an extensive paper currency, or the various forms of banking credits, the value of gold as a commodity would rise, all existing creditors would be benefited, and existing debtors would be so far injured. This, how- ever, is a liability which must attach to any article whatever, that is fixed upon as a standard of value, but less so with gold than any other, as the circumstances of its production and the objects of its use are more uniform than those of any other commodity. Before entering further into a consideration of the practice of banking, we think it in the first degree essential to clear up what we may almost term a universal confusion among writers and ex- pounders of currency and banking, viz., in mixing up, and in no way discriminating between money, coin, or bullion, as capital and as circulation or currency* To an absence of any proper discrimi- nation of money or coin as performing the function of currency, and as representing capital, we think we can clearly trace the origin of what appears to us the fundamental errors of Sir R. Peel's banking measure, and of that system or principle of currency on which it is obviously, though not avowedly, founded. And, therefore, to this part of our inquiry we must crave an earnest and close atten- tion, as many of our subsequent reasonings and arguments will have reference thereto. We will premise, first, that we shall throughout treat coin and bullion of corresponding weight as of the same identical value, for in the absence of any charge for seigniorage on coining, and with perfect freedom to export and import alike the one or the other, no difference can exist in their intrinsic value as a mere commo- dity, as representing capital, or for transmission to foreign coun- tries ; and, next, that at present we are treating of a supposed case, in which metallic money was alone in use, and before the in- troduction of paper. In our last article we showed that, when gold was first adopted as a standard of value, and money coined, it became necessary for those having payments to make to supply themselves with a portion of this coin necessary to perform that object ; and, in the first place, a portion of the capital of the country must have been invested in coin to accomplish this necessary function ; for, it will be borne in mind, that the portion of coin used as currency has no value or utility whatever, except as a mere instrument of .exchange — except as a medium of transferring commodities indi- rectly that cannot so conveniently be passed directly. In fact, it is simply to avoid the obvious inconvenience of barter that the community consents, and finds it more profitable, to invest a por- tion of its capital in gold coin, to be used only as an instrument of exchange ; and there is no doubt that the time and labour which are saved by the interposition of coin, as compared with a system of barter, forms an ample remuneration for the portion of capital withdrawn from productive sources, to act as a simple circulator * Mr Tooke is very clear in this distinction in his last pamphlet. 11 of commodities, by rendering the remainder of the capital of the country so much more productive. Still, whatever coin is ac- tually used in circulation, although it may aid the productiveness of the general capital of the country, is itself so much withdrawn from productive uses to perform the simple function of currency. It is, therefore, obvious that the smaller the quantity of coin which can be rendered efficient for that purpose, consistent with the safety of public and private interests, the better for all. Well, then, when money first came into use, a portion of the ca- pital of the country was invested therein to supply the wants of the community ; but, as we showed in our last article, a much larger quantity of currency was required for a given trade before the establishment of banks of deposit than afterwards. Before the establishment of banks, every tradesman and private per- son, independent of the money actually in use at any given moment, required, in addition, to keep certain reserves, in proportion to their transactions, to meet accidental demands or liabilities falling due. In consequence of this necessity, the amount of capital withdrawn for the purposes of currency was greater, at all times, than the actual circulation of commodities x§r^ quired. , ' , The establishment of banks of deposit, as explained in our last article, effectually cured this evil, as far as their influence ex- tended, and was the first step to economise the currency, lie- mark carefully how that was accomplished. The reserves, before required to be kept by private individuals and traders, were accu- mulated in the hands of the banker, who was able, by certain rules and plans, to which we shall afterwards more particularly allude, to employ a large portion of them in aid of additional and new productive power, at the same time securing to each deposi- tor the return of his money at the moment he required it. Now, it must be quite clear to those who are at all familiar with such subjects, that by this means a large portion of the money or coin hitherto used as currency or circulation, without impairing those functions, was transferred to capital — was abstracted from the un- productive coin in the hands of the public as circulation, and, through the medium of the banker, restored, as capital, to such an extent as circumstances rendered prudent, to productive purposes. The effect, in point of fact, was the same as if so much new capital were added to the wealth of the country. It is, therefore, clear that only that portion of coin or money which is at any time in the hands of the public, employed in per- forming the exchange of commodities, is entitled to be deemed circu- latio7i, while all the coin, or money, or bullion, lymg in the hands of bankers or merchants, seeking an opportunity for profitable in- vestment, is capital, — capital, it may be, withdrawn from the circu- lation, either permanently, by the introduction of an economising principle ; or, temporarily, at particular periods of the year, when less circulation is required. Nor is the matter changed in any way because deposits are for short periods and always at the command of the depositors; for, if withdrawn by one, they are replaced by another, and the general average does not vary much. The varia- tions in the amount of deposits that do take place, arise far more 12 from the amount of the private capital of individuals temporarily disengaged and seeking employment, than from any variations which occur in the circulation. Let it, however, be observed that the yielding up of this spare coin from the circulation in the hands of the public, to deposits in the hands of bankers, is a voluntary act, and will only be done as far as the convenience of the community and the necessities of trade permit; and that the advantages of such an economy of circula- tion, though of immense importance to the country at large, yet are very subsidiary to the individual traders, compared with the greater objects and ftmctions of currency : — and that currency on the largest scale on which it can ever be required is so trivial in pro- portion to the whole capital, the productions of which it is used to circulate, that the public wiU. never yield up to the uses of bankers more than is perfectly convenient and consistent with their wants. The public convenience and command of capital and circula- tion are the cause — deposits and bankers the mere effect, in the relative positions which each stand to the other. The former can always act powerfully on the latter ; but the latter can at any time act but very feebly on the former. In the case before us, it is quite clear the banker would have no power whatever to influence the amount of circulation, which would be determined only by the actual amount necessary for the public to retain in their hands to accomplish the daily exchanges. If trade increased, a greater number of labourers became employed, and more wages paid; and if commodities rose in price, the public would find that they re- quired to keep a larger portion of their capital in money to answer these new calls; the circulation would increase and deposits would decrease, and, as the amount to be lent would become smaller, while the desire to borrow would from similar reasons become greater, the rate of interest would rise. The reverse of this would occur if trade diminished, fewer labourers were employed, and commodities fell in price ; less coin would be required for circula- tion ; after a time capital would be disengaged, deposits would in- crease, and the rate of interest would fall. But in all this the BANKER IS THE MERE PASSIVE AGENT. But if the confusion of ideas is great as to the true difference between coi7i or money performing the function of circulation and that performing the function of capital, it is rendered even greater by extending this indiscriminate association of ideas alike to coin in circulation, coin in the possession of bankers, either waiting for investment as capital, or held as reserves to meet unusual de- mands upon them, and bullion in the hands of the import mer- chant, or held by bankers as reserves to answer the demands of their depositors in the event of an adverse foreign exchange. A very general notion exists that our circulation or currency, if it were, as we have now been supposing it to be, purely metal- lic, would expand and contract exactly in proportion as the pre- cious metals flowed into, or out of, the country. Very little consideration will show how utterly groundless such a notion is in reality. Important as gold may be in the performance of its function as a circulating medium, it is not less so in many other capacities. It has another distinct function to perform in its 13 character of reserves of capital held by bankers to meet demands upon them, and in this capacity may be actively used to a great extent without in any way affecting the amount of coin acting as circulation. Large sums of money may become due by the customers of a banker A, to the customers of a banker B, and on a given day the former may withdraw such sums from their banker, but they would only be transferred to the banker of the latter, to be used again by him to meet the current liabilities of his customers. The amount of the precious metals necessary to be held by bankers for these purposes, will depend in a great measure upon the perfection of banking arrangements for trans- ferring capital, upon the character of their individual business, and upon the confidence entertained of their solvency. But no- thing can be more clear than that no one rule can be equally applicable to all, whatever may be their credit or the nature of their business. Circumstances may arise which may render it desirable for bankers to increase those reserves, or which may render it safe and more profitable to diminish them, and a greater or smaller amount of gold may therefore be required at such different periods ; which, however, could never be effected by any action on the cir- culation, but by a decrease or increase of the rate of interest. It is quite true that, consequent upon a material change either way, the amount of circulation might be ultimately affected ; if by di- minishing the rate of interest more industry were called into exer- cise, and a larger amount of commodities required to be circulated, the coin retained in the hands of the public as circulation would be increased ; or if, on the other hand, by raising the rate of interest, less labour was employed, and a smaller amount of commodities were required to be circulated, the coin retained for that purpose would be less, and a larger portion would find its way to the de- posits with bankers, or would be invested in interest bearing secu- rities. But the essential thing to bear in mind here, is that the action on circulation in either case is the effect, and that somewhat remote, and not the cause, of a change in the amount of bullion held on the part of bankers. It is the ultimate consequence of their efforts to obtain more of the precious metals, and not the meanshy which they can accomplish that object. 7 his distinction is of the utmost consequence. Again ; another and far more extensive use of the precious metals, whether as coin or bullion, is for the purpose of transmit- ting capital from one country to another ; and to balance the mer- cantile exchanges. This commodity is employed in preference to any other, because it has a more uniform value in nil countries, and is allowed to be imported and exported altogether free of duty. Suppose, therefore, the trade of this country shall have been for a considerable period much depressed from any cause, and the price of our products unusually low, a large export of those goods would be the consequence ; and, if a corresponding consumption of foreign commodities did not take place at home, the demand for them would cease, and their import would leave a loss, and espe- cially if our fiscal regulations, as in the case of the sliding scale of our corn laws, raised up a barrier against imports at the time when 14 they are usually most required to balance increased exports. The exchanges would be turned in favour of this country, and large and continuous imports of bullion would take place, until the capital of the exporter was replaced in this country. But the replacing of that capital, by the commodity bullion, would not, in the first instance, have anymore effect on the quan- tity of coin in circulation, than had it been replaced by corn or wool. On the contrary, as far as circulation is dependent on private expenditure, if any other commodity had been imported which yielded a profit to the merchant, it is more likely his ex- penditure would have increased, than by importing bullion, which €an never yield much, and may be no, profit. It is, in fact, a means by which a merchant brings back his capital to this coun- try with the least loss, when other merchandise will not leave a profit, the immediate effect of which may be to decrease the cir- culation and to lower prices in two w ays : first, by the lessening of the private expenditure of individual merchants, owing to a decrease in their profits ; and, secondly, by diminishing the de- mand for home products as long as merchants see no probability of entering on more profitable or successful transactions, and thus lowering the rate of wages, lessening the internal demand for and consumption of commodities, and reducing prices. Thus, coincident with a large import of bullion under such cir- cumstances, the internal circulation would be diminishing, and the quantity of coin in deposit with the bankers would be corres- pondingly increasing. Merchants who had imported bullion, see- ing no prospect in the meantime of profitably renewing their mercantile speculations to the same extent as before, would no doubt convert their capital (bullion) into money, and endeavour to employ it at interest. In the first instance it would appear as increased deposits in the hands of bankers, where it might remain, if their practice was to allow interest ; but, if not, it would find its way to the public funds, or other government securities, the prices of which would rise correspondingly, or be handed over to bill brokers, to be employed in the discounting of commercial bills. But this great competition to employ capital, at a time when there was so little need for it, would greatly reduce the rate of interest, lessen the profits, in the first place, of large classes of traders, including bankers, diminish demand, and keep prices low. Nor would this state of things be checked, until increased competition, activity, and ingenuity among producers, aided by the low rate of interest, had so far reduced the cost of production, that an extended foreign demand was once more ex- perienced, when merchants could again resume extended ship- ments with a fair prospect of benefit , until increased production ensued, and a rise of price of the raw materials of foreign pro- duce again encouraged and promoted a larger import. In the meantime, the extreme low rate of interest in this country would promote a disposition to investment in foreign securities; and between this cause and the increased imports of foreign raw commodities, the surplus capital might be at length absorbed, and the interest of money might rise to the original rate. The in- creased demand for labour, the increased quantity of commodities 15 to be circulated, and the increased prices, would then restore the coin required for circulation to its ori^nal amount. This is precisely the principle which has been in operation during the last three years, acting under a combination of all the circum- stances and causes to which we have now referred. There is not a banker, merchant, or manufacturer of any importance who will not clearly identify this description with the experience of that period. But this is in direct opposition to the principle of Sir Robert Peel's bank measure, and of the doctrine of currency so ably advocated by Mr Loyd, Mr Norman, and Colonel Torrens, who, in common with Sir Robert Peel, place implicit confidence in the effect of an import of bullion to increase the circulation, to raise prices, to encourage imports, and to correct the exchanges. Whereas, we have shown that the same cause which most com- monly operates to produce an influx of bullion, will, at the same time, operate to reduce prices and diminish circulation ; and that it is not until other causes come into operation, which at the same time tend to an export of any surplus quantity of buIUon, that either prices can be raised or circulation increased. And in our positions we are held out most strictly by the experience of the last three years. The truth is, that imports and exports of bullion we believe to have no direct effect whatever on circulation (and we are still all along speaking of a purely metallic currency) ; but we believe that it can be proved, beyond any doubt, that, in all the ordinary cases where bullion is exported or imported, the same causes which promoted the one or the other, would act on the quantity of coin in circulation, in the first instance, in the opposite way to that indicated by the measure of Sir Robert Peel, and the theory of Mr Loyd. We believe that this fundamental error, apparent to us, and supported so remarkably by the experience of the last three years, to have arisen from overlooking the character in which bullion is imported or exported under such circumstances. The advocates of that doctrine have overlooked the fact, that such imports of bul- lion are not in consequence of an absolute increase of the quan- tity of the precious metals, but are, in fact, owing to a simple change in their distribution, in order to transfer capital from one place to another. If a large import of bullion took place, direct from the mines, and the whole stock was thereby materially increased, no doubt then the price of all other commodities would rise in relation to gold, and the quantity of coin required to circulate them would be correspondingly increased ; but a similar rise of price would take place throughout the civilized world. Nor shall we find that Sir Robert Peel's measure is likely to be more successful in the object it professes to secure, in the case of an adverse exchange, than recent experience and reasoning have shown it to be in the case of a favourable exchange. We will still adhere to the case of a purely metallic currency, because that is the test to which it is his great object to make our circulation conform. The cause which has most frequently produced, and which is most likely again to produce, an adverse foreign ex- 16 change, is the sudden necessity of importing large quantities of corn in the case of a deficient harvest. Now, suppose, with a purely metallic currency, trade generally is in its usual state, the quantity of coin retained by the public to perform the functions of circulation at its lowest convenient point, and the most econo- mical distribution of the capital of the country, through the me- dium of bankers and otherwise, most perfectly obtained, and bankers holding their usual reserves of coin or bullion, to meet the demands of depositors : — Let us further suppose, in this even and apparently safe and prosperous state — similar to that which this country enjoyed in the first half of 1838 — that the approach of the harvest led, in a short time, to a rise in the price of wheat, from 50s to upwards of 70s the quarter, and that an import of more than three millions of quarters of wheat became necessary, as was then the case, that the exchanges were turned violently against us, and a demand set in for the precious metals. What would then be the effect on the circulation ? The same cause which led to an import of foreign grain, and a drain of bul- lion (namely, the high price), would also lead to an increase of the quantity of coin required for circulating the higher priced com- modity. Coincident with a drain of bullion from the bankers to pay for foreign imports, would there also be a drain of coin to increase the internal circulation. Bankers would have no controul whatever over the circulation ; they might raise the rate of in- terest, they might even refuse to discount bills at all, and entirely discontinue their usual accommodation to their customers ; — the more they did so, would inducements be held out to others to withdraw their deposits, and the necessities of trade would retain in circulation a sufficient portion of coin to conduct the internal exchanges in spite of any efforts on the part of bankers to cur- tail the amount. For it must not be overlooked, that the case of increased price of the first necessaries of life differs from every other article. Whatever be their cost, there is little or no diffe- rence in the quantity consumed as long as people have the power of obtaining them, while a higher price of other less necessary articles is often immediately compensated by a reduced consump- tion. It is true, that before long the high price of food would lessen the consumption of manufactures and other commodities, and the high rate of the interest of money would assist to reduce production ; people would be thrown out of employment, and in the course of time the higher price of food would be compensated by the smaller expenditure on other articles, and their reduction of price ; and then the circulation would again fall to the former rate, or even below it. But the first effect of the high price, and coincident with the early period of a drain of bullion, in spite of all the efforts of bankers, in spite of all the efforts of legislation, the actual coin in the hands of the public (in the case of a purely metallic currency) would increase, and not diminish, as Sir Robert Peel's doctrine infers it would. And this inevitable consequence, in the case of a purely metallic currency, is, according to Sir Robert Peel and the advocates of his adopted doctrine, " the head and front of offending" of the mixed currency, which has of late years circulated in this country ; and to compel which to conform with what would take 17 place with a purely metallic currency, the banking measure of last year was passed. If any one will examine the imperative consequences which we have now shown must follow from an adverse exchange, and a drain of bullion in the case of a purely metallic currency, with what did occur in the autumn and winter of 1838 and spring of 1839, wdth our currency mixed of coin and convertible paper, they will find them in every respect parallel. In our next article we will proceed to examine the other parts of the subject, as in- timated at the outset, and illustrate these principles by the expe- rience of the past. ARTICLE III. Having thus far considered the fundamental principles on which currency and banking are based, and by which they are regulated, we will proceed to our next proposition, and consider, Second, The application of these principles to banking, as it existed in England prior to the late act. For our present purpose it is not necessary that we should tra- vel back to examine the history of our banking institutions, or the various changes to which they have been subjected. It will be more to the purpose to confine ourselves to a consideration of what is worthy of remark in their modem history and condition. Banking, generally, as it has been conducted in England, has not had the tendency to attract much capital either for direct oc- cupation as a business, or as a means of permanent invest- ment for the capital of depositors. No banking business either requires or attracts much capital in the former capacity, and the construction of the English banks, as well as the principle on which they have been conducted, have been unfavourable to the encouragement of large and permanent deposits as investments. As a general rule, the independent capital of bankers constitutes but a very small portion of the means upon which they trade. As we have before observed, bankers are rather the medium through whom the capital of others is lent and borrowed than dealers in their own capital. The private and independent paid up capital belonging to banks may be looked upon rather in the light of a guarantee to the public for their security against the risk which it is known bankers must incur in the use of the deposits placed in their hands, than as constituting any very important portion of their means of trading. A banker being essentially, in the first place, a borrower of money, returnable on demand, the great art of his profession is to employ those funds in such a way as will at all times, and under ordinary circumstances, enable him to meet such demands. The prudent employment of such funds entrusted to his care is an infinitely more important consideration for a banker than the possession of a large independent capital. As, however, the credit which a bank can obtain with the public, on which its deposits must depend, can only be the result of implicit confidence, it is essential that so much honafide paid up capital should be known to exist, as, in addition to the reputation and character of the parties concerned, will give perfect faith to the public. Apart 19 from this consideration, a large capital is generally felt rather as an inconvenience than as an additional means of making banking profitable. A well conducted bank should be able, in all ordi- nary times, and with the exercise of due caution in the selection of its securities, even in the times of pressure and panic, to con- duct its affairs with what may be termed, strictly speaking, its banking funds, and without infringing upon its capital. Nor has the constitution of English banks, nor the principles on which they have conducted their business, been favourable to attracting any very large portion of permanent deposits of capi- tal for employment. In the first place, there have been too many interruptions to the credit and soundness of English banks, to entitle them to that degree of confidence which must exist be- fore banks are selected as the places of permanent deposit for private and, more particularly, for trust funds. And, in the next place, the practice of allowing interest on deposits is not general, and in London, with some slight exceptions, on special terms, quite unknown. Such capital, therefore, has generally been invested in the Funds, or other government securities. The main capital on which banks in England conduct their business is the deposits of the aggregate amount from time to time of the spare money which the vast magnitude of the trade and income of the country release from occupation for tempo- rary periods, too short or uncertain in their duration to induce to any permanent or more profitable investment. Merchants, manufacturers, retail-dealers, farmers, landowners, the recipients of public salaries, and of interest from the Funds, have all at particular times considerable sums of money in reserve to meet their liabilities and future expenditure. Besides these monies, there are always large amounts of capital, which, having been released from one channel of investment or speculation, are waiting for investment in some new channel ; and it is these accidental funds that constitute the chief means of banks to conduct their business — which, though accidental in each particular case, are yet remarkably certain on the general average. One half of a banker's customers may be lenders at one time and borrowers at another, but amid a constant change in the relation of each as his debtor or creditor, the actual amount of means in his hands may vary but little. In short, we may consider a banker as an agent, acting between the lenders and the borrowers of money at any particular moment — always ready to borrow, and always ready to repay. The two great essential and fundamental principles, therefore, on which the success of banking depends, and to which hitherto very little attention has been paid in all the discussions which have taken place on the subject, are — First, B}^ what means can a bank attract the largest amount of deposits. Second, In what way can a bank employ those deposits to the greatest advantage, consistently with the conditions on which they are made ; that is — repayment on demand. These two propositions really do involve the whole art of banking, whether viewed as a source of profit to bankers, or as a source of economy, safety, and convenience to the public. We will consider them separately. First, By what means can a bank attract the largest amount of deposits. The first and essential property which a bank must possess, is a perfect confidence on the part of the public. The small amount of benefit which a banker can afford to give his customer for placing his money in his hands, can never be sufficient to induce any man to run a hazard ; and, more particularly, the mere diffe- rence of terms which one banker can afibrd compared with ano- ther cannot be sufficient to induce any man to give preference to more tempting terms, when weighed against a greater security and confidence. The want of this confidence, to a sufficient extent, and for a sufficiently long and uninterrupted period, has done more to injure the business of banking in England than any other circumstance. In this respect, and in the effect which the absence of confidence has exerted over the amount and character of the deposits of Eng- lish banks, we discover a striking contrast between them and the banks of Scotland. Much of this fundamental defect in the cha- racter of English banks, if not all, we believe can be traced to the effects of legislation. From the time the Bank of England was erected into a corporation, the restrictions which the Government has, from time to time, imposed on the exercise of capital and the independent efforts of individuals, whether singly or in a combined form, in order to preserve the privileges of that establishment, we believe to have been the root of much, if not ail, of the mischief and discredit which has attached to the banking practice of England. But for the peculiar privileges granted to the Bank, from time to time — ^but for the restrictions thus placed on private enterprise, and the constant interference of the Government to tinker and patch up evils to which their own previous acts had led, there can be no doubt whatever that, many years ago, we should have had our banking estabUshments placed on the highest, safest, and most beneficial principles which free competition, intellect, and energy could suggest and carry into practice. Banking, above all other professions, is that which, under entire freedom and non-inter- ference, would soonest be placed in the most perfect position. The pubhc will not employ an unsafe bank while they have those of perfect safety with which they can deal, and who are ready to afford them all the facilities which banks can do. It may be said that some men, who are chiefly borrowers, have no choice with which bank they can deal. But to suppose that bad banks could be supported by borrowers, with an indifferent credit, is absurd. It is the lenders and not the borrowers, and, least of all, the inferior bor- rowers, that constitute the strength and power of banks. We know what has been the result of the restrictions imposed on banking, by the law, in this country, and we have only to look to Scotland to see what has been the effect of a long career of perfect freedom and competition upon the character and credit of the banking establishments of that country, as well as in affording the greatest convenience and satisfaction to the public. Confidence is the first essential of banking, and it will be much 21 in proportion as the banks of a country possess that essential that they ■will attract large deposits. Comparatively inferior banks may command a certain kind of mere temporary and fleet- ing deposits, but great stability alone can secure such large and more permanent deposits as constitute the power and strength of the Scotch banks. Nor is the advantage thus derived from any principle which leads to a large amount of deposits in the hands of bankers, felt more by the banker himself than by the com- munity where he is placed ; for it is a means by which the spare capital of every locality is kept within itself, and is used, through the medium of the banker, to encourage productiveness and im- provements in the neighbourhood. But for some safe means of investment at home, the spare capital of every district will have a tendency to find its way to the metropolis for investment in the public funds or other securities, while, through the medium of a safe bank, it might be retained at home to effect important local improvements and facilitate manufacturing and agriculture. But, independently of the great requisite of confidence which a banker must possess, there are other important causes which ma- terially affect the amount of deposits in bankers' hands. Bankers, as borrowers and safe-keepers of the money of the public, must not only be paid for their services, but must also be reimbursed the expense of the establishments necessary to conduct their business. There are, however, various practices as to the mode in which bankers are so paid and reimbursed, and which, in their practical effect, tend more or less to encourage or discourage large amounts of deposits. The Bank of England derives its profits from its circulation and the use of a portion of its deposits, for which, however, it gives no interest, and which are, therefore, al- ways kept at the lowest amount which is consistent with the con- venience of their customers. The other bankers in London, with very trivial exceptions, and those under special conditions, give no interest on deposits. Nor do they charge any commission for the trouble of keeping their customers' accounts, presenting their bills when due, paying their cheques, and performing a variety of services which would otherwise cost each individual much labour and no little risk ; but they are remunerated by the balance which it is understood each customer will keep at his account, the ag- gregate of which constitutes a fund which the banker can invest in securities, bearing interest, along with a given proportion of the other accidental balances, at all times averaging a large sum, which these various customers have in their hands. But, in consequence of this principle of conducting banking in Lon- don, by which no interest is paid on deposits, it must be ob- vious that even the sums left temporarily with bankers for em- ployment will be always at the lowest level consistent with public convenience. Out of this defect in the London banking a new class of money-dealers have been called into existence, or rather an old trade has changed its character of late years. Some years ago the London bill-broker was merely an agent who negociated between the merchant having bills to discount and the banker having money to invest in such securities, and he was paid by a small brokerage for his trouble ; but the practice of bankers not 22 allowing interest on deposits has at length changed the character of the bill-broker to that of a banker, taking deposits (money at call) at a given rate of interest from one man to lend it by dis- counting bills at a higher rate of interest to others, at the same time that he acts as a medium for transferring the spare capital wliich accumulates with bankers in one part of the country to those in other parts, where trade and commerce create a greater demand for it. It must, how ever, be evident that, were the Lon- don banks constituted so as to allow interest on deposits for short periods, they would not only secure a much larger amount of deposits, but with them they would also secure the discounting of a large amount of the biUs which, at the present time, are done by bill-brokers. And many who now make temporary invest- ments in exchequer bills or consols would leave their money with their bankers at a low rate of interest, and thus increase their means of extending their transactions in bills of exchange and other securities. Bankers may reply, that, as it is, they have sufficient difficulty to employ their present deposits in good secu- rities, but they forget that by their present practice they raise up competitors in every man who requires a temporary investment for the same securities. The best bills are taken out of the mar- ket by the money at call left with the bill-brokers. Among the country banks various modes are adopted for re- munerating the banker for his trouble and expense. In some cases a banker allows interest on deposits, charging a commis- sion on all transactions with his customer. The great disadvan- tage of this system is, that much more capital remains idle in the hands of the public ; for a man will never pay money into his bank account, unless he can spare it for such a time that the in- terest which he will receive will exceed the commission which he will be charged for paying it in and drawing it out ; and thus one of the great objects of economy of capital effected by banks is lost, and the amount of deposits in bankers' hands is necessarily much curtailed. This difficulty has been met by some bankers, who have charged a fixed sum per annum for doing business in- stead of a commission (this plan has been pretty generally adopted between country bankers and their London agents), allowing in- terest on deposits placed in their hands for a given fixed period, or subject to a certain notice before withdrawal, but not upon those which are operated upon in open account. But in this case one of the inducements to place money with bankers for short periods is removed, and much more idle money is left in the hands of the public. The principle of conducting banking, which has tended to the greatest amount of deposits, and gene- rally to the greatest success of the banks themselves, while the greatest advantages have been secured to the public, has been that pursued by the banks in Scotland. In the first place, they are constituted on a principle to afford to the public the greatest amount of confidence in their perma- nent and ultimate safety. By the profits derived from their circu- lation they are enabled to allow interest on all deposits for how- ever short a time ; and they derive a further profit from the higher rate at which they are enabled to invest a considerable portion of 23 such deposits. The rate of interest which they allow on deposits is generally equal to that which could be obtained by investment in government securities, especially when people consider the charge of brokerage, and the risk of a fall in such securities when they may happen to require their money ; and, as they al- low the same rate of interest for however short a period a deposit is made, the consequence is, that almost every man keeps a bank- ing account, into which he pays whatever money he can spare at the conclusion of the business of each day, looking to the day's in- terest which he will receive. The combination of advantages which result from this system to the banks themselves, but more particu- larly to the community at large, is greater than, at first sight, will be very plain to those unacquainted with the practical effects of the system. The first effect is to economise the currency of the coun- try to the greatest degree that, under any circumstances, would be possible. The strongest inducement is held out for every man who has spare funds in his hands, to keep a banker's account, and to keep no money, even for a day, for which he has not imme- diate use. In consequence of this, the whole trade of Scotland is performed with a circulation of only 3,000,000/, including notes of all denominations, from one pound upwards, while the circulation of England in coin and notes cannot be less than from 50,000,000/ to 60,000,000/. The population of England and Wales is six times greater than that of Scotland, and, therefore, a currency of 1 8,000,000/ ought to perform the functions of exchange as well here as one of 3,000,000/ does in Scotland. Nor can it be said that a greater commerce existing in the one country in proportion to the other is the cause. In the first place, it is doubtful if such is the fact ; but, whether or not, the large transactions of com- merce are not those which require the aid of the common circu- lation of notes and coin, the use of which is chiefly confined to retail transactions, payment of wages, and private expenditure. The next striking result of this great economy of capital is the enormous amount of deposits which are placed in the hands of the Scotch banks, and on which their great strength chiefly rests, amounting, as they do, to more than 30,000,000/. The bank of England, with a capital of 14,500,000/, and with a circulation of 20,000,000/, independent of what it holds on the part of the Government, commands deposits, even at the present mo- ment, to the extent only of 10,000,000/,* a large portion of which are merely the reserves of the London bankers ; while the Scotch banks, with a capital of less than 1 0,000,000/, and a circulation of 3,000,000/, command deposits to the extent of 30,000,000/ for investment and use. The effect of this system, as re- gards the public, is far more important than the mere interest which each, receives for his spare cash. It is in effect increasing the actual capital of the country, by rendering much of it produc- tive that would otherwise be idle ; and, moreover, it keeps large sums at home, and in each locality, that would otherwise be sent for investment in government securities. And thus, through the medium of the banker, the spare capital of each neighbourhood is * Of which upwards of 2,000,000/ are the deposits required bylaw from the applicants for new railway acts. 24 rendered available for the promotion of improvements and general industry, which, did the banks not allow interest, must necessa- rily have been sent to a distance for investment. And there can be no doubt that much of the agricultural improvement for which Scotland is so remarkable has been owing to this local appli- cation of the spare capital of the country. We shall have occasion, in the future parts of this discussion, to refer more particularly to the influences exerted on the prosperity of the banks, as well as the people of Scotland, through this prin- ciple, by which they attract, and permanently retain, such large amounts of deposits, and which we conceive to be highly deserving the attention, not only of bankers in general, but also of states- men and politicians. In our next we will proceed to consider ihe nature of the various securities in which bankers may most safely invest their deposits, to combine a fair amount of profit with the most perfect security, and consistent with the peculiar conditions on which they hold them. ARTICLE IV. At the conclusion of our last article, we proposed next to consider by what means a bank can employ its deposits to the greatest ad- vantage, consistently with the conditions on which they are made — that is, repayment on demand. As we may again have to re- fer, in a subsequent part of this discussion, to the effect of the new law at a time of pressure upon the securities held by bankers, we do not propose to devote much space to this consideration in this place. The business of a banker is to borrow and lend ; but as he bor- rows generally on the condition of repayment on demand, it is necessary that his loans shall be made on such conditions and on such securities as will enable him to rely upon a return of his liinds in a given time, or to have them represented by such secu- rities as, in the case of unexpected need, can be converted into money. It is, therefore, equally as necessary that a banker should look to the convertibility of his security as to its ultimate safety. On this account mortgages on real property have now become universally repudiated as proper banking securities. Strictly speaking, a perfect banking security should combine ultimate safety, a certainty of payment on a specified and not distant day, a capability of being converted into money in case of unexpected emergency, and a freedom from liability to depreciation. The first and last of these requisites are common alike to all banks ; the second and third will admit of some modification, according to the state of the money market and the peculiar character of the business of particular banks, and especially whether deposits are by practice of a very fluctuating or of a more permanent character. On the whole, the first class of bills of exchange may be said to possess all the requisites of a perfect banking security in a degree superior to any other. The united guarantee of drawer, acceptor, and indorsers, insures the ultimate, and generally the punctual, payment. The period for which such instruments are drawn is generally short. They are always capable of re-conver- sion under ordinary circumstances, and even in a period of greatest pressure money can be obtained upon them in preference to any other security, though perhaps at an advanced rate of in- terest, and the sum to be paid is not exposed to depreciation. But though bills of exchange combine most perfectly all the re- quisites of a banking security, they unquestionably require an exercise of more prudence, caution, and knowledge of individuals 26 than any of the other usually received securities, as their value depends altogether on personal responsibility. In short, more strictly speaking, bills of exchange may be termed the only security in which bankers can with propriety absolutely invest their de- posits, or in which prudent bankers practically do so. All the other means of using deposits are rather in the shape of personal loans, guaranteed by collateral securities, such as exchequer bills, consol warrants, the scrip of public companies of a well known and convertible value, the warrants of merchandise lying in our public warehouses, or of any other property at all times and easily convertible into money. In most cases the investment of money on merchandise is made through the instrumentality of brokers, who are personally liable for the sums advanced, and who have a power of sale over the property to realise the funds in order to provide payment for the loan in due time. In all such loans, how- ever, it is the practice only to advance a portion of the value of such property, to secure the banker against any depreciation in its market price when it is sold ; and, in order to give to such loans the further attributes of a banking security, of convertibility at pleasure, and fixing a day for repayment, the promissory note of the borrower is not unusually deposited with the warrants. But though personal loans, made by bankers with such precau- tions, may fairly be considered a legitimate use of deposits, it will be apparent that an actual investment in any of these securities could hardly be considered in that light, as a banker would, by such a course, expose himself to all the consequences of a fluctu- ation in the value of such commodities, and would become a spe- culator in government securities, railway shares, or foreign pro- duce, as the case might be, instead of a mere lender of money at interest. But though it is inconsistent with the business of a banker to invest money in such securities, except as a collateral guarantee for a personal loan, it is not always inconsistent with safe and judicious practical banking to lend money without such collateral securities, and depending only on the personal credit of the borrower. The propriety of such investments must, of course, depend entirely on the prudence and caution exercised in the transaction. But it certainly cannot but be considered a legiti- mate transaction for a banker to lend money to a customer in whom he has perfect confidence, at a particular period of the year, when it is well known the nature of his business requires the use of a larger capital, and whose spare funds the banker is in the ha- bit of liolding at another period of the year when he less requires his capital. In the agricultural districts this practice exists to a greater extent, and is attended with less danger, from the simph- city of a farmer's transactions, and the more intimate knowledge of his affkirs possessed by the banker than can possibly prevail in large mercantile and manufacturing communities. If a land- owner requires a large advance of money, to carry out particular improvements in anticipation of his next rents, his banker can al- ways judge of the propriety or safety of making such advances, from his local and personal information. If a farmer requires an advance at a particular period, either for the purchase of stock, or the payment of his rent, his circumstances, charac- 27 ter, aud his crop in liund, are usually so well known to his banker as to enable him to judge of the propriety of making such an advance, and of the certainty of its repayment on the day stipulated. Such advances on mere personal security, though more common in the agricultural districts, are by no means, however, con- lined to them ; but in whatever cases they prevail much must de- pend on the discretion and peculiar circumstances of each indivi- dual banker as to how far he can so employ the deposits in his possession ; and in all cases the four general rules for the use of de- posits should never be lost sight of, though in each individual case it must be left to the discretion and judgment of the banker him- self how far any particular investment which offers, secures him in those respects. First., That it is ultimately perfectly safe. Second, That it be repayable within such short periods as com- port with the natiu'e of the deposits in his hands, and to enable him, by the frequent retiu'n of his funds in the regular course of business, to contract his loans if the state of his deposits or of the money market renders such a course desirable. IMrd, That it should generally be of such a nature as to be capable of being re- converted in case of need, or, at least, that a sufficient proportion of the deposits or other means of the banker should be held in such securities in reserve as will enable him to command money for any unforeseen emergency. And, Fourth, That it presents a perfect guarantee against depreciation of the principal sum during its cur- rency, or such a margin as will at least secure the banker against any ordinary fall of price. The whole of our remarks hitherto have been strictly applicable to banking conducted with a purely metallic currency; and we will now pass on to a consideration of the effect, and more particularly as it has of late years existed in this country, OF A MIXED CURRENCY OF BANK NOTES AND COIN. We have already explained under what circumstances coin was originally introduced as a medium of exchange, how a portion of the capital of the country was abstracted from productive uses to perform the function of currency, and how that necessary amount of capital became economised by the introduction and instrumen- tality of banks. In the progress of time many other plans have been adopted for the purpose of further economising the capital invested as coin requisite to conduct the internal exchanges. Bills of exchange have been resorted to as a means of making payments between different parts of the country, instead of trans- mitting money to and from various districts for each payment ; and the practice now so general of making bills of exchange pay- able at a banker's in London, is an important additional means by which the use of a large amount of money is dispensed with. Again, bankers' cheques have been now almost universally intro- duced for making payments between individuals resident in the same town, instead of money being passed to and from various individuals for each payment; and thus all the money that is re- quired to conduct the whole of these transactions, whether be- tween parties resident at a distance from each other, or in the same place, is the sum which one banker has to receive from an- 28 other as the final balance of these various orders which they hold upon each other. The same function which a bill of exchange performs between parties at a distance from each other, is per- formed by cheques between parties resident in the same place. But the most important way in which the use of money has been economised since the introduction of banks of deposit, has been by the use of bank notes issued for small sums and payable to bearer on demand. From the long habit of an indiscriminate use of notes and coin as a circulating medium, much confusion prevails as to the precise nature and character of the former. By no one has the relation between them and money been stated more clearly, or in fewer words, than by Mr Huskisson in the fol- lowing sentence : — " Money is a given quantity of gold or silver . . . Money, or coin of a country, is so much of its capital. Paper currency is no part of the capital of a country. It i«? so much circulating credit. Whoever buys, gives — whoever sells, receives — such a quantity of pure gold or silver as is equiva- lent to the article bought or sold : or if he gives or receives paper instead of money, he gives or receives that which is valuable only, as it stipulates the payment of a given quantity of gold or silver. So long as this engagement is punctually fulfilled, paper will of course pass current with the coin with which it is thus constantly interchangealle. Both money, therefore, and paper promissory of money, are common measures and representatives of the value of all commodities. But money (gold) alone is the universal equiva- lent — paper currency is the representative of that money." Thus bank notes are to be considered as means of trans- ferring a claim which one man who holds them has upon the issuer of such notes, to another man to whom he pays them. In- stead of so much absolute coin, he hands over a document en- titling the owner, on presentation, to receive the specified quantity of coin ; in a similar way that a man, in paying an account, instead of handing over the actual money, gives an order or cheque which entitles the bearer to receive it from his banker. It is true the latter instrument seldom continues in circulation, while the former passes from hand to hand for an indefinite period, and is subject to different legal regulations ; but in its simple function, as a medium of exchange, and as a means of economizing the coin, it is precisely the same. And we think it will readily be admitted by all, that if such bank notes were established upon a principle which would give to the public satisfactory security, and which would really act in every way as the coin they represent would act by itself — which, in short, would perform all the functions of currency and preserve their value as perfectly as coin, that the economy con- sequent upon their use would be a source of great gain to a country : — First, in saving the wear and tear of the coin which they would displace ; and, next, by restoring to productive uses some portion of the capital which the coin in circulation had ab- stracted for the purposes of currency. The paper currency which has been issued in various countries, and at different times, has materially and essentially varied in its character, but it may be generally divided into the two general classes of inconvertible and convertible, and on which we will be- stow a few remarks separately. First, Inconvertible Paper Currency. — This may again be 29 divided into two kinds : First, Paper issued by a government for its general expenditure, nominally representing some coin, but not convertible into such coin. If the quantity of such paper issued were always kept somewhat below the smallest amount of cur- rency required in a country at any given time, so that the addi- tional quantity had to be supplied by coin, and thus coin and notes freely circulated together, there is no reason whatever why such notes should suifer depreciation. But the moment the quantity issued exceeded the amount of currency required at any moment, the precious metals, having an intrinsic value both for purposes of manufacture and for foreign exchanges, would be withdrawn altogether from circulation, and the paper would have no limit to its depreciation, except the quantity in which it was issued. Second, Paper issued by a bank exclusively in the dis- count of bills of exchange, or on loan for short periods. It is an opinion which many of the ablest writers on currency have held, that inconvertible paper notes might be issued to any extent that legitimate transactions required them, provided such issues were confined to the discount of good bills of exchange, and to loans for short periods, without any risk of depreciation, because a larger quantity never could be so issued than was again shortly returnable to the bank in payment of the loan. The most able reasoning with which we have met in favour of this pro- position, is in a very clever work by Colonel Torrens, published in 1812. Against this view it has been urged that, though a mer- chant might require a sum, say of 10,000/ to day, it did not follow that he would require it for any length of time, and that, as it was not returnable to the bank until the repayment of the debt or bill on which it was borrowed became due, the currency might in the interim be redundant and so much depreciated. But those objec- tors overlook the fact, that if the same merchant did not continue to require the use of the money more than a few days, he would either invest it in interest-bearing securities, or, through the me- dium of a banker or bill-broker, it would be used to discount other bills for other parties at a lower rate than that charged by the bank, and would thus intercept such bills or securities on their way to the bank, which in the meantime would be receiving its notes in payment of loans and bills falling due from day to day, and, if not re-issued to the same extent, the currency would be contracted to the wants of the day by this means, just as much as if the 10,000/, no longer required by the first borrower, had actu- ally and immediately been returned to the bank. It is quite clear that in this way no larger quantity of notes could be kept out than the purposes of currency actually required; for the momenta man held notes for which he had no use, he would with them in- tercept some interest-bearing securities on their way to the bank, and, while other notes were flowing in, in repayment of bills or loans falling due, he would to that extent prevent further re- issues. But it is also evident that the instant such a bank began to lend money to a government on securities not redeemable, that in such a case, as with the government itself, as soon as the quan- tity of notes in circulation exceeded the want for currency, that moment depreciation m ould commence, and would go on just in 30 proportion as the issues exceeded that limit. In practice, therefore, we conceive such a principle far too dangerous for one instant to encourage. Still, it is well that the distinction which we have pointed out should be understood. Second, Convertible Paper Currency ; which we may also consider of two kinds : First, Paper which is convertible into its representative of gold, but not always, at the will of the holder, but at some specified, though not far distant, time. However secure such paper may be of payment at the time stipulated, or whatever may be the credit of the issuers, it is not free from the risk of depreciation ; if gold be required for immediate use to balance an adverse foreign exchange or any other purpose, any instrument, however secure of ultimatepayment, will sink in value. Thus, for example, exchequer bills rise and fall in price in the market, as the demand for money rises and falls ; but it is clear that, with securities to which no hazard attaches, these fluctuations will be confined to the extent to which parties will be induced at any particular moment to take them as investments, for the sake of the interest they will bear. But in times of great pressure and discredit, when there is a great demand for money, and few lenders, the price of exchequer bills may fall very low, without implying any doubt whatever in their ultimate security ; but simply from the fact that they will not command money or coin if wanted at the moment. Again, in past times, it w as not uncommon ibr banks to issue notes payable on demand, or at a distant day irom that of presentation, at the option of the issuer, but in such case the notes bearing interest till the day of payment. However secure such notes might be of ultimate payment, they were never free from the risk of depreciation at times of pressure, or an adverse exchange, and on this account have long been abandoned in this country as part of the currency. Second, Paper which is at all times convertible, at the option of the holder, into its representative in coin — such as is the whole of the paper currency now circulating in the United Kingdom ; for though country bankers can pay their own notes in those of the Bank of England, yet as the latter are immediately convertible into their representative in coin, so for all practical purposes this arrangement does not interfere with the convertibility of country notes, while it has the desirable effect of keeping a large stock of bullion centred in London, where it is always available for transmission to foreign countries, in place of being scattered throughout the country in each banking establishment to a greater extent than is necessary for the internal purposes of currency. Indeed, we consider this arrangement a highly desirable and use- ful mode, by which a considerable economy of the use of bullion is effected, and the stock of that commodity, thus centred in the Bank of England, is rendered more effective for all purposes than if held in considerable quantities by private bankers through- out the country, as reserves against their liabilities. Until of late, all writers worthy of any respect, from Adam Smith downward to Kicardo and Huskisson, whatever different opinions they held in other respects regarding the currency, were agreed at least in this principle, that im.mediate convertibility .31 of notes into the coin they represent, at the option of the holder, would be at all times an infallible guarantee against any depre- ciation of their value. The correctness of this opinion is now, however, doubted by some and denied altogether by others. It is asserted that, noth withstanding the convertibility into coin at the option of the holder, notes may be issued in excess, and may depreciate in value. On this principle the bank measure of last session was founded, in introducing which Sir Robert Peel said, — • " We want only a certain quantity of paper, not indeed fixed and definite it), nominal amount, but just such a quantity of paper, and that only^ as shall be equivalent in point of value to the coin it represents. If the pa^jer be cheaper than the coin, it is an evil, and not an advantap-e. That system, therefore, which provides a constant suj^ply of paper, equal in value to coin, and so varying in amount as to insure at all times immediate convertibility into coin, together with perfect confidence in the solvency of the issuers of l)aper, is the system which ought to be preferred." This is unquestionably true ; but it appears to us the most difficult of all conceivable propositions that bank notes, convertible into coin at the option of the holder, can ever be " cheaper than the coin," or can ever be other than "equal in value to coin." To suppose otherwise would be to admit that people would volun- tarily retain in their possession one representative of currency of inferior value which they coidd at option exchange for another of superior value. But Sir Robert Peel appears to be of that opinion, for he denies that convertibility at pleasure is a security against over issues and depreciation. He goes on to sa}^, — " Now, unless the issuers of paper conform to certain principles, unless they vigilantly observe the causes which influence the influx or efflux of coin, and regulate their issues of paper accordingly, there is danger that the value of paper will not correspond with the value of coin." But, in a future stage of the debate. Sir Robert Peel, in replying to a question put by Mr Newdegate, appeared to forget altogether the fundamental charge against the existing system of paper issues, and supplied a most perfect reply to his own assertions, that convertibility at pleasure is not a guarantee against deprecia- tion. We quote from his speech reported in the Ti?nes of the 21st of May 1844.— " First, I beg to inform the hon. gentleman that I do not admit that this is an extension of the principle of the act of 1819. I say it is a comple- ment to the act of 1819, and a measure that will fulfil it ; but it is not an extension of the principle of that act. The act of 1819 re- cognised this principle, that there should be a standard of value in this country — that that standard of value was a given amount of gold; and that he who issued paper should be obliged to fulfil his engagement, and pay it in gold. The measure I propose does not carry that principle any further. My answer to the question is this : — I say there is a standard of value, and that that standard of value is a definite quantity of gold, of certain fineness. He who issues paper promises on the face of that paper to pay a certain amount of gold. The paper, then, ought to conform to the gold. I admit the operation of this measure may for a time affect a limita- tion of prices ; but 1 say that all increase of prices, arising from an excess of paper, is an illegitimate increase ; and that there is no advantage in any increase of prices that arises from an issue of paper beyond the vahie of the metal it represents. I bring tlie matter to this sim- ple issue: — Suppose you have deprecia led your paper, and your paper still re- mains converlihle into gold, do you think that every man who had a right to insist upon receiving five sovereigns for his 51 note, would not immediately insist 32 upon that right the moment he found that gold was more valuaHe than paper ? Dnyi't vou suppose^ that if the great denier in exchanges i7i London. Mr Roths- child, fmnd that hi/ presenting 500,0001 of paper at the Dank of England he could get 500,000 sovereigns, and that they were more valuable ilian paper, he would avail himself of the power the law gave him, and demand the gold ? And donH you suppose that every other man, whose transactions were less extensive, but who had a right to receive five sovereigns for his 51 note, would immediately de- mand it ? Does not all experience show that, though there may be a temporary in- crease of prices, a time of reaction — of revulsion — will arrive? I say that no increase in the price of paper beyond its value in gold can be of advantage to the country — it cannot be permanent.'''' In our next article we will enter into a consideration of" those principles" to which Sir Rx)bert Peel would have " the issuers of paper money to conform," in order that the same action may be maintained on a mixed currency of paper and coin, as would take place upon an entire metallic circulation, in the event of an influx or efllux of bullion ; and this we shall have more facility in doing, having already, in our former articles, closely examined the effect of such events on a purely metallic currency. ARTICLE V. During the suspension of cash payments by the Bank of England, and more particularly in the discussions which took place on the subject of the currency from 1810 to 181 9, it was common to refer all the great fluctuations of commerce and the revulsions of credit to the capricious expansions and contractions of the circulation of the Bank, under circumstances which enabled that establishment to depreciate or appreciate the currency at pleasure, according to the amount of its issues. Greatly, however, as the influence of the Bank over such com- mercial revulsions was then exaggerated, and fatal to the future interests of the country as was that error, inasmuch as it prema- turely closed the door of investigation into other and more impor- tant causes, stUl the whole theory of the baneful influence of the bank rested on the issue of inconvertible paper, the fluctuations in the quantity of which, it was asserted, not only caused a mate- rial variation in facilities for mercantile credits, but also (which was no doubt the case) raised or lowered the nominal price of goods, as the notes appreciated or depreciated. By all, however, it was agreed, that a return to cash payments — that a restoration to con- vertibility of bank paper into coin of standard weight at the option of the holder — that a removal of the restrictions on the ex- port of coin, and, in short, the provisions embraced in the Bill of 1819, would eflfectually secure the country against over-issues, and consequent depreciation, of bank notes, and prevent for the future any fluctuation in the value of the currency ; and had the antici- pations of the effects of that measure stopped here, we know of no- thing that has since occurred which, when patiently investigated and well understood, could be said to have falsified those ex- pectations. But the advocates of a return to cash payments went further — they had attributed much of the frequent occurrence of commercial crises and revulsions to the suspension under the act of 1796; and they accordingly anticipated, with the resumption under the act of 1819, a material, if not entire, preventative of all future commercial derangement. The subjects of currency and capital, of circulation and credit, though as distinct as things can possibly be in their nature, and in the laws which govern them, were commingled in men's minds in one mass of intricate confusion, and led greatly to an erroneous estimate of the evils of the past, and of the benefits to be anticipated in the future. This confusion is apparent in most of the discussions and writings of that time, 34 and in a great majority of all that have appeared since, and in no place in a more remarkable dep^ree than in the speeches with Avhich Sir Robert Peel introduced and supported his New Bank Bill last year. The occurrence of the panic of 1825-26, bringing with it de- rangement and havoc without any previous parallel while it lasted, at once convinced every one that a grave miscalculation of the effects of the bill of 1819 existed somewhere. This is not the place to go into a close investigation of the causes of that crisis, but the government of the day, falling into the common error, and not dis- tinguishing between credit and circulation, suddenly interposed a law to abolish, within a short and limited time, all notes hAovi Jive pounds, which, at least, it was thought, would secure all the pro- mised advantages of the bill of 1 81 9, as far as regarded trade. Sub- sequent experience has proved how ineffective even that restriction on paper circulation has proved to secure the desired object and prevent convulsions of credit, which, on the contrary, have oc- curred so frequently, as to attract once more the further interfer- ence of the legislature by the bill of last session ; but we fear with no more chance of success to obtain the desired object than all the former abortive attempts, as its whole or chief object is to regu- late currency, while it does little or nothing to improve the basis of credit. All former regulations of the currency having failed, the minis- ter has adopted a principle of further regulation, which has been gaining ground for many years past, and which has been advocated by the most leading and (numbers considered) by far the most in- fluential and eminent politicians, political economists, and practical bankers of the day. It has, however, been opposed, by men indi- vidually as eminent as any by whom it has been supported, both by their published writings, and their evidence before parliamen- tary committees. Were we, however, to judge only by weight of authority (numbers considered), we would readily admit that Sir Robert Peel might fairly expect a happy result from his experi- ment. But when we look to the grave errors which, on former occasions, have been supported unhesitatingly by even a more unanimous approval of all living authority ; and when, on inves- tigation, we find the principles in themselves totally at variance with what we conceive to be a just conception of the nature of currency, and when we find, on further investigation, that, even were it not so — were the fundamental assumptions, on which that act is grounded, all true — even then the anticipated effects would not result, we are compelled to fear only another serious failure and disappointment ; and if the operation of the law be relied upon, as implicitly as the authority with which it has been introduced would fairly lead us to expect, we fear that derangements will occur under it in even an aggravated form. SIR ROBERT PEEL'S BANK MEASURE. At the conclusion of our last article, treating of a mixed cur- rency of hank notes aiid coin, we stated that the fundamental objec- tion which Sir Robert Peel entertained to the circulation, as existing previous to the introduction of his act of last year, was that convertibility into coin at the option of the holder was not 35 alone a sufficient guarantee against over-issues and consequent depreciation ; and that, " unless the issuers of paper conform to cer- taiti other principles, there is a danger that the value of the paper will not correspond with the value of coin ;" and that this check alone will not secure the same action and variation on a mixed currency of bank notes and coin in various states of the foreign exchanges, and during an efflux or influx of bullion, as would occur with a purely metallic circulation. Now, if these positions were true, we would at once conceive the necessity of some change, for we ad- mit all these qualities to be essential to a perfect currency — that is, we admit that all paper currency, to be perfect, or in any way admissible, should possess the most entire guarantee against depreciation, just as much as a man who contracts to deliver a quarter of wheat should not be able, by any trickery on his own part or that of the law, to get off by delivering seven bushels; and such perfect convertibility being at all times maintained by what- ever means, it must follow, as a matter of course, that a mixed currency must then follow the same rules in its variations that a purely metallic currency would. In order to secure these necessary and desirable objects, Sir Robert Peel asserts, that convertibility at pleasure is not enough. The advocates of his measure contend that, in order to prevent depreciation of bank paper, and to make it conform with the va- riations which would occur with a currency entirely metallic, it is further needful that the issuers should regulate the quantity of notes in circulation by the variations in the foreign exchanges — that with an efflux of bullion they should contract the cir- culation, and with an influx of bullion they should again ex- pand it. They contend that a strict observance of these rules will regulate and restore the foreign exchanges, and, if not entirely prevent, yet will materially modify the severity of a crisis which would attend any such derangement — that it would only be doing by a fixed law, and at an early period of the derangement, what has always been done by no rule, but by the chance of pressure and necessity, and always so late that the evil has been greatly aggravated. They contend that if, at the commencement of a drain of bullion, bankers were to contract the amount of their notes in circulation, it would raise the value of the currency, lower the price of goods, check any further im- portation, encourage more extensive exportation, and thus correct the adverse exchange by an action on merchandize, and stay the drain of bullion : — that, during a favourable exchange, bankers should expand their circulation of notes, lower the value of the currency, raise the price of goods, check further exportation, and encourage importation ; and thus again, through this action on the prices of goods, correct the exchange, and prevent a further influx of bullion. In order to accomplish these objects it is contended, that while the bank may safely issue, upon fixed securities, a quantity of notes, which shall not exceed the smallest amount of paper currency that can at any time, and under any circumstances, be required — such a quantity, in short, that, even were it inconver- tible, would continue to circulate free from the risk of deprecia- tion ; yet that all above that sum must vary in amount exactly with 36 the quantity of bullion in possession of the bank — that, as gold in- creases in the coffers of the bank, the circulation shall increa se, and, as gold diminishes, the circulation shall correspondingly di- minish ; for such, it is contended, would be the action of a purely metallic currency. In pursuance of these principles, Sir Robert Peel's bill provides that the Bank shall circulate, on fixed securities, the sum of /oMr- ieen milUons, as being the smallest sum that, under any ordinary circumstances, can be required, and that the issues beyond that amount shall vary precisely as the amount of bullion varies. These principles, and the course pursued by Sir Robert Peel, necessarily involve the following FIVE ASSUMPTIONS. First, That bank notes, though payable in coin, at the option of the holder, are still hable to be issued in excess, and are conse- quently subject to depreciation. Second, That convertibility is not alone a sufficient guarantee that a mixed currency of bank notes and coin shall conform, in its variations, to the same laws that would regulate a purely metallic currency. Third, That issuers of bank notes have power to increase or de- crease the circulation at pleasure. Fourth, That, by an expansion or contraction of the issues of bank notes at pleasure, the prices of commodities can be increased or diminished ; and, Fifth, That, by such increase or diminution of prices, the foreign exchanges will be corrected, and an undue influx or efflux of bul- lion, as the case may be, will be arrested. We think it will be admitted that these five propositions fairly represent the principles involved in Sir Robert Peel's measure, and maintained by those who advocate and support it. In the face of such an array of personal weight and authority, inchiding the most expert and practised politicians of all parties, and men the most accomplished in economical science, it has not been with- out the most careful and diligent process of investigation and reflection that we have arrived at a conclusion that these proposi- tions, which at first sight startle any thinking mind as involving principles contradictory to those generally received as regulating ordinary mercantile pursuits, are not only not true and support- able by fact, but are in every instance nearly the. reverse of truth. But we are not altogether without the support of high authority in our views ; in all main and essential points they concur with those advocated for some time past by Mr Tooke, whom, taken singly, we are bound to regard, whether viewed as a political economist, as a man of practical knowledge and experience, as a laborious, pains-taking, and candid writer, or as evincing in his works the most minute and extensive investigation, among the highest of all living authorities on such subjects; whose great works have been stamped with universal approbation, and secured a permanent place in the commercial and economical literature of the country. Nor can we omit mention of the more recent work of Mr Fullarton on the subject, which also in the main supports 37 our views— a work which exhibits a more intimate and familiar knowledge of all the facts and reasonings on which these princi- ples are based, and in which they are treated in a more popular manner, than any other that has yet come under our notice, and which cannot fail to give to the author a permanent place amoiig the most able writers on the question of money and currency.* In undertaking, which we shall now do, to show that each of these propositions is fallacious, and has no foundation whatever either in true principle or experience, we would carefully guard ourselves from the most remote suspicion that our opposition to them has any sympathy with those who object to this measure on the ground of its rendering more stringent or secure the converti- bility of paper at the option of the holder. CONVERTIBLE PAPER AND DEPRECIATION. Assumption, First. — That bank notes, though payable in coin, at the option of the holder, are still liable to be issued in excess, and are consequently subject to depreciation. This proposition contains a prima facie contradiction of terms, that would appear to throw the whole onus on those who assert and maintain it to prove it, and not on those who deny it to disprove it ; for it is indeed difficult to conceive any state of circumstances which would induce the public to retain in their possession a lower representative of value, when the mere trouble of stepping to a bank and presenting it for payment would instantly put them in possession of a higher and more valuable instrument of exchange. When we think of the increasing pains and labour which men use to make the smallest profits by busi- ness, the supposition must be at once rejected as having any foundation in fact, that so simple and so easy a means would be neglected. For what in reality does excess of issue, and conse- quent depreciation, mean? If it means anything, it is that the paper in circulation will not command the full quantity of coin it represents, or exchange for the same quantity of other commodi- ties as that coin would. But will any one believe that in this country, with such facility of intercourse, bank paper, in any part of it, could ever experience such a disparity w ith coin, when, on pre- sentation, it can be exchanged for its full value ? It may indeed be said that, in distant parts of the country, a premium is sometimes paid for the exchange of a large note into sovereigns. True, but this is only in the character of a banker's charge, for a facility given to the party holding it — for keeping open an office to facili- tate the business of the public. Suppose a party in London has to transmit 50/ to a party in a small market town in Cumberland ; the cheapest way of doing so would be by a Bank of England note, * Tbis work has rapidly passed into a second and somewhat enlarpred edition, as we recently noticed, and it has only been the great pressure of matter that has prevented us hitherto noticing it at greater length. There are some minor points in it which we think fair matter for discussion, and which it is our intention at an early opportunity to undertake. And in so doing our pages will be open to the accomplished author to vindicate his views, and we are happy to say he has expressed a wish to avail himself thereof. But these points, though deeply important and interesting in themselves to practical bankers and men of science, are by no means essential to the great principles under discussion, in which we are generally and fully agreed with the author, and of which there is no other work so well calculated to convey a clear, correct, and popular view. 38 which, however, when received, might cost the recipient a small commission to the banker in the town for changing it, if he could find no one requiring such a note. But such charge would only be in the light of the cost of transmission of money from one place to another, and in no way prove any depreciation in the instru- ment of exchange itself; for the very same day another party might go to the same banker and pay a premium for the same note to transmit as a payment to another part of the country, rather than incur the greater expense or risk of sending fifty sovereigns, or taking a bill at the par of exchange. But some admit, " that while convertible paper cannot perma- nently be depreciated — that while it must at length become equi- valent to the specie it represents, still, under certain circum- stances, the adjustment may be long deferred." — (Normaii's Re- marks on Currency and Banking.) If Mr Norman here refers to paper convertible at pleasure, and not at a distant day, then we can only say that it is beyond our comprehension how such depre- ciation could, under any circumstances, be deferred beyond the time requisite to exchange the instrument. Nor does Mr Norman ex- plain under what circumstances the depreciation he speaks of would take place. It is true, he and other writers constantly re- fer to the various proportions in which Bank of England notes and country bank notes have been in circulation at particular times ; but that is no more an evidence of depreciation than were it at- tempted to prove that, at some particular time, half-sovereigns were depreciated, because they w ere found to occupy a larger share of the circulation in relation to sovereigns than at any other time. No one has yet shown that a convertible bank note ever sold for less than its value in gold, or would command less wheat than such gold would. But Sir Robert Peel stated some startling evidences of his pro- position in his speech on the 6th of May 1844 — startling indeed, had they turned out to be true, or applicable to his case. He cited as evidences of the truth of this propositions ; First, That shortly after the establishment of the Bank of England its notes were at a discount of 17 percent ; Second, That in Ireland, in 1804, the exchange was unfavourable, and that it required 118/ 10s of the notes of the Bank of Ireland, to purchase 100/ of the notes of the Bank of England ; and, Third, That unfavourable states of ex- change had existed between Scotland and England. And he as- sumed over-issue and depreciation, from the fact, that in all these cases the derangement had been corrected by a contraction of issues. Now, what were the facts ; for these we are indebted to Mr FuUarton's work (page 169 to 179). First, In the case alluded to, of the Bank of England, Sir Robert Peel suppresses, or at least omits the fact, that at the period to which he alludes the Bank had actually suspended cash payments, and its notes were not convertible. It occurred in 1696, when silver was a legal tender for all sums. The coin however, had then become so much de- graded by wear, that it was itself depreciated in relation to the market price of silver. In 1695-96, though an ounce of silver re- presented 5s 2d of coin, yet those coins had become so much worn that silver sold in the market for 6s 4d of such coins. At that 39 time a re-coinage took place, and coin of full weight was put into circulation along with that of light weight. The consequence was, that parties carried their notes to the Bank and exchanged them for the new and heavy coin, which they melted down for the profit obtained by its difference. The Bank's treasure was exhausted, and it suspended payment, and the notes, being no longer convertible, were capable of depreciation to any extent to which they were issued, and capable of appreciation by a contraction of the quantity. Second, In the case of Ireland in 1 804, Sir Robert Peel again overlooks the all-important fact that the notes of that day were notoriously inconvertible. It was during the bank restriction act, M'hen, for seven years, the Bank of England and the Bank of Ire- land had been equally reUeved from the payment of their notes in gold. The variation of the exchange was not, however, 18^ per cent, as Sir Robert Peel states it, but only about 10 per cent, as there was a difference of 8^ pev cent in the intrinsic value of the Irish and English currency at a par of exchange. But no one ever de- nied that an inconvertible currency is capable of over-issue and de- preciation to any extent that such over-issue takes place. And that, consequently, the currencies of two separate countries, being both inconvertible, will become depreciated in relation to each other, just in the proportion that over-issue may exist in the one or the other at the same moment. In 1804, the Irish inconvertible cur- rency was depreciated by 10 per cent, in relation to Bank of Eng- land paper, which, in the same year, being also inconvertible, was depreciated by 21 13s 2d per cent, the price of gold being then 41 an ounce. Either was then capable of greater or less depreciation by further expansion or by contraction. Sir Robert Peel says that the Bank of Ireland reduced its circulation from 3,000,000^ to 2,410,000/, which, " in conjunction vrith an increase of English cir- culation," restored the two (inconvertible) currencies to a par of exchange ; or, in other words, the English circulation was a little more depreciated, while the Irish circulation was somewhat ap- preciated, until they settled at the same point. Third, In the case of the unfavourable state of exchange be- tween Scotland and England, the only instance which we know was during a period just preceding 1766. At that time, before the establishment of branch banks in the country, a great num- ber of small and inferior tradesmen issued notes for very small sums, not exceeding a few shillings, which were practically paid in the larger notes of the banks when required. But at that time the notes of the Scotch banks had the optional clause inserted in them, to which we referred in our last article, by which the banker could delay their payment for six months after their presentation, by giving legal interest during that time. As we explained in our last article, an instrument of this kind, though ultimately, and at no distant day, convertible, is not free from the risk of depreciation, in the case of an adverse exchange, when coin is required immediately for transmission to other countries ; but, as we also there explained, such depreciation, if the instrument be of undoubted credit, will be confined to that rate at which peo- ple will be willing to buy it as an investment for the sake of 40 the interest, until it becomes due. Such is the case with ex- phequer bills. Sir Robert Peel further alluded to the result in recent years of the system of banking in America. Here again, however, the notes, though nominally convertible, were not so in reality. In the first place they had no metallic standard, but all coins, of all metals, were legal tenders according to certain rates fixed by a tariff, and when bankers had their notes presented for payment, they availed themselves of the coin and the metal that was cheap- est ; and Spanish dollars, their money in account, have been as high as 7 J per cent premium. And, moreover, '' for some time previous to the last suspension of cash payments in America the banks there had fallen into the habit of advancing to the mer- chants in post-notes at four, six, and eight months' date" (Fullar- ton, 179), which circulated as currency, and were exposed to the same evils of the optional-note system of the old Scotch bankers; and which, not being payable on demand, became greatly depre- ciated when the banks which had issued them fell into discredit. Here, then, is the evidence on which Sir Robert Peel founded his bill, not one tittle of which has the slightest relation or rele- vancy to the subject with which he was deahng. We cannot sup- pose Sir Robert Peel ignorant of the evident and essential differ- ence between the present convertible currency of this country, of which he was treating, and of the inconvertible notes by which he illustrated his argument ; nor can we suppose it possible that he was ignorant of the fact that the cases he quoted, at least of the more notorious and startling ones of the Bank of England and the Bank of Ireland, in which he asserted the depreciation to have been 17 per cent and 18 J per cent respectively, were of inconver- tible, and not, convertible paper. And really, therefore, we cannot give the minister credit for much candour in securing a temporary apparent triumph in a speech, by the use of facts which, when stated fully, were not only irrelevant altogether, but which, fairly looked at, would have supported the opposite theory. But the most subtle and truly curious argument is that used by Colonel Torrens. He admits that there is a difference between the liability to depreciation of an inconvertible and convertible paper, which he states thus : — '* The increase in the quantity of inconvertible paper is unlimited ; the increase in the quantity of convertible paper is limited by the power of the holder to exchange it for gold, as soon as from the increase of its quantity its value in relation to gold begins to decline. If the increase in the quan- tity of convertible paper had no effect in lowering its value in relation to gold,,the holder could have no motive for exchanging it for gold." Now, really, this is a special case of magnificent refinement. Every case of an optional exchange of equivalents must be con- sidered an evidence of depreciation ! It is certainly an evidence of some preference, or greater applicability for the purposes im- mediately required. But let us ask this ingenious reasonerv — Two men go to the Bank counter on two successive days ; one has received a remittance of a fifty pound note from the country, which is of no use to Jiim till he has converted it into coin, and he presents it for payment ; the other man has fifty sovereigns, but wishes to make a remittance to the country, and he receives a note in exchange for it. The one has a •'motive" for exchang- ing the note for gold, the other for exchanging gold for the note ; the one had a preference for gold sufficient to take him to the bank, the other had a preference for the. note sufficient to take him there. Now, we ask, which was depreciated-^-the coin or the note ? for in one case there was more coin in circulation, and less paper, than the convenience of the public required for circulation, and there existed, therefore, a " motive" to convert coin into paper ; .in the other case, there was more paper and less coin in circula- tion than the public convenience required, and there existed a *' motive" to convert it into coin. But enough. We will grant Colonel Torrens that bank paper may be depreciated in relation to coin to the extent of supplying a " motive" to step to the bank and exchange it ; but he too must grant that sovereigns also may be depreciated to the extent of supplying a similar motive to ex- change them. But when all the ingenuity of this most ingenious writer on these subjects has been able to give no better evidence of the liability of convertible bank paper to depreciation, what are we to think of the minister who gravely affects to found a great bank measure on such a principle ? The truth is, that dif- ferent portious of the currency are used to perform diiferent kinds of exchanges. Notes, and especially those of a high denomina- tion, are used for making large payments, or transmitting money to a distance ; while coin is used chiefly for small payments on the spot. But coin is also useful, in case of need, to transmit to other countries to make payments where our bank notes do not circulate ; and, as long as these different instruments of currency can be exchanged for each other, at the option of the holder, it appears a perfect contradiction in terms to say that either one or other can remain in excess in proportion to each other, or be de- preciated in reference to each other. The experience of every member of the community amply testifies the fact. And if we wanted any further argument for this truism, we would find it in the following passage of Sir Robert Peel's own subsequent speech iOn the 20th of May, extracted from the Times of the 21st : — "I say there isastandardof value, and that standard of value is a definite quantity of gold, of certain fineness. He who issues paper promises to pay a certain amount of gold. The paper, then, ought to conform to the gold. I admit the operation of this nieasure may for a time affect a limita- tion of prices ; but I say that all increase of prices, arising from an excess of paper, is an illegitimate increase ; and that there is no advantage in any increase of prices that arises from an issue of paper beyond the value of the metal it represents. I bring the matter to this sim- ple imne '.-Suppose you have depreciated your paper, and your paper still re- mains converlilde into gold, do you think that every man who had a right to insist upon receiving five sovereigns for his 51 note, would not immediately insist itptui that right the moment he found that gold was more valuable than paper ? Dun'^t you suppose, tliat if the great dealer in exchanges in London, Mr Roths- child, found that hy presenting 500,0001 of paper at tlie Dank of England he could get 5^,000 sovereigns, and that they ihere more valuable than paper, he would avail hiinsef of the poiver the law gave him, and demand gold ? A nd donH you suppose that every other man, whose transactions were less extensive, but who had a right to receive Hve sovereigns for his hlnote^ would immediately demand it ?" 42 There remains to be considered an opinion held equally by those who assert the liability to depreciation of paper in relation to gold, and some who deny such Hability, that convertibility df paper is no guarantee against its being issued to such an extent as will depreciate the whole ctirrency, bank notes and coin to- gether, in relation to foreign currencies. This is an interesting point, and deserves some consideration. There can be no doubt that, to w hatever extent the use of gold is economised by the introduction of banking, by the use of bills of exchange tor transmitting payments from one part of the coun- try to another, by the use of cheques for making payments in the same place, or by ihe circulation of bank notes as part of thfe curreiicy, — to whatever extent the use of gold is economised by these various means, to that extent a portion of that hitherto used as money will become applicable to other purposes, as much as if an addition to the whole stock of gold had taken place. Suppose, for example, that the whole of our currency w as, at this moment, seventy millions of gold, instead of being about ilnrty-five milli'Ons of gold, and the same of bank paper ; and while it w as entirely gold, the present system was introduced. There can be no question that the introduction of such an amount of bank notes w ould release a shnilar amount of gold from the purposes of currency, would make gold as a commodity more abundant, and would lower its value in relation to commodities. And ■were it possible to prevent the export of any portion of the gold so released from the uses of money, would depreciate our whole currency in relation to that of other countries, supposing them to have been equal before. But as long as gold is freely transmissible from one country to another, it wiH not be difficult to show that such depreciation could only exist lor a very short lime, and only at all to the extent of the small profit which constitutes a motive to send the precious metals from one country to another. If thirty-five millions of sovereigns were released from circulation, by the use of so many bank notes, the value of gold would fall in relation to its value on the continent. The bullion dealer would, as soon as a i'all had taken place which w ould leave any profit, transmit a portion of it to other countries ; and by this means the value would again become perfectly equalised, Vnd the depreciation on our currency would not be measured by tliie proportion which the coin released from circulation bore to the stock of gold in this country alone, but to that of the general stoc4c of gold in the markets of the world. And no possible issue of convertible paper could have a greater efiect, or could suffer any depre- ciation for a longer period than was necessary to equalize the the value of the metals by transmission from one country to ano- ther. For, though bank notes could not be so transmitted, if issued in a larger quantity, yet being convertible into their repre- sentative in coin, as long as it was profitable to transmit the latter, the former would be exchanged for gold for that purpose, and thus the principle of convertibility w ould effectually prevent any depreciation of longer duration than would suffice to transmit the bullion, or to a greater extent than would supply a motive 43 for so doing, and for which the smallest appreciable pi^fit would be sufficient. CONFORMITY OF A MIXED CURRENCY WITH THE VARIATIONS OP^ A METALLIC CURRENCY.— A SERIOUS DISTURBANCE .,* TO. THE CURRENCY THEORY.* i Assumption, Second. — That convertibility is not alone a suffi- cient guarantee that a mixed currency of bank notes and coin shall conform, in its variations, to the same laws that would regu- late a purely metallic currency. The first step in this inquiry is to ascertain how a purely me- tallic currency would vary when the prices of commodities were rising or falling, or in case of an efflux or influx of bullion arising from an adverse or favourable exchange. Among all the writers who have brought the charge against a mixed currency of want of conformity with the action of a metallic currency, we have met with no one who has very clearly attempted to explain their views as to the precise action of a metallic currency ; nor with any in- stance where the reasons for the generally assumed action are even attempted to be given. We are, however, ready to admit most fully that whatever is the action on a purely metallic cur- rency under such circumstances, the same precisely ought to be found to exist on a mixed currency of coin and convertible paper. All writers who support the opinion acted upon by Sir Robert Peel, seem to take it for granted that a metallic currency would diminish with rising prices, and would increase with falhng prices — - would increase in the event of an influx of bullion, and diminish in the event of an efflux of bullion. It would have been very sa- tisfactory had any one of the accomplished writers who have supported this view taken the pains to explain the grounds on which they rest it. Having, however, assumed this much, when they discover, by the periodical returns of bank notes in circula- tion, that they, as part of a mixed currency, have followed a diffe- rent rule, they have at once taken that as an evidence of a vice in the system, without any inquiry or suspicion as to the accuracy of the rule. Had these writers reflected for one moment, they would have seen that even were they correct in their assumed action of a metallic currency, the amount of evidence furnished by the returns of notes alone was not sufficient to prove the precise state of the circulation in the case of a mixed currency, the whole of which they could never ascertain without knowing what portion of coin was circulating at the time. For no one will pretend that, with a mixed currency of notes and coin, it is in any degree es- sential that the relative proportion of each need always be the same. We introduce this argument here, not for the purpose of taking any advantage of a doubt it may create, as to whether the return of bank notes in circulation may be taken as a fair test of the Avhole amount of the currency in the hands of the public, in the case before us ; but in order to show that in all the arguments which have been drawn from these returns, as to the amount of the circulation and its effects at any particular time, there is in the fact a great and may be essential disturbing cause, which has * We iire not awaie of any reason for Uiis appellation to tlice doctrines, but we use it as k well known dislinctioi!. 44 hitherto, as far as we know, entirely escaped the attention of every writer on the subject. The whole amount of the coin em- ployed as circulation in this country is estimated at from 30,000,000^ to 40,000,000/, say 35,000,000/, a sum nearly equal to the whole amount of paper circulation. The returns, therefore, of bank notes at any time represent the state of only one-half of the circulation, while the other half, which does not necessarily' bear any fixed or certain proportion to the notes, may have varied in a directly opposite way; and thus, when there is an indication of a change in the amoimt of the currency by these returns, there may in fact be none whatever, were the whole circulation known ; or there may really have been a considerable difference, when none has appeared on the face of the note returns ; or, again, the actual change which has taken place on the entire circulation at any given time may have been directly the opposite of that which such returns indicate. All the arguments of those who support what has been termed the currency principle, are derived from and have reference to the action of the whole circulation, paper and coin conjointly, whether they speak of the regulation of issues or" the effect on prices ; while, however, all the data on which they proceed to prove their theory, or to sustain charges against any other system, has reference only to one half of the whole circula- tion, which is not necessarily any true indication of the other half, and which, as we shall have hereafter to prove, will often have a directly opposite tendency. But, to return to the consideration of the question before us^ we are quite willing to admit that a mixed currency of coin and convertible notes, does increase with a rise in prices, and does diminish with a fall in prices — does increase in most cases at the early period of a drain of bullion, and does diminish in most cases in the early part of, and may continue for a long period during, an influx of bullion ; but we do not admit, with one of the most emi-- nent writers in favour of the currency theory, that this " is the re* verse of what would take place with a metallic circulation f' on the contrary, we submit that a little investigation will prove that it is precisely the same. We have already, in our second article (page 9), gone so mi- nutely into the proof and reasonings why a purely metallic circula- tion must necessarily follow the variations now pointed out, that we shall not weary our readers by a repetition of them in this place, as they can be easily referred to ; but we may state some general reasons to prove that, whatever is the action in the case of a metallic circulation must of necessity be the same with a mixed circulation of coin and convertible notes. Mr Jones Loyd says, "A metallic circulation could never be drained oiit. Because, as the drain went on, the decreased amount would produce a continually increasing value of the cir- culation ; which, by its effect upon the rate of interest, upon the state of credit, and upon prices, would assuredly stop the drain at some stage of its progress." In this, and in all other allusions to a drain, it seems to be the opinion that, with a metallic cur- rency , it would immediately act upon the circulation ; and hence the reasoning that, with a mixed currency of coin and paper, u 45 drain should also be made immediately to act upon the paper ; but little consideration will show how erroneous this supposition is. The actual currency of a country is so much of its capital, which it retains in its hands, or, in the case of paper, the represen- tative of so much of its capital over which it keeps a constant order and control, bearing no interest, yielding no profit, but per- forming the simple function of exchange, and facilitating the em- ploymexit of the remaining portion of the capital of the country. The smallest quantity with which this function can be performed will only be retained for the purposes of currency, because it yields no interest, and every portion that at any time can be spared will be invested, as capital, in some security bearing interest, or some occupation giving profit. But it must be evident that the quan- tity of coin or notes required to conduct these exchanges must de- pend in great measure upon the quantity of exchanges to be per- formed, and the amount they represent in value. And that, therefore, a higher price, and a greater value of commodities, must require a larger currency. When a drain sets in, which merely means when it becomes profitable to export the commodity gold, such demand will act on the stocks of bullion, and on the coin in the reserves of bankers, but not directly on the coin constituting the actual circulation, at least until all those reserves were ac- tually exhausted, and then a struggle would commence between those who required coin for circulation, and those who required it for export. To this point a drain never yet has proceeded with a convertible currency, nor can we conceive any circumstances under which it is likely to do so. It may, indeed, occur that a portion of the identical coin in cir- culation is exported, or that a portion of paper is taken to the Bank in exchange for gold to be exported ; but, in either case, the moment the circulation becomes deficient, the necessary quan- tity will be supplied from the deposits in the banks. If a drain proceed from any cause, which is accompanied by a high price of commodities at home, as in the case of a deficient harvest, there can be no doubt that, co-existing with such drain, the actual amount of currency required for internal circulation would, for a time at least, be greater, whether purely metallic or paper and coin. But the whole of the arguments which we applied in our second article (page 9) to a metallic currency, are equally appli- cable to one of paper and coin ; for the paper, being convertible at pleasure, would be subject to every action that coin would be. In short, bank notes are merely so many orders to receive coin, and, therefore, any motive that could influence coin, command its course, or direct its variations in quantity or value, must apply equally to those paper instruments which, in reality, are simple orders for gold. Can we, in practice, conceive any circumstance which would arise, when a man holding one hundred sovereigns could be induced to dispose of them differently, than if he held a one hundred pound bank note, which he could, at option, and without delay, exchange for one hundred sovereigns. Whatever motive actuated the disposal of the coin would actuate an exchange of the note into coin, provided that were needful for the use to which he wished to apply it. In short, convertibility cither means strict m identity for every object, or it means nothing. The coin of a mixed currency, with this check alone, would stand as little risk of being drained out, as it would in the case of a metallic circula- tion , for, whatever effect a drain produced on a metallic currency, it would equally produce on the coin, and the notes for which coin could be had at pleasure, constituting a mixed currency. We, therefore, hold it as an incontrovertible fact, that there can be no variation whatever in the quantities, values, or general ac- tion of a currency purely metallic, or of one composed of coin and convertible paper. And that the principle of convertibility alone is a perfect guarantee that, in all cases and in every respect, the one currency would strictly conform with the other. In our next article, we will proceed to examine the remaining three assumptions on which Sir Robert Peel's measure rests ; the four practical illustrations of the principles contended for, as given by Mr Loyd ; the experience of their operation, so far as embo- died in the new bank bill ; and their tendency and consequence in the case of an adverse exchange. -lb III aio') UoitrtJibi utli'io ao< H <; U .iiiiilHi atii Hi ritiMuqrilt tidi iHUlt uq ifjiirf Jt T(;ff |>ninaqrtiof)-jn m H'»id'w »f>8ii f ,l85j nHil inabHyb fl 'io •»' »« ,o ' -qq« avf H ' * Ill h„r 'iVian-i V j?:.K:i!i-i/iio'» .iic.j!.: »; i .fj -/uiip, o7 >..) -atS^M^]: C ^KiT- ':-\'.> ;3->l, it.*i ^v^^nT" ]:■ - K^ Pitlfirtr, >T3 in uil ^; ,„, .-..,.,.,... :-,=;-^ -v,, rmrr>«t^ti«^'^ ^ "- «•■/..■.- -v,, ,.^. r;,ii :",. .,. ..,:r ARTICLE VI, ,, Following up a consideration of the five assumptions which ar^ involved in Sir Robert Peel's measure of last year, we come next to that which infers the power of ■ CONTRACTION AND EXPANSION OF CURRENCY AT PLEASURE. ^Assumption, Third. — That issuers of bank notes have power to increase or decrease the circulation at pleasure. The important and essential principle by which Sir Robert Peel expects his new measure to operate in rectifying: the foreign ex- changes, is by an assumed action on the circulation by means of a regulation which imposes the duty on the Bank to withdraw its notes as bullion flows out, and to increase their quantity as bullion flows in — on the supposition that in the former case the prices of commodities would be lowered, exports encouraged, and imports discouraged ; and in the latter case, that the prices of com- modities would be raised, exports would be discouraged, and im- ports encouraged ; and in both that the derangement in the foreign exchanges would thus be corrected. The inference as to the effect of such an action on prices, were such possible, we shall have to consider by and bye. In the meantime we think it will not be dif- ficult to show that no such power rests with the Bank, as this re- gulation infers ; and that whatever efforts may be made to com- ply with this condition imposed by the Bank bill, will be effectu- ally counteracted by another action, over which the Bank will have no control, and which will materially aggravate the dangers and difficulties of an adverse exchange. Let us, for one moment, recal to the mind of the reader the true nature of currency and the functions of a banker. The currency, originally metallic, was so much of the capital of the country put aside in the form of coin, for the purpose of facilitatmg exchanges. The institution of banks were highly useful to the public, in as far as the facilities they afforded of depositing money, with the cer- tainty of its return when required, rendered a smaller quantity of capital necesssary for that purpose, and released the remainder for productive purposes. But the public, under no circumstances^ will yield uj) to banks a larger portion of their money for deposit, than is consistent with the convenience and necessities of their trade. As 'ar, therefore, as regards the amount of currency when purely metallic, the banker is obviously a mere passive agent, the circumstances which really do control its- amount being such 48 as the banker cannot in any way influence. If transactions in- crease in amount and in number, the means of exchange must al- so increase ; if transactions diminish in amount and in number, the means of exchange will necessarily diminish, and a portion of the capital formerly held as currency, will be restored to produc- tive uses. But in all this, an expansion or a contraction of the currency is an EFFECT and not a cause. In all such changes the banker is a PASSIVE AGENT, actsd upou by the circumstances which determine the amount of currency required, and not an active agent, acting upon the amount of the currency. A mistaken notion as to these relations, we believe to be the fundamental error of Sir Robert Peel's bill. Nor will the question, as we have now stated it, be in any way different, though other modes are adopted of economising the amount of capital in use as currency, by the introduction of cheques or bank notes, as long as these are convertible into coin at pleasure. For it must be quite evident, that, if the transactions of commerce do not require the amount of notes which are in cir- culation, they will be returned upon the issuers, or, if any attempt be made to curtail the currency by forcibly withholding bank notes from circulation, it will only oblige the public to withdraw from their deposits a larger quantity of coin. We will separately examine the practical effects, as they would arise in the case of an adverse and favourable exchange, in order to illustrate our ar- gument. Firsts An Adverse Exchange. — We will suppose that the Bank of England is in the most satisfactory position as regards the amount of bullion and circulation, and that the occurrence of a bad harvest suddenly requires a large import of grain ; that the exchanges are turned against us, and that a strong drain sets in on the precious metals in the hands of the Bank, under which two or three millions quickly disappear, and render it necessary, under the regulations of the new law, for the Bank to withdraw a quantity of its notes from circulation, either by withholding its usual discounts or by the sale of its securities. But in the mean- time nothing has occurred in the trade of the country to render a smaller currency requisite. On the contrary, the higher price of provisions would require a larger amount of currency to circu- late them, and, therefore, if the Bank attempted forcibly to with- draw a portion of its paper from circulation, the only effect would be to create a further drain on its treasure to supply the vacuum thus created in the circulation, by coin. This would be effected by an action on the deposits. It has been observed on all former occasions, when the policy of the Bank dictated an ar- bitrary and forced withdrawal of notes, that their place was immediately occupied by the paper of country banks ; nor does it follow that the banks in question, which have been much blamed for increasing their circulation on such an occasion, had any con- trol over it. It does not follow that they might not at the very moment be diminishing their credits, and acting on the most cautious principles; for, even in that case, their deposits were still exposed to be drawn upon to make up the requi- site amount of currency. Under the new law, they will be 4a effectually prevenled from issuiuii^ more paper; and, therefore, when the Bank curtails the amount of notes in circulation, the depositors in the country must be answered by coin. The securities held by country bankers will be sold, and deposits withdrawn Irom ihc bank in the shape of coin to answer the in- ternal demand. And thus, in spite of any attempt on the part of the Bank to curtail the circulation, all that it can accomplish will be to alter the proportion of notes and coin — to create an internal drain for bullion co-existent v\ith, and in addition to, the external drain. Bankers may contract the portion of the circulation con- sisting- of notes, but they cannot aftecfc the whole amount of notes and coin conjointly. All they can at the most accomplish will be to alter the proportion ; and thus, any action of the i3ank on the currency of the country, by a withdrawal of its notes, which it lias been asserted has hitherto been rendered nugatory by the in- creasing issues of country banks at such times, will still be ren- dered equally so by the place of the withdrawn notes being filled np with coin, and will only tend to aggravate the drain on the Bank. Unfortunately there is no means of ascertaining, in the case of an efflux of bullion from the Bank, what portion of it is actually transmitted abroad, and what portion goes to increase the internal currenc\\ But there are many reasons for believing, that what is often regarded entirely as a foreign drain is in a conside- rable degree an internal drain. In 183,9, under the unprecedented import of grain, the bullion in the bank sank very rapidly. In September 1838, the circulation of Bank of England notes amounted to 19,665,000/, and the bullion in the Bank was 9,615,000/. From that month to May 1839, more than 2,000,000 quarters of foreign wheat were imp(>rted ; and, in the latter month, the circulation of the Bank had been reduced to 18,350,000/, and the bullion to 6,023,000/. Under a sudden import of grain to such an extent, in eight months, and of w hich the greatest part (1,800,000 quarters) took place in the first six months, represent- ing in all a value of at least 7,000,000/, a reduction in the bullion of 3,500,000/ does not appear large, and especially in the face of a contraction of the circulation of the Bank during the same time of 1,300,000/. It appears, however, th.at during that period, as rapidly as the Bank withdrew its notes, those of thecoimtry banks were increased, and filled up the circulation. In September 1838 the country circulation was 11,364,000/, and in June 1839 12,275,000/. For this increase of circulation the country banks were much blamed ; but, whatever opinions may be held regard- ing the course they pursued, we think there can be little doubt that, had they retained their quantity of notes the same'as they were in September, the bullion in the Bank would have suffered a reduction during that period to fill with coin the vacuum created in the requisite amount of currency by the withdrawal of the bank notes. At this period of the drain, the Bank, conceiving that their plans for correcting the exchanges were frustrated by the expansicm of the country circulation, took severe measures to check it, and even to throw it into discredit, by making it a rule of the Bank Parlour to refuse to discount any paper having the indorsement of a joint stock bank of is&aie. This act was ac- .50 cordingly succeeded by a sudden and violent attempt at contrac- tion on the part of the country banks, so that, between June and September, their circulation of notes was reduced from 12,275,000/ to 11,084,000/, makindities took place luitil the coin was pressed out of circulatioi;, because, as the paper was issued, the tendency to a redundant currency was constantly corrected by the withdrawal of silver, wliicli, being a commodity having a general value in the markets of the world, could be ex])ortcd or taken for the general uses of the cambist or the silversmith. But as soon as silver was ex- hausted from the circulation, the issue of assignats still continuing, and the same (juantity of internal exchanges only remaining, the currency became redundant, there being no means of absorption cxce])t in the existing (juantities of commodities. Paper in the first ])lace would accumulate in the hands of individuals, and as the issues of assignats continued for commodities for the use of the government, or of those receiving pay from the government, the simple law of supply and demand would reduce the value of this paper and increase the price of commodities expressed in paper. But it will be observed that this increase of price is only in relerence to paper assignats, and not to the coin which they originally represented ; for the coin or bulHon at this stage rose in the same proportion as other things. During the high prices in this country from 1810 to 1816, as far as they Avere caused by a depreciation of the currency, they were h'lfjh only in relation to paper and not to gold, which rose equrtlly and at the same time as 59 other commodities from this cause. Well, then, seeing that re- dundancy and consequent depreciation of paper can only c(Mr.- mence when no pare of the currency consists of coin which can be exported or taken for manufacturing purposes (the paper having no intrinsic use at home, or exchangeable value abroad), it fol- lows, as a simple corollary of those principles which have been admitted by all writers worthy of mention, that as long as paper is at pleasure convertible into gold, no such redundancy can take place, no such diiference can arise between the value of gold and the value of paper, and no such general increase of prices of com- modities can be experienced. No doubt, if the internal transactions of the country increase, or if the prices of commodities rise, a larger amount of circulating- medium, whether purely metallic, or mixed of paper and coin, will be required to conduct the exchanges ; ^nd thus, though an in- creased circulation could not be called into existence as a cause to produce higher prices, it would follow as the effect or consequence of higher prices. But in that case, " the circulation would not be augmented without a corresponding augmentation of trade." Mr Tooke expresses this view of the case thus : — " That the prices of commodities do not depend upon the quantity of money indicated by the amount of bank notes, nor upon the amount of the whole circulating medium; but that, on the contrary, the amount of the circulating medium is the consequence of prices.'* To which Colonel Torrens replies — *' The logical accuracy of this conclusion may be tested by affirming (lie analogous proposition, that the prices of commodities in Europe, aftir the discovery of the mines of South America, did not depend upon the qiuintity of money indicated by the amount of coin, nor by the amount of the whole of the supply of gold and silver; but that, on the contrary, the mines of South America, and the increased amount of gold and silver obtained there- from, were the consequence of the subsequent rise of prices." That this ingenious and accomplished economist should have stated these as two ^^ analogous propositions,'' is the most striknig evidence with which we have yet met of thevitter confusion which prevails in men's minds of the real nature of currency and capi- tal — of coin as a circidating medium, and of the precious metals as a commodity of commerce ; a confusion which must be so appa- rent to those who have followed oiu- arguments thus tar, that we need not further refer to it. But some have an idea that, in every case of an influx of bullion, a similar effect should be experienced locally that is produced generally by an increase of metals from the mines. The diii'er- ence is very essential. In the case of an ordinary influx of gold into this country, caused by a favourable state of the exchanges, the general quantity of gold is not changed, nor its relation in value to other commodities ; a new distribution of it is all that takes place. To those who received larger quantities of metal from South America in exchange for the commodities which they have shipped to that country, and in consequence of the increased productiveness of the mines, the additional quantity was in the first place so much increased profit, which not only enabled them to expend more money privately, but which also formed a power- ful inducement to increase their purchases of goods and ship- 60 meiits to South America. Such additional demand, for shipment to that country, of woollens and cottons from England, of wine and silks from France, of flour and domestics from America, and the increased demand for articles of consumption, and for securi- ties for investment by those who made the additional profits at first, would soon increase prices generally, in proportion to the new supplies of the metals. But in case of an influx of bullion, owing to a favourable ex- change, the case is widely different. The very fact that merchants have recourse to bullion to bring home their capital from those countries where it is not produced, is usually an evidence that other commodities cannot be imported but at a loss. In con- sequence of the lessened imports the exchanges turn in our favour, and at length bullion is resorted to as the least disadvantageous medium of transferring capital from one place to another. But this neither infers a power for an increased private expenditure, nor an inducement for a repetition of purchases for shipment ; and hence we find that in practice neither circulation nor prices increase under such circumstances, but that both diminish. In Article II (page 9) we fully considered the effect of an influx of bullion in consequence of a favourable exchange on a metallic currency, and the same precisely must take place with a mixed currency of coin and convertible notes. From the beginning of 1841 to 1843 we had an uninterrupted favourable exchange ; the bullion in the Bank rapidly increased all the time from 3,965,000/ to upwards of 11,000,000/; every means were used, which properly could be, to increase the circula- tion ; but it fell, during that time, from 35,660,000/ to 34,049,000/, and, during the whole period, the prices of commodities generally were sinking lower; and 1842, the year in which the largest import of gold took place, was the most depressed in prices, and the lowest in the circulation of any during the last thirty years. Nor were the socks of commodities generally above an average, and the imports were much below an average ; and, up to this time, though bullion has latterly increased to upwards of 16,000,000/, all the recent efforts of the Bank to increase the circulation have proved unavailing, and the prices of all kinds of commodities, even in the absence of any unusual stocks, with some few exceptions, continue unprecedentedly low. The events of the last four years must go far to convince even those who will not exercise the patience to investigate and under- stand the theory, that a great error has existed in regard to the connection between bank circulation and prices of commodities. ARTICLE VIII. SIR ROBERT PEEL'S NEW BANK BILL CONTINUED— REGULATION OF THE EXCHANGES BY PRICES. Assumption, Fifth. — That by such increase or diminution of prices the foreign exchanges will be corrected, and an undue in- flux or efflux of bullion, as the case may be, will b3 arrested. The theory of regulating the foreign exchanges by an action on prices is simple and easily stated. As we have already explained, it is assumed that bankers can contract or expand the circulation at pleasure — that, with every such expansion, the prices of com- modities generally will rise, and, with every such contraction, they will fall ; and, therefore, it is contended that if some general rule can be fixed, by which, when the exchange is favourable and gold flowing into the country, the circulation can be uniformly in- creased, the prices of commodities will rise, an import of the cheaper goods of other countries will be encouraged, the export of our goods discouraged, and the favourable exchange thus cor- rected; and by which, when the exchange is unfavourable, and gold is undergoing a drain, the circulation could be contracted, the prices of commodities lowered, imports from other countries discouraged, and exports of our cheaper goods encouraged, the adverse exchange would be corrected, and the drain of gold ar- rested. The means proposed for accomplishing this object, by the bill of last session, are, that the Bank of England shall issue notes to the extent of 14,000,000/ on securities, and that beyond that sum the amount of notes issued shall fluctuate exactly as the bullion in the bank fluctuates. The principle is, that 14,000,000/ is as- sumed as the lowest amount of paper that, under any circum- stances, would be required, and that above that quantity every increase or decrease of bullion shall be accompanied by a corre- sponding increase or decrease of notes issued ; that as an influx of gold, indicating a favourable exchange, will thus be accompanied by an expansion of the issues of notes, prices will correspondingly rise ; that a rise of prices will encourage commodities to be im- ported, check our exports, correct the exchanges, and thus arrest the influx of gold; that, on the other hand, a drain of gold, indi- cating an unfavourable exchange, will be accompanied by a con- traction of the issues of notes, corresponding with the drain, that the prices of commodities will fall until it shall be more profitable 62 to export goods than gold, while the same cause will check imports, correct the exchanges, and arrest the drain of bullion. And this law is to be implicitly followed and relied upon to regulate th« currency and correct the foreign exchanges. The state of the fo- reign exchanges is to be taken as an index for contraction or ex- pansion of the currency ; which, in its action on the prices of com- modities, is, in its turn, expected to correct the foreign exchansjes when deranged. In considering the preceding four assumptions on which this bill is founded, we have brought under review the fundamental grounds upon which the theory is constructed, and we must leave it to others to decide how^ far we have succeeded in proving that it is based on grave and essential errors, which must result in a serious disappointment in its practical effects. It will be seen, however, that the w hole theory resolves itself at last into the effect which a forced action on the prices of commodities would produce on the exchanges, and on an influx or efflax of bullion. Now, for one moment admitting that the whole theory and proposed machinery for affecting such action on prices w ere as true as we have endeavoured to show them to be gro^uid- less ; admitting for a moment the whole hypothesis on which Sir Robert Peel has built his scheme to be true, let us examine how far such action on prices could be relied upon to effect his object — of correcting the exchanges. In the first place, it is not professed, by the most unhesitating advocates of the principle that the Bank can influence prices at pleasure by a contraction or expansion of the currency, that there are not other very important elements which must also, and at all times, be in operation, connected with the various and intricate circumstances otherwise affjcting supply and demand. This is so obvious that it would appear to require little illustration ; for it is notorious that, at periods of the greatest pressure on the money market, even when discredit and panic prevail, there are some ar- ticles which, from circumstances connected with supply and de- mand at the moment, command very high prices ; and that, on the other hand, when trade is exceedingly prosperous, capital seeking employment extremely abundant and cheap, and credit in a most perfect and undisturbed state, some great and leading ar- ticles have been at the lowest point of price. In fact, no one w ill pretend that, altogether independent of any influence of the cur- rency, some articles are not constantly falling while others are rising in price ; and that there is, therefore,, no uniform action, which at any time or under any circumstances has been observable. It is therefore quite evident that, though all the principles sought to be established under this theory were true, we should have no gua- rantee whatever, that, while an effort was being made to reduce prices by means of a contraction of the currency, some other In- fluences equally, or even more, powerful might not be in action having an opposite tendency. But It may perhaps be said that the circumstances which would otherwise affect prices would do so equally in all countries, and that all you wish to accomplish in relation to the exchanges is to affect them in this country in rela- tion to the surrounding countries. With regard to some articles 63 this no doubt is true. If cotton, foreign sugar, or any other article which has a common and natural value in this country, should rise or fall in price, the rise or fall will be general; but in respect to co- lonial sugar, or any other article of foreign produce, having by our fiscal laws a price in this country altogether independent of its ge- neral price in other countries, a rise or fall may take place in such commodity in this country altogether irrespective of its value in the markets of the world. For example, suppose the Bank were attempting to contract the currency and to lower prices, while there was a strong tendency for colonial sugar and coffee to rise in consequence of a deficient supply, and that perhaps at a time when the similar articles of foreign growth were really falling in the markets of the world, there being no affinity between the price of these articles here and in other coun- tries, they would not only rise in price actually but relatively. The same would be the case with our home produce protected by high duties against the competition of other countries, and with our manufactures which we produce so much more cheaply as to be uninfluenced immediately by similar articles produced elsewhere. But the most difficult case to which to apply the principle, and the most important one, because in nine cases out of every ten it would be found to attend an adverse exchange, would be a scar- city and high price of corn. The balance of exchanges can seldom, if ever, be turned against us to any inconvenient extent, except either from a foreign war or from the necessity of importing grain. In any other case where derangement in the balance of trade oc- curred, the correction would be early and easy. If at any time, from a spirit of speculation, a very unusual quantity of produce generally were imported — of silk, wool, flax, sugar, cofffee, tea, and other articles, the high price which induced the import would have the eff'ect of reducing the consumption ; a reduced consump- tion, and such a greatly increased supply as turned the exchanges against us, would immediately lower prices, and the exchanges would be instantly, and at an early period, corrected by the re-ex- portation of commodities, which had fallen in consequence of over-supply, while further imports would be for a time suspended. Therefore, in all these ordinary articles of mercantile exchanges, the simple effect which supply and demand exert over price must constantly be exercising an influence of correction. But in the case of a bad harvest the difference is very impor- tant. The supply of a sufficient quantity of corn is a necessity before which every other consideration sinks. At whatever cost, at whatever other sacrifice, it must be procured ; nor does a high price for a longtime act on the quantity consumed; indeed, it is a question whether the reduced condition of the masses of the people in the times of scarcity, which prevents them obtaining so much butcher meat, or other more expensive articles of diet, does not really increase the consumption of bread when it is dear. During most cases of an adverse exchange corn is a great article of importation, and one of the chief articles of internal trade for which a circulating medium is used. Now, in 1839, when we re- quired an import of nearly four millions of quarters of wheat to eke out the consumption of the year, what amount of contraction 64 of currency would have been able to reduce the price of this com- modity, or would have arrested the importation ? So far all this goes to prove that, if even all that is professed as to the power of the Bank over the currency and prices were true, there are other antagonist influences over prices which would render the action of the currency theory extremely uncertain, and, to say the least, not to be relied upon as the self-acting and safe principle which its advocates have represented it to be. But there is a consideration in relation to this part of the ques- tion of the highest importance, which appears to have been en- tirely overlooked, and which we think, when fairly stated, will be admitted to involve consequences not only the reverse of those which are expected, but such as will prove highly dangerous and detrimental in the event of an adverse exchange. As this is a point from which an important practical evil is likely to arise in the working of the present law, we are more desirous of stating it in a clear and explicit way ; and, in order to do so, we will assume that the whole theory of contraction and expansion of currency, and the consequent action on prices, contended for by Sir Robert Peel, to be true, and then we will show that even in that case the effect on the exchanges which he contemplates could not and will not be obtained, but that his regulations will rather have a tendency to aggravate and protract the evil. Sir Robert Peel has passed a law — the great and leading princi- ple, as proclaimed to the world, of which is, that in the event of an adverse exchange against this country, and an efl[iux of bullion, our system of currency has within it a self-acting principle of con- traction, whereby the prices of commodities shall be reduced, in order that they may be exported in preference to gold. Now, let us — for an example of the practical effect of this regulation, and ofthis proclamation to the world — letus suppose wehada recurrence of such a harvest as that of 1838 or 1839. On the approach of the harvest the stocks of old wheat are exhausted ; the harvest itself is later and very defective ; prices rapidly rise from 50s to 60s, and from 60s to 70s the quarter, as in 1838 ; a violent speculation com- mences in foreign wheat ; two millions of quarters are imported in a few months; the exchanges are rendered adverse; bul- lion flowing out; and every means is being used to con- tract the circulation of notes according to the prescribed rule. What will be the effect on the purchasers of British manufac- tures for shipment at such a time? Will a regulation, which has for its professed object the cheapening of goods, induce people to increase their orders, or to countermand those they have given ? When every day that the adverse exchange continvies, is expected, by the effect of these currency regulations, to reduce prices still lower, is any merchant goiiig into the market this week to pur- chase what he expects will be cheaper next week? or will he purchase next week what a continuance of the same events, and a still more adverse exchange, lead him to expect to be cheaper the week after? No. The first symptom of an adverse exchange — of a drain of gold — will be taken as a notice for all foreign buyers to suspend their purchases, and to keep them down to the lowest possible point, from the expectation which is thus held out 65 to them that e House of Commons last year on the in- troduction of the bill to regulate the currency of England, Sir Robert Peel appealed to the general dissatisfaction felt in this country with the existing system as an evidence that at least some change was requisite. He said he held in his hand " proof of the evils flowing from the present state of the law," which would make it impossible to resist some change. These are the two most important points of which the Right Honourable Baronet's present case is utterly destitute; dissatisfaction with things as they are, or proofs of any evil arising from a system which has existed through all the civil and foreign wars, commer- cial and political convulsions of nearly two centuries. And it is surely no slight responsibility which a minister takes upon him- self to commence, in however small a degree, an interference with a system which has worked so satisfactorily and so safely, and to attempt to make it approximate with another system of currency which, to say the least of it, is yet only an experiment, and which, with all the care of the state hitherto, has been so imperfect that dissatisfaction has never been separated from it — calling for fresh legislation and interference every few years; and to this day having gained the absolute confidence of no man. Sir Robert Peel took occasion to express his satisfaction w ith the measure of last session, so far as it has gone. Now , if he considered the principle on which it was founded, we think he would have no cause for that satisfaction. The fundamental principle of that bill was, that the circulation should expand and contract with the bullion. During the whole year, nearly every fluctuation of bullion and circulation has marked a reverse action. And though no inconvenience could be expected from any bank bill w hile the exchanges w ere all in our favour, and bullion flowing in from all quarters, yet, if the principle be true at all, it ought to have acted as certainly under a favourable exchange as it is expected to do under an adverse exchange. All that has yet happened should have taught the minister to doubt and pause, instead of being confident and going on. Nor does there exist the same reason for interference with the Scotch banks that there did last year with the country banks in UNIVERSITIJ 68 England, even for the purpose of giving a fair trial to tlie experi- ment now making on the currency through the regulated action of the Bank of England. It was contended by Sir Robert I'eel, as it had been before by the most eminent advocate of this system, that the Bank of England could never exercise perfect controul over the circulation as long as numerous and competing issuers of notes existed in the country. It was asserted that when the policy of the Bank decreed contraction, and took steps to accom- plish it, their efforts were counteracted by increased issues on the part of country banks, and that the notes of the former in such cases being withdrawn, only made room for more of those of the latter, and that thus the expected action on the whole circulation, on prices, and on the exchanges, was defeated. Now, with those who have faith in the doctrine on w hich Sir Robert Peel proceeded, this was a most reasonable objection. But no such objection can be taken to the Scotch circulation of notes, because by law they are prohibited from circulating in England at all, and therefore the action of the Bank of England on the circulation could not in any possible degree be affected by the issue of Scotch notes, any more than by those of the bank of France. Not one note withdrawn by the Bank of England could by any possible scheme be supplied by the Scotch banks. Not one effort made by the Bank to act on the circulation in England could be counteracted by the Scotch banks. If the Scotch banks advanced money to houses in England, it could only be by drafts on their reserves in London, and paid in gold or bank notes. The experiment, therefore, of the New Bank Bill was perfect and complete, without any interference with the Scotch banks. But it is said, why should Scotland have one system of banking and England another? To this there is no reply. There can be no earthly reason why the same system should not be applicable to both. There may be certain care and precaution needed in the assimilation. But then, if you are about to assimilate two systems, what do you do ? Do you assimilate the perfect to the imperfect; or the imperfect to the perfect? That which gives universal satisfaction and affords no proofs of frailty, but has withstood the test of nearly two hundred years, w ith that w hich, after passing through centuries of tinkering and clianging, with- out even approaching to a more satisfactory condition, is now only in the first year of the ninety-ninth experiment ; or would you do the reverse? This is really the question to be determined by those who assert that the systems should be the same in both countries — that Scotland should possess no privilege that Eng- land does not. In contrasting the experience of the two coimtries, it would he impossible in the whole history of commerce to find such striking ex- amples of the beneficial effects of perfect freedom of action on the one hand, unaccompanied by any privileges or monopolies to any one party, but in which all are exposed equally to free and unrestricted competi- tion, and the wholesome influence of public opinion ; and, on the other hand, of the evil effects of piivileges and monoplies granted to fa- voured parties, and of the attempt toiegulate by acts of parliament questions of commerce and currency. In the case of Scotland we have seen for nearly two centiuies the effect of a perfectly free and un- 60 controlled competition. Not one act or law has been pa^cd duringf the whole of tliut time to interfere with or regulate the currency of that country. The eftect of free competition has been to assimilate and mould the system of business to the wants of the age, and to the habits of commerce as they changed. Hence, competition and ftee action have maintained the Scotch banks exactly what the Scotch public and their necessities required ; and hence the universal satis- faction which lias all along marked the system. But does free com- petition produce unsound banks or unsound banking ? On the con- trary, the soundness of the Scotch banks is the necessary offspring of that free competition. The first essential in a bank is safety; the first thing, therefore, which a bank must study in competing for business, and to attract valuable customers, is the perfect confidence of the public ; competition, therefore, directs immediately to the adoption of such safe and perfect principles as shall secure that great e! know of an instance where a maker of watch cases purchased many' thousands of pounds from bankers. But let us take the Bank of Ei»g-, land only as our test. The Bank purchased light gold to the va- lue of— From January to December 31st, 1843 £ll,n7,'223 January to July 1st 1844 2,905,194 14,042,417 This was the net money value of the light coin, and the number of coins , would, therefore, be more than are represented by that sum. The '' loss sustained by the {uiblic was, in many cases, as much as one shilUng " each sovereign; in most cases, at least, sixpence, but at the smallest! rate, fourpence ; but, let us suppose that ow\y fonrpence on eaeh , was lost by the j)ublic, and taking the number only at 14,(>00,000/,: leaving out of the question altogetlier those used up for watch cases and other purposes, at this very limited calculation, the loss to the community of England, on its gold circulation, amounted to no less than 233,333/ — and, computing the real loss during the period fiom 18lfi to 1843, from light coin only, we cannot make it less than 300,000/. What do we find has been the case in Scotland, which has had the same convulsions in commerce and in politics, and the more serious ones of civil wars to contend against. It appears in pailia- mentary evidence in 1826, that from the first establishment of banks in Scotland until that time, a period of nearly one hundred and fifty years, the whole loss which the public had sustained by Scotch banks and by the free and imlimited competition in the issue of notes, was 32,000/, or little more than one-tenth oi the loss in England by the wear of coin alone during the last 27 years. Contend as we may about theories, here are the staggering prac- tical effects of the diflei-enee of system and management. And can 71 it, then, be a matter of swi-prise if a whole nation should recoil from the idea of disturbing a system so perfect and so safe in practice ; so convenient, and in every way so adapted to its wants and habits ; and to adopt in its place, one which is but in its first year of ex- I»eriment, and which is the remnant of others which have proved 6o disastrous. But there is an idea that Scotland enjoys her privileges at the ex- pense of England — that England has to keep a stock of gold to sus- tain the wants of Scotland. Nothing can possibly show tlie utter ig- norance which prevails on these questions so much as the cnide no- tions thus expressed. Shall we enable the Bank of England more easily to maintain a stock of bullion, because we also compel the Banks in Scotland to do the same ? There is still only the same quantity of gold ; and we seek to diffuse it into more channels and reservoirs. Jiut then. Sir Robert Peel says, that at periods of pressure the Scotch banks are sustained by the resources of the Bank of England. Now the reverse is the fact. No period of pressure of late years has been accomj)anied by any discredit of the Scotch banics, or any necessity for thein to draw gold into Scotland, to meet the d( mauds of deposi- tors, or for the payment of their notes. And does the minister really fancy, by the proposition which he has made, that he is to assist the; Uink of England in a time ol' pressure ? A glance at this subject will show at once the huge aggravation of the evil of all periods of jnessure and panic, which, if his proposal is canied, will be expe- rienced, not only by the banks and community in Scotland, but chiefly and most seriously by the Bank of Englmd itself. Sir Robeit Peel says, take the average of the last thirteen months — fix your circulation at that ; if you exceed it, increase your bullion to the same extent. Now one great fallacy of tlie averages of circula- tion is, that the aventgo of a week, taken at the close of business, is no criterion of the actual quantity of notes which must, during the week, bo issued at particular times to represent exchanges, the greatest part of which return to the issuers before the amount in circulation is taken at the end of the week ; but when notes are issued, it is always uncertain what i)recise portion will return within a given time. A banker dealing with his notes, therefore, keeps a reserve by him for such momentary purposes, and to sustain a ciiculatioii of 100,000/, as shown by the returns, lie will have 150,000/ or 200,000/ of notes, more or less, and occasionally in use. But under such restrictions as proposed, he will not be able to venture the issue of such notes, being uncertain as to their re- tain, without holding bullion to avoid the penalty in the event they do not return. The system of averages is, therefore, ex- tremely fallacious ; and we cannot understand how it is to improve the condition of the Bank of England, if for the limited stock of gold in the world it is to have the fresh competition of all the Scotch and Irish banks, in order that they may hold uniformly larger quantities than they do. but this is the least of the evil. Let us suppose a period of pressure. The bullion of the Bank is reduced to seven or eight millions (no very small amount compared with some periods), so that the circulation of notes is nearly equal to the securities of 14,000,000/ and the bullion together. What will take place in Scotland and Ireland under the new bill then ? "^I'he Scotch banks have to protect 3,000,000/ of circulation and .'505000,000/ of deposits. Pres^^uie is felt and is further exi)ected. The Scotch banks feel that it is necessary to increase their leservcs; that their de[)osits may be required by their customers to assist their friends, to pay up railway calls, or any other purpose for which money becomes 72 so much required at a time of pressure. They see they cannot move without increasing their amount of coin; they are the largest holders of securities and stock in London of any class of bankers; they order them to be sold in the market, draw bullion from the Bank, and increase the drain already rapidly going forward. It does appear the most extraordinary idea for a Miuistor to enter- tain, that he can relieve the Bank at a period of pressure, by bring- ing a new, and powerful, and irresistible class of competitors into the market, in the sale of securities and in the struggle for bullion. If his object were to increase the intensity of such a crisis, he could not adopt a more certain plan. But experience has shown that it is utterly impossible to antici- pate all the evils of artificial interference in such cases. Experi- ence has taught us the benefit of the free system in Scotland, the monstrous evils of the other in England. One interference, how- ever small, will be but the beginning, the commencement, nay, the necessity for others, and the Scotch banks must either wholly and enlii-ely resist the princi])le of interference altogether, and rej)n- diate the bribe of a monopoly as unworthy of them, or sulunit them- selves to a course of constant exj)erimentsand changes, accoiding to the fashions and theories of the day. ARTICLE X. Having closely examined the various received and assumed prin- ciples on which the Bank measure of last year was founded, we are now induced, in consequence of the remarks made by Sir R. Peel, in bringing forward the plan for regulating the Scotch and Irish Banks, to make some observations on the experience, short as it has been, which we have already had, of the operation of the bill of last year. On that occasion the Minister said : — " But T must say, as far as we may judge from experience, we have a perfect right to be satisfied with the measure we adopted (clieers) ; admit- ting the experience to be short, as far as it lias gone, I must contend it has been decidedly in favour of the policy and justice of the measure sanctioned by the house in the course of last year/' On all hands it is admitted that the experience of that measnre has been much too short to form any conclusive criterion of its en- tire effect, at all times, and especially at the more important period of pressure and crisis occasioned or accompanied by an adverse exchange. Yet so far as the general principles are concerned on which the bill is founded, as well as some of the objects which the Minister expected as the result of his imposed restrictions, we may draw some useful conclusions from that experience, short as it has been. In doing so, however, we cannot agree with Sir R. Peel that there is any ground for satisfaction with that measure, inasmuch as the experience of it, as far as it could be evinced under the peculiar circumstances of the last year, has in every re- spect been the contrary to that which the principles on which it was founded would have led us to expect. The fundamental principle on which the system adopted by Sir Robert Peel mainly relies, and which his measure of last year chiefly aims at, is, that the circulation shall follow all the fluc- tuations of the bullion in the Bank; that the former shall increase and decrease as the latter increases or decreases, by an involuntary self-action. Now, we are ready to admit that the object Avhich the bill liad practically in view, as of most importance, was the decrease of the circulation with the de- crease of the bullion in order to correct an adverse ex- change, when such existed, and thus to arrest a drain of gold. But though this half of the action was that chiefly kept in view, yet the principle on which Parliament relied for the accomplish- ment of that object should prove itself equally efllicacious in an opposite way under contrary circumstances, if it be true at all. 74 If it be true that an adverse exchange can be corrected by this bill, by means of a self-acting contraction, it should be equally true that a favourable exchange should be corrected by means of a self-act- ing expansion. And the bill itself equally contemplates the one and the other. During the last year the exchanges have con- tinued steadily and inconveniently in our favour, though some slight variations have taken place in the amount of bullion held by the bank ; but with little, if any exception, the fluctuations in the circulation have been just the opposite of those of the bullion, though the two ought to have corresponded. By a return of circulation of the Bank, and the bulhon held in each w^eek since the new law came into operation, presented to Parliament, we find that on the 7th of September the circulation was 21,206,624/, and the bulHon 15,209,060/. On the 2d of No- vember the bullion had sunk to 14,038,757/, but the circulation had increased to 21,871,806/. From that date until the 22d of March the bullion gradually increased in quantity, until it reached 16,000,424/; but the circulation, in place of exhibiting a corres- ponding increase, actually fell to 20,532,542/. Thus, while the circulation should have increased nearly two millions, it decreased upwards of one million ; and this took place during a time when the Bank was using the most active measures to increase its busi- ness in all possible ways. The returns from week to week exhi- bit in their variations the same difference from the principle im- plied by Sir Robert Peel's bill. In the next place, as for the results of the restrictions placed on the circulation, as anticipated by Sir Robert Peel in his speech of the 6th of May last year, we cannot but consider that events have seriously falsified those anticipations. In concluding that speech he said : — " I rejoice, on public grounds, in the hope that the wisdom of Parliament will at length devise measures which shall inspire just confidence in the medium of exchange, shall put a check on improvident speculation, and shall ensure, as far as legis- lation can ensure, the just reward of industry, and the legitimate profit of commercial enterprise, conducted with integrity and con- trolled by provident calculation." Now, we think it will not be denied by many, that during the last nine months a more reckless and hazardous speculation has existed, whether we look at its enormous extent, or the serious and ruinous consequences which will some day, within the next very few years, ensue from it, than any other which has been known in modern times. We have known nothing equal to it in extent. We have known no instance in late years, when all the parties concerned speculated more daringly, or more beyond their bona fide intentions, or capability to invest the requisite capital, or from which so wide-spread a re- action and ruin must ensue. To repress these excessive specula- tions, the Bank bill of last year has been wholly inoperative. So far, therefore, as we have yet had an opportunity of judging, whe- ther of its principles or its results, we are utterly at a loss to un- derstand the self-satisfaction expressed by the Minister. Nor, if we would reason upon circumstances of a different kind, under which the bill is expected to operate, can we expect a more favourable result. In the pamphlet published by Mr Loyd last 16 autumn, in support of the Bank bill, that accomplished writer ad- duces four distinct periods, of late years, as illustrations of the ap- plicability of the principles contended for. On carefully referring to the periods in question, and the facts connected with them, we cannot discover any reason whatever to believe that any of the anticipated advantages of the new bill would have been expe- rienced had it been in operation at the several periods referred to. Mr Loyd refers to four distinct periods in our late history as illustrations of the practical benefit which can be relied upon as arising from the adoption of this principle — in three of which cases a large and continuous drain of gold resulted in severe commercial crisis; and in one of which such drain did not so result. Now, in looking to the New Bank bill the great object is to consider, in what way it would have operated had the currency been under its regulation at those periods ; and we think, on attentive investiga- tion, it will appear that nothing which did then occur would have been materially different under the operation of the New bill. The first period to which Mr Loyd refers is from September 1833 to March 1837, in which latter year " commercial and monetary pressure occurred." Mr Loyd furnishes the following table of the circulation and bullion during that period: — 1833. September 1835. September December 1836. March 7,701,000 17,739,000 29,186,000 11,447,000 June 7,362,'i00 17,899,(100 30,101,000 12,202,000 September .'5,719,001) 18,147,000 29,880,000 11,733,000 December 4,545,000 18,361,000 29,372,000 12,011,000 1837. March 4,048,000 18,178,000 29,209, 00 11,031,000 Referring to the imiform decrease of bullion during the above period, the comparative trivial diminution of the circulation of the bank, and the smaller diminution of the aggregate amount of the bank and country issues together, and of the great irregularity of the country issues, and their want of uniformity with the fluctua- tions of those of the bank, Mr Loyd observes ; — ** Such are the facts. " What are the inferences to be deduced from them ? " 1. That there exists no efficient connection between the fluctuations of the country issues and those of the bank. ** 2. That by the conflicting action of those two sources of issue, the aggregate circulation is maintained at a comparatively uniform amount., during a period when the long- continued and heavy drain of the bullion required a corresponding contraction of circulation. " 3. That consequently the aggregate circulation cannot be considered as subject to any management or regulation which has reference to the bullion. " 4. That in consequence of the absence of early and steady contraction of the circulation, the decrease of the bullion remains for a long time unchecked, and therefore goes to a greater extent than it otherwise ■would do " 5. Had the aggregate circulation been steadily contracted in correspon- dence with the bullion, from the maximum period of both (in September 1833), is there not the fairest and most reasonable ground to conclude, that Buch timely and steady contraction would have been gradual and easy in Bullion. Bank Circulation. Aggregate Circulation. Country Issues. 11,078,000 ... .... 19,780,000 ... ... 29,932,000 ... ... 10,152,000 0,261,000 ... 6,G26,U00 ... .... 18,240,000 ... ... 17,321,060 ... ... 28,660,000 ..., ... 28,456,000 ... ... 10,420,000 ... 11,134,000 76 its effects — thaf, commencing; before any feelinj? of alarm had arisen, it would have •worked more easily and not less effectually ; and that by putting an earlier restraint U|^>on tlie etilux of bullion, it would have kept that action within smaller limits and thus probably have obviated a large part of the pressure of \?>r>7 ? Compare such supposed contraction of the aggregate circulation witli what really took place. Bank Aggregate Country Bullion. Circulation. Circulation. Issues. 1833 L. L. L. L. September 1!,078,000 19,780,000 29,932,000 10,152,000 1834 March 9,829,000 18.700.000 27,891.000 10,191,000 June 8,645,000 18,922.000 29,440,000 10,518,000 SSeptRmher 7,693,000 19,126,000 29,280,000 10,154,000 December 6,750,000 18,304,000 28,963,000 10,659,000 1835 March 6,5.36,000 18,311,000 28,731,000 10,420,000 June 6,150,000 18,460,000 29,399,000 10,939,000 *' Here is a period of two years, during which the bullion suffers a conti- nuous and heavy drain, being diminished 4,928,000/. The bank circulation is diminished 1,320,000/, being a decrease in proportion to that of the bul- lion of little more than twenty-five per cent ; and that decrease occurring very irregularly ; not in the steady and uninterrupted manner in which the bullion decreases. The aggregate circulation is diminished only 533,000/ — or about eleven per cent upon the decrease of the bullion ; and this decrease again occurred very irregularly. " The country issues increased 787,000/, being an increase in the propor- tion of about one-sixth to the decrease of the bullion. " This course of things terminated in the pressure and difficulties of 1837. What would have been the effect of a different course ? Had the bank and country issues been both contracted, in such manner that the aggregate cir- culation should in its fluctuations have followed the bullion, the certain and undeniable effects would have been, a contraction of circulation commencing early, proceeding gently and equably, acting during a period when there was no alarm or apprehension respecting the state of the bullion or of trade, and producing a gradual, moderate, but continuous restraint upon confi- dence, rate of interest, and speculation, before they reached the extent to which they were permitted to go." Now, admitting this reasoning on these unquestionable facts tobe true, we are led to inquire, what provisions are there in the new .bill to have altered the results as stated ? Mr Loyd is of opinion that had the bank and country issues been both contracted in such a manner that the aggregate circulation should, in its fluctuations, have foIloAved the bulhon from September 1833, the crisis of 1837 might have been averted ; but this would not have taken place had the new law been the regulator of the currency. On the contrary, there is nothing in the new law which, as far as regards the circula- tion of the bank, would have made the slightest difference in the whole period, except a trivial reduction of circulation of 130,000/ at the very lowest point in March 1837, or even as regards the aggre- gate circulation of the whole country until after June 1836. The new law provides for a circulation of bank notes, to the extent of 14,000,000/ in addition to the amount of bullion held at any par- ticular period, and an uniform amount of country issues, which we may state at 9,000,000/. Now, during the whole period, from Sep- tember 1833 to June 1886, the lowest point which the bullion ever reached, as shown by the above tables, was in June 1835, when it amounted to 6,150,000/; by the new law the circulation of the bank might then have been 20,150,000/, whereas it was only 18,460,000/; and in June 1836, when the bank became alarmed, 77 and began to use severe measures to contract, the amount of bul- lion was 7,362,000/, when by the new law the circulation of the bank might have been 21,362,000/, and the aggregate circu- lation of the country 30,362,000/, whereas, in truth, the former was then only 17,899,000/, and the latter 30,101,000/. Therefore, down to June 1836, no disproportion occurred between the amount of bullion held by the bank and the amount of circulation of paper. Mr Loyd, at page forty, states — we think very accurately — the causes from which resulted the crisis of 1837 : — " The revulsion of 1837 was the eonsequence of a long preceding period of prosperity, which had generated excessive credit, over-trading, and over- banking. " These effects were exhibited more particularly in excessive credits given to the United States, in the negotiation in this market of American, Dutch, and other foreign securities to a great amount, in the rapid and excessive expansion of joint-stock banking in this country, and excessive credits given by them." We think we have shown that no provision of the new law would have altered the circumstances connected with the circula- tion down to June 1836, at which period no one will deny that all the causes above enumerated, to which the crisis of 1837 is attri- buted, had occurred to the full extent which they reached, and that no policy on the part of the bank, after that dale, could have prevented their effects on our monetorial and commercial interests. The long period of prosperity had been enjoyed — excessive cre- dits, over-trading, and over-banking had taken place ; the Ame- rican, Dutch, and other foreign securities had been negotiated in our markets ; the unusual amount of exports and credits to the United States had been given ; and the enormous credits from the great leading American houses on China, Brazil, and other distant countries, had been issued in favour of houses in New York and Boston, in anticipation of the future shipments of American produce, the rapid expansion of the system of joint- stock banks, and the undue competition among them for business, which led to unwise advances on illegitimate securities, had all taken place : — unwise investments had been made at home, which could not then he recalled ; extensive and imprudent engagements to other countries had been contracted in the form of mercantile cre- dits, which must he provided for. To meet this difficulty, in which the whole commercial community was less or more involved, the available means of the country were drawn upon to such an extent that no policy of the bank could then have averted it. The deposits of the bank, including the country branches, amounted in January 1836 to 20,429,000/, and were reduced on the 4th July 1837 to 10,257,000/; and there can be no doubt that, had the circulation been more suddenly contracted from June 1836, from which time only the New Bill would have had any effect, and "when it became utterly impossible to alter or change the causes of the drain of bullion, the first effect would have been to have caused a more sudden withdrawal of deposits from the Bank of England, as vidl as all other banks, to fill up the vacuum created in the inland circulation by the contraction of the paper ; for people would not submit to a sacrifice in the price of their goods, until they had 78 exhausted the deposits over which they had control. In this case, it is more than likely the bullion in the bank would have sunk even more rapidly than it did from June 1836 to March 1837, by the increased demand for internal circulation, to replace the notes withdrawn, and which would have been obtained by an action on the deposits. And it is evident that after the circulation of the bank became reduced to the minimum amount to which its bullion entitled it by the new law, any decrease of deposits must have been attended again with a corresponding contraction of notes, and a consequent demand for gold to replace their circulation, and thus both deposits and bullion would in all likelihood have be- come reduced even more rapidly, and to a greater extent than they were, before the effect of forced low prices of commodities induced a turn in the foreign exchanges. It is also here worthy of remark, that although the three months from March to June 1837 were attended, as Mr Loyd observes, with ^^ a further decrease of bullion, and a large increase of bank cir- culation,'" which is quite the reverse course which they would have taken under the present law; yet with it the crisis suddenly ended in that month, the clouds cleared off, confidence was re- stored, and on the 29th of August the bullion had increased to 6,548,000/, and a considerable advance had taken place in the price of commodities. The next period to which Mr Loyd refers, is from March 1838 to September 1839; and he furnishes the following table of the progress of the circulation during that time : — Bank Aggregate Country Bullion. Circulation. Circulation. Issues. 1838 t. I.. t. 1. March 10,015,000 18,600,000 29,526,000 10,926,000 June 9,772,000 19,047,000 30,792,000 11,745,0>'0 September 9,615,000 19,665,000 31,029,000 11,364,000 December 9,362,000 18,469,000 30,694,000 12,225,000 1839 March 8,106,000 18,298,000 30,557,000 12,259,000 Jmie 4,344,000 18,101,000 30,376,000 12,275,000 September 2,816,000 17,960,000 29,044,000 11,084,000 "The bullion was at its maximum in March 1838, and continued to rfe- crease steadily from that time. " The bank circulation and aggregate circulation continued to increase largely till September. "The country issues continued to increase largely till June 1839 ; and it is remarkable that they were at their minimum point when the bullion was at its maximum (March 1838), and they advanced to their maximum point Whilst the bullion was undergoing a decrease of sixty per cent (June 1839 )* The causes of this drain Mr Loyd states to have been — " 1. Large importation of foreign corn. ** 2. Large importation of American securities. " 3. Large mercantile credits given to America. " 4. Peculiar state of credit in France and Belgium. " 5. Peculiar circumstances connected with the cotton speculation. *' ' The importation of the raw cotton had been principally paid for by advances which the consignees on this side obtained upon it.' — Tooke^ p. 74, " Here, again, had the management of the circulation followed the indi- cations of the bullion, the check to the importation of foreign securities, to the excessive mercantile credits, and to the advances made to the con- signees of cotton, would have been applied early in 1838." Now, if we examine this period by the same rule as we have that of 1833 to 1837, we will also find that there is nothing in 79 the new law which could have accomplished what Mr Loyd deems needful to have prevented or averted this crisis ; there is no provision which could possibly have made the circulation fol- low the indications of bullion in the early part of 1838, nor in- deed till long after March in 1839 — for in that month the bullion held by the bank was 8,106,000/, when the circulation of the bank would be, under the new law, 22,106,000/, and the aggregate cir- culation 31,106,000/; whereas the former was only 18,208,000/, and the latter 30,557,000/ — both, therefore, were below what the new law would have given, even at that advanced period of the crisis. Now, at that time (March 1839) all the reasons above enumerated for the crisis had already occurred. We had then already imported, in less than six months, upwards of two millions of quarters of wheat, and we had purchased above one million of quarters more, which arrived during the next four months ; and, as circumstances afterwards proved, we were obliged to import ano- ther million of quarters, making in all four millions and a half of quarters of wheat from October 1838 to October 1839, inclusive. The importation of American securities, and the extension of American credits, had already taken place throughout 1838. The monetorial commercial crisis in Paris and Belgium, and the stop- page of the Bank de Beige, had already occurred in November, December, and January, and these causes, therefore, could not have been acted upon, or prevented by any peculiar or different action of the Bank of England under the new law, as its effects on the circulation would not have been experienced till after March 1839, at which time all these moving causes and necessities of the drain of bullion had occurred. There is every reason to believe that, with these necessities on the country, had the circulation been more rapidly contracted than it was from March forward, the same consequences would have occurred that we have already described as being more than probable, if not quite certain, to have occurred in 1837. As it was, the deoosits of the Bank and its branches, which amounted in January 1838, to 11,230,000/, fell in July 1839, to 7,489,000/. Mr Loyd next refers to the crisis of 1825, and gives the follow- ing table : — Bullion. Bank Circulation. 1824. L. L. February 13,H10,000 19,736,000 August 11,787,000 20,132,000 1825. February 8,779,000 20,753,000 August 3,6;i4,000 19,398,000 " Here, again, is a crisis preceded by a long continued decrease of bullion and a large increase of paper circulation. The panic of 1825 was tlie result of this course ; but had the circulation been contracted with the bullion from the beginning of 1824, can any person entertain a doubt that the re- volution of credit in the latter part of 1825 would have been infinitely less sudden and less severely felt ?'''' But, again, there is nothing in the new law to have induced any contraction of the circulation from the beginning of 1824, nor in- deed until some considerable period after February 1825 ; for in that month the bullion amounted to 8,779,000/, which would have entitled the bank to a circulation of 22,799,000/, and the whole country to 31,779,000/, whereas the former was then only 80 20,753,000/, and the latter, taking Lord Liverpool's estimate of 8,000,000/ as the country circulation, in the absence ofanypub- lis'ied returns, was only 28,753,000/. So that it is quite clear that no action which the new law could have exerted on the circulation, had it then been in existence, could have in any way influenced the wild speculations which occurred chiefly in the last three months of 1824 and in the first three months of 1825. All the mischief had been done which afterwards induced the heavy drain between February and August of that year ; the obligations had been undertaken, and the imperative necessities for their provision had arisen long before the new bill could have acted as any check. The deposits in the bank sunk from 10,168,000/, in February 1825, to 6,410,000/ in the following August. As an example of a diiferent kind, Mr Loyd refers to the drain of bullion from August 1830 to February 1832, without being pro- ductive of any crisis, and gives the following tables : — Bullion. Bank Circulation. 1830 L. L. Au^ast 11,150,000 21,464,000 1831 February 8,217,000 19,600,000 August 6,439,000 18,5:^3,000 1832 February 5,293,0'tO 18,051,000 " On this occasion the drain upon the bullion does not, as in all the other cases, terminate in a crisis." , During this period the bullion was reduced nearly 6,000,000/> while the circulation of the bank fell little more than 3,000,000/. There is no means of knowing how the country circulation then stood ; but, even admitting that it may be true, as suggested by Mr Loyd, that if we knew the fluctuations of the country circula- tion during that period, it is probable that the reduction of the aggregatecirculationcorrespondednearly with that of the bullion ; yet it must be quite evident that there is nothing whatever in the new law to have accomplished this result ; for, by its provisions, in August 1831, when the bullion stood at 6,439,000/, the issuing department would have then had out 20,439,000/, instead of 18,533,000/; and even at the lowest point of bullion in Feb. 1832, when it was 5,293,000/, the bank issues under the new bill would have been 19,293,000/, whereas the circulation was only 18,051,000/; the New Bank bill, therefore, could not have pro- duced the effect had it then been in operation, though it would not have prevented it. The truth is, that during this period and for some time previously, prices of commodities (except wheat) had been very low, and there had been a very long absence of any speculation whatever. All this, however, sufQces to show that, even admitting Mr Loyd's principles to be true, the provisions of the new bank bill are by no means calculated to carry those principles into effect. For example, further — the bank at present has about 16,000,000/, which will make its issues 30,000,000/ ; which, with the country issues, will make an aggregate amount of 39,000,000/; of which, however, not more than 30,000,000/ at the outside can be used. It is quite clear, therefore, that all kinds of speculations may be fostered, and an enormous amount of injudicious credits may exist, and a drain of bullion to the extent of 9,000,000/ may take 81 place, before, under the new bill, any action whatever can be ex- perienced on the present amount of the circulation ; or the circu- lation might even increase to an aggregate amount of 34,000,000/, while a drain of bullion might be going on to the extent of 5,000,000/, without any check whatever being experienced from the new law. So it will be when the next seriously adverse exchange and commercial crisis occurs. At present it is impossible to foresee what may be the immediate predisposing cause of such derange- ment; but, suppose it to be the uncontrollable necessity of import- ing large quantities of grain, lo make up the deficiency of a bad harvest, is it not sufficiently evident that all the other obligations for the future employment of capital, into which men are now so eagerly entering without limit, will then constitute liabilities and demands on the capital of the country, which no regulation of the currency under the new law, or any other law, can control? How- ever adverse the exchange may be, engagements which are now being entered into to make railways abroad, when once begun and partially performed, must be completed, if by any means it is pos- sible. However severe the crisis may be, and however scarce money may be, no man will voluntarily forfeit his interest in the half-completed railways at home by neglecting to pay up the calls, if by any means it be within his power to do so. The obli- gations which, in such an event, will consitute the uncontrollable necessities of the moment are being entered into now (as was the case in all former instances), w hile yet capital is abundant, and there is nothing to excite the slightest alarm. Nor will there be anything in the action of the new bill in any way to ameliorate the symptoms hitherto experienced under simi- lar circumstances ; but, as we shall be able to show, it will have the tendency materially to aggravate them, and more especially when we extend to Scotland and Ireland the proposed provisions of Sir Robert Peel's new bill. ARTICLE XI. There are certain questions of the highest importance to a clear understanding of the changes which are constantly taking phice in what is popularly termed the '•^ money marltet^'' of a character too difficult and abstruse to command, under ordinary circumstances, a sufficient attention from the active man of business, in order that they should be fully understood. The only time when we can hope usefully and entirely to arrest public attention to such ques- tions, is when the current events of the day clothe them with more than usual interest, and when every man is disposed to give his whole attention and intellect to their consideration, in order the more safely to govern his own policy at a time of existing or expected difficulties. Such an opportunity is the present moment, for the arrival of which, we candidly admit, we have been for some time waiting. It is impossible to conceive that at the present moment, when just a sufficient amount ofthe predicted disturbances of the capital and finances of the country is disclosed to public ob servation, tendmg to create a general belief that much mv)re serious developments of the same elements remain behind — that those who are deeply interested either in the commerce or the finances of the country will be unwilling to devote the whole of their powers of mind to a clear comprehension of passing events, and of the causes by which they are governed. Many have been deterred from a sufficient attention to these subjects from an exaggerated notion of their abstruseness and difficulty. We shall, therefore, in the remarks which we are about to make upon the great ele- mentary causes which regulate the *' money market,'' and their in- fluence upon the present passing events, use terms and language as popular and simple as possible. The three first great primary points, without a clear under- standing of which to start with, all attempts usefully to discuss the subjects of Banking, Currency, or the ^^ Money Market," must be a mere waste ot time, and a further bewilderment of bewildered no- tions, but with a clear understanding of which, the whole science of capital and money becomes comparatively simple to the com- monest understanding, are : — Firstly, What really constitutes capital ? Secondly, What constitutes the difference between fixed and floating capital ? Thirdly, What constitutes the difference between capital and currency or circulation ? . 83 Without clearly understanding these three points, all attempts to draw correct deductions from passing events with respect to the " Money Market " will be entirely vain ; with a familiar and clear understanding of them, it will be a comparatively easy and simple task. We propose, therefore, shortly to consider thes3 three points in as popular a way as possible, before we pass to a consideration of the present state of the " Money Market," and the claims which exist upon the capital of the country. With respect to the first point of consideration — WHAT REALLY CONSTITUTES CAPITAL ? there is a much more general and accurate notion than of the other two points. This question has been so often treated in a clear and distinct manner, that we do not propose to dwell much upon it. It is generally and clearly understood, that capi- tal, in the broad sense, means labour accumulated in such a form as to facilitate future production. The savage who hunts and fishes just enough, with the simple means which Nature provides, in order to supply his wants, neither possesses nor accumulates capital. But the moment a savage spends any portion of his time in constructing an implement which facilitates his hunting or his fishing, so as to enable him to procure more food with the same laboar, that moment he is possessed of capital, constituted of such implement, the value of which is determined by the ex- tent of facility which it affords in acquiring food. This capital, consisting, for example, of a net, has two values : one which would be measured by the time and the skill expended in con- structing it, which would determine the price which another per- son would be willing to pay for it by purchase, and another ■which would be determined by the profit or fac.lity which its use would affbrd, and which would determine the price which a person would be willing to pay for the loan of it. The first value is the selling price, the second is rent or interest. If, in such an early stage of a community, only one person accumulated capi- tal, that is, procured as much food as he himself consumed, and made nets besides, it is clear that he could not sell his nets, because no one else possessed more food than he actually con- sumed ; but it would be quite possible at once for any one to rent such nets, and to pay a portion of the extra food which he was able to obtain by its use, for the loan of it. As soon, however, as the use of this net enabled the bor- rower of it to obtain as much food as was sufficient to support him, to pay the stipulated quantity for the use of the net, and to leave him sufficient leisure to make a net for him- self, or to buy the net, he would become the owner of so much capital, in place of the renter of it. Thus, the capital of every individual would increase just in proportion as he produced more than he actually consumed, and the value of this accumulated labour would be proportioned to the facilities which it afforded for future production. If a man expended the labour of a year in the attempt to make a machine, which at length gave no new facility in production, he would add nothing to his capital ; but 84 i^ his labour was expended in improving the soil or making an implement, which would in future enable him, with the same quantity of labour, to produce more food or clothing, he would have added so much to his capital — which improved land or im- plements he might either sell for a price, or lend at an annual rent. What is true with respecc to an individual, is equally so with a whole community. In proportion as a country produces more than it consumes, and in proportion as the extra-labour or income from rents or interest, which must be all paid out of labour, are invested in profitable means of future production, does its capital increase. From the most simple to the most complicated state of society, all capital, therefore, represents accumulated labour, and is valuable just in proportion as it has been invested in means calculated to facilitate future produc- tion. In the earliest stage of society, the net which represents the first saving or accumulation is valuable just in proportion as it is calculated to facilitate the natural and unassisted means of catching fish. In the most refined and complicated state of society, the machine, the railroad, or the ship, in which the accu- mulations of individuals are invested, add to the general amount of capital just in proportion as they facilitate and cheapen pro- duction or profitable exchanges , and that facility determines the price which people will pay for their purchase, or the rent which they will give for their use, as the case may be. It is, therefore, clear that capital consists of all improvements in the ratural elements of production — of all implements which facilitate production — and of all commodities, which though pro- duced for consumption, yet the value of which will be replaced to the producers, from the incomes of those who consume them. Thus, permanent improvements on land, by which larger crops are raised with the same labour ; improvements in water-courses, rivers, or docks, the construction of canals, roads, or railways, which faciUtate intercourse and the exchange of commodities; buildings, ships, machines, cattle, all implements for reproduc- tion, and commodities of every description, such as cloih, wheat, sugar, gold, silver, iron, &c., which are produced for the purpose of sale, the price of which is to be replaced from the income of the consumers, while the pro- fit only is to be consumed by the producers, constitute the capital of a nation. Whatever adds to the efficiency of any of these ele- ments of production increases the capital of a country, as, for ex- ample, the application of steam to ships, machinery, and railways, while anything which injures or destroys them, such as fires, ship- wrecks, &c., abstracts so much from the capital of the country. The recent inundations in France have subtracted as much from the capital of France, as it will require of labour to restore the mis- chief they have done. So with regard to the effect of seasons on the productions of wheat, cotton, or other articles, while, in an abundant year, more is produced than is sufficient for the consump- tion of the year, the surplus goes to accumulation, and constitutes so much capital, so, in a deficient year, when the production is not enough for consumption, the accumulations of former years 85 must be used to make up the deficiency, and thus the capital oi the country is reduced. The next point which we would consider is, — WHAT CONSTITUTES THE DIFFERENCE BETWEEN FIXED AND FLOATING CAPITAL? This is a point, with respect to which much greater obscurity exists than the one which we have already examined ; it is one also, on which though the most important practical questions and considerations arise, yet which we believe has not yet met with such a clear and explicit explanation as to enable men of business readily to distinguish between the one and the other in the nu- merous cases which are constantly arising in the application of capital, and where a clear understanding of the distinction is of the first consequence. A want of a clear understanding upon this point has, we have little doubt, had the eff'ect of causing losses to the community of this country to the extent of many millions dur- ing the last two years, as a consequence of obligations which have been undertaken, which, had this distinction been clearly under- stood, would not have been entered upon. We will endeavour to do something towards clearing up this important point. Every accumulation of capital furnishes a cer- tain command over labour, and can only be rendered productive by the employment of labour. This labour may, however, be used for the production of two distinct classes of commodities. It may be applied to the production of implements, the improvement of land, the building of houses, or the construction of roads, all for the purpose of facilitating further production, or it may be em- ployed for the purpose of producing commodities for the imme- diate consumption of the community, to be repaid and replaced by the income of the country. In the first case, tiie labour is fixed, and the profit which is derived from it must be either in the form of an additional facility for future production, or in the form of a rent which some one is willing to pay for the use of such facility. In this case the capital is not itself returned to the owner. In the latter case, the whole capital is re- turned to the producer along with his profit, paid from the* fund constituting the general income of the country. For example, in the first case, a man builds a mill, and fills it with machinery ; the mill and the machinery present to the owner a facility by which he can more easily produce cloth than hitherto, and this greater facility returns a profit upon the capital thus sunk, analagous to rtnt ; or he may let it on hire to another person, who is willing to pay rent for such a facility thus given. All the profit derived from such capital must be in the character of rent ; and in all such cases the rent or interest alone is repaid from the income of the country, included in the cost of the goods, the production of which it facilities. In all cases, therefore, where the capital itself is not repaid from the income of the country, but only a rent or interest for its use, it must be classed as fixed capital. This applies to houses, improve- ments on land, navigation, roads, machinery, ships, and all classes 86 of commodities which form only the means of producing articles of general consumption. On the other hand, another man who rents or employs the mill and machinery in producing cloth, and uses his capital for that purpose, employs it in the purchase of wool, and in the payment of wages, and does so upon the faith of selling his cloth at such a price as will replace the whole of his capital so expended, together with the rent or interest of the outlay for the mill, and with such a profit as will remunerate him for the use of his capital, and the labour in conducting his business. In this case, the whole capital, with the profit, is replaced from the general income of the country, and is again available for the performance of a similar operation, and for continuing the employment of a similar amount of labour. All such commodities constitute the floating capital of the country ; including agricultural produce, manufactured goods, imported ar- ticles for consumption, and, in short, every thing which is fully and entirely replaced out of income. In all cases oi fixed capital, the community only pay out of income a charge for the use of a facility analagous to rent. As for example, the fares paid to a rail- way company by the community, out o the general annual income, are only a consideration for a facility, and in the form of interest or rent, including the cost of upholding, but does not replace the capital which it cost to construct the railway. On the other hand, the prices paid by the community, out of the general income, for cloth, grain, or sugar, &c., replaces the whole capital expended thereon, leaving the same fund undiminished for the further em- ployment of similar labour, and the reproduction of similar com- modities. The distiixtion, then, which we make between fixed capital and floating capital is — that all commodities or improvements, for the use of which only the current income of the country is charged — or, in other words, for which the owners only receive rent or in- terest — constitute the. fixed capital of the country ; while all com- modities, the entire cost of which is replaced out of current in- come, constitute the floating capital of the country. The former class of v^ommodities are stationary, yielding only income; the lat- ter class are constantly circulating, affording a constant means of new employment for their reproduction from the current income of the country. The two most important distinctions between fixed capital and floating capital are, first, that the former consists of labour em- ployed only for the purpose of affording greater facility for the production of those commodities required for the daily use of mankind, while the latter consists of labour employed in the actual production of those commodities themselves; and second, that the use of the commodities reoresenting fixed capital, returns no fund from which the same amount of labour can be continuously em- ployed, whereas the use of the commodities representing floating capital returns an undiminished fund, by which the same amount of labour can be again employed. The occupation of a mill, or the use of well-drained land, may add to the income of the capitalist, but the fund employed in the building of the one, or the perform- 87 ance of the other, is absolutely withdrawn, except so far as the additional profit, rent, or produce which they yield is concerned, from the fund for the future employment of labour , while the fund employed in the immediate growth of wheat or the manufac- ture of cloth, is returned to the farmer or manufacturer entire, and is again available for the employment of labour to the same extent as before. It is, therefore, quite clear that no community can, without the greatest inconvenience and derangement, increase its Jixed capital faster than it is able to spare labour from the produc- tion of those commodities on which the community relies for its daily subsistence. Under all circumstances it can only be the amount of labour which the savings ot the country can command and sustain, that can be applied to the increase of its fixed capital. The time which the savage could spare in order to make his first net, must have been confined to that which was not absolutely required to procure his subsistence; and the fund which any country can set aside to the increase of its fixed capital must be limited by the commodities of general use which it produces over and above its consumption, or, in other words, by the savings of the country. This important point will be more plain if we consider, that in fact the wages paid for labour, tiiougli nominally in so much money, really consist of the distribution of the commodities used by the labourers in maintaining them during its performance. Whether wages are paid in money, or whetlier the labourer is, in return for his work, supplied with food and clothing, are one and the same thing. Now, the whole labour employed in producing those articles of daily consumption, such as wheat or cloth, whether for consump- tion at home, or for export in exchange for sugar, coffee, tea, or other foreign commodities in common use, replaces in the hands of the employer the wliole of the commodities used to sustain it, and leaves the funds for the future employment of labour undiminished. The labourers employed in manufacturing calicoes not only produce as much as they themselves consume of this particular article, but as much as wil! exchange for any other article which they do consume, besides replacing the capital of their en»ployer. The produce of this labour in calicoes exchanges for the corn and the provision which they consume of home growth, as well as for the sugar and coffee which they consume of foreign growtii. Suppose a manufacturer, for the sake of simplicity, to make one thousand pieces of calicoes, and that, instead of the payment of money-wages, he distributes amongst his work-people the proper quantity of bread, meat, sugar, tea, and clothing, to support them, — his thousand pieces of calico are then distributed in exchange for wheat and provisions to the farmer, for clothing of different kinds to other manufacturers, for sugar and tea to the merchant, who in their turn distribute these calicoes, with other things, to the labourers employed in producing these various commodities; and thus the manufacturer is again possessed of an- other stock of commodities, to repeat the same operation. By such a process all labour is re-producing tlie fund for its future support. The introduction of money and credit are merely means of affording ad- ditional facilities to this simple operation. This process will go on without any interruption as long as labour is employed in the produc- tion of the commodities thus consumed, because every day's con- sumption or expenditure will be replaced on the aggregate by a similar production ; or, in other words, as long as the capital of the 88 country is continued iii this floating or circulating state. But the inoment we begin to build houses, to make roads, or to improve navigation, however much they may add to the facilities of future reproduction, while there is the same consumption of bread, meat, clothing, tea, sugar, &c., there is no immediate reproduction of these commodities, or of anything that exchanges for tliem, however good or profitable an investment such works may be as far as the interest or rent is concerned which they yield. It is, therefore, clear that they cannot be undertaken, except with the surplus provisions, or capital which is left over and above the quantity re- quired for regular reproduction, and that this quantity must always limit the power of a community to increase its ^a:'gc? capital. In short then, the floating capital of the country is that which is employed in the production of all those commodities which constitute the ordinary consumption of the country, or which exchange for such commodities so consumed which are produced abroad, and is at all times represented by such commodities in whatever shape they are found ; and which is always replaced from the current incomes of the country, whether derived from 1 ibour, rents, interest, or profits; wiiile flawed capital arises fiom that portion of labour, which, being over and above that which is required for the immediate production of commodities for current use, is withdrawn from such production, and invested in some way which will yield an annual interest or rent, by affording new facilities to ordinary production, and by thus im- parting greater value to the floating capital and labour of the country. It is, therefore, not difficult to see, that it becomes a most es- sential thing to the continued prosperity of a country, that its floating capital, on which the continued reproduction of commo- dities of everyday use depends, as well as the continuous employ- ment of labour, should not be withdrawn from those necessary pur- poses, and converted into flxed capital, in a greater degree than the surplus accumulation of the country, after replacing the whole fund needful to continue the production of such commodities, whether of liome or foreign growth, will admit. li tlio floating capital of the country is thus misdirected into flxed capital, it is quite plan hat the ultimate result must be, that as the labour employed in the works representing iheflj:ed capital does not reproduce the commo- dities which are consumed in supporting it, or any commodity which can be exchanged either with the home or foreign producers of such commodities, they must become scarce and dear, and ultimately the fund for the employment of labour must be diminished; and the individuals who withdraw their floating capital, from its ordi- nary occupation, and convert it into flared capital, must either to that extent reduce their ordinary business of production, or suffer the greatest embarrassment from the absence of their ordinary capital, however large may be the annual interest or profit derived from their investment. It is quite true that, for a time, while the process of the conver- sion of ^oa/in^ into ^^ec? capital was proceeding, there would be a momentary appearance of great prosperity. It would, in fact, in the first instance, be the same as if we were to expend \n labour the principal, instead of the interest, of our capital, as far as the im- mediate effect upon the demand for labour, and commodities of daily consumption, was concerned. The production of commodities required for daily use being unequal to the consumption, they would continue to rise in price ; increased importation would follow as a 89 matter of course, and as no corresponding commodity had been pro- duced to exchange for such imports, they must ultimately be paid from the existing fund o^ floating capital, in reduction of that fund, and before long a reaction must take place, deeply prejudicial to the general interests of the country, and especially to those of the labour- ing classes who will have been exhausting the food on which their future employment depended without reproducing more. The ultimate effect of such a disturbance or misdirection of the boating capital of the country must be to create a great scarcity of it, which will be evinced by the high rate of interest, and ulti- mately a great diminution in the demand for labour, in consequence of the exhaustion of the fund on which it depends for continuous support. Having thus worked out the important distinction between fixed and floating capital, we will proceed, in our next number, to consider the third of the three propositions, — What constitutes the difference between Capital and Currency or Circulation ?^ — and then practically to apply these great principles to the present condition of the country. ARTICLE XII. Having, iu the preceding article, disposed of the two important questions — First, What really constitutes capital? and second. What constitutes the difference between fixed and floating capital ? we now come to the proposition, WHAT CONSTITUTES THE DIFFERENCE BETWEEN CAPITAL AND MONEY, CURRENCY OR CIRCULATION. There Is probably no single point connected with monetaria) questions which is so little understood as the distinction between capital and money, currency or circulation, and a confusion of which terms has been so productive of error both in legislation and in ordinary practice. We will first endeavour clearly to ex- plain the difference, and then we will show in what way some of the most dangerous and popular opinions, both in legislation and in the present calculations and views of the public, are erroneous. We have already shown that all capital is accumulated labour, re- presented by, and consisting of, the commodities in which the la- bour has been expended; and that the distinction between Jloatitig und^xed capital, is, that the first represents the fund (which itself consists of commodities for every day consumption) which is em- ployed in producing food and other articles of consumption, the whole cost of which is returned to the producer from the annnal income of the country, along w ith the profit, which constitutes the producers' income, and which fund, therefore, provided such pro- ducers spend no more than the profit, remains perfect and without dirtiinution, to repeat again similar processes of production, and to maintain a similar amount of labour ; while the latter consists of that accumulation represented by such commodities or pro- perty, which are not repaid in whole from the income of the coun- try, but for the use of which only an annual sum is paid, in the shape o^ rents, dividends, &c. ; thus the fu?id or capital employed in growing wheat, in manufacturing fiour, in feeding cattle, in mak- ing cloth, in importing sugar, in providing entertainments, &c., &c., is replaced in full from the income of the country, and is again ready to perform the same operations over and over again, and it is therefore on this fund that the continuous labour of the country is most dependent; while the fund or capital employed in building houses, making machinery, improving land, constructing railways, 91 building ships, making docks, improving navigation, is not repaid from the income of the country, but yields only a rent or dividend^ which is paid from the income of the country, in consideration of the use of the object on which that fund has been expended, and, therefore, becomes j^a^ec? capital, not being again available for a si- milar production in the following year, excepting so far as the rent or dividend goes ; and, therefore, with this small exception, this fund is withdrawn from that on which the continuous em- ployment of labour depends. Thus, if a man employs a capital of 20,000/ in making cloth, or importing sugar, the whole of his capital in addition to the profit, which constitutes his income, is re- paid from the annual income of the country, and is jprailable at once to repeat similar operations, and to continue to give employ- ment to the same amount of labour, while another man who em- ploys a capital of 20,000/ in the construction of a railway, even though his income from the latter may be as great as from the former, yet he receives no part of his capital back, with which he could repeat the same operation or continue to employ the same quantity of labour, and, therefore, except to the extent of the di- vidend received, the fund is wholly withdrawn from active em- ployment. We shall afterwards find, as we proceed, that this distinction entirely forms the basis of what are, and what are not, proper banking securities. From what we have already said, it is evident that capital existed long before any system of money was introduced. Before the introduction of the use o^ money, the capital of a country con- sisted, as it does now, of tbe portion of commodities which the community produced more than they consumed ; and the exchange of those commodities between the different producers was accom- plished altogether by direct barter, instead of, as it is now, by indirect barter, through the use of money. The introduction of money was, therefore, only a scheme for making the exchanges of commodi- ties more convenient and easy. These commodities consisted of everything produced by labour, including food of all kinds, cloth- ing of all kinds, implements of all kinds, gold, silver, iron, and, in short, everything to which a value had been given by labour ; and the relative exchangeable value which attached to these different commodities was determined by the amount of labour it required to produce them. If it required as much labour to produce an ounce of gold as a ton of iron, these commodities would exchange with each other in this proportion ; if it required as much labour to produce a quarter of wheat as an ounce of gold, these two com- modities would exchange with each other in these propor- tions ; and the ordinary demand for different articles would determine, on the broad scale, the portion of the labour of the country which should be occupied in each pursuit. The exchangeable value of commodities would, however, be sub- ject to sudden and accidental fluctuations. Suppose a very abundant season, in which the ordinary quantity of wheat produced was doubled, the labour represented in a quarter of wheat would just be one-half; and by the self-acting principle 92 of supply and demand, the producers of which, having double the quantity required under ordinary circumstances, would, by competition, be compelled to dispose of a quarter of wheat for half an ounce of gold, or for half di. ton of iron. Or if, on the contrary, in consequence of a very bad season, the same quantity of labour produced only half the usual quantity of wheat, double the quan- tity of labour w'ould be represented in a quarter of wheat ; and, again, by the self-acting principle of supply and demand, com- petition to obtain the wheat would make each quarter exchange for two ounces of gold, or two tons of iron. And so, in the same •way, the quantities of every description of commodities which would exe^nge for others, would be continually fluctuating and varying, in proportion as, from natural or accidental circumstances ■ — such as the state of the weather, the discovery of new mines, or other circumstances — the quantity of labour required to produce them varied ; labour being the sole regulator of value. The inconveniences which must soon have arisen from this state of things — one of simple barter — is too obvious to require to be pointed out or dwelt upon ; and long before a coinage of money was thought of, the force of the inconvenience of that state of things had induced the most advanced communities to adopt the precious metals as a standard of value and a medium of exchange. In the very early stages of society, we read of a given article being worth so many oxen or sheep ; but, in a more advanced stage of those same communities, we always find the price or value of an atticle expressed in a certain weight of silver or gold. The pre- cious metals seem to have been determined upon as a standard of value, and as a medium of exchange, not from any general reason- ing as to their peculiar suitableness for those purposes, but, as has been the case with most of the permanent regulations of society, from their being found by experience to be best adapted for those purposes. And here experience or necessity, which first adopted these commodities, is found to correspond exactly with what the most perfect reasoning upon the subject would have suggested or pointed out. If one commodity were required to be used as a standard, in which the value of all other commodities was to be expressed, it is quite clear that we would adopt that which, by its nature and character, was least subject to fluctuations in its own intrinsic value ; that approximated in itself the nearest to a de- terminate and fixed quantity of value, or, in other words, in the labour required for its production. And if we required to fix upon a commodity which should not only serve rs a standard of value, but as a medium of exchange, then we should look for that commodity which, in addition to steadiness of value, had the least tendency to be depreciated by wear, and v/as of the easiest trans- portable character, by representing the greatest quantity or value in a given bulk or weight. With all the knowledge which we now possess, reasoning upon these points would direct us to adopt, for these purposes, the commodities which experience and necessity induced society in its early stages to adopt. There are no commodities, the production of which depend upon such even and unvarying elements, as gold and silver, and the intrinsic 93 value of which, or, in other words, the quantity of labour which they represent, is so uniform, and, therefore, they are, above all other commodities, suited to be adopted^as the standard, with respect to which the value of all other commodities can be ex- pressed or measured, and thus constitute a more perfect standard of value than any other commodities. Again ; there are no other commodities which are so little liable to depreciation by wear, or which are so convenient for transport, in consequence of repre- senting in a given bulk and weight the greatest intrinsic value. As a standard of value, and as a medium of exchange, gold is the most perfect and convenient commodity, and next to gold is silver — tried by all these tests. When first the precious metals were adopted as a standard by which the value ot all other commodities was measured, and as a medium by which other commodities were exchanged, or, in other words, were bought and sold, the simple plan of weighing was used — an ox or a piece of land exchanged for so many shekels of silver or gold ; but it was soon discovered that much time and in- convenience would be saved in weighing, subdividing, and testing the exact fineness of the simple metal, if it were subdivided into small pieces of a uniform weight and a uniform fineness, which would save the process of weighing, subdividing, and assaying, and which would constitute mere counting of such pieces a per- fect and easy mode of conducting exchanges. But the first thing that became obviously necessary, in order to accomplish this most desirable facility, was to adopt some system which should afford a guarantee to the public, that each of such pieces really did possess the stipulated quantity of the stipulated fineness of metal. In order to furnish this guarantee, the practice of coining was resorted to, and this necessity first brought the question of currency or money into immediate connexion with the state. The principle of coining was simply, that the pieces, or subdivisions of the metals, issued, should be known to contain a given quantity of metal of a given fineness, and it was considered that nothing short of the state stamp would afford a sufficiently satisfactory evidence to the public of these facts. Gold and silver were, therefore, di- vided into pieces of uniform weight, the metal first having been made into the uniform standard quality by the state, with a stamp upon them, to indicate the guarantee of the state that each peice did contain the proper quantity and quality of the metal agreed upon. Thus originated the practice of coining metal into money, as a mere facility for the transactions of business. It may be well here to remark that, thoughout all these changes, the original principle of barter is never departed from. In a state of barter, the relative value of all commodities depends entirely upon the quantity of labour which each represented. When com- modities come to be bought and sold by quantities of gold or silver, weighed and assayed for every transaction, the quantity of metals to be given for any particular commodity is still determined by the same principle — that is, by the quantity of intrinsic labour which each represents ; and when the metals come to be coined into money, the sum of money for which any 94 article would buy or sell is determined alone by the intrinsic value or quantity of labour represented by the article in question, com- pared with the intrinsic value, as a commodity, of the metal of which the coin is composed. All the steps, therefore, which bring us down from simple bayter to the most perfect money system by means of coins, are all so many means adopted to simplify and facilitate the exchange of every man's produce with that of others, which was originally very imperfectly accomplished by direct barter. But it will be borne in mind that as the precious metals have other uses besides forming a medium of exchange in the charac- ter of money, the quantity abstracted from the general stock for the purposes of a currency would be confined to that which was absolutely required for such a purpose. As a whole, the quan- tity of precious metals required for the currency of a country would be so much of its capital withdrawn from productive pur- poses in order to facilitate the greater production of the remain- der. Suppose a country pursuing a course of barter were all at once to adopt a perfect system of gold currency. It is to be in- ferred that the stock of gold in the country was only sufficient to provide for the demand for it for usual purposes of ornaments, plate, &c., and it would become needful to export a quantity of commodities produced in such country in order to procure a suffi- cient quantity of gold to use as a currency. This gold, coined into money, would not be of itself re-productive capital, but would only afford a greater facility for the productiveness of the rest of the capital of the country ; so that, in truth, the precious metals converted into coin are so much of the floating capital abstracted from immediate productive purposes, in order to afford greater productiveness to the remainder, by simplifying and facilitating exchanges. All persons, therefore, will hold as little of this unproductive capital as is just sufficient to conduct their business — that is, no one will keep in his possession more money than he requires to make his payments. As the whole interest of the coin in circulation is lost to the community, so each individual shares that loss just in proportion as he holds it in his possession. The rule, therefore, is, that no one holds more than he actually requires from time to time to conduct his transactions or make his payments ; and the introduction of the system of banking enables each person to reduce that sum to the lowest possible amount, and thus enables the community to economise its capital by performing the greatest possible amount of business, in ex- changing commodities with the least possible amount of money. The next step in the consideration of the important subject before us, by which this capital necessary to constitute the cur- rency has again been greatly economised, was the introduction of notes payable on demand, called ^^ paper money," because they represented, and generally corresponded, with the coin or metal- lie money in general use. The nature and character of this money is simply a written obligation to pay on demand the coin it represents, or a means by which a claim is transferred from one person to another. A. has a credit with a banker: he has 95 a payment to make to B. of 20/. A. would, in the earliest stages of banking, have withdrawn from his banker tivenly j>ounds in coin, and paid them to B., who would either have retained it idle in his possession, or paid it away in another payment, or returned it to the banker. But in place of taking 20/ in coin, A. takes the amount in notes, which obliges the banker on de- mand to pay the coin ; these he gives to B., and thus transfers his claim upon the banker to B., precisely the same as if he had given his check for the amount, only that the document bears the obligation of the banker to pay, instead of a mere order to pay ; with these notes B. either makes other payments, and thus trans- fers the claim to a third party, or he returns them to the banker, either in payment of a debt due to the banker, or in deposit to his credit. Now, the very same principle which limits the use of coin to the smallest sum necessary to conduct the transac- tions of the country, must also limit the circulation of these notes to the smallest possible amount. A banker does not part with his notes, any more than his coin, without receiving what he believes to be full value for them. Every one who holds notes more than are actually required for his transactions, loses the interest of them, just as much as if they were coin. And, therefore, the sum which can be kept in circulation must be determined by that which it is absolutely needful for the uses of business, and not by the quantity which bankers may issue. Bankers may issue in loans, by discounting bills, or in pay- ment of deposits, as much paper as they please, but not one pound would remain out more than the country required — all the rest would instantly find their way back, either in exchange for the coin they obliged the banker to pay, or in payment of a debt due to the banker, or in deposit to the credit of the holder, on which again he could draw at pleasure. Notes are, there- fore, a mere means of transferring a claim for a given quantity of money, or, in other words, of gold, upon the issuer of the note, from one person to another ; the present holder always being en- titled to demand payment in gold for the amount the notes re- present. As long, therefore, as notes are payable on demand, it is utterly impossible to keep more of them in circulation than the sum that would be required, were the circulation purely me- tallic; but there is the obvious advantage in notes being thus circulated in place of gold, as long as their convertability is secured, that they economise the quantity of gold which is re- quired to be abstracted from the re-productive capital of the country in order to perform the functions of a currency ; and they, moreover, economise the coin in the wear, besides being more convenient for transmission to a distance. But the note contains no intrinsic value in itself; it only represents a liability of the issuer to pay on demand so much gold, and, therefore, the whole value depends on the credit of the issuer. The issue of notes is a simple question of the credit of the issuer — of his ability to pay at all times, on demand, the coin which the notes purport to represent. So far, therefore, notes are precisely the same as bills of exchange, except that the former are payab!- . Cheese — 158,435 ... i>20,474 ... 17), 148 Quicksilver ll> 550,886 ... 1,901,548 ... 191,420 R-aRS tons 8,877 ... 10,:^85 ... 6.420 Olive oil gal 880,673 ... 1,581,074 ... 724,719 Clover seed cwt 107,140 ... 115,942 ... 68,141 Linseed hush 2,195.093 ... 2,888 247 ... 2,153,077 Onion seed lb 52,379 ... 177,267 ... 80,012 C nriamon — 381, 05(; ... 42.5,643 ... 156.485 T'.bacco — 22,155,.550 ... 40,061.185 ... 25,82S,94o Talli.w cwt 680,382 ... 1,164,037 ... 864,962 Wool lb 22,564,485 ... 43,816,906 ... 15,989,112 Wine gal 6,637,506 ... 10,892,033 ... 7,.586,937 Silk, Italian lb 1.828,343 ... 2,080,965 ... 678,654 — all kinds — 3,477,648 ... 3,894,770 ... 2,665.22=; Parliamentary returns show that the following were the official values of foreign and colonial produce imported in each of the three years in question : — Years. £ 1824 37,559,9.35 1825 44,l;J7,482 1826 37,686,113 This account shows an increase of nearly 7,000,000/ of import?, in 1825 ; but when it is considered that the official value repre- sents the goods at one nniform price, and that the avera2:e prices in 1825 cannot be called less ihan 25 per cent above those of 1824, the following will more justly represent the real difference in the value of the imports of each year : — 1824 1825 £ £ Oflficial value by quantity at same price 37,559,935 44,137,482 Add 25 percent of increased price — 11,034,370 37,559,935 55,171,852 Thus shewing that the imports of 1825 could not represent a less increase of value on those of 1824 than 18,000,000/, and that the liabilities of the mercantile community were increased by that sura ; and they were even further increased by the smaller amount of foreign and colonial produce exported in that year. 121 The following is an account of the official value of foreign and colonial produce exported in 1824, 25, and 26 ; — JE 1824 10,204,785 1825 9,169,494 1826 10,076.285 So that, while our imports were so rapidly increasing, our ex- ports were falling off in 1825, and which, by the end of the year, created so large a balance of trade against us, as to cause an ad- verse exchange and a rapid drain of bullion, which resulted in the extreme pressure of the winter of 1825 and the spring of 1826. The commercial pressure began in the autumn of 1825, as the prices of commodities began to fall, and the large mercantile liabilities became due. But the great crisis did not occur until December, when the unsound business which had been done by bankers, in making advances on improper securities, became fully apparent, A«liich created the discredit and panic so well re- membered. The share in the difficulties and losses of that time, borne by the mercantile community, was necessarily very great, inasmuch as their liabilities, created by the enormous imports of the year, and speculative purchases, were extensive, and the losses to which, from a sudden fall of prices, they were subjected, were of the most serious character. The whole trading classes were, there- fore, seriously and deeply implicated, not only in the discredit, but also in the losses which attended that crisis. Produce for a time was wholly unsaleable, and extensive ruin was the consequence. We thus very clearly see the reasons why the commercial classes were so deeply and so injuriously implicated in that crisis. It was shortly, that they themselves had been greatly the cause of it ; and that a great extent of the overtrading, and, consequently, the great weight of the liabilities, rested upon them. But while we thus easily trace the direct causes which so deeply implicated the commercial classes in that monetary derangement, which will be found to be in such striking contrast with the facts at this moment, we must also claim the serious attention of all, to a great peculiarityat that time, and arising out of these facts, which, as far as regarded the facility with which the adverse exchanges, which immediately led to the monetary crisis, could then be righted, but which do not now apply. The payments which we were called upon to make to foreign countries, at the end of 1825, were for goods which had been imported, and which had been in great measure accumulated in our warehouses. They had not been consumed ; and they, therefore, of themselves, furnished a means, to a great extent, of correcting the exchanges. The sudden fall in prices, though ruinous to our merchants, had two effects upon our foreign trade, both calculated to correct the ex- changes. First, the lower prices suspended, or greatly diminished, further importations ; and next, the same cause induced an in- creased exportation of those commodities. Thus we find, by the tables already given, that while the official value of our imports in 1825 was 44,137,482/ ; but, takinginto account the increased prices, compared with 1824 or 1826, to be calculated at least at 55,000,000/, 122 it fell down, in 1826, to 37,686,113/— so that the real value of our imports in the latter year must have been about 18,000,000^ less than in 1825 ; that is, the supplies of 1826 were partly made up by the excess of our imports in 1825. Then, again, our exports of produce, in 1826, amounted to 10,076,286/ against only 9,169,494/ in 1825; so that the large stocks of goods left on hand at December 1825, which proved so ruinous to the mer- cantile community, supplied an important means of more quickly correcting the foreign exchanges. The present crisis, or rather pressure, is marked by circum- stances totally different in every respect, and the results will be as different. We have already, in a former article, carefully traced the causes which are now oppressing the money market, and wliich, for a long period, must continue to do so. In an article — "Retrospect and Comparison" — formerly referred to, published in the Economist, Oct. 18, 1845, in which we com- pared the liabilities of 1825 with those of 1845, we showed that there were in 1845 schemes proposed, i nplicating capital to the extent of 691,000,000/, foreign and home, on which deposits re- quired to be paid, amounting to 78,000,000/. We have since seen how much those schemes have been reduced, but still the por- tion which have struggled through Parliament, and are sanctioned to be undertaken, amount, as we showed last week, to a sum utterly beyond the means of the country to accomplish, except in a very lengthened period. It has proved a most fortunate circumstance, and we trust may be adduced as a striking evi- dence of the more prudent and wiser principles on which busi- ness is now conducted, that the fever of speculation which raged so much in 1845 never approached commercial commodi- ties, but was confined nearly exclusively to railways. As far as the effect which those speculations were likely to pro- duce on the country, it was also a most fortunate thing that none of these undertakings could be proceeded with, until they had obtained the sanction of Parliament. This fact ne- cessarily delayed the absolute expenditure of capital, which otherwise would have been immediately begun in the commence- ment of works, &c. A large amount of deposits paid up, and placed in the hands of bankers, but not withdrawn from ihe money market, was the only immediate inconvenience felt, beyond the extensive losses which a re-action produced to those who had paid high premiums for the stock they held. The delay thus ob- tained has saved the country from many of the worst conse- quences which those headlong speculations would have entailed upon it ; and it may be said that, even up to this moment, very little beyond parliamentary proceedings has been done to carry out the schemes of 1845. In the meantime, however, a gradual, though rapid, absorption of capital has been taking place in executing the works sanctioned in 1844 and 1845, and now the country is called upon to carry out those sanctioned in 1846. To the effects of this expenditure upon the capital of the country we sufficiently referred last week. As far as the mercantile community is concerned, (we mean, in their 123 own pursuits,) the supply of commodities has not been greater during the period in question than the demand. In the present year there has been no speculation, (cotton and corn excepted — of both of which, however, the stocks are lower than for some years,) and, therefore, there are, at the present time, in place of large stocks and extensive liabilities, at high prices, on the contrary, very small stocks of most of the leading articles of ordinary con- sumption, held at moderate prices ; and it may safely be said th at, whatever may happen, the liabilities of merchants were never less than at this time, nor were there ever fewer reasons to excite dis- trust or discredit. But this very fact, which places the commercial community in so safe a position, is calculated to prolong the period of pressure and of adverse exchanges. As we have such small stocks of foreign products, we shall be unable, as in 1826, to reduce our imports or to increase our exports ; and, therefore, it will be longer before the exchanges can be corrected. We must increase our imports of food, and we must, at least, continue our other general imports on the usual scale ; and, therefore, nothing can prevent capital still in- creasing in value. This difficulty can only be met by such an in- creased rate of interest as will induce foreign capital to find its way here for employment, and especially by the purchases of pub- lic securities, which must fall in price in proportion as the interest of money is raised. We have thus endeavoured to explain the grounds upon which we have formed an opinion, that no commercial discredit or crisis is to be feared at this time, except so far as it may turn out, that railway obligations and losses are mixed up with other commer- cial undertakings ; and even in those cases, the immediate difficul- ties will be greatly modified by the necessity which all companies will find to postpone their undertakings, a suspension of which, however, must gradually produce a great depression in business for a long period to come, but it need not be attended with any severe crisis or shock to credit. Extreme prudence and caution in en- tering into distant engagements, and in giving limits for future im- ports, will well repay those who exercise them. ARTICLE XV. THE BANK OF ENGLAND AND THE AMERICAN EXCHANGES. Looking to the peculiar wants of the country at this particular time, and to the condition of the countries in the west of Europe, with which we have the most extensive commercial intercourse, it is plain that, as our wants can only be supplied either from the United States or from the extreme east of Europe, the great in- crease of our obligations must arise in those quarters, and the drain of bullion, to meet those obligations, must continue in those direc- tions — which fact must have a considerable influence upon the du- ration of the drain, and the period when, from ordinary mercantile causes, a return of bullion might be expected. If, as in former times, when we had the necessity of suddenly importing very extensively of grain, the countries in immediate proximity to us — France, Belgium, Holland, and Germany — and with which we have already established extensive commercial and banking relations, had all large surpluses of grain with which to supply us, the return of bullion exported to them might be looked for at a much earlier period, in the ordinary course of business. But, as it is, those countries are similarly circumstanced to ourselves. They, too, with their bullion, must draw supplies from the United States and from Russia. And, if we follow the subject still further — if we trace the transactions to the United States, we shall find that the great bulk of the money transmitted from Europe will be absorbed in the large, active, and growing population in the Western States, where an increased circulation will be required to carry out those improvements and extended cultivation which will be promoted by this extraordinary demand. Among a people so rapidly advancing in industrious pursuits and in population, a few millions of additional circulation is easily absorbed, without creating in the banks any such accumulation of bullion as would lead to its rapid return. On the other hand, the money transmitted to the extreme east of Europe will be scattered over extensive districts, in small sums, among the producers ; who, from the absence of banking establishments, and means of finding an immediate and profitable employment for it, will hoard it, in small sums, until each, in the course of time, expends it, either in increasing cultiva- tion, which would retain it in circulation on the spot, or in the pay- inent of luxuries or clothing brought from the sea-ports. But it 125 is to be apprehended that the fear of the exactions of the govern- ment agents and the landlords will lead to a great extent of secret hoarding. The circumstances, therefore, under which the present drain is going forward are such as will, in all probability, mcrease the duration of the monetary pressure, and the adoption of measures of extreme stringency, in order to preserve the con- vertibility of our circulation, may become absolutely neediul. Entertaining these views, as we have done for several months past, we felt great satisfaction in observing the evidences which the Directors of the Bank showed, of a determination to take early measures to correct or alleviate the coming pressure. Within a few weeks, and before the drain showed much intensity, the rate of interest was twice raised, and Government securiiies to the extent of nearly 800,000/ were sold upon the market. Unfortunately those measures were not persevered in. From the middle of Jan., while the drain was progressing rapidly, nothing was done until the advance in the rate of discounts to 5 per cent last week. We do not, however, wish further to allude now to what we consider has been an error ; which we believe to have been committed from no other motive than a desire not to alarm the public. Alarm, however, it must be remembered, of danger, is really one of the first means of securing safety. A feeling of security, when there is danger, is calcula ed to aggravate our difficulties. Had the Bank rate been raised to 5 per cent six weeks ago, and to 6 per cent now, we should have felt much greater security than we do. The period has, however, arrived, when, from the operation of the new Bank Bill, the Bank of England will be compelled to use the most stringent means, in order to comply with the provisions of that bill. The rapid decline in the bullion and in the reserve of the Bank, during the last few weeks, while the state of the exchanges in the United States is such as to lead to a certainty of a further drain, must be conclusive evidence to the directors of such necessary precaution. There have, moreover, been sufficient evidences during the last week, that the directors feel such a ne- cessity in the policy which they have pursued, with respect to the business of the Bank. And it is to some of these acts, as generally understood, that we particularly wish now to allude — which, in themselves, we deem to be very doubtful remedies, but rather tending in some respects to aggravate the evil, while they may prevent the adoption of measures of more certain effect. Considerable alarm was excited in commercial classes, last week, by the rumour that large amounts of bills, of the quality required by the Bank, were thrown out, on the ground that they had a direct co"inexion with the export of gold to America. It was, however, afterwards explained that the reason for the rejec- tion of the bills in question had reference more to the extent of accommodation already givon to those parties, than to the origin of the bills or to the object for which the proceeds would be applied. Whichever version of the transactions we take, they are equally conclusive evidences that the Bank had too long refrained from raising the rate of discounts, and from thus giving a higher value to capital. But we wish to consider how, in the present state of our connexions with the United States, such indirect attempts, on the part of the Bank, to prevent the export of bullion, are li!vely to aggravate the present drain. What are the facts ? America, in the present year, is called upon suddenly to supply us to an enormous extent with the neces- saries of life, in addition to the usual supply of the chief raw materials of our manufactures. It is, therefore, in the highest de- gree essential to the best interests of the country that their imports should be encouraged ; in short, their continuance is so strongly marked by necessity, that no difficulty which can be im- posed by Bank restrictions will prevent them. Thus an unusual amount of bills is necessarily drawn from America upon England, against their shipments — an amount out of all proportion i o that usually taken by the exchange houses in New York. The necessity has, therefore, arisen for the drawers of the bills in question, to leave them with those houses for transmission to Eng- land, and to wait for the arrival of the funds before paying them to the drawers. This has been accomplished in the following way : — The houses in New York have forwarded these bills to their agents here, who, having obtained their acceptance, have then discounted them, and remitted the proceeds to New York, in bul- lion. This operation has occupied about two months, and the bills in question have, therefore, been bought, it is said, on a credit of 60 days, in New York. In effect, this is quite true ; but what difference does it make to the quality of the biU, whether cash is paid by the house in New York for it at the time, or at the end of two months ? The real question is — Do such bills represent real transactions or not ? Are they drawn against actual shipments or not ? That they are there can be no doubt, for any one who for a moment considers the nature of these ex- change transactions, and the necessary links which would be re- quired to carry out such operations, without the intervention of actual shipments, will see that the report, that a large amount of such bills are drawn merely for speculation, must be entirely foundless. This great difficulty of disposing of bills in New ork has already reduced the exchanges to 103 to 104^. Now, we do not pretend to say that it is the duty of the Bank of England to discount these bills to whatever amount they may appear. All that we w;ant now to show is, that any steps taken by the Bank should have a tendency to raise the value of money generally, and should, therefore, have a pressure equally severe upon all classes of bills ; and that it is unwise of them to attempt to make pressure partial or peculiar to particular interests. Now, there can be no doubt that if the Bank refuses to discount these American bills, and if they cannot, at length, be discounted at all, we might somewhat delay the shipment of the bullion ; but the most we could do, even in that way, would be to defer it until the bills became due and were paid, and then the bullion would be sent. The effect of this would be, that in New York the exchange houses would only take English bills at a credit of four months^ in place of two months^ which would enable them to keep the bills on hand here until due. But what effect would this 127 have upon the rate of exchange in New York ? The pressure which would be telt for money on the part of the merchants, drawing these bills would cause a great reduction in the rates to those who were in a condition to pay money ; and the exchanges would fall considerably lower for cash, thus offering a clear profit of at least five per cent, by the purchase of such bills, which would hold out a powerful motive for capitalists here to ship gold immediately, in order to purchase the bills so depressed in price in New York ; and thus, the very means used by the Bank to delay the transmission of gold, in return for bills, would cause the gold to be sent from here beforehand to purchase the bills. For example : — The next packet will carry out accounts of the increased difficulties in obtaining discounts here. An in- creased difficulty will be immediately experienced in New York to sell bills on England ; the rate of exchange will probably fall for cash on the spot. What, then, would be an operation so certain of a large profit, without the possibility of loss, than for a capitalist here to send out by the steamer on the 18th, a large amount of bullion for the purchase of bills? The Bank has, no doubt, a difficult duty to perform ; which can only be done satisfactorily, by applying rules generally, and not partially. There is but one means of arresting the difficulty ; and that will be found in rendering money so dear, and securities so cheap, in proportion, that the latter will be taken in preference to the former. The rates of discount to which we have been accus- tomed in this country, must not be held to be any criterion of those to be charged now ; and the public must learn that every advance in the rate of interest, is only another step of security and guarantee against worse consequences. THE GOLD MINES IN OREL AND SIBERIA. {From Official sources in the Journal of St Petersburg of February 6(h, 1847.) Of the quantity of gold worked in 1846 m the Crown mines, and in the mines in Orel and Siberia, the mint has received to this date 1,397 poods 15 liv 13 zoU, to which must be added 325 poods 14 liv 74 zoll, expected during the winter, thereby making the total pro- duction of gold in 1846 amount to 1,722 poods 29 liv 87 zoll. Formerly gold was only worked in the district of the mines of Catherineburg, belonging to the Crown, in the mines of Berezoff", and in the district of the mines of Koly vano, Voskressensk, and of Nertchinsk, and was extracted from silver which was worked in those mines. The whola quantity extracted annually amounted to but 34 to 40 poods. In 1819 some veins of golden sand were discovered in Orel. Since then the production of this precious metal has increased in the following proportions 1819 Poods liv zoll 40 9 55 1825 Poods liv zoll 257 12 54 J820 44 3 1826 . 257 25 15 1821 62 24 85 1827 18-28 Total 307 30 95 1822 79 21 36 317 39 44 1823 125 19 79 1824 228 13 38 1.711 21 t28 It was in 1829 that some veins of golden sand were also dis- covered in Siberia. At first the working of it was not very productive ; but after a while, and more especially during the last six years, the results have been very brilliant, as the following figures will prove :- 1829 1830 1831 1832 1833 1834 1835 183S 1837 1838 oods liv zoll 314 n 1 378 15 79 396 29 37 410 8 61 408 22 71 406 4 64 413 1 8 426 3 74 469 20 75 524 36 69 Poods llT 1839 525 1840 585 1841 681 1842 950 1845 1,283 1844 1,341 1845 1,386 1846 1,722 Ht zoU 6 38 15 60 20 34 26 68 2 60 25 60 6 41 2S 87 Total 12,624 28 24 Thus, since the discovery of the golden sand, that is to say, since 1819, the working of the gold, both in Orel and Siberia, has pro- duced 14,335 poods 28 liv 45 zoU of this precious metal, of which the Crown mines in Orel have contributed 2,924 poods 24 liv 32 zoU ; those in Siberia 1,293 poods 7 liv 28 zoll ; the private mines in Orel 4,219 poods 39 liv 70 zoll; and those in Siberia 5,897 poods 37 liv 11 zoll. The produce of the year 1846, which, as before stated, amounts to 1,722 poods 29 liv 87 zoll, forms more than a tenth of the whole quantity of gold worked since 1819, and surpasses by 336 poods 23 liv 46 zoll the result of the working of this metal in 1845. ARTICLE XVI. THE CRISIS. Great as have been the advantages which the world has derived from the iatroduction of a system of money, in order to facilitate the exchange of commodities, it would not be easy to estimate how much those advantages have been reduced by the confusion which has, in consequence, arisen, as to the true principles which regu- late all such exchanges, and which could not have existed had simple barter been adhered to. The introduction of the systems of credit and money, however admirable in themselves, and how- ever needful in order to conduct commerce on its present scale, and with due regard to the convenience and necessities of civilised life, has, by withdrawing attention from the fundamental rules on which all exchange of commodities must proceed, done much to complicate and confuse what would otherwise have been simple and plain. The economy of human labour and time, accomplished by the introduction of those facilities for effecting the exchange of commodities, is greater than has probably been derived from any other invention whatever ; but, strange to say, the science or principles which regulate these great facili- ties are, as yet, so little understood, that it is difficult to find two practical men of business who entertain the same views on questions of money and currency. And yet there is no science whatever which is based upon more invariable and tangible laws, and which, therefore, should, if proper attention were paid to it, be so exact or so well defined. Much, if not the whole, of the confusion and error which exists, is to be traced to the fact, that men habitually look upon money as an independent element of wealth, and not as a mere representative of commodities ; and therefore neglect to refer all the fluctuations in the abundance or scarcity of money to fluctuations in the quantities of com- modities, over which bankers and others, who are supposed to regulate the monetarial affairs of the country, have no control whatever. So little attention is paid to these subjects, during periods of ease and leisure, that when times of pressure and diffi- culty arrive, men are seized with panic and terror, in a great measure, because the subject is so little understood, and so little accordance exists in public opinion as to the causes which have immediately led to such a state of things. We have before 130 us a pile of letters, received during the last week, bearing the marks of proceeding from men with strong powers of thinking, and many of them containing very valuable suggestions, but which ex- hibit such a variety of contradictory views, as to the causes of the present crisis, as show, in the strongest way, how unsettled and ill- defined public opinion is upon a subject so essential to the best interests of the country. In consequence of this want of a clear and well-defined view of the real causes which influence the severe pressures, which from time to time are experienced in the commercial and monetarial affairs of the country, it is common to refer them rather to some of the symptoms by which they are immediately accompanied than to such true causes themselves ; and the public are always too apt to try to shift the consequences of their own imprudence, or of mere misfortune, upon those who are simply the instruments through whom the inconvenience first becomes felt. This is strikingly so at the present moment. A writer, whose only desire was to obtain popularity, would have little difficulty in accomplishing his object, by joining in the general complaints against the Bank bill of 1844, and against the management of the Bank directors, as having led to all the inconvenience and pressure which is now felt among commercial classes. Whatever may be our views with respect to the one or the other, which we have never hesitated freely to express, W2 are bound to say, that we do not attribute any very important share of the present crisis to either of those commonly assigned causes. That the immediate pressure and want of confidence have been aggravated by the Bank directors having too long delayed to use the j roper means to con- tract their liabilities, in proportion as their reserve of capital (the bullion) diminished, and the severe measures to which they have necessarily had recourse of late, to recover their position, we think no one can deny, nor have we ever failed, during the last three months, week after week, to urge this point on their consideration. To this we shall have occasion hereafter again more specifi- cally to allude. It shall be our object, in this article, to confine ourselves as much as possible, to a consideration of the practical causes which have le 1 to the present crisis, to the course which it is likely to take, and to the influence which the two commonly assigned reasons alluded to have exercised upon it. In doing so, we shall care- fully avoid, as much as possible, any controverted points of prin- ciple, and apply ourselves, as exclusively as the subject will ad- mit, to the practical bearings of the questions under considera- tion. Having already, in former articles, explained our views as to the main causes which have led to the present scarcity of ca- pital, we propose now to consider, first, TLe cnaracter of the pre- sent crisis ; and, second. The efcct which the Bank Bill of 1 844 and the management of the Bank of England have had in pro- moting it. WHAT IS THE CHARACTER OF THE PRESENT CRISIS? It is one of the most essential considerations, both for the public 131 and the directors of the Bank, to form a just estimate of the pre- cise character of the circumstances which have led to the present monetary difficulties of the country, and of the probability of their duration. In former articles, we have fully considered the effect which the extravagant expenditure in railways has produced upon the available floating capital of tha country. In those articles, we have shown that we have fixed in railways a large portion of capi- tal, or, in other words, of commodities, in a way which have not reproduced themselves, or any thing else which will exchange in foreign countries for commodities which we require ; that, as a consequence of that process — while our home consumption of all the articles of ordinary use materially increased, the prices rose, and importations were larger— the exports from this country ne- cessarily diminished, and the debts due to us abroad were gradually extinguished, or, at least, much reduced. These consequences were severely aggravated by the failure of the crops of last year, which rendered an extensive importation of food imperative. In 1846, and chiefly during the last six months, we imported no less than 3,814,666 qrs of grain and 4,356,812 cwts of flour and meal, and up to this time in the present year the importation of grain and flour has already amounted to about 1,500,000 qrs. At a mo- ment when we had exhausted, or much diminished — by along series of extended imports, to supply the consumption of the last two years, stimulated so much by the expenditure on railways — our command over the commodities of foreign countries, in the form of credits, as indicated by the state of exchanges, a sudden necessity arose to import for Ireland and for Great Britain the enormous quantities of grain referred to, as well as other provisions. While, however, our imports had been in- creasing, and exhausting our claims on foreign countries, we were accumulating no commodities in this country which we could, under any exigency whatever, export. We had fixed our capital in railways, which, except under the highly improbable supposi- tion that English railway stock could be sold in foreign markets, and especially at such a moment, were utterly useless as a means of meeting the imperative importation of food which became needful. The real state of the country, during the last six months, has been, and still continues to be, this :— With unusually small stocks of all the ordinary commodities of commerce, — with a small amount of foreign debts due to this country, as indicated by the state of the exchanges more than six months ago,— with our capital withdrawn from these sources, to an unusual extent, the sudden necessity arises of importing food to an extent alto- gether without precedent, and that at a moment when many of our nearest and most usual sources of supply are not only unable to afford us relief, but are even in a worse position than our- selves. Putting out of view altogether, in this place, any consi- deration of our monetary matters, the real source of all our diffi- culties is, that we have a sudden and imperative necessity of importing a large quantity of food, and have no sufficient stock of such other commodities as foreign countries require, to exchange for them, nor have we a sufficient amount of foreign debts due to us with which we can liquidate our purchases. It is, in reality, a question 132 altogether of the exchange or barter of commodities ; it is a ques- tion of an import of food, for which, as far as Ireland is concerned, the Legislature of the country is committed, to a past and future expenditure within a year, to the extent of about eleven millions sterling, and to which the remainder of the United Kingdom is committed to an expenditure of their own means, to whatever extent may be requisite to procure sufficient supplies ; the whole is a question which involves the supply of wants in themselves so imperative, that any sacrifice will be made in order to do so. Of course, the extent of the difficulty must depend altogether upon the extent to which those imperative necessities of importation exist. We know what we have already imported, which in the state of our resources as they have existed, has been productive of the inconvenience already experienced; and, if we are to judge by the inadequate power of our sup- plies hitherto to affect prices, we cannot entertain any hope that our wants are nearly satisfied. Of the Irish expenditure for food, upwards of six millions have yet to be provided ; for the expenditure for the remainder of the kingdom, a very large sum must yet be necessary. If we are to judge by the reduced state of the stocks of grain in the hands of the growers at this moment, as compared with this time last year, which after the most minute and careful examination are unquestionably much less — if we are to take into consideration the enormous stocks which, a year ago, existed in our bonded warehouses — and if we are to consider the backward character of the season, both in this country and espe- cially on the Continent, which at least precludes the possibility of an early harvest, no reasonable man can resist the conclusion that a larger quantity of food will be required for the United King- dom during the next six months, than during any similar former period. At such a moment, when our means of procuring it are already so much exhausted, this, we confess, is an appalling fact. But it would be criminal, and the height of folly to shut our eyes to a danger because it is great. If it can be met — if it can be ameliorated (of which we are not without hopes) — it will only be by forming a just estimate of its extent. In all the views which we take of the present crisis, of its causes, its intensity, and its dura- tion, we must never lose sight of those great necessities which are at the foundation of all, and over which neither Bank Bills nor Bank Directors have any very material controul. These necessities wUl controul our monetary affairs, in spite of any regulations or arrangements ; while no regulations with respect to our currency will materially affect them. As, however, all commercial obliga- tions are much affected by the course of our monetary affairs, it becomes a most essential consideration to examine how far the circumstances to which we have alluded will affect them. We will therefore proceed to consider: — THE PRESENT STATE OF THE BANK OF ENGLAND, AND HOW IT IS AFFECTED BY THE BILL OF 1844. The easiest and clearest way of arriving at a satisfactory con- clusion upon this question, is, that we should place before our 133 readers a simple explanation of the real character and state of the Bank of England, which will show, that though it is an establish- ment possessing an enormous capital, that it neil.her possesses the power to stem such difficulties as the country at present experiences, nor is it any part of its duty to do so. Our remarks, too, on this point will tend also to show how exaggerated have been the popular complaints which of late have been made against the bill of 1844, as having been the cause of the present pressure. The Bank of Engla id possesses an independent capital, amount- ing in all to 17,950,077/, which is thus made up :— £ Proprietors' Stock,., 14,553,000 Rest, or Reserve, being the accuniulacion of profits from time to time 3,397,077 Total independent capital 17,950,077 As bankers, beyond this capital, the Bank derives large means from two other reseurces, on account of its credit. The one is from its circulation of notes, which the public take and use to perform the same operations as coin, for a medium of ex- change in carrying on the business of the country ; and the other is the deposits which the public place in their hands for safe-keeping. These different items, according to the last Bank Return, stood thus : — £ £ Proprietors' Capital 14,553,000 Rest 3,397,077 Independent means 17,950,077 Circulation of Notes, including Bank post bills 21,152,853 Deposits 13,015,731 .. — 34,168,584 Total means of the Bank 52,118,661 The entire means possessed by the Bank, according to the re- turn of last week, amounted to 52,118,661/ — of which 17,950,077/ was its own independent property, (without calculating the value of the Bank buildings, which is always done in the assets of the Bank of France,; and of which 34,168,584/ formed claims on the part of the public, payable on demand. As a trading establish- ment, the great and only consideration for the Bank of England is, how it can most profitably employ these large sums, so as always to be prepared to meet any portion of the demand which may arise upon the sum of 34,168,584/, held upon credit from the public. It is clearly the first duty of the Bank of England, as it is of every other commercial establishment, to take every precaution to meet its liabilities to its creditors, and with the Bank of Eng- land this is peculiarly imperative. It is, therefore, obvious, that of the funds, amounting to 52,118,661/, with which it has to deal, it is the duty of the Bank at all times to retain in its possession a reserve in bullion, equal to whatever portion of the 34,168,584/ — which it is liable to be called upon to pay at the option of the public — as is likely, under any ordinary circumstances, to be de- manded ; and, beyond this, to invest the remainder in public se- curities, bearing an interest, which can be sold, if necessary, and 134 in discounting commercial bills of exchange. By the accounts of last week, the whole means of the Bank were thus distributed : — £ Debt due by the Government 11,015,100 Government securities of various kinds 14,662,719 Private securities, or commercial bills 17,111,001 Bullion 9,329,841 £52,118,661 Therefore, to meet such part of the liabilities of the Bank, con- sisting of its deposits and circulation, as it is likely to be called upon to pay, it had in its possession a sum of 9,329,841/. Now, it is quite clear that the amount of liabilities which the Bank owes to the public, consisting of the circulation of notes, and deposits, must be subject in their fluctuations not to the will of the Bank, but to the wants and means of the public. The Bank cannot keep more notes in circulation, than are required for the internal exchanges of the country at any specific time, for the simple reason, that, as a rule, no one keeps more money in his possession than is necessary for his wants ; and, therefore, what- ever advances the Bank may make beyond that sum must imme- diately fall back upon it for payment, and thus all such advances are in reality advances of capital. Nor has the Bank any means of reducing the circulation of its notes at its own will, as long as it holds a large fund belonging to depositors, which can ba with- drawn at pleasure ; for if the Bank were to attempt to withdraw its notes from circulation, either by withholding discounts or by the sale of its securities, so as to reduce the circulation below the sum actually required to conduct the internal exchanges of the country, it is evident that the public would withdraw the notes so required from their deposits, through the medium of private bankers, to whom the private deposits in the Bank chiefly belong. So that, until the private deposits in the Bank of England are very much reduced, an effort on the part of the Bank to withhold the notes, absolutely needful for circulation, in the hands of the public, would be counteracted by withdrawing the deposits. It is thus that we frequently see, on the one hand, a very great increase in the amount of securities held by the Bank, indicating extensive ad- vances, without any corresponding increase of the notes in circula- tion ; and, on the other hand, a very extensive decrease of securities, indicating that those advances are much curtailed, without any corresponding decrease of notes in circulation. But we will always see, when such increased advances have been made as we allude to, that they have been accompanied by a decrease of the bullion, and when such decrease has taken place in the advances, that it has been accompanied by an increase of bullion ; we mean, when the circulation lias not been affected. It is, therefore, plain that the circulation and the deposits are acted upon by circumstances over which the Bank can exercise no immediate control ; and, therefore, that the chief regulation of the reserve of bullion held by the Bank to meet its liabilities must necessarily be through its advances upon securities; and, therefore, that when a period of scarcity of capital arrives, and the reserve of bullion in the Bank is sinking, the only means which the Bank possesses of preserving 135 a necessary amount of bullion to meet the demand which will pro- bably be made upon it, is by a reduction of its securities, either by the sale of stock or by diminishing its discounts. The amount of the bullion held by the Bank, it is plain, should bear a certain proportion to the extent of its liabilities payable on demand ; and should, therefore, be equal to any probable di- minution which may take place in the deposits and circulation during a period of pressure. The extent to which the deposits and the circulation may be diminished at any particular time, must depend upon the causes which are at work, which are likely to withdraw capital from the country, and which are likely to increase our transactions abroad and limit them at home ; and therefore, it is impossiole to furnish any precise rule which can govern the Bank at all times. But let us examine what the circumstances are at this moment which are likely to affect these two classes of claims upon the Bank. We have had a large demand for bullion to meet foreign payments for grain. At the commencement of that drain the Bank held in its posses- sion upwards of sixteen millions of bullion^ a sum considerably larger than was considered necessary to hold as a reserve. As the demand for capital increased to pay for foreign grain, the first way in which it showed itself, was in a demand upon the Bank for increased advances on securities, which the Bank were then in a condition to grant. On the 23rd of Oct., after the payment of the dividends, the Bank account stood thus: — Private Securities, or Bullion. Bills under Discount. £ £ 15,143,048 12,788,939 On the 22iid of Jan., after the payment of the dividends, these items stood thus : — Private Securities, or Bullion. Bills under Discount. £ £ 13,948,681 14,450,711 On the 23rd ult., after the payment of the dividends, these items stood thus : — Private Securities, or Bullion. Bills under Discount. £ £ 9.329,841 17,111,001 On the 23rd of October, and on the 22nd of April, the deposits and the circulation of the Bank were as follows : — Deposits Circulation £ £ 1846 October 23 14,440.534 22,314,213 1847 April 22 13,015,731 21,152,853 During this period the amount of bullion taken from the Bank amounted to 5,813,207/, of which it will be seen that no less than 4,322,062/ was furnished by increasing the amount of discounts. During the same time the deposits diminished only 1,424,803/, and the circualtion 1,151,360/; the only aid which the Bank has had resort to, being the sale of Government stock to the extent of 1,130,300/ during the whole time. It is, therefore, quite clear, that the great source from which the corn hitherto imported has been paid, has been the reserve of bullion held by the Bank in October last ; and, if the Bank have committed any error at all — and we think they have — it has been in permitting so great a decrease of bullion to take place, without reducing its liabilities to a greater extent, v^hich could have been done by raising the rate of interest^sooner and more rapidly; so that, if bullion was with- drawn, it should be in exchange for its deposits. The first item which is affected in the Bank accounts, during every drain of bullion, is the reserve, which the Bank is willing to advance on securities. This has been done, on the present occasion, to too great an extent already. The next source which is applied to, when advances are withheld, is the deposits con- stituting the reserves or balances of the private banks, and the last source is the circulation of notes. The first source, we must consider, is now exhausted as far as it can be, and the private securities in the Bank must rather be diminished than increased. To provide for the payment of further imports, the pressure will next be upon the private deposits, as the balances in the hands of the bankers throughout the country diminish ; and the last pressure on the Bank will be felt in the reduction of the circulation of notes, which will be carried in for bullion. The last process will occur thus : — The high price of provisions will materially, as it has already done, curtail the demand for all other commodities ; the internal exchanges, and the quantity of money required to conduct them, will be lessened ; and the portion of the capital of the country thus freed from circulation will be used to pay for foreign grain. This is precisely the pro- cess which would occur under a purely metallic currency, and which must occur under one of a mixed character, when the paper is convertible at pleasure. In 1839, under the drain which then took place, a similar course followed. The first drain acted upon the bullion which the Bank was willing to part with, in advances upon securities ; it next acted through the deposits; and lastly, through a decrease of the circulation. In 1839, the bullion deposits and circulation stood as follows : — Bullion. Deposits. Circulation. 1839 £, £ £ April 5 7,073,000 8,998,000 18,035,000 July 1 4,344,000 7,567,000 17,620,000 September 19 ... 2,816,000 7,781,000 16,809,000 December 12 2,887,000 5,952,000 15,817,000 In considering, therefore, the sources on which we must de- pend to meet the further demand for bullion, to pay for the import of grain, it is quite evident that the Bank must prepare, first, for a considerable reduction in its private deposits, and during the year, as the trade of the country becomes contracted, for the re- demption of a large amount of its notes. To what extent the private deposits may fall, and to what extent the trade of the country may become contracted, so as to liberate the notes at present in circulation, it is impossible to say. In 1839 the whole de- posits, including government and private, tell to 5,952,000/, and the circulation, exclusive of Bank post bills, to 15,032,000/. With a certainty that very large imports of grain will still be 137 required both for Ireland and Great Britain, besides large sup- plies of raw materials essential to our manufacturing industry, the stocks of which are all extremely low — and looking to the small stocks which we possess of other commodities, which can be used as a medium ot payment to corn-growing countries — we cannot deny the necessity wiiich must exist for a further and very considerable drain of bullion ; and as such, of a strong action, first, upon the private deposits of the Bank, and next, for the redemption of a portion of the circulation. And, therefore, we do not believe that, under the present circumstances, the Bank would be in any degree safe to permit its bullion to sink below its present amount, except in order, first, to Hquidate its deposits as they are required, and next, to redeem its notes as they are presented. It is common to talk of the low state of the bullion in 1839, when it was reduced to 3,000,000/, and to compare the present amount held with that period; but those who make such a comparison entirely overlook the fact that in 1839, when the bullion was reduced to the point mentioned, the deposits had al- ready been satisfied, down to a point of 5,952,000/, and the cir- culation, including bank post bills, had been reduced to 15,817,000/; whereas, at this moment, these two great liabilities are yet to be met. The comparison is thus : — Dec, 1839 April, 1847 Deposits 5,952,000 13,015,731 Circulation 15,817,0'iO 21,152,853 Bullion 2,887,000 9,329,841 Our remarks have been hitherto made without any reference to the arrangements under the Bank Bill of 1844, because, in reality, the same general reasoning refers to the general state of the Bank assets and liabilities in either case, the whole difference effected by that bill, and by the separation of the two departments, being one simply of account, and which could be, and in fact is, done merely by different modes of stating the account. The only practical difference in the manngement of the Bank is, that the reserve of bullion is divided into two parts : one as applicable to the payment of the deposits, and the other as applicable to the redemption of the notes. That law assumes that the lowest state to which the circulation could be reduced would be to 14,000,000/, and therefore it provides that the Bank shall always keep a reserve of bullion equal to the notes which it circulates over and above that sum, and which shall not be applicable to any other liability of the Bank, To effect this object, 14,000,000/ of securities are placed in the issue department, and all the bullion of the Bank, over and above a sufficient supply of coin for the banking department, for the full amount, notes are given to the banking department; from which the circulation of the country is sup- plied, and a reserve kept to provide for the deposits as they may be required. This reserve ot notes is the only command which the banking department has over the bullion, which, were they en- tirely converted into gold, it is plain that a sum would still be left in the issue department, equal to the whole ot the notes in circula- U8 tion, over and above the 14,000,000/ of securities. The old and new plans are substantially the same, as regards the entire lia- bilities of the Bank ; but by the new bill the reserve of bullion is practically separated and apportioned to the circulation Jind the deposits. The following statement, made from the last returns, will show exactly what the difference is, and by which it will be seen to be merely a matter of form. Under the old law the ac- counts of the bank would have stood thus : — £ Circulation of notes 20,242,785 Deposits 13,015,731 Total liabilities to the public 33.258.516 Against which would have been held a reserve of 9,329,841/, in bullion. Under the new forms, the two departments stand thus : — ISSUE DEPARTMENT. Notes to the banking department, for public circulation, £ and for the reserve, against the deposits 22,801,100 Against which notes, bullion is held to the amount of 8,801,100/, being the excess above 14,000,000/ of securities. In the banking department the liability is — £ For deposts 13,015,731 Against which are held — Notes which can be exchanged for bullion from the issue £ department 2,558,315 Coin 528,741 3,087,056 Suppose the banking department were to convert all the notes into bullion, which it has the power to do, then the bullion would be held thus : — £ Issue department 6,242,785 Banking department 3,087,056 Total bullion 9,329,841 The practical effect, therefore, of the new bill is, to assign abso- lutely a reserve of bullion against the real circulation in the hands of the public, equal to whatever sum it exceeds 14,000,000/, which cannot be touched by the Bank, or used for any other pur- pose ; the remainder being assigned, whatever it may be, to the payment of the deposits, whereas, under the old bill, the whole bul- lion was held equally against all the liabilities. By the old bill the bullion, amounting to 9,329,B4l/, held last week by the Bank, was held equally against the circulation and the deposits, amounting to- gether to 33,258,516^, while, under the new bill, 6,242,785/ is practi- cally held against the circulation alone, and 3,087,056/ against the de- posits alone. If the new bill be more stringent than the old bill, it can only be because the amount of 6,242,785/ of bullion, which it compels the directors to hold, is larger than is necessary in ordinary prudence, to place as a reserve upon a circulation of 20,242,785/; or that if the Bank directors were conducting their business under the old bill, they might with prudence reduce their reserve below 9,329,841/, to meet claims payable on demand amounting to 33,258,516/. From the action which, in former times, we have seen take place upon the deposits, and the circulation under a continued dram for the import of grain, and looking to the many reasons which we have already given why that drain may be expected to be continued for some 139 months to come (thougli there may be a temporary suspension), we are clearly of opinion that no prudent body of directors would allow their bullion to sink below that sum ; and we have never refrained from expressing our opinion, during the last three months, that the directors should have taken measures at a much earlier period to prevent it sinking even so low, excepting in reduction of its liabilities. Whether the new bill has been more stringent than the old bill prudently managed, depends entirely, therefore, upon a question of opinion as to whether the Bank directors could prudently have suf- fered their bullion to go below 9,329,841/, as a guard under any large probable import of grain, upon deposits and circulation to the extent of 33,258,516^; we have no hesitation in expressing the opinion, that after the experience of 1839-40 no body of directors could have been rash enough to have done so. But while we cannot trace any part of the pr< sent pressure to the condu t of the Bank directors, or to the operation of the New Bank Bill, but simply to the uncontrollable and imperative neces- sity of importing large quantities of food at a time when we have no other means to pay for it, but by drawing upon our reserve of banking capital, we would not thereby be understood to approve of the course the directors have pursued. Our object is not to vindi- cate the Bank directors, but to keep public attention directed to the sole and great cause of the derangement. If the Bank direc- tors have erred at all, of which we entertain no doubt — it has been that they have increased the private securities, by discounts of com- mercial bills too freely, considering how rapidly their reserve has declined — that they did not sufficiently early, or to a sufficient ex- tent, increase the rate of discounts, which would have checked the demand upon them, and induced an importation of capital, (if we may use the term), for investment in this country. We think we need only to place before our readers the following statement of the bills under discount in each week, since the begin- ning of this year, and compare those amounts with the reserve and the bullion, (the former representing the portion of the latter at the command of the banking department,) to show that the public can- not, at least, complain that the Bank directors have withheld accom- modation ; but to eveiy prudi nt man, familiar with banking, this statement will rather show that the directors have increased their securities, in the face of a rapid diminution of bullion, in a way which but few bankers would consider safe. The following is the table, ex- tracted from the bank retuins of each week :— Private securities Reserve Bullion Rate of discount. Jan. 1 14,6r)4,!)05 ... 9,437,796 ... 15,066,691 ... 3 per cent. — 8 1S071,820 ... 8,920,397 ... 14,951,572 ... 3 — — 15 14,464,948 ... 7,471,177 ... 14,308,022 ... 3^ — — 22 14,4i0,7ll ... 7,269,311 ... 13,948.681 ... 4 — — 29 14,489,657 ... 6,843,790 ... 13,442,880 ... 4 — Feb. 5 14,106,072 ... 6,432,343 ... 12,901,658 ... 4 — — 12 14,019,936 ... 6,674,267 ... 12,287.737 ... 4 — — 19 15,071,256 ... 6,575,174 ... 12,299,109 ... 4 — — 26 15,039,339 ... 6.732,821 ... 12,214,761 ... 4 — Mar. 5 15,819,148 ... 6,711,809 ... 12,044,934 ... 4 — — 12 16.905.705 ... 6,316,390 ... 11,595,635 ... 4 — — 19 17,35«,712 ... 6,217,261 ... 11,449,461 ... 4 — — 26 17,650,874 ... 6.162,440 ... 11,231,630 ... 4 — April J 17,824,355 ... 5,571,258 ... 11,015,583 ... 4 — — i 18,627,116 ... 4,391,470 ... 10,246,410 ... 5 — — 16 ]»,136,377 ... 3,463,628 ... 9,867,063 ... 5 — — 23 17,111,001 ... 3,087,056 ... 9,329,841 ..5 — Thus we see, while the bullion has sunk from 15,066,691/ to 9,329,841/, 140 and the banking reserve from 9,437,736' to 3,087,056^ the bills under discount bave increased from 14,054,905/ to 17,111,001/; and it will be seen tliat, from 22(1 of January, tb^^ bills under discount rose from 14,450,711/ to 18,G27,1IG/ on 'tbe 9tlj of April, in the face of a decline of bullion from 13,948,681/ to 10,246,410/, and without tbe slif)[hest effort being used to increase tlie value of money, by raising the rate of discount. In tbe face of tbat demand, tiie rate remained at four per cent, during tbe whole period. These facts aie a suffi- cient justification for those wbo bavc, during tbe whole of that time, been calling upon tbe Bank to increase tbe rate of discount; and we are satisfied, if they bad done so at an early period, and suffi- ciently mucb, the sudden sbock which has affected confidence so much during the last tortnight, might have been avoided, and so ibe pressure, though not averted, migbt have been mitigated. We entertain a strong opinion that it would be highly injudicious, under tbe present circumstances of the conn ti-y, for tbe directors of tbe Bank to allo^^ the bullion to sink below its present amount, ex- cept by a corresponding reduction of deposits, or by a redemption of its notes in the event of the trade of the country leading to a con- traction of tbe circulation ; and we are the more decided in that opi- nion, on account of the large imports of grain which will be required during tbe remainder of the year. To whatever extent more bul- lion is exported, it must bi; obtained, not by the bank adding further to its discounts, but by the public falling back upon their own capital. It is probable that, from a variety of circumstances, the pressure will be partially mitigated for a short period, but it is impossible that any circumstances can occur which can avert tbe consequences which must arise from a deficient supply of food, and tbe necessity in which we are placed of making any sacrifice in order to obtain it ; and it would, therefore, only be deceiving ourselves to imagine any permanent relief, except through the means of strict economy and increased production. We look forward to tbe future condition of the commerce of the country, and tbat of tbe labouring popula- tion, with much greater alarm than to the mere money market; for past experience has proved that the condition of capitalists may be rendered easy, and the exchanges corrected, while tbe trade of the country continues to suffer severely for a long period afterwards. It is our intention, next week, to lay before the country, for its serious consideration, an extensive plan, by which the pressure may be in a very great degree mitigated, and by which the trade and industry of the country may be saved during the next two years, from an ex- tent of suffering and depression, of which it is appalling to think. It will be remembered that the full effects of tbe crisis of 1839 and 1840, were not experienced to the full extent before 1841, and even 1842, long after tlie original causes had passed away. We bave no faith whatever in temporary palliatives ; they may give momentary ease, but they invariably prolong and often aggravate the evil. We pledge ourselves to propose nothing that shall not be in the strictest accordance with the most approved principles, sustained by experi- ence, and that shall not be as advantageous as a permanent measure, as It shall be efficacious as a cure for the disasters with which the country is threatened during the next two years, from a singular and unparalleled complication of causes. Meantime, we crave the careful attention of our readers to this article, and to the fact, that the evil we are labouring under is an exhaustion of capital — a scarcity of commodities, which nothing but economy or increased productiveness can cure. ARTICLE XVII. THE PRESENT CRISIS, ITS CHARACTER AND REMEDY. The awful predicament in which the country is now placed, and the still more awful predicament into which it is fast hurrying, from causes over which human power can now exercise little or no direct control, renders it the imperative duty of all to exert every effort of mind in order to avert, or at least to ameliorate, if possible, the disasters which impend over us. But, above all, it is our duty, while suffering under the severity of a great pres- sure, to be careful that we do not yield to mere empyrical pallia- tives, which, while they may afford some immediate ease, must ter- minate in increased disorder and aggravation of the evil. At the same time, while this caution is necessary, it is our duty, as intelli- gent beings, to discard every prejudice which former abuses have created, and to bring all our intellect and experience, uncrippled by preconceived notions, to our aid at such a moment. In fulfil- ment of our promise of last week, we now propose to lay before the country an exposition of the only safe plan which can now be adopted in order to meet the extraordinary difficulties with which we are beset — in which we pledge ourselves to propose nothing that is not in the strictest accordance with the most rigid principles of safe finance, and supported by ample experience. And if j in the course of our exposition, there should occur some propositions which jar against the present notions or prejudices of the public, we must beg that they will suspend their judgment until they have carefully gone through it, and seriously considered it as a whole. If our views upon these subjects are entitled to any confidence on^ the part of the country, — if our writings for the last four years entitle our opinions to any weight, — then, on these grounds, we claim from all a careful and patient consideration of our proposals, before they permit themselves to be prejudiced by any pre-exist- ing opinions, formed under different circumstances. If we have any reputation for economical science or commercial knowledge, we stake the whole of it for the perfect safety of every part of the plan we shall now venture to propose. There was probably never a period, at least in modern times, when such a combination of causes existed, all tending to produce the most serious and the most complicated difficulties, present and future, as at this moment. First, we have, during the last three 142 years, been engaged in expending our capital, at a rate infinitely exceeding our available means, in the construction of railways, which, however useful and beneficial of themselves as great and new machines for economising time and labour, and facilitating the transport of goods, have absorbed the floating capital of the coun- try to an extent beyond all proportion to our means, consistent with the demand upon it for reproducing or obtaining the ordi- nary commodities necessary for the consumption of the country. During the last three years, the formation of railways and other similar internal works, have been sanctioned by Parliament to the extent of two hundred millions sterling, and schemes amounting to about FORTY MILLIONS morc are seeding for its sanction in the present session. Out of the tvto hundred millions already sanc- tioned, as nearly as we can estimate, not more than seventy or EIGHTY MILLIONS have yet been expended. However men may com- plicate that expenditure in their ideas, by the intervention of the money, used merely as the instrument for transferring commodities, or a command over them, from one to another — the simple fact is, that we have consumed commodities in the shape of food, clothing, lodging, &c., to the extent of eighty millions in railways, which, though t.-ey may facilitate the future production of commodities, do not, at this moment, replace them for present consumption ; nor do they furnish a means of exchange, by which we can obtain them from foreign countries. In order to look at this subject fairly, and to understand it distinctly, we must put money out of the question altogether (as it is a mere instrument of exchange) — and confine our views entirely to it as a question of commodities. At a moment when we Avere indulging in this extravagant course of exhausting our floating capital — if our harvests had been unusually productive, by which a great abundance of cheap com- modities had been placed within our reach — had the supplies of the raw materials of our industry been abundant and cheap, whereby we could have employed our population and mills in producing cheap goods to exchange with foreign countries for other commo- dities which we require to import, such an increase of wealth would have enabled us to go on with that extravgant expenditure much longer than we could under less favourable circumstances. But, as the facts are, the very opposite is the case. The harvest of 1.845, and especially the potato crop, not only in this country, but in the whole of Western Europe, was deficient, so that all the old stocks of grain and provisions were consumed in ekeing out the consumption up to the harvest of 1846, which unfortunately proved even much more deficient than the preceding one. The effects which these two bad harvests, in succession, have produced in this and the neighbouring countries, during the past six months, are too well known to require any special allusion to in this place. The influence which they have had in producing the present crisis has already been so fully discussed in our columns, and is so fully appreciated, that we shall not now lose time by further consider- ing them. In about eight months, we have lost nearly est, a serious fact in two respects : — first, it imposes upon our insufficient resources for this season the necessity of supply- ing the consumption of all Europe — for all are alike late — for a month or six weeks longer than if we had had an early harvest ; and secondly, because a late crop is exposed to danger which an early one is not. In the south of France, the failure of the rye crop is already considered almost a certainty. In this position, we must consider that supplies are yet required for nearly five months' consumption. Up to this time, the supplies from the United States, though upon a scale without any former precedent, have had no effect in preventing a rapid advance ; and if they are for the next four months sufficient to prevent a material fur- ther advance, it will be most fortunate for the country, at what- ever sacrifice otherwise they may be obtained. As regards the general wealth of the country, and our ability to pay for imported corn, the loss of the crop in Ireland has been further aggravated by the almost total suspension of productive labour in that country. If, in this state of matters, we had a large stock of other commo- dities required for consumption, such as sugar, tallow^ 8fc., and of the raw materials required to sustain our industry, such as cotton, 7vooI, flax, 8fc.^ so that we could, for some time, suspend any further import of them, and so throw the purchasing power of our exports more exclusively upon corn, it would be some ease. But here again we meet with an evidence of a reduced capital, by a small stock of these commodities, of which we must import even more freely than we have done for some time past. The failure of the cotton crop in America is a misfortune scarcely second to that of the corn crop ; for, being the material on which the largest portion of our labour is employed in producing articles of export, a large portion of our people are rendered unproductive at a moment when their labour, or, in other words, its produce, is most required to pay for the food I hey consume ; and thus another great difficulty arises in making our foreign payments. But even here this peculiar diffi- 145 culty with regard to the short crop of cotton does not end. The cotton which will be imported this year may be nearly the same in quantity as last year (one-third of the consumption of last year having been taken from stock on hand at the beginning of the year), but at a price at least fifty per cent higher. Thus, com- pared with 1846, we must pay to America irom. four to five millions sterling more for our cotton in 1847 than in 1846. So far, then, our difficulties arise entirely from a scarcity of the commodities which we require for consumption, or of those which would exchange for them. But there are some considerations of a purely financial kind, of great importance, which it may be well here to refer to, as likely to have a serious effect upon our condi- tion, in the present low state of the bullion and reserve in the Bank of England. First. — During the next five months, we have the whole of the remainder of the eight-million loan for Ireland to be abstracted from the capital of the country, and which, being chiefly, if not wholly, destined for the purchase of provisions, will in reality be sent out of the country to meet our foreign payments. The money, it is true, goes to Ireland first, where it is expended for provisions, chiefly imported from abroad, and from the dealers there finds its way back to England, to pay the bills drawn agamst those shipments of foreign grain from abroad, and to be transmitted to the United States, to pay the balance of trade created by the imports of food. The greatest part of the eight millions loan will, therefore, be an ab- straction of the capital of the country to meet foreign payments. Second. — At the conclusion of the session of Parliament, which it is understood will be in the middle or end of June, the railway bills now before Parliament will be either passed or withdrawn, and the deposits at present lying with the Bank of England, amounting, we believe, to about three millions^ will be withdrawn, and the present deposits of the bank reduced by that amount. Another portion of those companies, who have invested their depo- sits in securities, amounting, we believe, to about one million, will probably then require to dispose of them, so that funds to the amount of four milliotis will have to be dealt with. It is true that so far this is a mere ti-ansfer of capital, in the first in- stance, from the Bank of England to the private bankers of the various companies ; but it is capital, which, being now locked up, though used by the Bank, will then be liberated, and either ex- pended by the companies or divided among the shareholders, in either of which cases some considerable portion of it will be applied to foreign payments, and if not immediately, yet ulti- mately it will be in effect the Bank repaying a large portion of these deposits in bullion. Third. — The most important difficulty which immediately im- pends over the money market, of a financial kind, and which can- not fail to create great uneasiness until it is disposed of, is — that, on the 21st inst., Exchequer bills to no less an amount than 9,000,000/ fall due. Now it is certain that, at the present rate of interest, no portion of that sum can be kept out, and that the whole will be sent in for payment unless the rate of interest be 146 very much raised. At the present moment, there are buyers of these securities only at ten sliiUimjs discount. For some time past it has been evident that the amount of Exchequer bills upon the market has been greater than has been required for the select purposes for which those securities are usually held, and the most economical plan for the Chancellor to have pursued would have been to have funded a portion of them at the time he raised the interest, by which means the remainder might have been kept at the present, or at a further, small advance in the rate of interest. As it is, the holders of the 9,000,000/, due on the 21st inst., will require a very large increase of interest to induce them to accept new bills in place of cash. There are three courses open to the Chancellor of the Exchequer. Either he may offer such a rate of interest as will induce the holders to retain the bills, which will be fully one per cent above the rate at which the Government is lend- ing their money, — or he may fund an amount equal to the bills now falling due, which could only be done on very disadvantageous terms, and which would cause a considerable fall in consols, — or he must be prepared to pay them off. The latter is impossible in the present state of the public accounts. It is now only a fort- night until this large amount falls due, and, up to this hour, no- thing is known as to the intention of the Chancellor in respect to them. But with this increasing expenditure, what are our prospects as to income ? It only requires that we should reflect upon the pre- sent condition of trade, and the rapid increase in the number of unemployed artisans in the manufacturing districts, to understand to what an extent a reduction may be looked for in the customs and excise duties, probably not immediately, but towards the close of the year ; for, as we have seen on all former similar occasions, as the duties are in the first place advanced by the importers and dealers, it is some time before a reduction of consumption tells upon the revenue. Under the present high price of food, with a certainty of its continuance for a long period to come, — with a scarcity and high price of the chief raw material of our manufac- turing industry, forming, as cottons do, about one-half of our entire exports, — looking to the monetarial derangement which exists, and which must sooner or later, if it continues, lead to such a depreciation of property, and more especially in railway stock, as will tend to shake individual credit, — looking at all the circum- stances influencing our present and prospective position — it is impossible not to feel the most intense anxiety as to the ultimate results. Such, then, are our difficulties. By what measures shall they be met ? Temporary expedients would not infuse confidence, because temporary — would not even give immediate relief, but might ultimately seriously aggravate the mischief. All pro- posals for an increase of currency are mere illusions. It is not a question of deficient currency^ it is a question only of deficient capital^ or, in other words, of commodities ; and anything that does not increase the quantity of commodities can be of no use what- ever. It must either be, therefore, by increased economy of the 147 r ommodities within our reach, or by the creation of new commo- dities, that any relief can be afforded. The common talk is, that there is too little currency — that there are too few bank notes. The error thus committed will be best shown by examining the course of the Bank accounts during the last eight months, during which period the Bank have increased their advances on bills discounted by upwards of six millions^ while the circulation of notes has not increased at all. On the 18th of September, the amount of bills under discount by the Bank was 12,321,816/, and the amount of notes in circulation was 20,922,232/. From that period there has been a gradually increasing demand for money, and applications for advances and discounts have been pressing upon the Bank ; so that, on the 5th of April, the amount of bills under discount had increased to no less than 18,627,116/, but the amount of notes in circulation, notwithstanding this increased amount of accommo- dation, was only 20,815,234/; so that, in reality, while the Bank had increased its advances to the public by 6,306,000/, the bank notes in circulation had rather diminished. What the public re- quired, during all the period referred to, was capital^ and not circu'aiion, and therefore, when they obtained discounts from the Bank, although paid in bank notes, yet those notes were soon re- turned to the Bank in exchange for bullion, which is a por- tion of the absolute capital of the Bank. So that when the Bank discounts bills, although it issues paper in the first place, it must look upon such transactions precisely the same as if they gave coin for them. If it would not be convenient to give coin, it cannot be prudent to advance notes, convertible into coin. If the Bank were to discount two millions extra to- morrow, it would not sensibly add to the circulation, or the quantity of notes, but would be found immediately to act in a reduction of the bullion. The Bank may increase or diminish its advances of capital at pleasure, but it cannot increase the circu- lation of notes at will, nor can it diminish them until the deposits, which can be acted upon at pleasure, are reduced to the lowest point. This is a point well deserving of attention ; for from this confusion of capital and currency a great portion of the popular errors on these subjects are founded. The facts alluded to are so instructive, that we will place them in a more clear comparison : — Bills under Ban notes in discount, circulation. £ £ Sept. 18, 1846 12,321,816 2<\92'2,2.'52 April 5, 1847 18.627,116 20,8l.i,234 The truth is, that we labour under the disadvantage of a great scarcity of commodities, which can be procured only in exchange for other commodities, and as such by bullion. But we have parted already with as much bullion as we have to spare ; and of other commodities, owing to their scarcity, the prices are gene- rally not low enough to enable us to export them to a foreign market. Our capital is inconveniently diminished. It behoves us, then, to see if there is any part of it which is at present idle and unproductive, and which could be called into active service. This is a moment when economy on all handsjatwHMAe st^Hed, and university) 148 especially is it incumbent upon us to see that none of our ex- changeable commodities are unproductive and useless. There are various modes by which we have already done much to economise capital. By the system of banks of deposit, all the spare capital, from day to day, is collected from the public, and forms in the hands of bankers a large fund, with which they make advances to those who are willing to pay for them, by discounts and otherwise. Without this system, all this fund would be scat- tered through the country in small sums, locked up in chests or cash boxes, and absolutely idle. The economy so accomplished is just the same as if so much additional wealth were added to the country. Another source of economy has been the substitu- tion of paper for coin, the former being convertible into the latter at pleasure, a sufficient quantity of which being always kept on hand, in order to secure such convertibility. Whatever amount of capital has been saved by these means, has been so much actual addition to the commodities of the country, and has increased to that extent our power over the commodities of other countries in exchange. In order to see if there is any further important eco- nomy which we can safely avail ourselves of, let us shortly insti- tute an examination into the nature of capital and the functions of currency. NATURE OF CAPITAL AND FUNCTIONS OF MONEY. That we may be able the more clearly to discover whether we possess any saje means of further economising the capital of the country, or rendering it more effective, let us shortly examine the various steps by which wealth advances, and the laws by which commodities constituting that wealth are distributed. Capital consists only of those commodities which each man saves from his annual production : until such accumulation takes place there is no capital. The first step, therefore, in the formation of capital is, that a man does not consume all he produces. The next step which experience has taught the world is, that division of labour, more than any thing else, aids and facilitates the power of accumulation. That a man occupying his whole time at any one employment will produce more, and that more perfectly, than if he was producing a variety of articles. Bu^ the adoption of this practice necessarily led to the necessity of an exchange of commodities be- tween the different producers. Each member of a community finds that he can procure any particular article at less cost of labour, by exchanging th^ article that he himself makes with what he requires, than by making it himself. Hence, each man labours at one class of production, and exchanges with others the surplus of his produce for so much of the surplus articles of each of his neighbours as he requires for his own use. A division of labour, therefore, immediately led to the system of barter. The difficulty and trouble of always ascertaining the relative va- lue of various commodities, which of course was always changing in proportion to their supply and demand, led to great loss of time and inconvenience. A cwt of sugar might be worth a quarter of wheat at one time, and by sugar becoming scarcer, or by wheat becoming 149 more abundant, it might at another time be worth a quarter and a half. Just in proportion as articles were subject to sudden and great increase of supply or of demand, it is obvious would their exchange- able value with other articles fluctuate. It became, therefore, evi- dent, 'that if any one commodity could be found that neither fluctu- ated in its supply or demand, and, therefore, retained one uniform and unchanging value, it would be an enormous economy of time and labour, to ado]3t that commodity as a, standard in which the va- lue of every other article should be expressed, No such article, how- ever, did in reality exist ; but the closest approximation to it was found in the precious metals — gold and silver — which have been respectively adopted as standards by which the value of every other article is expressed or measured. The intrinsic value of gold and silver, like all other commodities, is regulated solely by the labour expended in procuring it. After the standard of value was agreed upon, no more difficulty could arise as to the relative value of other commodities, even though the system of barter had been adhered to. If a man had two quarters of wheat to exchange for sugar, he knew how much gold his wheat was worth, and he would receive as much sugar as was worth the same quantity of gold. But it was soon found that the exchange of commodities would be further greatly facilitated by the introduction of a general medium of exchange, as well as the adoption of a standard of value. The same commodity which had been adopted as a standard of value offered on many accounts the best medium of exchange ; the quali- ties of which must be, that it always conforms in value with the standard, that it presents in itself the greatest value in the smallest bulk, and is, therefore, more easy of transport, and that it is less than any other article subject to decay in the use. But the whole object of the adoption both of a standard of value and of a medium of exchange, is to facilitate the exchange of commodities : they are simply instruments to that end and no other. But it is plain that the quantity of the circulativg medium necessary for a country will not depend upon the quantity of commodities which it pos- sesses at any time, but by the rapidity with which they are ex- changed. A circulating medium, therefore, never can alter or con- trol the intrinsic value of commodities, but being an instrument only for their exchange, must be controlled in its quantity by the commodities, the exchange of which it represents. When gold had thus been adopted, first, as a standard of value, and next as a circulating medium, another step soon suggested itself, by which a still further facility could be obtained in con- ducting the exchange of commodities. A great deal of time was consumed in weighing, and assaying the gold presented in pay- ment, and in calculating any difference which its quality bore to the standard quality. In order to get rid of this difficulty, the system of money was invented, by which the metals were coined in pieces of a certain weight, and of certain fineness, bearing the stamp of the mint, as a guarantee for the weight and fineness ; so that, in all ordinary transactions, the simple operation of counting relieved the public of all the trouble of weighing and assaying. We have thus seen that the steps in the creation of capital, and the establishment of a currency, are these : — 150 First. — All capital is the saving or accumulation of labour. Second. — To facilitate this accumulation, a subdivision of labour, by which each man adheres to one employment, was adopted. Third. — That this led to the necessity of barter. Fourth. — That, in order to facilitate barter, one commodity was fixed upon as a standard, in which the value of all others should be expressed. Fifth. — That, further to facilitate the exchange of commodities, the standard of value was adopted as the medium of exchange. Sixth. — As a further facility, the commodity used as a medium of exchange was coined into pieces, of a given uniform weight and fineness guarantaed by the stamp of the mint, called Money. Now, here we would claim the special attention of the reader to a fact which has baen much overlooked, even by those to whom all the above propositions are perfectly plain and familiar. In a state of barter, commodities will be supplied to a community just in pro- portion as they are required for ordinary uses ; gold and silver will be imported in exchange for the produce of the country just in proportion as they are required for the ordinary uses of plate, ornaments, &c. But when a country is so far advanced that it determines to adopt gold as a standard of value, and as a circu- lating medium, it must be prepared to give up and devote to that purpose a certain portion of its capital or accumulations. The money circulating in a country is a certain portion of the capital of the country, absolutely withdrawn from productive purposes, in order to facilitate or increase the productiveness of the re- mainder. A certain amount of wealth is, therefore, as necessary, in order to adopt gold as a circulating medium, as it is to make a machine in order to facilitate any other production. The process is this : — Suppose in a country a system of barter existed. The commodities produced over and above the consumption of the country would be sent abroad and exchanged for foreign products, to the extent and in the proportion as each commodity was used in the exporting country. Among the articles so imported would be gold and silver ; but only to the extent to which the community required them for general use, for plate, ornaments, &c. In such a state, let a country determine upon adopting gold money as a circulating medium. It is quite clear, if the country does not pro- duce gold, a sufficient quantity must be imported for that purpose, and in order to do this a correspondingly larger quantity of the commodities produced at home must be exported, in order to ob- tain the requisite quantity of gold, which is to be used as an instru- ment for the exchange of commodities in general. The commodi- ties, therefore, which are thus exported for such gold are so much absolutely abstracted from the general capital of the country, in order to facilitate the exchanges of the remainder, and the expense of supporting such a currency is borne by the community, just in proportion as they use it, in the following way : — The whole of the money in use is scattered over the community, but no one receives any interest for what he holds. If he borrows, he pays interest, 151 but for any portion which he holds in his possession he receives none. If it is his own money, received in exchange for his own labour or produce, as long as he keeps it in his possession he re- ceives no interest. Thus the money actually in circulation at any time is totally unproductive ; and it is an expense which the com- munity go to, in order to render the remainder of their capital more productive, by facilitating exchanges. On this account, the smallest quantity of money consistent with the convenience of business will, as a rule, be kept in circulation. Adam Smith describes money as bearing a resemblance to machines or instru- ments for facilitating production, thus : — First, as those machioes and instruments of trade, &c., require a certain ex- pense, first to erect them, and afterwards^to support them, both which expenses, though they make a part of the gross, are deductions from the neat, revenue of the society ; so the stock of money which circulates in any country must require a certain expense, first to collect it, and afterwards to support it ; both which expenses, though they make a part of the gross, are, in the same manner, de- ductions from the neat revenue of the society. A certain quantity of very valu- able materials, gold and silver, and of very curious labour, instead of augment- ing the stock reserved for immediate consumption, the subsistence, conveniences, and amusements of individuals, is employed in supporting that great but expansive instrument of commerce, by means of which every individual in the society has his subsistence, conveniencies, and amusements, regularly distributed to him in their proper proportions. Secondly, as the machines and instruments of trade, &c., which compose the fixed capital either of an individual or of a society, make no part either of the gross or of the neat revenue of either ; so money, by means of which the whole revenue of the society is regularly distributed among all its different members, makes itself no part of that revenue. The great wheel of circulation is altoge- ther different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them. In computing either the gross or the neat revenue of any soci- ety, we must always, from their whole annual circulation of money and goods, deduct the whole value of the money, of which not a single farthing can ever make any part of either. Money, therefore, the great wheel of circulation, the great instrument of com- merce, like all other instruments of trade, though it makes a part, and a very valuable part, of the capital, makes no part of the revenue of the society to which it belongs ; and though the metal pieces of which it is composed, in the course of their annual circulation, distribute to every man the revenue which properly belongs to him, they make themselves no part of that revenue. Thirdly, and lastly, the machines and instruments of trade, &c., which com- pose the fixed capital, bear this further resemblance to that part of the circulat- ing capital which consists in money ; that as every saving in the expense of erecting and supporting those machines, which does not diminish the productive powers of labour, is an improvement of the neat revenue of the society ; so every saving in the expense of collecting and supporting that part of the circulat- ing capital which consists in money, is an improvement of exactly the same kind. We thus see that in maintaining a gold currency, the country absolutely loses not only the whole interest of so much capital, but also a sum equal to the wear and tear of the coin. Any means, therefore, by which the currency can be economised, by which the same facilities can be with equal certainty and safety per- formed without the use of coin, offers a means of absolutely adding to the available and productive capital of the country. Without the adoption of such economical facilities, the wealth of a country 152 would be enormously retarded. Suppose that for every transac- tion in business, coin were actually used as the medium of pay- ment, the amount of capital or commodities that it would be neces- sary to part with, in order to import a sufficient quantity of that metal (even were it possible to get it), would be enormous ; and by such an addition to the coin, the country would be corrospon- dingly impoverished, or in other words, deprived of the ordinary quantity of the other commodities of general consumption, which would have been imported had the gold not been required. Bills of exchange, when used to pass goods from hand to hand, and the use of cheques upon bankers, by which the command over money is transferred from one to another, are the chief and most extensive means used by merchants themselves to economise the use of money. But the most important and most perfect means for effecting such economy, has been the substitution of bank notes, payable on demand. But it is perfectly plain that no substitute for coin can be per- fect or safe, that does not in every respect perform exactly the same operations, that does not follow the same laws in the fluctuations of its quantity, and that does not in every other re- spect conform to the coin itself. Admitting this principle in the most unqualified way, in order to enable us to test the qualities which any substitute should possess, let us shortly examine what are really the offices performed, and the character of the fluctuations which take place, under a purely metallic currency. THE OPERATION OF A PURELY 3IETALLIC CURRENCY. K we used only a metallic currency, the business of the Bank of England would be precisely the same as that which is now conducted in the banking department. The issuing of paper constitutes no necessary part of the business of the Bank of England or any other Bank. The business of all banks in such case, which would be the same as many banks at this moment, would be to receive deposits of money from the publie, for its safe; keeping, and, as their agents, to make whatever payments they ordered. But, as a banker must incur a great expense for the convenience of his cus- tomers, he is allowed to use such portion of his deposits in dis- counting bills, or in holding interest bearing securities, as he can, with safety to himself, considering his liability to repay these de- posits on demand. By this means the banker acquires a fund, in addition to his own capital, from which he can advance money to such of his customers who require to borrow it, taking what he considers good security for its repayment ; and the profit which he thus derives, enables him to perform the business of his cus- tomers without any charge. It is, however, evident that the first consideration for a banker must be, that he at all times keeps such a quantity of his money unemployed as will meet any probable demand upon him — that this quantity must have a reference, first, to the entire amount of deposits which he holds, and next to the circumstances which at any particular period renders it likely that his customers will require more than usual of their money. With a purely metallic circulation, the Bank of England would :153 have its own capital and the deposits of its customers only to deal w.th. The deposits would be made in coin only (or in bullion, by an arrangement for that purpose, by which the Bank would re- ceive bullion at a small reduction from its value in coin, to pay for the trouble and loss of time in sending it to the mint to be coined, as at present). In addition to its own capital, the Bank would use such portion of its deposits as experience proved to be safe and prudent, in public securities and in discounting bills of exchange. The deposits of the Bank in this case would vary as they now do, just in proportion as the unemployed money of the community increased or diminished. Gold is a commodity which is imported only, like other commodities, when it offers to the mer- chant the greatest inducements. As long as wool, or silk, or tal- low, or any other commodity is scarce at home, and offers a profit to import, no merchant will buy bullion ; but when the stocks of all other commodities are so full, that the prices at home are such that it will not answer the purpose of the merchant to import them, then he has recourse to bullion as the most profitable return. So that bullion is never imported except when the stocks of other commodities are large, and their relative prices in this country and others such as will not remunerate the iifiporter. Then bullion is taken as the best mode of balancing the exchanges. The mer- chant, importing gold, places it in the Bank of England, as the merchant importing wool places it in the London docks. But the use which the Bank may make of the gold while they hold it, en- ables them to do so without any charge for rent or risk ; while the Dock company, having no use of the goods placed in their hands, charge a rent. The process, therefore, of an increase of de- posits in the Bank, would always infer a great increase of the stock of other commodities beforehand ; that is, in short, a general abundance of capital, A decrease of the deposits of the Bank would infer exactly the opposite state of things. If we required to import commodities from abroad, we should first send such other commodities as bore a profit, the price of which, from their abundance here, was less than the price abroad ; and it would not be until our general stocks of other commodities were so much reduced, and the prices were so high, that no profit would be de- rived from their export, that gold would be sent to make a foreign payment. So that, as an influx of gold implies a great abun- dance and low price of all other commodities, so an export of gold implies a great scarcity and high price of all other commodi- ties. As a commodity, the price of gold is so uniform in all places, and at all times, that it is seldom used as an article of commerce between nations, except under the peculiar circumstances described; or, in other words, to balance the exchanges of other commodi- ties. When, therefore, the deposits in the Bank were increasing, it would be an evidence of a great abundance of those commodi- ties which constitute the floating capital of the country, and when they were decreasing, it would be an evidence of the great scarcity of such commodities. The deposits held by the Bank would be a fund altogether dif- ferent i'rom the coin in circulation, over which the Bank could ex- 154 ercise no immediate control. Suppose a community required a circulation of twenty millions to perform its internal operations of business, and that that quantity of coin was in circulation. There would be no possibility, on the part of the Bank, of in- creasing that amount of circulation, as long as only the same amount of transactions were performed, for no one would take money from the Bank, and pay interest for it, to keep it idle in his possession. If, under those circumstances, the Bank were able to increase the amount of their advances, by discounting more bills than were sufficient always to return into the channels of circulation, the same amount as flowed in from day to day, either as payments of former advances falling due, or as deposits on private accounts, or in payment of the revenue of the State, always supposing that the circulation had been exactly sufficient for all internal exchanges before ; then such further advances made by the Bank could only be, either for the purpose of trans- mitting the bullion abroad, or for the purpose of using it as an article of manufacture, for plate or ornaments. Such advances, therefore, would not add to the circulation, but would be a re- duction from the capital of the Bank, until replaced, when the security on which the advance had been made became due. And as the Bank cannot add to the circulation by merely increasing its usual advances, so neither could it diminish the circulation by withholding such usual advances, as long as so many persons held deposits with their bankers, upon which they could draw at pleasure. Any attempt on the part of bankers to contract the circulation below the required amount, would immediately lead to a reduction of the deposits ; and until such deposits were reduced to the lowest point, would prove unavailing. We are ail along referring to what would take place with a purely me- tallic currency. But there are means by which a larger circula- tion may be induced in the one case, and a smaller one in the other case. At a period of great plenty and abundance, we have already seen that the deposits in the Bank would increase, in consequence of an import of buUion. The difficulty to employ the deposits to the extent to which the Bank would judge it safe to do so, would induce it to lower the rate of discounts; and this at a moment, too, when the cheapness and abundance of commodities would be tending to create an increased demand for the manufactures of the country, owing to their cheapness ; the two causes combining — a greater demand for cheaper com- modities, and a lower charge for the use of money— would lead to a more extensive trade, and tuller employment ; and thus the quantity of circulation required would be greater ; but all that the Bank can contribute towards such a result, is by re- ducing the rate of interesr, which is of itself one of the compo- nei.t parts of the calculation of every commercial operation. The way in which a contraction of the circulation, were it purely metallic, would take place, would be as follows — and to this part we claim especial attention, as being very important to our consi- derations hereafter. We have already shown that an export of gold takes place when we have such a diminution in the stock of 155 commodities generally, that it becomes unprofitable to export them to a sufficient extent to pay for our imports. From whatever cause this security of commodities at home proceeds — whether from a very undue investment of the floating capital of the country in public works, which had stimulated an enormous consumption of everything, without reproducing the same commodities, or any thing that would exchange for them — or whether from a great de- ficiency in our own crops at home — or whether from a great defi- ciency of the crops, and, consequently, the scarcity and liigh price of those raw materials, by which our manufacturing industry is kept employed — or whether from all these causes combined — mat- ters not ; it is the most certain evidence of a diminished floating capital. At the commencement of such a period, let us suppose that the Bank accounts stood thus : — Capital ^£14,500,000 Rest 3,500,000 Deposits 12,000,000 30,000,000 Government securities ... iEld, 000,000 Bills of exchange 12,00'»,000 Bullion or coin 8,000,000 30,000,000 This would have been nearly the state of the Bank six months ago, leaving out of consideration its issues of notes altoge- ther, and supposing it existing under a purely metallic currency. The Bank would have advanced 22,000,000^ of coin on Govern- ment securities and bills of exchange, retaining 8,000,000/ unem- ployed as a reserve. But as their only liability would have been that of 12,000,000/ to depositors, the reserve of 8,000,000/ would be considered much too large, and a low rate of interest would be charged to try to employ more of it, probably three per cent. In this state of things, a period of scarcity has set in— "our imports are increasing, and a demand for capital exists to pay for them. The Bank is willing to discount at three per cent. The first fund that merchants apply to, therefore, is the reserve of the Bank, which generally sinks, while the bills under discount are increas- ing. The Bank, finding the demand upon them increasing, raises the rate of discount ; and they go on until they have reduced their reserve of coin to as low a point as they think it prudent to pre- serve against the liability of their deposits — say to 4,000,000/; while their bills under discount have risen to 16,000,000/ — the sum of 4,000,000/ having been exported for corn. At this time the Bank accounts would stand thus : — Capital £14,500,000 Rest 3,500,000 Deposits 12,000,000 Public Pecurities £10,000,000 Bills Discounted 16,000,000 Bullionor Coin 4,000,000 30,000,000 30,000,000 The demand is unsatisfied. Corn continues to rise, and more is imported and must be paid for. The Bank is unable, with safety to its own solvency, and looking to the claim of 12,000,000/, due to depositors payable at call, to allow any further reduction in its reserve lund. By a high rate of interest or by limiting dis- counts, a pressure is thrown upon the deposits, which consist chiefly of the reserve balances of various bankers and private per- sons, and as they are reduced to pay for the imports of grain, the buKion sinks in proportion. But it must be plain, that when the 156 deposits had sunk to 9,000,000Z, the whole reserve coin, expept 1,000,000/, would be exhausted; and therefore, in order to pre- vent this great reduction, the Bank would be obliged, during this operation, to limit its discounts daily to a sum much less than the amount falling due, so that, while its deposits diminished, the advances on bills should diminish likewise ; or the Bank would sell a portion of the public securities, but as they are generally, at such a time, at a low price, it is more likely that it would de- pend upon limiting its advances upon bills. Supposing that the Bank held it as a rule not to be departed from, that it should hold at least one'third of its deposits as a reserve, then, to meet a reduction of the deposits to 9,000,000/, a reduction must be made in the amount advanced on bills of 2,000,000/. At this point, the account would stand thus : — £ Capital 14,500,000 Rest 3,500,000 Deposits 9,000,000 27,000,000 Government securities ... 10,000,000 Bills discounted 14,000,000 Bullion or coin 3,000,000 27,000,000 The pressure created by diminishing the discounts by 2,000,000/ at such a time, when a great demand for capital prevailed, would be intense. But, suppose the demand for foreign grain still unsatis- fied, and the deposits finally sunk to 4,500,000/ — against which the Bank would hold a reserve of 1,500,000/— the bills under dis- count would have to be reduced, or public securities would have to be sold, to the further extent of 3,000,000/. The amounts would then stand thus : — £ Capital '. 14,500,0(10 Rest 3.500,000 Deposits 4,500,000 22,500,000 £ Public securities 10,000,000 Bills under discount 11,000,000 Bullion or coin 1,500,000 22,500,000 During a portion of this time, while the advances on bills had been reduced from 16,000,000/ to 11,000,000/, the amount of circulation, withheld by the Bank's limiting the discounts, would be supplied from tlie sums withdrawn from the deposits. But in such a state of things, with a scarcity and high price of raw materials, with a diminished demand for goods, owing to the ex- haustion of people's means, for the payment of food, the trade of the country and the amount of employment would rapidly diminish ; and with them the amount of circulation required. The amount of the circulation thus liberated would be used for the payment of foreign corn. Thus, with a purely metallic cur- rency, in all cases the circulation would be acted upon last, and as an indirect consequence of other causes, both in the case of an import and an export of bull. on — and it would only be in ex- treme cases that the circulation would be acted upon at all ; for — in the case of an adverse exchange, which only went so far as to reduce the reserve of coin in the Bank to the proper propor- tion to the deposits, and there stopped, a considerable export of bullion might take place, without any derangement of business, or any sensible contraction of the circulation. During an influx of bullion, the effect would be — 15T First. — To increase the deposits, and correspondingly the re- serve of bullion. Second. — To increase the securities, and, if discounts were not required, by advances on stock at a low rate of interest ; and Third. — By the establishment of a low interest ultimately to promote more active business, and to increase the circu- lation through advances on bills. During an export of gold, the effect would be : — First. — To draw upon the reserve of coin in the Bank (by dis- counting more bills), wjich the Bank held over and above the quantity required to protect their deposits. Second. — To draw upon the deposits held by the Bank, which could only be done, partly by a reduction of securities, and partly by a reduction of the coin in hand ; and Third. — As a consequence of these measures, and other causes, to contract trade and reduce the circulation. So that, as Mr Tooke has always contended, the first effect of an import or export of gold to correct the exchanges, is felt exclu- sively on the reserve of bullion held in the bank. Such would be the operation of a purely metallic currency ; and it will be seen, that under the circumstances supposed, of an adverse exchange, arising from the necessity of importing a large quantity of corn, at a time when our other commodities were much exhausted, a pressure of great magnitude must be experienced by the commercial classes ; whei a reduction of the amount of bills under discount becomes needful in consequence of a withdrawal of the deposits. And if it is not possible to avoid this evil under a purely metallic currency, how can it be expected to be accomplished by any contrivance with a mixed currency? The whole amounts to this — great ease is the ac- companiment of abundance, and great difficulty and pressure, of scarcity, which cannot be remedied by any artifice which does not give greater abundance of commodities. By other schemes, the burden may be shifted from one shoulder to another, but it cannot in reality be lessened. HOW CAN THE CURRENCY BE ECONOMISED? Having shown that all the precious metals used as a circulating medium are so much of the wealth or the capital of the country, abstracted from reproductive uses, in order to be used as an in- strument for exchanging other commodities — and having shown the practical operations of a purely metallic currency — we now come to consider how far cheaper substitutes may be used, and to what extent the expensive commodity of gold may be liberated, in order to add to the real and reproductive wealth of the coun- try. We lay it down as a clear and undeniable rule, that what- ever substitute be adopted, it must be upon a principle which will secure to it an identity of exchangeable value with the coin which it represents ; and that in all its changes, under any circum- stances, it should be found to follow the same course precisely as a purely metallic currency would follow under similar circum- stances. 158 We have already remarked tbat the most perfect instrument by which the currency can be economised, and by which gold can be liberated from an unproductive to a productive use, is by means of Bank notes, to be used as a substitute for coin. But. in order that these Bank notes should at all times be identical in value to the coin they represent, and express equally the value of commo- dities in relation to the adopted standard, it is absolutely neces- sary that they should be convertible, at the pleasure of the holder, into the coin they represent; so that whatever purpose the coin could serve might be equally well performed by the note, or if not — as, for example, a foreign payment — that the note would in- stan Jy, and without loss of time, command the coin itself. That such a condition attached to a Bank note must at all times, while the condition is complied with, make it in every respect indentical with the coin, is to us a self-evident truism ; admitted, too, by all the first authorities on the subject. Adam Smith says : — A paper money, consisting in bank notes, issued by people of undoubted credit, payable upon demand, without any condition, and, in fact, always readily paid as soon as presented, is, in every respect, equal in value to gold and silver money, since gold and silver money can at any time be had for it. Whatever is either bought or sold for such paper, must necessarily be bought or sold as cheap as it could have been for gold and silver. If there be any discrepancy of opinion on this subject among men whose opinions are worthy of respect, we think it more apparent than real. From Sir Robert Peel's speech on the introduction of the Bank Bill, in 1844, it might be inferred that he doubted the efficacy of the mere convertibility, as a security against depreciation, and for constant identity of value between the note and the coin. But, looking to the provisions of the bill, it would rather appear that Sir Robert Peel did not so much dispute the principle itself, as that he considered some further restriction to be necessary in order to secure a fulfilment of the condition on which the note was issued — namely, payment on demand. We come to this conclusion from the fact, that the bill of 1844 depends on no other principle, against depreciation of Bank notes, except convertibility at pleasure, though it does provide a guarantee that that convertibility shall be certain, by imposing the necessity of keeping a large re- serve of coin against the notes issued. Now, no one will deny that certainty of payment on demand is a necessary condition to maintain an identity of value between a Bank note and the coin it represents. But whether that certainty is derived from a faith in the ability of the issuer always to pay when called upon, or from a reserve of coin, held voluntarily by the issuer, or from the same being held compulsorily by an act of Parliament, can make no difference. As long as the holder of the note is satisfied that he can at pleasure receive coin for it, it is the same value to him ; and, when he doubts that fact, he carries it to the issuer for pay- ment. So that, till the issuer actually ceases to pay, no deprecia- tion can take place. We may then take it for granted that all are agreed that a certainty of convertibility at pleasure, from what- ever that certainty is derived (which may be a proper subject for discussion hereafter), is a perfect guarantee against depreciation 159 of bank notes, and for their maintaining an identity of value with coin. If this be the case, then it will be readily admitted that all the fluctuations aiid changes which take place in a currency com- posed of coin, and bank notes convertible into coin, must be ex- actly the same as would take place under a purely metallic cur- rency ; and, therefore, that such bank noies, so preserved, perform all the functions of a measure of value and a medium of exchange, as perfectly as gold. It is, however, quite plain that, in order to secure the convertibility of such notes into gold at all times, the issuer must hold in his possession, or the immediate command over it, such a stock of gold as will meet any probable demand upon him for the payment of such notes — the remainder being held in good interest bearing securities; and, therefore, only a certain portion of the gold, liberated by the substitution of notes, can be applied to other and productive purposes. By this substitution, the public gain in two ways — first, by the addi- tion of such part of the gold thus absolutely liberated, to the general capital of the country ; and, secondly, by the saving of the wear to which such coin is always subject. Before we inquire how far we have availed ourselves of this great source of economy, by which the capital of the country is so much increased, we will consider how far Some other countries have done so. THE CURRENCY OF HAMBURG. The commerce of Hamburg is conducted entirely by silver, without any economy whatever in its use as capiraf. They do, however, save the wear of the metal by depositing it in the vaults of a bank, and transferring it from one to another by means ot written cheques on the bank. The plan is this : — The Bank of Hamburg is exclusively a Bank of deposit. It receives silver into its vaults, crediting the accounts of the de- positor with the amount he pays. The Bank possesses no ca- pital, and, therefore, the silver in the vaults of the bank is al- ways exactly the amount of the deposits. The depositors with- draw from or add to this amoimt of silver at pleasure. The commerce of the town is then carried on by cheques or orders, given by the buyer to the seller, which orders being paid into the bank, the amounts are transferred from the credit of one account to that of the other. The Bank, therefore, neither dis- counts bills nor makes any advances whatever upon securities. Therefore, as the Bank of Hamburg has no means of making a profit by the use of any part of the bullion deposited with it, any more than the proprietors of the London docks have of using any part of ihe goods deposited with them, it becomes necessary that the depositors of the bank shall pay for this safety and convenience they derive in thus keeping their treasure. All the economy which the Hamburg people derive from bank- ing, therefore, is, they save the wear to which the metal would be subjected if actually passed from hand to hand; but for this they pay certain charges to the Bank. We do not know the exact amount of silver thus deposited with the Bank of Hamburg, but taking it on an average at 4,000,000/ sterling, then that 160 amount of capital is entirely withdrawn from all productive purposes, for the facilitating of exchanges. Taking it, on an average, to be 4,000,000/, and supposing that when capital is very abundant, it sometimes increases to 5,000,000/, and, on the other hand, when capital is very scarce, it diminishes to 3,000,000/, and never below it, we see how much banking ca- pital is thus unproductively locked up, which might be usefully engaged in making advances on good securities, and in discount- ing bills of exchange. If the Bank of Hamburg kept at all times a reserve of silver equal to one-third of its deposits, the remainder might be used as active capital, and the depositors (it being a public establishment not seeking to derive a profit) would, in place of paying for the safe keeping of their capital, receive a certain amount of interest derived from its use. As a matter of fact, the rate of interest is more fluctuating in Ham- burg under this system than in any other capital in Europe ; the changes often being equal to 1 per cent week after w^eek. THE CURRENCY OF FRANCE. In France the currency is of a mixed character, and the capital of the country is economised, not only by the use of the deposits in the banks, but also by a portion of the circulation being in paper. We will leave out of consideration the local and private banks, and glance only at the Bank of France as the most im- portant establishment. The business of the Bank of France is. in effect, precisely similar to that of the Bank of England ; it is a bank of deposit and of issue, combined in one, as the Bank of England was in form prior to the bill of 1844, and is in reality still. The Bank of France, like the bank of England, has a capi- tal of its own, receives deposits from its customers, issues notes payable on demand, and advances its funds on public securities and in the discount of bills; and it is thus enabled, while it af- fords great facilities to the commerce of the country by these advances of capital, to pay a good dividend to its proprietors without any charge to its customers. On the 15th of last month the accounts of the Bank of France stood thus, con- verted into sterling money .- £ Liabilities Circulation of notes 10,880,000 .Deposits 2,720,000 13,000,000 £ Assets Bills under discount, &c. 9,400,000 Bullion or coin 4,200,000 13,600,000 The notes of the Bank of France are payable on demand, and so being convertible into silver at the pleasure of the holder, perform equally well all the uses which coin would perform. So that, compared with the system used by the Bank of Hamburg, the Bank of France, between its deposits and its issues, supplies capital, which would otherwise be in a great measure useless, to the extent of 9,400,000/. And in order to secure to the public the payment of their deposits and the notes in circulation, a re- serve of 4,200,000/ in bullion remains in the vaults of the Bank. As the Bank of France issues no notes below the value of Jive hundred francs, or 20/, the currency of the country can- 161 not by this means be economised to any greater extent than notes of that and higher denominations can be used. The whole of the remainder of the currency is performed in silver. The economy, therefore, practised by the Bank of France, though affording many millions of capital to the public (which would otherwise be locked up unproductively) in performing the func- tions of a circulating medium, is extremely imperfect. In notes of 20/ each, it circulates 9,400,000/ ; against which it holds bullion, say, to the amount of 3,200,000/; the remaining 1,000,000/ of its bullion being supposed to be held in reserve against tlie deposits. By this means, therefore, the capital of France is thus economised or augmented, by — £ The amount of circulation of notes 10,880,000 Deduct the bullion held in reserve to secure the convera- bility of the notes 3,200,000 7,680,000 Thus, 7,680,000/ of additional capital is obtained by France, just as much as if that quantity of silver were dug from a mine in one of her provinces. But still the extent to which this economy is carried is extremely imperfect. Let us compare it with the Bank of England, and see how much more capital France would really economise, and render available for all her purposes, if the Bank of France carried the principle to the same extent as is done by the Bank of England. The Bank of England issues notes of the denomination of 5/ and upwards. On a recent day, the whole circulation of the Bank of England was thus composed : — £ Notes of 5/ 6.100,000 Notes of 10/ 3,900,000 Notes of 201 to 100/, both inclusive 5,700,000 Notes of 200/ to 1,000/, both inclusiye 4,300,000 20,000,000 So that the notes under 20/ were exactly 10,000,000/, and the notes of 20/ and upwards were also 10,000,000/. Supposing, therefore, that if the Bank of France were to extend their issues to notes of the same denominations as the Bank of England does, and that the amount of the smaller notes would bear the same proportion to those of 20/ and upwards, in France as in England, then the circulation of the Bank of France would be increased by 10,880,000/ in addition to its present amount. But this additional circulation of notes would not increase the circulating medium of France by one franc, but would only displace so much silver, and liberate it from the unproductive purposes of a circulating me- dium, and give it to the country as an increased amount of capi- tal, for foreign payments or any other pbjects. In issuing this additional quantity of notes, the Bank would, of course, be obliged proportionably to increase its reserve of bullion, to secure their convertibility at all times. The mode would be thus : — The Bank would issue, in payment of its depooils, in advances upon securities, and in exchange for bullion, the notes in question to the extent of 10,880,000/; as the bullion increased in its vaults, it would extend its accommodation to the public by additional discounts of bills, or it would increase the amount of its interest, 162 bearing securities, retaining always a sufficient additional propor- tion of bullion to secure the convertibility of its notes. At the conclusion of the operation, the accounts of the Bank ot France would stand thus, supposing the deposits to remain the same : — Liabilities £ Circulation 21,7(30.00:» Deposits 2,720,000 24,480,000 Assets £ Securities 17,080,000 Bullion and coin held against the circula- tion 6,400,000 Do. against the deposits 1,000,000 24,480,000 So that, such a change would accomplish an economy of capital, thus : — £ Circulation of notes 21,760, 00 Deduct bullion held as a reserve to secure their convertibility 6,400,000 15,360,000 Thus, besides absolutely adding to the capital of the coun- try, after retaining a corre-sponding increased reserve ot coin, the sum of 7,680,000/, this step would save the country the great expense caused by the wear of the coin, and the enor- mous inconvenience which attends a circulation of Jive franc pieces, carried about in bags. The introduction of this huge economy is now contemplated by France. THE CURRENCY OF RUSSIA, AND ITS CURIOUS EFFECTS IN THE RECENT TRANSACTIONS OF THE RUSSIAN GOVERNMENT. We will next consider the state of the Russian circulation. It is most interesting and instructive. The money of account of Russia is the rouble — a silver coin equal in value to 3Sd or 40^ sterling, according to the rate of exchanges. Originally, the rouble was a silver coin only ; hut at a very early period the Government, to aid its finances, issued paper roubles, which for a time, while their quantity was small, circulated at the full value of the silver rouble. In the course of time, as the necessities of the Government pressed, the amount of paper roubles was increased in payment of the Govern- ment expenditure beyond the wants of the country ; and as there was no provision made for their convertibility into coin, they gradually pressed the latter out of circulation altogether, and were rapidly de- preciated in value. This process went on until, at last, the paper rouble, originally worth SSd to 40d sterling, exchanged only for lid to 11 ^rf sterling in the transactions between Russia and England. In order at length to correct this abuse, and to restore the circulation to a sound footing, the Emperor, by an imperial manifesto, dated the 1st of July, 1839, ordained the adoption of cash payments, by- making the paper roubles in circulation paj^able in silver on demand. To have done this at the original rate at which they were issued, or rather which they originally bore — that of S8d — or one rouble paper for one rouble silver, would have been manifestly unjust to the country; nor did justice to the holders demand it, as they had all obtained them at the depreciated value of about lid. The paper roubles were therefore, by this ordinance, made payable on demand 163 in silver roubles^ in the proportion of 3^ of paper to one of silver, which it will be seen the rate of exchange indicated as the real value. This is a remarkable example of the effects of inconvertibility in pro- ducing depreciation. 13ut since the 1st of January, 1840, when the ordinance referred to first took effect, no further depreciation has taken place, but 05 paper roubles are for all purposes taken for 1 silver rouble^ for the simple reason that the Government is always ready to convert the former into the latter at this rate. Con- vertibility at pleasure is thus proved to be a sufficient guarantee against depreciation. This act was similar in principle to our resumption of cash payments in 1819, though not accomplished in precisely the same way. But the Russian Government did more. The Commercial Bank of St. Petersburg, under the superintendence of a mixed Board of Directors, composed of Government Bank officers and eminent merchants, was empowered to receive deposits of specie, and to issue against those deposits new bank notes representing silver roubles, (intended ultimately to displace the old notes, of which 3^ are equal to one of the new ones, as long as they circulate together.) This Bank has carried on these operations since January 1st, 1840, and has up to this time accumulated deposits of specie, for which it has issued notes, payable on demand, to the amount of 114,000,000 roubles, — or about 1 9,000,000^ sterling ; so that the present account of this Bank stands thus : — Liabilities. £ Notes issued 19,000,000 Assets. Bullion. £ 19,000,000 It is understood that the convertibility of the whole circulation of paper, including the old paper rouble^ (the amount of which is not known,) depends upon this fund of bullion. The Government Officers and Directors of the Bank have come to an opinion that this bullion of 19,000,000Z, locked up in the fortresses of St. Peter's and St. Paul's, is much greater than is neces- sary to hold as a reserve against the circulation of notes, and that they may therefore safely employ a portion of it, in interest-bearing securities, — and as such have determined to invest 30,000,000 of roubles, or at the exchange of 40^/, o,000,000Z sterling, in " liome and foreign stock!''' When this is accomplished, the accounts of the Bank will stand thus : — Liabilities. Circulation £ 19,000,000 19,000,000 Assets. £ Seciuities 5,000,000 Bullion 14,000,000 19,000,000 Of the safety of which, as a Bank arrangement, there can be no doubt ; and as it is essentially a Government Bank, the interest or profit is to be used for the benefit of the public, in liquidating liabi- lities of the Government. Thus the loan of the Emperor of Russia, which has excited so much interest during the last week, is neither more nor less than the adoption of an economy of banking capital. 164 THE SCOTCH SYSTEM OF BANKING. In this system, the most perfect freedom existed up to 1845, and even now the restrictions placed upon it by law are less than on any other System of Banking recorded in history; and under it the economy of Capital and Currency are pushed to the greatest possible extent. These Banks are Banks of Deposit and of Issue, but, un- like the Bank of England and the Bank of France, they extend their issues from 1/ and upwards. The entire circulation of the country is paper, except the silver coin for sums below II, but, the notes being convertible at pleasure, and on demand, always conform strictly to their real value in gold, and cannot therefore suffer any depreciation, or be increased beyond the sum which would circulate, were gold substituted entirely in their place. But in order to preserve this convertibility, it is absolutely needful that the Scotch Bankers shall always keep beside them a sufficient amount of gold, or the command over it, as will secure the payment of any portion of the notes sent in to be redeemed, either for the purpose of making a foreign payment or any other. Besides the issue of notes, the Scotch Bankers hold deposits to a greater extent, in proportion to their business, than any other Banks in the world which arises from their great stability and the con- fidence reposed in them, and also from the fact that they allow inte- rest upon them from day to day. As near as it is known, the deposits of the Scotch Banks amount to about 30,000,000Z. But in the present case we will treat only of the circulation. The quantity of gold for which they can ever be called upon in Scotland is so trivial that the smallest possible quantity would be sufficient to hold there. The only considerable demand which they can have for gold is to make foreign payments, and this is required in London or Liverpool. The Scotch Banks, therefore, hold their great conmiand over bullion, wherewith to protect the circulation as well as their deposits, in credits or securities, which will give them a command over bul- lion when required in London. The Scotch circulation, prior to the act of 1845, may be thus stated: — Liabilities. £ Notes under £5 2,500,000 Notes above £5 1,000,000 3,500,000 Assets. £ Securities in Bills of Ex- change 2,500,000 Securities in London, and bulUon 1,000,000 3,500,000 The Scotch Banks might hold the reserve against the circulation in Government Stock, or in Exchequer Bills, but which would always be liable to a loss, in converting, at a moment of an adverse exchange, when their customers are most likely to require funds for foreign payments ; but these are much more likely to be taken from the deposits, and certainly would be so in the first instance, and always, except in a case of extreme drain, than from the circulation. Still, as a matter of economy, it must be a calculation with Scotch Bankers, whether it is better to keep such a balance unemployed with their London agent, to answer all the purposes of their foreign payments, or to run the risk of loss by being obliged to sell securi- 165 ties at a disadvantag-eous moment. It is a question of calculation between the loss of interest on such a balance in London, and the loss of selling securities when required. But the Scotch do, and always have, kept such unemployed balances of cash with their London agents, or, in other words, a command to that extent over the bullion of the Bank of England. A portion of the bullion in the Bank as much l)elongs to the Scotch Bankers, as if it lay in their vaults; and remaining in the Bank of England, it has this advantage ; it is alwajs on the spot where it is required for the only purpose for which it is ever wanted, to meet foreign payments. A Scotch Bank leaves this balance with their agents — say Messrs. Jones, Loyd & Co. — Messrs. Jones, Loyd & Co., keep their unem- ployed balance in the Bank of England, and the bullion in the Bank of England always answers to the demands of its depositors. This system, therefore, perfectly carried out, secures at all times the convertibility of the notes, and renders their depreciation im- possible. Now let us examine, as we have done in the case of France, what the effect would be, if the Scotch system of issues was made to con- form with that of the Bank of England, and they were prohibited from issuing notes under 51. As the Banks redeemed their notes, their place would be occupied with sovereigns, and the Banks would be obliged to withdraw their advances of capital to the public to a corresponding extent ; but as correspondingly less reserve would be required, the advances to the public would not necessarily be re- duced by the whole amount of the redeemed circulation. When completed, the statement of the Scotch circulation would be — Liabilities. £ Notes, £5 and upwards, . 1,000,000 1,000,000 Assets. £ Securities on Bills of Ex- change 700,000 Securities in London and bullion 300,000 1,000,000 By this means the capital of Scotland would be actually reduced for all productive and useful purposes, by the amount of 800,000/ ; — thus, in the first case, the economy would be — £ Notes In circulation 3,500,000 Reserve against it, even though all held in bullion 1,000,000 2,500,000 in the last case the economy would be — £ Notes in circulation 1,000,000 Beserve against it j 300,000 700,000 In the one case the economy of capital affords additional means for productive purposes, to the extent of '2,.50O,0OO/, and in the latter case to the extent of 700,000/ ; and in both the circulation has the same extent of guarantee against depreciation. But Scotland would lose still further by the change, — in two waj's. First, — The profits which the Bankers obtain from the circulation of the notes, not only enables them to avoid the charge made by the Bank of Hamburg, W6 and not only enables them to keep the money of their customers without any charge, as the Bank of France and the Bank of England do, but it further enables them to give a liberal interest from day to day for all monies deposited with them ; so that, by this means, the profit of the economy of capital thus brought about goes indirectly to the public, the Bankers' profit arising from the difference of the inte- rest he pays for deposits and receives for loans. Second, — The Scotch nation are saved from the expense consequent upon the wear and tear of a metallic currency, which the experience of England within the last seven years has taught us is no trifling matter. The only possible question to which the Scotch system is left open is, whether the convertibility of the notes is sufficiently and absolutely secured. Experience should be a satisfactory proof of this, and it is a question which we may discuss hereafter. THE STATE OF THE CURRENCY IN ENGLAND. We now come to consider the character and state of the currency of England ; and to examine how far the unquestionable principle of economy, which we have described, and which has the sanction of every writer and politician of any eminence whatever, has been adopted. The amount of gold coin in circulation in England is not precisely known, but by a variety of tests and calculations, to which it is not necessary here to allude, the lowest estimate is 35,000,000/. Exclusively of silver coin, then, the whole circulating medium may be thus stated : — £ Gold coin 35,000,000 Bank of England notes 20,000,000 Country notes 8,000,000 Total circulation 63,000,000 These notes are all payable on demand, and therefore always con- form exactly in value with the coin they represent. There is no provision by law for the Country Banks to keep any reserve of bullion against their notes, but there can be no doubt that every well- managed Bank does keep such a stock of bullion, or an immediate command over such an amount of the bullion in the Bank of England, as to secure the payment of any portion of their notes as may be presented. For the sake of simplicity we will confine our attention now, only to the Bank of England. The Bank of England issues 20,000,000/, convertible at the will of the holder. This convertibility is secured to the public by the act of 1844, thus : — it is there provided, that against any amount of notes which the Bank shall circulate, it shall hold as a security fur their payment, 14,000,000/ of Government Stock, and for the remainder, gold and silver in the proportion oi four-Jifths of the former, and one-fifth of the latter. The circulation of the Bank in the bands of the public, averages about 20,000,000/, the notes in the banking department of the Bank, being in reality bullion, having gold and silver represent- ing them in the issue department, lying to the full amount over and above the bullion, which acts as a reserve for the notes out of the Bank. If the notes in the hands of the public are 20,000,000/, then there is absolutely assigned, as a guarantee for their payment, 14,000,000/ of Government Securities, and 6,000,000/ of bullion ; 167 the economy of capital, therefore, which England enjoys from the use of Bank of England paper may be thus stated : — £ Circulation of notes 20,000,000 Bullion held in reserve 6,000,000 Economy of capital 14,000,000 The Bank of England is not, as some writers have supposed, relieved by the operation of the Bill of 1844 from paying the whole of their notes in coin. They are liable to pay them, as before, to the last pound. The Bill of 1844 only provides, that they may issue notes, to the extent of 14,000,000/, upon securities; but that whatever amount is issued above that must be against bullion. The principle which seems to have been acted upon in framing that Bill is this : the author of the Bill has considered to what sum, under any conceivable circum- stances, could the circulation of Bank notes be reduced, while they are issued of the present denominations, that is, 61 and upwards. The lowest point in modern times to which they have contracted, under a similar process as we have described the contraction of a metallic currencj'- would take place, was to 15,000,000/, in December, 1839, — after a severe drain for coin ; — he then seems to have acted on the safe side, and adopted the sum of 14,000,000/, under which the circu- lation could not fall ; and then, by compelling the Bank to keep bul- lion above that amount, he secured at least, under any possible event, the immediate payment of all the notes which were likely to be car- ried in. But if under any extraordinary circumstances more than the 6,000,000/ were presented for payment, the Bank would be equally bound to pay them in gold, for which purpose it would sell a portion of the Government Stock held against them. In this arrangement there is nothing new in principle ; it is precisely the same as all banks of issue follow, which are bound to pay their notes on demand. What is new, and the only essential part of the arrange- ment, is, that it prescribes the kinds and proportions of the securities which the Bank shall hold, in order perfectly to guarantee the con- vertibility of their notes. By this means England is richer in the possession of absolute and effective capital, — has the command over other commodities to an extent of 14,000,000/ more than she would under a metallic currency, leaving out of view the Country bank issues altogether. But the public have other advantages from this economy. The Bank of England virtually pays to the Government a large sura annually as a share of the profit derived from the notes circulating, against the 14,000,000/ of securities; and further, the public are benefited by saving the loss which the wear of so much more coin would subject them to ; they save, as Adam Smith says, all the capital which it would require, " first to collect and afterwards to support " this additional 14,000,000/ of bullion. Now let us consider how we should be affected in England were we to adopt the French system, and confine the circulation of our notes to those of 20/ and upwards. We have already seen that the circulation, on a recent day, of notes under 20/, and of notes of that denomination and upwards, were exactly 10,000,000/ each; this vva.s the case within a mere trifle. In the case now sup- 168 posed, the Bank would be called upon to redeem all its notes now circulating under 20/ ; it would be called upon for this pur- pose to furnish bullion to the extent of 10,000,000Z, which would pass into circulation in the country in place of notes. If at the moment there was not a very large stock of bullion in the country, it would have to be imported, and commodities to the full amount sent in payment of it ; and when completed, supposing the securities to be held in the same proportion as they are at present, the Bank account of issue to the public would stand thus : — Liabilities. £ Notes issued 1 0,000,000 10,000,000 Assets. £ Government securities 7,000,000 Bullion 3,000,000 10,000,000 By this charge the country would be absolutely deprived of 7,000,000/ of Capital, of one-half of the annual sum allowed by the Bank for the issue of notes, and subjected to the further expense of the wear of so much more coin. THE PROPOSED REMEDY. We now come to the chief and important object of this article, — having first cleared the way of every objection that can possibly be raised against our proposal, either in principle or practice. We have shown that the circulation of gold in this country amounts, at the lowest estimate, to 35,000,000/, of which, probably, 5,000,000/ con- sist of half-sovereigns^ and 30,000,000/ of sovereigns, — and that the whole ot this amount is capital, for which we have given commo- dities — food, clothing, ^c, in exchange, and is absolutely withdrawn from all productive uses, to be employed only as an instrument, or machine, by which the rest of our capital can be with greater faci- lity circulated. For this purpose, it would be worth all its cost ; but, if a cheaper and equally efficient instrument can be found, it is the height of folly to persevere in the use of so expensive a one. It is impossible that any can entertain stronger or deeper con- victions than we do, of the necessity, at any cost, of maintaining and securing the value of our currency unimpaired, in relation to the standard, and therefore of securing, in the most perfect way, the convertibility of the notes which form a part of it ; and no system, however perfect and attractive in other respects, that does not pos- sess this important quality, should be listened to for an instant. Whatever plan therefore may be found most perfectly to guarantee the convertibility of our paper, should be adopted, nor will we propose any system which shall by any possibility endanger it. Well, then, we have a circulation of at least 30,000,000/. of gold in sovereigns in England, and w^e prohibit, by an act of Parliament, the issuing of paper of a lower denomination than 51. We know that a strong prejudice prevails against the use of 1/ notes; but if we show that that prejudice arose from causes, which our plan will entirely obviate, and that no more danger can exist with respect to 1/ notes than those of 51 by the system which we advocate, while at least Twenty Millions of Capital will be liberated immediately from an unproductive use, 169 and rendered available for the purchase of food and of raw materials ; for the employment of our population, and for all the purposes to which such an increase of capital could be applied, then we feel certain, that in the present and rapid accumulating difficulties in which the country is placed, a mere prejudice founded upon the adoption of false principles half a century ago, will not be suffered long to remain between the country and such a boon. The prejudice against the use of 11 notes originated with the depreciation which took place in our currency during the suspension of cash payments, for twenty years preceding 1819. But this depreciation arose entirely from the fact, that the notes of the Bank of England, like the paper Rouble of Russia, prior to 1839, were not convertible into gold. But this applied just as much to notes of 51 and upwards as to those of 11. The depreciation was the same on all, and from the same cause ; and it would have been as unreasonable for the Bank of England to have withdrawn 51 notes from circulation, after the resumption of Cash Payments, because they had been depreciated during the suspension, as it was to with- draw 1/ notes. What was the consequence? The Bank of England, a large and wealthy Bank, withdrew what had previously been the main circulation of the country, — its 1 Z notes. To replace them with gold required an abstraction of actual capital from the country, the im- mediate effects of which were severely felt. Under this pressure, as no law existed against private bankers beyond a certain distance from London issuing such notes, a great number of new private banks sprung into existence, which, together with shopkeepers and manufacturers, all through the country, who were totally ignorant of the business of Banking, became issuers of 1/ notes, and soon filled up the channels of circulation, which had been previously occupied by the notes of the Bank of England; and, but for the withdrawal of which, could never have found their wa}'' into circula- tion. Undoubtedly, wise as was the Bill of 1819, there can be no doubt that the precautions taken by the Bank of England for the change, were very insufficient to prevent a great amount of mis- chief and abuse. The restrictions imposed by the then existing Bank Charter, prevented the formation of sound and good banks, and threw the duty of issuing notes upon a class possessed neither of capital nor knowledge. This extensive issuing of notes by an inferior class of private bankers was one of the remote causes which led to the panic in 1825, but not a very important one. The sudden command which ignorant men found they had of capital by the issue of these notes, which they were enabled to keep out in consequence of the withdrawal of Bank of England notes, led to wild and extravagant systems of advances upon securities of a class which no banker understanding his business — and certainly none at this time — would dream of, and the consequence was, that such bankers, the moment the breath of discredit passed over the country, and their notes were returned for payment, were a mere herd of bank- rupts, with nothing to oilfer their creditors but valueless securities. But all this again was as good a reason for the abandonment of 5/ notes as of those of 11, or, in fact, against a system of Banks of Deposit as against those of Circulation ; for curiously, the panic of 170 1825 began with Banks in London which did not circulate notes, but were only Banks of Deposit. But it is perfectly idle to dwell upon reasons against a system founded upon such abuses. We have had an experience of twenty years more, during which the whole system of our banking and banks has been greatly im- proved, and the principle has become universally admitted, and proved by experience, that Bank notes, against which a certain reserve of coin is held, the remainder being represented by interest, bearing securities, as a guarantee for their convertibility, form a currency in every respect as efficient and safe as coin itself. Now let us see what would be the effect if at this time we were to adopt upon a sound and unquestionable principle, a circulation of 1/ notes as a substitute for gold. Take the circulation of sovereigns at 30,000,000^. Now, let it be clearly understood, we would not add one shilling to the circulation ; what we would do, would be to substitute paper, payable on demand, the instant and immediate convertibility of which should be secured by a sufficient reserve of gold coin, and the remainder in Government securities— for the gold now performing the purpose, which such paper would do equally well. The paper could only be got out as the gold came in, and, therefore, the change would be gradual, but the greatest part would be accomplished within a year, and a very large portion within a few weeks. We will not now discuss what would be the best machinery by which such a paper circulation should be managed, — whether by a Board of Commissioners appointed by Parliament, by which the whole profit would go direct to the public ; or through the means of banks of sufficient magnitude, like those in Scotland, in open competition, but all complying with whatever restrictions Parlia- ment might impose — and through which plan the profit would reach the public, by more liberal terms of business, as we have shown prevail in Scotland — or by the present machinery of the Bank of England, under the existing charter, and in every respect conform- ing thereto in spirit, — the Bank paying to the Government a suffi- cient sum for the additional profit which it would derive from such a privilege, and extending to certain Country Banks the same parti- cipation in the profits of the circulation as at present. We will not now discuss which of these three plans would be best ; but we will, for the purpose of illustrating the advantage, as well as the safety which would result to the country, by the adop- tion of such a system, suppose that the last-mentioned plan, — that of employing the Bank, were adopted, at least for a time ; and that would present the great advantage of being in a state of perfect preparation and readiness to undertake it. As we have at present no absolute data by which we could form an opinion as to the lowest point to which under any probable circumstances the circulation of \l notes would contract, a certain proportion should be fixed of the whole amount issued, which the Bank should hold in government secu- rities and in bullion ; one which would be amply safe, would be two of the former and one of the latter ; so that for every 100/ of one- pound notes which the Bank issued, it should place in the issue department 66Z 13* Ad of government securities, and 33/ 6.? 8c? of 171 coin. Now let us see what the effect of this would be when the whole operation was effected. The Bank now stands thus : — LiabiUties. Notes in the hands of the public 20,000,000 Assets. £ Government securities. . 14,000,000 Bullion 6,000,000 £20,000,000 £20,000,000 After the change in question, it would stand thus : — £ £ Notes in the hands of the public. Of £ 1 30,000,000 Of £5 and upwards. . . . 20,000,000 £50,000,000 Government securities 34,000,000 Bullion 16,000,000 £50,000,000 The economy of capital, at present secured by the adoption of this principle, compared with what it would be, thus compares : — At present. Under the proposed system. £ £ Circulation of notes 20,000,000 50,000,000 Bullion held specially against this 6,000,000 16,000,000 14,000,000 34,000,000 Let it be observed that the 16,000,000/ of bullion held by the Bank against the circulation would be over and above what it held against its deposits in the banking department, and would be appli- cable only to the payment of notes, and for which it would provide instant payment, down to the amount of 34,000,000Z, to which the whole circulation of this country never could sink ; but if it did, then for every shilling below that sum, there would be Government secu- rities to sell in order to provide payment for the notes. Who could doubt the safety of paper to the extent of 50,000,000/, guaranteed by English consols to the extent of 34,000,000/, and gold to the extent of 16,000,000/.^ While therefore at present we economise the capital of the country by the use of 5/ notes and upwards to the extent of 14,000,000/, we would accomplish the same to the extent of 34,000,000/,— or 20, 000,000/ in addition,— by the use of 1/ notes, and with the most perfect safety. We should thus immediately add to the effective capital of the country, to our stock of commodities, or, which is the same thing, our command over them, to the extent of 20,000,000/ — just as much, as if we dug that amount of bullion out of the centre of England, in the same way as France will add to the amount of her capital by extending her issues from notes of the denomination of 20/ to those of 5/; and in the same way as Russia has, by the law of 1839, accumulated in the Fortresses of St. Peter's and St. Paul's, bullion, or capital to the extent of 19,000,000/. While we write, it is just a week since all London, from the Royal Exchange to the Houses of Parliament, was one buzz of cheerful congratulation at the prospect of the country being saved, by the news that the Emperor of Russia was about to invest 5,000,000/ of bullion which he had thus economized from his cir- culation by substituting notes, under a perfect guarantee for their convertibility, in English Stocks, by which the annual income or dividend derived from them would be transferred from the owners in England to the Russian Government, but, of course, in lieu of ample value given in return ; while we, by the adoption of similar .!j!..Tak'!j:.t~v->as!J~A, 172 means, — by the extension of the same principle and system, which we have already adopted with regard to notes of 51 and upwards, pos- sessed a fund at home, from which we could, with the greatest ease, derive a stock of bullion to the extent of 20,000,000/ over and above the 10,000,000Z which would be needful to protect the immediate convertibility of the notes ! ! But to some it may appear at first sight that so sudden an addition to our stock of bullion would depreciate the whole currency of this country, in proportion to that of other countries. Any such effect would be prevented by the immediate export of such part of the bullion as we did not require, just as the Emperor of Russia is ex- porting his bullion, collected by the issue of notes of the value of thirty-nine pence each. The effect of such an economy of gold from our circulation would be the same as if a similar quantity were pro- duced from a new mine, and distributed over all the markets of the world. An immediate distribution would take place, so as to retain the same value over the whole world. The operation would be this : Immediately that the Bank of England began to issue the \l notes, the gold which they would displace would be at the service of the Bank, two-thirds of which would consist in the public securities it now holds, and one-third would be placed as an addition to the bullion in the vaults. For every lOOl which came in, 66Z 13* 4d would form a fund for additional advances to the public, for though public stock would be held for it, yet that stock must either be pur- chased in the market, or taken from the Government securities now held by the Bank, and so it would go on until the whole 20,000,000/ additional capital was diffused in the country. By this operation the rates of discounts would immediately fall ; facilities would be afforded to commerce, — the orders held by our manufacturers could be executed, — and a large fund of bullion would be provided for the import of grain, a sufficient supply of which in this country has become a matter of the most alarming doubt. Besides the advantages which would immediately result from the addition of such an enormous amount of capital, the Bank of Eng- land would make an amount of profit (including the additional cost of management) of 600,000Z, being three per cent, on the 20,000,000/ of Government Stock purchased, and held as a guarantee for that portion of the notes in circulation, out of which the Government Would receive such a portion as might be agreed upon for the privi- lege given to the Bank ; and besides this, the country would be saved the incessant cost of maintaining a gold circulation, which cannot be estimated at less than 2^ per cent, in twenty years from wear, which amounts to a large sum. All these advan- tages we have voluntarily foregone for the last twenty years ; but no period could be imagined when such a combination of the most complicated difficulties called upon the country no longer to neglect so obvious, so sound, so vast, and so easily attainable a boon as the crisis which has begun, but of which no living man can see the end. The question — how are the hundred millions of people which inhabit these islands and the adjacent countries to be fed during the next four months? remains still without the slightest solution, while every market-day witnesses fresh advances in the 173 price of grain. And the almost equally important question, how are our artizans in the manufacturing districts to be employed during the remainder of the year ? it is difficult to answer. And, lastly, the great and essential question ; how is our public revenue to be kept up amid such prospects ? forces itself upon us. It is a period when common danger demands that all party or other considerations should be set aside, and a great effort made to avert the serious calamities under which we suffer, and which time will only aggravate. In conclusion, we claim for our suggestions the calm and de- liberate consideration of the country. In support of every principle which we have advanced, we have ample authority. We have the authority of Smith, Horner, Huskisson, Lord Liverpool, Ricardo, Tooke, Loyd, and Sir Robert Peel, an array of the most unquestion- able authorities upon political economy and finance to be found in history, for all the principles essential to our plan ; which, moreover, is in perfect accordance with the principles of the Bill of 1819, and to which all the checks and guarantees afforded by the Bill of 1 844 may consistently be added. We would therefore suggest, that the various chambers of commerce throughout the country should immediately meet, and should each appoint a select committee of their members, best acquainted with these subjects, carefully to consider, and report upon the plan as a whole. The only objection which the most careful examination of the subject has enabled us to suggest, is the greater liability to forgery — but practically that is not found to be the case in Scotland, and moreover, that objection is perhaps more than balanced by the present liability to counterfeit coin, and the loss caused by the wear of the coin, which when it does occur, falls greatly upon the lower classes. We can only say that it is with feelings of the deepest anxiety for the welfare of the country that we venture to propose this plan, and we shall be glad to fur- nish any further explanation of our views which the public may require. ARTICLE XVIII. In our preceding article upon the state of the currency, in which we proposed a plan for the substitution of a paper circulation, in- stead of the gold now used, based upon a principle which should secure, at all times, the most certain immediate convertibility, we purposely avoided a discussion of the precise machinery by which it would be best to carry out that plan. We were anxious, first, to establish, beyond any doubt, the correctness of the principle on which the proposal was based ; and, having once done that, we should then be prepared to proceed to consider the details of the machinery by which it could, with the greatest ease, simplicity, and security, be carried into operation. The number of the com- munications which we have received during the week, in reference to that proposition, renders it utterly impossible to notice them individually. The great majority of these communications, and many of them from men of the highest authority, fully and entirely concur, not only in the principles on which the plan is advocated, but also as to its practicability, as a safe and certain means of ef- fecting an extensive economy of the capital of the country, and thus securing a measure, efi'ective for immediate relief and for permanent economy. The objections which have been made to the plan, not only by our correspondents, bnt also by our contem- poraries, have been chiefly confined to matters of detail, which we have not yet discussed. There are also numerous points, on which some of our correspondents appear to have misunderstood the ar- ticle of last week, or its practical operation, on which it may be well that we may now offer some observations, by way of more perfectly clearing up some of the popular doubts and errors in re- lation to the principles involved in our proposal. Some of our correspondents regard the proposed substitution of 30,000,000/ of one-pound notes for the same amount of sovereigns as an addition to the circulation ; and, therefore, fear, with such an addition to the circulation, that, compared with its present intrinsic value, it would become depreciated, and that contracts based upon the "Bill of 1844" would be virtually violated, because "money would be cheaper." It is impossible to conceive any conclusion more at variance with the truth, or one which evinces so imperfect an understanding of the proposal made by us, than is implied in this objection. All contracts made in this country, in the sterling money of the country, since 1819, are, in truth, made for so much gold, at the rate of one ounce for every 3/ 1 7s 1 O^d of such cur- rency ; and so long as our currency maintains that proportion, 175 Vf hether it be in coin, or in written obligations of any kind, conver- tible at pleasure into coin, so long does every contract, to pay 3/ 1 7s 1 O^d, impose the necessity of paying one ounce of gold, and all other sums in like proportion. Nor could any depreciation of the value of our currency take place, except by such an adulteration of our coins that 3/ 17s lO^d did not contain one ounce of gold, or by the issue of written obligations (notes), which should not be convertible at pleasure, and which might, therefore, not at all times be worth the coin they represented. The parties who start this ob- jection are obviously confusing the effect of the plan proposed by us with the state of the circulation during the period of the sus- pension of cash payments, when Bank paper, not being convertible into gold, was depreciated in relation to the coin — when it required a Bank note of one pound and seven shillings in silver to purchase a guinea coin. Xo doubt that contracts entered into in 1814, under such a depreciation, and fulfilled in 1821, after the resumption of cash payments, did impose on the debtor a great loss, and give to the creditor a corresponding benefit. But the same objection pre- vailed then with reference to notes of all denominations. The issue o^ one-pound notes had no more connexion with that depreciation, or, as it is called, " cheap money ^'' than the issue of notes of a higher denomination. The idea that our plan would add to the circulation, is equally erroneous. We have shown, by unanswerable arguments, that under no circumstances will more circulation be retained in tLe hands of the public than is just sufficient to perform the functions of a medium of exchange for the internal transactions of the coun- try. No man retains more money in his possession than he re- quires for immediate use, but either places it in a bank or employs it in the purchase of commodities on which he expects to obtain a profit, or securities which will yield an interest. As a rule, there- fore, the circulation is at all times confined to the lowest sum which is sufficient to conduct the transactions of the country. If, there- fore, any amount oi one-pound notes were issued, they would displace the same amount of sovereigns, which, in the first place, would be received by the bank issuing the notes. The greater amount of ca- pital thus placed at the disposal of the bank would enable either that body or those from whom they purchased public securities, to give to the mercantile community that accommodation, by the discounts of commercial bills, which would enable the latter to import food and raw materials, and to execute those orders for the manufac- tures of the country, which would not only keep the people em- ployed, but would also convert our labour into a means of paying for the food imported from foreign countries In the course of this ope- ration,the gold which was no longer required here,would be exported in exchange for those commodities which we required more than gold. But the gold, though exported, would not on that account be lost to the country. Its whole value would be retained as perfectly as at this moment ; the only difference being that it would be performing an acti> e and profitable purpose, instead of, as at present, remaining idle and dormant, as far as production, is concerned. 176 If we export 10,000,000/ of gold, we receive in return the full value in a variety of commodities which are to us more valuable ; otherwise the transaction would not take place. In the present instance, suppose we export that amount of gold to the United States, and import corn and cotton in exchange, the import cost of the corn and cotton is replaced from the general income of the country, or by the export of the goods to foreign countries. The capital itself remains undiminished ; and whenever other articles become again cheaper in this country, and gold more valuable, the latter would again return here, in exchange for the former, just as certainly as a supply of any other commodity is received when the price is so high as to offer a profit on its im- portation. The substitution, therefore, of one pound notes, con- vertible at pleasure, for the gold now performing the function of circulation, would immediately place at our disposal an additional capital, which we could employ in securing the largest possible share of the corn and the raw materials of our manufactures which the markets of the world have to offer ; and that without diminishing our capital, but by rendering effective for reproduction that which at present must be regarded as dormant and idle. No doubt the liberation of this quantity of gold would be pre- cisely the same in effect as an increased supply to the same extent from the mines. But that increased supply, because liberated from the circulation of this country, would have no effect in depreciat- ing the value of property in this country in particular, in relation to our standard. The effect would be, that of so much gold added to the general stock of the whole world, and not to that of this country in particular ; and when even this large source of eco- nomy, the profit of which would be derived by this country exclu- sively, is considered in relation to the wants of the whole world, no appreciable change could take place between the relative prices of gold and commodities in general, and certainly none between the exchangeable value of the commodities of this country and those of others. And, therefore, no such disturbance as is apprehended by some, could take place in our standard of value. Another objection has been stated, which is also founded on an entire misapprehension of the effects which such a change would produce. A notion prevails, that the effect would be to increase the price of " corw a?i^ cotton',"' but to diminish still further the price of cotton goods, and consequently to aggravate the present want of employment. Now, this notion again proceeds upon the supposition, that we add to the amount of the currency, in place of merely substituting an instrument which, as long as it is converti- ble, is equally secure for internal circulation, but which could not be used for a foreign payment, for another instrument, which could be used for the exchange of foreign commodities. The effect would just be the reverse of that anticipated by such parties. It would tend to lower the cost of corn and cotton, and to increase the price of manufactured goods, and thus to remedy the evils of short employment, so sensibly experienced in the manufacturing districts at this time. The operation would be this : —The Bank of England would become possesssed of a larger quantity of bullion ; irr the operations of the American merchants, instead of being, as at this moment, brought to a dead lock for the want of the ordinary- facilities, would be resumed. Corn and cotton, being both scarce and dear in this country, would be imported in exchange for the gold thus liberated from a useless purpose. The increased supply of these articles would lead to lower prices, while the greater im- port would also tend to a greater demand for our manufactures. At the same time, the larger supply of food, tending to moderate the price at home, would leave a larger portion of the na- tional income free to purchase clothing. The effect, in short, would be, that we should exchange a commodity which we at present have, and which is of no absolute utility, for other commo- dities, mainly for the want of which the country is now suffering. We siiould obtain corn and cotton in greater abundance, and, therefore, at lower prices, while the demand both for exportation and home consumption of our manufactures, would be increased ; and thus not only would the supplies of the necessaries of life be greater, but the means of the working classes to purchase them would also be more extensive. That some portion of these ad- vantages would be obtained by railways is very true ; but, in the present state of the prices of corn, we do not believe to any very great extent. However, to whatever extent even rail- ways might share in the advantage of the great national economy proposed, it is certainly better than allowing this capital to remain, as at present, entirely unproductive — or, at least, not more so than the convertible notes would be which we would substitute in its place. The great and immediate effect would be to place us in an infinitely better position than we now are in the great struggle which will take place in the world during the next five months for the corn and the cotton which can be brought to market. A suggestion has been made by many, that in adopting the change in question, it might be better to begin by the adoption of an intermediate denomination of notes between 1/ and 5/ — or to limit the amount of notes at first to one half of the whole amount which it is supposed would represent the whole of the gold circu- lation. Another suggestion has been made, proceeding from a very similar view, that so great and unquestionable a reserve of capital as this source opens up to us should be kept till some more press- ing and trying emergency. With respect to the former proposi- tions, as far as they affect the mere detail of the mode of carrying the system most conveniently into operation, we will not now treat; but as to the notion, that by such a plan we should be retaining a fund for use at a future time, which would otherwise be exhausted now, we will endeavour to show the fallacy. In the first place — although it were a !-ource to which we could apply only once, and which, having applied to once, would fail us in future — we may remark, that it would be difficult to conceive the possible recurrence of such a combination of unhappy events, when any extraordinary reserve of means could be more demanded that it is now certain they will be during the next six months. And, therefore, on that score alone, and even admitting the view thus taken, it would be difficult to conceive any time when such a re- serve could be resorted to with more propriety. But those who 178 reason thus, do so upon a misapprehension of the effect of the change proposed. They appear to suppose that the capital thus economised would be absolutely expended, and the e:old sent abroad and irretrievably lost to the country. No such effect could ensue. If we thus added so much to our effec tive and disposable capital, which, in the first place, would assume Ihe shape of gold — and if we disposed of that gold in payment for foreign commodi- ties, consisting of corn and the raw materials of our manufac- tures — we should receive full value for it ; and the same amount of capital would exist as before, only in commodities which we did require, in place of those which we did not so much require. The cost of the corn and the cotton so imported, would be replaced to the importer or the manufacturer from the current income of the country, and the capital itself remain undiminished, unless the popula- tion subsisted on their former accumulations instead of their cur- rent income, which they are much less likely to do wiih the aid which such additional facilities would afford to commerce than without them. This great national reserve, therefore, in place of being exhausted by its immediate application to useful purposes, would, in reality, be greater next year than it is now, by the profit which its useful application would afford to the country; and whenever the relative values of other commodities and gold were such, that an increased supply of the latter were desirable, it would find its way back to this country with as much certainty as the large quantities of bullion do, which always accumulate in the Bank of England during a period of a favourable exchange ; and thus this fund, to a great extent, would always return to this country in periods of great plenty, and be ready for a renewed and similar use in periods of great scarcity, on precisely the same grounds that, from 1842 to 1846, many millions of gold lay in the vaults of the Bank more than were required for its im- mediate use. Under any state of currency, the great commercial character of this country, and its great command of capital, will always, during periods of great plenty, become the chief deposi- tory of the precious metals. The great and main objection which has been taken to our plan — that it would subject the country to a great increase of forgeries — is in no way appropriate to our article of last week. In that article we sought only to establish the principle. The objection is one which would be applicable exclusively to the details of any plan which might be proposed for carrying the principle into effect. If, indeed, we were to be content to risk the whole plan upon the adoption of a similar management as that employed by the Bank of England, during the time of cash suspensions, then might we expect a great objection on the score of being exposed to the evil of numerous forgeries. As it is, this objection, raised by our contemporaries the Globe and the Manchester Guardian, are wholly inapplicable to our propo- sition as so far developed. Our first object was to establish the principle; and, that being done, we will next address ourselves to the mode by which that principle can be most effectually and safely carried into practical operation. ARTICLE XIX. A REPLY TO FURTHER REMARKS ON THE PROPOSED SUBSTITUTION OF ONE POUND NOTES FOR GOLD. Before proceeding to consider what would be the best mode of carrying into eiFect our proposal for substituting a convertible paper circulation for the gold coin now in use, we feel called upon to make some further preliminary remarks on the merits of the proposed plan, in reply to objections or doubts suggested by some of the numerous correspondents to whom we are indebted for re- marks and criticisms thereon. We must, however, be excused for remarking, that had the whole of the articles in our two last num- bers been carefully read and considered, the greatest bulk of those correspondents would have been spared the trouble of put- ting forward their objections, as, in most cases, they had been anticipated and answered in the lengthened introductory remarks upon the general principles on which the proposal itself is based. We well knew how great a force of hostility wc should have to encounter, arismg from preconceived opinions based upon a long association of one pound notes with a state of the currency utterly and entirely indefensible upon any well recognised principle ; and on this account we felt it more necessary to preface our proposi- tion with a full explanation of the fundamental principles upon which every sound currency must be based, and to confine our- selves to a plan which should be in every way consistent with Buch principles. To those principles, as laid down in our article of the 8th inst., we have not yet met with one single objection, nor has there been an attempt, on the part of any one, to show that our plan is inconsistent with the strictest application of those principles. It would, however, be just as reasonable to object to Banks altogether, because we have seen, from time to time, so much mischief arise from their mismanagement, as it is now to object to the use of one pound notes, based upon a principle which must secure their convertibility under all circumstances, because in former times the greatest abuses have been permitted in the way in which they were used. Inconvertible one pound notes, issued by the Bank during the period of the suspension of cash payments, or convertible one pound notes, issued from 1822 to 1825 by Banks which, from their character and the circunistances under which they existed, as explained in a former article, were utterly unworthy of exercising such a function, or of the credit 180 reposed in them by the country, are no more to be considered as a test of the use of such an instrument of currency, when placed upon an unexceptionable basis, than the numerous failures of non-issuing Banks during the last twenty-five years, and the enormous losses inflicted thereby on the country, are to be taken as a conclusive reason for the suppression of all such Banks. We will endeavour, in a few general observations in relation to our proposal, to embrace the minor objections which appear still to be entertained against the proposal. Many of our correspondents proceed, in their remarks, upon the supposition that our proposal is intended as a temporary pallia- tive to meet a temporary exigency. If it were so, we should doubt much the wisdom of applping it. We should doubt much the wisdom of having recourse to any plan which would be calculated to afford a temporary relief to temporary difficulties, and which was not recommended by undeniably sound principles, as equally applicable to all times. Temporary pallia- tives have only the effect of delaying and postponing the natural cure which is inherent in every evil. But while we would object to the adoption of any system as a temporary palliative, the pressing exigencies of the times are surely not to be used as a reason why a system calculated to effect a great and permanent economy in the capital of the country, should be rejected. As well might it have been urged that the corn laws should not be repealed during a period of scarcity and famine. If our measure be sound in principle, it would be desirable at all times, but most useful at a moment like the present, when every means of increas- ing the supply of commodities should be carefully economised ; just as free trade, though equally sound and applicable at all times, even at periods of the greatest abundance, is yet of the greatest practical importance at moments of scarcity. But if on the other hand it can be shown that there is anything in our proposal inconsistent with sound principles, in its application at all times, then we would not for a moment urge its adoption as a temporary remedy. On this alternative we have already placed our proposition, and as yet, not one objection has been raised to the principles on which the plan is based, or on which it is supported. There are, however, some points requiring further explanation and illustration. We have stated, in a former article, that we hold it as an indis- pensable principle, with regard to a paper currency based upon a metallic standard, that it should conform in every respect v\ ith a circulation consisting exclusively of coin. It must perform the same functions as an internal currency ; it must maintain at all times precisely the same value ; it must be equally capable of being used to effect a foreign payment, by commanding the amount in gold which it represents ; it must follow precisely the same rules in all its fluctuations — in its contractions audits expansions ; it must, in fact, m every respect, be practically identical with a pure and entire metallic currency. If so, it is impossible that any objection can apply to paper that would not apply to gold. ISTow, the plan which we have proposed embraces the whole of these es- 181 sentials of a currency. We should not add one shilling to the currency ; we should only substitute paper, secured in its conver- tibility into coin, for the coin itself. We should withdraw 30,000,000/ of gold from circulation, and we should replace it with 30,000,000/ of one-pound notes, which should be guaranteed by the deposit of 20,000,000.^ of Government securities, and 10,000,000/ of gold coin, to meet any possible demand which might arise under a contraction of the currency for a demand for gold m exchange for paper. Out of the 30,000,000/, we should thus liberate gradually, as the substitution took place, 20,000,000/ of gold, which would be added to the effective capital of the country, for the purchase of foreign commodities, and the employment of our people. If it were possible to effect the whole change at once, it would be pre- cisely tantamount to increasing the stock of our commodities, of corn, raw materials, &c., by that amount, just as much as if we had, by additional industry, produced commodities to that extent. Bur, then, some of our Lancashire readers complain that such a measure, inasmuch as it would make capital more abundant, and discounts, therefore, more easily obtained, would increase the price of both cotton and corn, by enabling the importers to hold more tenaciously for their price, and by making the demand on the part of the manufacturers, in consequence of a better trade, more urgent. Our correspondents, who take this view of the matter, entirely confuse the benefits of a low price produced by abundance of supply, and of a low price produced by the absence of demand, in spite of scarcity. What benefifc is it to the manufacturer, that cotton should be pressed down a penny a pound, in consequence of his inability to purchase and consume it? What benefit to the mechanic is it, that corn should be forced down 10s a quarter, only because he has not the means to purchase it? Price is a thing relative to supply and demand; and a low price, existing in spite of a short supply, is the very worst evidence of the state of the country, and i§ productive of the worst consequences to the manufacturers and consumers. What are the facts at the present moment ? Liverpool is said to be the cheapest market in the world for cotton, owing to the inability of the importers to hold it, and to the inability of the manufaccurers generally to purchase and consume it. The result is, that shipments of cotton are being made to all other markets, and a scanty supply rendered still more scanty here ; while, by the two last packets, all orders have been countermanded, and credits upon Liverpool closed, so as to discourage as much as possible further shipments to this country. The same has been the case with respect to grain and provisions. We have every reason to believe that, by the two last steamers, nearly every order to pur- chase grain or provisions in the United Stales, lor this country, has been countermanded ; not because there is any doubt that supplies, both of cotton and corn, will be wanted, but because parties have no faith in being able to effect tbe payments neces- sary for the operations. Whatever effect, therefore, the present pressure may have in reducing prices, or in closing the usual channels of supply, it must act most prejudicially upon the interest 182 't)f the manufacturers, in makiug cotton still more scarce — and upon the general consumer, in making grain and provisions still dearer. We last week stated that our measure^ would make both cot- ton and corn cheaper, by increasing the supplies. It would have been more accurate if we had said that it would increase the abundance of these commodities which, with the same given de- mand, would also give greater cheapness. If, however, the price were to rise, in spite of the greater abundance, in consequence of a better demand, such a result could only be an evidence of a greatly improved state of trade and means of the con- sumer. At the present moment, both with cotton and corn, it is entirely a question of quantity. Any plan, which is not of itself otherwise objectionable, that will increase the quantity of cotton, must be beneficial to the manufacturers, — or that will increase the quantity of corn, must be beneficial to the general consumer. While a high price is the only natural corrective of scarcity, a low price is not only calculated to aggravate the evil, but, as it can only be the consequence of the absence of demand, is the surest evidence of extreme depression and suf- fering. But as it is quite clear that the plan we propose could not fail to obtain a greater abundance of cotton and corn for this country, it follows, as a matter of necessity, that we must either have a lower price, or if not, a better trade and a larger consump- tion, which would maintain or increase the present prices in spite of a larger supply. Whether, therefore, we had lower prices, with the present demand, or higher prices, as a consequence of increased demand, greater abundance could only be a source of unmixed blessing to all. Some of our correspondents, again, who see clearly the manner in which the 20,000,000/ of capital might be liberated, and used most opportunely to increase our present amount of necessary commodities, afre alarmed as lo the effect which a return of such an amount of bullion would have upon the currency of the coun- try. This alarm is founded upon an entire misapprehension of the operation. The effect of an efflux and influx of bullion, under the plan proposed by us, would be in every respect identical with that which would take place under a purely metallic currency, as explained at great length in our article on the 8th instant. Bul- lion bearing so uniform a value in any country, is never made use of as a subject of export or import, until other commodities have ceased to bear a profit. We do not export bullion, until we Lave no other commodities which we can export at a profit; nor do we import bullion until our stocks of all other commodities are so large that it will no longer be profitable to import more. In both cases, bullion is usually resorted to as the last instrument of in- ternational exchange, excepting from the countries where it is produced. We are now come to the predicament in this country, that we have no commodities to export in sufficient quantities to meet the payment for those which we must import. We have arrived at the point when we must have recourse to bullion. We had from five to six millions of bullion lying in the Bank above 183 what was needful to be retained. That has been disposed of m payment for grain and cotton. We now propose to liberate 20,000,000/ more, by an operation which would be gradual in itg^ effect, for the purpose of continuing our importations of grain and raw materials. The effect of this last operation would be that we should have so much more cotton and flax to work up, and so much more food with which to support our labourers ; and these combined would furnish more goods to exchange, for a fur- ther quantity of raw material and food. The additional capital of 20,000,000/ thus added to the existing means of the country, would thus correspondingly add to the extent of our commerce, the employment of our people, and the general income and wealth of the community. But, then, some of our correspondents apprehend inconvenience from a return of the bullion, unless we again returned to a gold circulation, which we do not contemplate, and which would be quite inconsistent with the principle upon which our plan is based. The apprehensions we will show to be quite groundless. It will easily be understood that we should not import gold as long as we could import commodities which yielded a profit to the merchant. As long as corn, or cotton, or flax, were in demand, and could be imported at a profit, there would be no influx of gold ; but, if we had seasons of abundance, and our imports of all other commodi- ties had been so large as to reduce their price, so that it was no longer profitable to import them, then, as the last article, an influx of gold would take place to balance the exchanges. Now, suppose the six millions which have already been exported were first to re- turn, then there would still be 20,000,000/, which would have been subsequently exported, existing in the general markets of the world. But under no circumstances could the whole of that quan- tity return ; for the larger extent of business which the employ- ment of that additional capital enabled the country to perform, would require larger imports of all the raw materials, as well as of articles of food of all kinds, consumed by those to whom such an extended traile would give an increased employment. A por- tion of the gold, therefore, which we first exported, would be circulating among those whose increased industry we called into existence to supply us with the additional commodities which we imported, and those new producers would become new customers for our manufactures. But suppose our imports were at length in excess of our wants, and that accumulated stocks reduced prices so as to diminish our im- ports, turn the exchanges, and lead to an influx of gold. Gold would then again accumulate in this country, as it did from 1 841 to 1 844. But an accumulation of gold in the vaults of the Bank would no more lead to an undue extension of the currency under the new state of things than it has done hitherto. From 1841 to 1844, although bullion in the Bank increased from 4,000,000/ to 16,000,000/, yet, comparatively, a very small increase took place in the circulation of the Bank. The stock of bullion remained in the vaults of the Bank, as the stocks of other commodities remained in the various public warehouses, until it again became profitable to export it in exchange for food and other commodities. JSTo doubt, however, such abundance of capital as is indicated by large stocks of com- modities of all kinds, including bullion, would necessarily lead, not only to low prices of commodities in general, but also to a lower rate of interest for the use of capital. If we have a stock of com- modities on hand, which is sufficient to serve the country for two years to come, a command over those commodities would be ob- tained for a given period, at a much lower rate than if the stocks were barely sufficient to last us two months. All loans of money, in whatever shape they are made, are simply a transfer of a com- mand over commodities from one to another. Whenever, there- fore, commodities are abundant, the interest of money must below, a' id when they are scarce, the interest of money must be high. The way in which this undeniable principle operates is this — As commodities become abundant, the number of sellers, in proportion to the number of buyers, increases, and, in proportion as the quan- tity is more than is required for immediate consumption, so must a larger portion be kept for future use. Under these circumstances, the terms on which a holder becomes willing to sell for a future payment, or on credit, become lower than if he were certain that his whole stock would be required within a few weeks. But let us examine the particular effect upon the currency which this greater abundance of capital, and a consequent return to this country of a large portion of the gold which it is now proposed to liberate for the purpose of making foreign payments. There can be no doubt that a return of abundant harvests, which would ren- der it unnecessary for us to import food to the same extent as be- fore, while our exports were increasing, would lead, in the course of time, to a return of a considerable portion of the gold now ex- ported, just as the bullion exported in 1839 and 1840, returned in 1842 and 1843. The effect of this return of bullion, were the currency purely metallic, has already been explained in our article on the 8th inst. Capital would be more abundant, and the price paid for its use, or in other words, " the interest of money," would be lower ; and as a greater abundance of general commodities and a lower rate of interest, would lead to an extension of business and a greater amount of employment, some increase would take place in the quantity of money required for the circulation of the coun- try. But in the case of a purely metallic currency, all the bullion over and above the quantity required for an increased circulation, would remain in the vaults of the Bank, as so much accumulated capital waiting for the iSrst opportunity of being profitably employed again in a foreign payment; just as the six mil- lions of bullion recently exported remained in the Bank from 1842 until the end of 1846. The same would pre- cisely take p'ace under the plan now proposed. We liberate 30,000,000/ of gold from circulation, supplying its place with the same amount of one-pound notes, guaranteed by 20,000,000/ of government securities, and 10,000,000/ of gold. We have a balance left of 20,000,000/ of gold, wherewith we can go into the markets of the world, and purchase food and raw materials, and where we can only obtain a large share of a limited quantity, 185 just In proportion to the price which we are willing or able to give. In the first place, the 20,000,000/ of gold sent abroad would be represented only by other commodities imported, and would con- tinue to be so represented until a return of general abundance, when, as explained, a portion of it would return in the form of bullion. As capital became abundant, the rate of interest would fall, and the increased transactions of the country would require a somewhat larger circulation. 'J his would be furnished by an in- creased issue of paper, but represented by the additional quantity of bullion in the Bank. The increase of circulation, however, always bears a small proportion to the increase of bullion. Thus, at the beginning of 1840, the bullion in the Bank of England did not exceed 3,000,000/, when the circulation was 15,550,000/. From that time until the end of 1842, the bullion increased to 11,050,000/, while the circulation of notes increased only to 17,400,000/; so that, in the face of an accumulation of gold to the amount of 8,000,000/,thecirculation increased onlyby 1,850,000/, andthis in the absence of the legal restrictions which have since been imposed upon the Bank. The efiect under the system now proposed would, therefore, be, that we should liberate a larger amount of bullion, for the purpose of making foreign payments when required, and that in periods of great plenty, we should again accumulate a large reserve of gold in the vaults of the Bank, to meet a similar emergency when it again occurred. Under the new circum- stances, in place of a stock of bullion, amounting only iofive or six millions, held in reserve by the country, to meet an emergency, as we had last autumn, we should hold a reserve equal probably to twelve or fifteen millions at such a time ; the difference, making up the twenty millions originally liberated, being held in an in- creased quantity of other commodities, to sustain the larger trade to which the active employment of 20,000,000/ of capital would give rise. The plan, therefore, which we now propose would al- ways place us in a more effective condition to meet any emergency, whatever it might be, which required a transmission of bullion to meet foreign payments — whether to carry on a foreign war, or to import grain during periods of dearth. By some the objection to our plan has been raised, that by re- taining a gold circulation we have always a large supply of bul- lion in the country to meet the emergency of a war. But to as- sume that the circulation of the country is kept as a reserve for such a purpose, is to admit, that on the recurrence of such an event, we should again suspend cash payments — a measure to which no government or parliament would assent. Coin consti- tuting the circulating medium of the country, would be entirely unavailable for the purposes of making foreign payments, either for the expenses of a war, or for the import of grain. Before it can be used for either purpose, it must be replaced with some other medium of exchange. And that had better be done under the system which shall secure the greatest possible economy of capi- tal, consistent with the perfect convertibility of the paper, than left until the pressure of the moment might involve the country in the necessity of resorting to some violent and ill-considered 186 measure of relief. The economy of capital proposed by us would at all times make us much better prepared to meet any emergency, whatever it might be. It would give us a command over 20,000,000/ worth of commodities, and whether gold, or grain, or cotton, matters little, which at this moment we do not possess. But against our proposal every prejudice which has been called into existence from time to time, owing to an abuse of the issue of paper, has been started. Amongst others, we have been re- mmded of the American Banks, which professed to circulate paper, convertible at pleasure. There is no parallel whatever between the paper issues of the American Banks and those con- templated by us. The paper of the American Banks, though pro- fessedly convertible, yet by the understanding which existed among the Banks themselves, and between them and the public, the paper wa^really not convertible. By an agreement between the different Banks, they never called upon each other to pay their notes in specie ; and thus each Bank always held large quantities of the notes of other Banks, for which they did not demand payment ; and such was the political prejudice against the payment of specie, that any private individual who demanded the payment of specie to any large amount, was marked as a com- mon victim by the Banks. The latter practice, however, would have been altogether unavailing, had the Banks themselves ex- changed regularly with each other, as the Scotch Banks do, twice in each week, the balances being paid in cash, and no over- issue could have taken place. But as it was, the paper of the American Banks was not practically converted, much less was it issued against well ascertained securities, and a suitable portion of bullion to secure its convertibility as now proposed. But be- sides notes nominally payable at sight, a large portion of the American paper currency, when it was depreciated, consisted of notes payable on a distant day, bearing interest, so that in no respect is there the slightest parallel between the two systems. We would, however, remark, that as soon as the American Banks adopted the system of exchanging their notes periodically with each other, and paying the balances in cash, their notes were never afterwards depreciated. An impression also exists, that the plan proposed by us would favour a more lax system of credit in general business. No such result could occur. No note would be issued for which there was not Government securities or bullion deposited to represent it. No better security could be offered. No more absolute representation of real capital, or a command over it, can be found in this country. No one doubts the security of consol warrants, or bars of gold; and surely no credit, based upon such undeniable representatives of value, could be con- sidered as undeserved or subject to abuse. It is a curious fact, that in Lancashire, where the greatest prejudice has always existed against the use of notes, (but this was always more di- rected against those issued by local bankers, than by the Bank of England, and if well considered, would have no relation what- ever to the present proposal) — it is, however, curious, that 187 CO existing with this prejudice, if we may so term it, an un- limited circulation of bills has been in use from time imme- morial. Where the notes of bankers, payable on demand^ and therefore the value of which could be tested at any moment, were refused, the bills of the same bankers, payable at the end of two or three months, have always freely circulated. Notes payable on demand can never be kept out in excess, because the excess would always return to the bank for payment, while bills at two months may be issued in great excess, there being no means of checking the issue till they have arrived at maturity, when they may have been replaced by others. For a people to admit the safety of the circulation of bills payable only on a distant day, and to object to the safety of a circula- tion of paper payable on demand, is, to us, perfectly unaccount- able. But even the paper which we now propose is altogether deprived of the objections which the Lancashire 'people always felt with respect to an issue of local notes. We know that a difference is made in the public mind be- tween notes and hills, inasmuch as the former circulate among the lower classes, who cannot judge of the solvency of banks, while the latter circulate among the trading classes only, who are supposed to be able to judge of the credit of the drawers. But whatever weight such an objection might have against an unlimited issue of local paper, which, were it needful, we could show is much less than appears at first sight, it cannot in any way apply to the plan now proposed by us. Notes issued upon the basis on which we propose, could never be the objects of discredit. The knowledge that each note was represented by Government security and bullion would effectually prevent this. But, then, it is said, that a sudden panic might seize the lower classes, and that they might rush, in ignorance, suddenly to demand payment of these notes. Practically, this objection has no existence. The lower classes, although the medium through whom, iu the pay- ment of wages, these notes are circulated, yet never, at any one moment, are holders of any great quantity beyond a few hours. What is the practice ? A manufacturer receives from his banker 500/ in notes on Saturday for wages, which he distributes among his men. On the same day the great majority are carried to the shopkeepers, and by them again returned to their several bankers. As long, therefore, as the bankers take the notes freely from the shopkeepers, and the shopkeepers from the operatives, there cannot be a hesitation on their part in taking these notes. There is no boarding, as a rule, among the working classes. Those who do save money, place it in the savings banks, but do not keep it by them. This rapid and d'rect circulation of notes from the banker to the manufacturer, then to the operative, and from him to the shopkeeper, and lastly, again to the banker, would always se- cure the plan against the effect of an ignorant panic, and is also one of the best guarantees against the poorer classes suffering from forgeries under any circumstances. While it is possible to suppose that a great and inconvenient demand might be made upon the savings banks, from a sudden panic among the lower 188 classes, no such panic could occur with respect to such paper as we propose, which would always be freely taken by shopkeepers, and by bankers, from the fact, that in their hands it would always be convertible. We cannot too often repeat and insist upon the fact that our proposal is not one of an increased currency, but simply one by which we are enabled to replace gold, so as to add to our exchange- able capital, with an instrument practically convertible into gold. No attempt to increase paper upon a principle which did not libe- rate gold would be of the slightest use to the country, or which was not at once convertible into gold, could be safe. It is commo- dities alone that we want, and no paper which will not command gold can be of any service in procuring them. But a correspond- ent says : — You assume, as a truth, that convertible notes can never be redundant. But were not the notes of 1826 convertible, and was it not also admitted that the issues of 1836 had been too profuse? Is it not indeed a subject of reproach to the Bank, by yourself, at present, that discounts have been too profuse, and what means has the Bank of discounting, but by an issue of notes ? Does not every biU discounted imply an issue of notes for its amount ? It surely is not pretended that the bullion advertised weekly is the source whence these discounted bills are supplied ? If this correspondent had carefully read our two last articles, these questions would have been unnecessary, as they are fully discussed therein. We have proved abundantly that convertible notes cannot be redundant ; and there can be no doubt that the abuses of 1825 and 1836 consisted entirely ot an excess of injudi- cious credits, and not of an excess of circulation, from the simple fact, that at neither period can it be supposed that any one held more notes in their possession than barely sufficed for their tran- sactions. That the power of issuing notes increased to a certain extent the means of seme bankers to give injudicious credits, there can be little doubt ; but the fact that injudicious advances were made as much by non-issuing banks as by those who did issue notes, shows that it was an injudicious advance of capital rather than a redundant issue of paper. But the facts of the last eight months, to which we referred in our article of the 8th inst., are conclusive as to our correspondent's question. We found fault with the Bank that it did not sooner check the demand for discounts by raising the rates, not because it was thereby increasing its issue of notes, but because it was parting with its capital, in the form of bullion, too easily. Our correspondent asks, "Does not every bill discounted imply an issue of notes for its amount?" Our reply is, that although notes may be imme- diately given for every bill that is discounted, yet that such notes do not add to the circulation, but, when the circulation is full, immediately return to the Bank, in exchange for bullion ; and that the bullion t. ais account with the Bank of England as at present ; and if he required any accommodation to eke out his quarterly payments, he must look to his banker for accommodation, or must borrow in the money market as at pre- sent. By this plan, also, all banks would be placed on precisely the same footing, none possessing any privilege which others did not, but left perfectly free to transact all the business of banks of deposit and agency in competition with each other. And by this plan twenty millions of capital, which is at present wasted in 201 performing much less perfectly the function of a currency, than would be accomplished by such notes secured in their converti- bility, would be liberated, to increase the o;eneral stock of com- modities, and to afford new facilities to increase the commerce of the country, just as much as the same amount of capital derived from any other source whatever. The country, moreover, would save a further large sum, which at present is expended in coin- ing, as well as in the wear of the coin and the cost of its trans- mission ; for when gold was required in exchange for notes, as it would usually be for foreign payments, bars wouM generally be taken in preference to coin. The immediate adoption of the plan now explained would, how- ever, be impossible, in consequence of the Bank Charter, at least so far as regarded notes of 51 and upwards, and it would raise a very doubtful question whether even the issue of one pound notes, by another body, would not be indirectly an infringement of that charter ; but whether or not, it would not appear desirable that the notes issued should be from two bodies, and especially as the same machinery and establishment might easily accomplish it all. We therefore now come to consider, in the third place^ how the proposed plan can be carried into effect by means of the Bank of England, under regulations corresponding with those which we have proposed for a National Bank, and of those by which the issue department of the Bank is now conducted. Third — BY MEANS OP THE BATOt OF ENGLAND. To all intents and purposes the issue department of the Bank of England is now as completely separated from the banking department, as if the two were conducted by a separate and dis- tinct administration. We have already explained that the direc- tors have no discretion left to them by the Act of Parliament which regulates this operation, excepting in a very extreme and highly improbable case, when it might happen that the directors would find it needful to sell a portion of the securities held against the 14,000,000/ of notes issued against them. Practically, this branch of the Bank is self-acting ; and all that the di- rectors have to do, is mechanically to follow the regulations laid down by the Bank Act. The precise character of the issue department has not been very clearly understood, or Mr Master- man would not have proposed that the next quarter's deficiency bills should be paid out of that department. And we rather agree with Sir Robert Peel, that if the two departments are to be separated at all, it would have been better to have made the distinction more clear and palpable than it is to the public, while it is left under the same administration. And this might easily have been done without either impairing the profits of the Bank, or depriving the Bank of England of the advantage of conducting its business by the Board of Directors as at present constituted. If, in place of the issue department, a separate bank of issue had been established, managed by a com- mission appointed by the Government and the Governor and Deputy-governor of the Bank for the time being, which bank 293L should have dealt solely with the Bank of England, on precisely the same terms as the issue department does with the banking department, there would have been no real difference in the pro- fits or management of the general business of the Bank of Eng- land ; but the distinction, contemplated under the Act of 1 844, would have been more perfectly understood. If, therefore, the Bank of England should be employed to manage the circulation of one pound notes, under the plan pro- posed, at least until the end of its present charter, the issue department of the Bank might be easily modified, to accomplish all the objects of a national bank of issue, as already explained, without interfering in any way with the privileges which it holds under the present charter. Instead of the present issue department of the Bank, we would propose to constitute a bank of issue, to be managed, as proposed, by three Commissioners appointed by the Government, in con- junction with the Governor and Deputy-governor of the Bank, who would form a Board to carry out the whole of the objects already explained, in precisely the same way as proposed to be done by a national bank of issue, the whole of the profit going in the first place to the Bank of England. This would give to the Bank of England a profit upon the circulation of the one pound notes, over and above what it is at present guaranteed by the existing charter. If the figures which we have assumed be correct, the Bank would issue 50,000,000^ of notes instead of 20,000,000/, as at present; but it would be obliged to hold 16,000,000^ of gold against these notes, instead of 6,000,000/, and 34,000,000/ of securities in place of 14,000,000/, as at present. The additional profit made by the Bank would therefore be con- hned to the interest of the additional 20,000,000/ of securities field against that portion of the one pound note circulation, subject to a deduction, on account of the additional expenditure con- nected with carrying out the plan in all its parts as proposed. The dividends thus obtamed by the Bank, for 20,000,000/ of stock, held against that amount of one-pound notes, would, at three per cent, amount to 600,000/, from which the whole extra expenses of management, including such a sum as should be agreed upon to be paid to the Bank, as a fair and liberal remuneration for the facilities aSorded, should be deducted, and the balance should then be paid into the public exchequer. Thus, by an easy and slight modification of the issue department of the Bank as it exists at present, the whole of the public advantages proposed by a separate and national bank of issue, might be easily secured at once, while the Bank of England would retain the whole of the advantages to which it is entitled under its present charter, unimpaired, with the additional ones, which would result from being employed to issue the new proposed paper circulation. At the expiry of the Bank Charter, no actual change would require to be made in the machinery by which the circulation would be, in the mean- time, conducted. The only question then to be considered, would be, whether the bank of issue should continue to be connected with the Bank of England at all ; and, if so, what modification should 203 be mad^ in the terms, or whether an entirely separate and distinct Bank, performing precisely the same functions, and through the same local agents, should then be established. With the issue department of the Bank converted into a bank of issue, managed by three Com- missioners appointed by Government, but only removeable by the House of Commons, w ith their duties strictly defined by a.i Act of Parliament, and the bank regulated in all the details of its business in the way described, as for a national bank of issue, the whole ob- jects of safety, economy, and public convenience, would be so per- fectly secured, that when the present Bank Charter expired, the only question to be considered would be, whether any further public economy could be secured by a change in its mode of manage- ment. By this means, the great economy of capital proposed could be at once effecied, and the consequent advantages secured to the country, without any infringement of the privileges of the present banks of issue, as guaranteed to them by the Bill of 1844. APPENDIX, CONTAINING THE EVIDENCE OF THE GOVERNOR OF THE BANK OF ENGLAND, TAKEN BEFORE THE SELECT COMMITTEE ON THE BANK ACTS. AN ACCOUNT OF THE NUMBER OF PRIVATE AND JOINT STOCK BANKS AUTHORISED TO ISSUE NOTES, AND THE AMOUNT OF THEIR ISSUES, AS FIXED BY THE ACTS OF 1844 AND 1845. THE GENERAL CIRCULATION OF THE UNITED KINGDOM, TOGETHER WITH THE BULLION IN THE BANK OF ENGLAND, AND BANKS IN IRELAND AND SCOTLAND, FROM SEPT. 14, 1844, TO JULY 30, 1859. AN ACCOUNT SHOWING THE AMOUNT OF THE CIRCULATION OF BANK OF ENGLAND NOTES; THE AMOUNT OF DE- . POSITS; OF SECURITIES; OF BULLION; AND OF THE RESERVE OF NOTES HELD EACH WEEK BY THE BANK FROM SEPT. 7, 1846, TO AUG. 13, 1859. ALSO, SHOWING THE MINIMUM BANK RATE OF DISCOUNT DURING THAT PERIOD. PREFACE TO THE SECOND EDITION. The matter of this Edition is substantially the same as that of the original Edition ; but, as an elucidationof the principles which are contended for, it has been thought both important and con- venient to publish in an Appendix the weekly and monthly accounts of the Bank of England and of the general circulation of the United Kingdom since the passing of the Acts of 1844 and 1845 ; and also extracts from the evidence taken before the late Banking Committee bearing upon the points discussed. London, Oct. 1, 1859. EVIDENCE OF THE GOVERNOR OF THE BANK OF ENGLAND^; TAKEN BEFORE THE SELECT COMMITTEE ON THE BANK ACT, MAY 22, 1857. MEMBERS PRESENT. Mr HiLDYARD. Mr Hope Johnstoxe. Mr Puller. Mr John Lewis Ricardo. Mr Martin Tucker Smith. Mr Spooner. * The CHANtiELLOR of the Exchkqurr. Mr TiTE. Mr Vance. Mr Weguelin. Mr Wilson. Mr Ball. Mr Blackburn. Mr Cayley. Mr Disp.aeli. Mr Ennis. Mr Fergus. Earl of Gifford. Mr Gladstone. Mr Glyn. Sir James Graham. Mr G. A. Hamilton. Mr Hankey. The Right Hon. the Chancellor of the Exchequer in the Chair, Thomas Matthias Weguelin, Esq., a Memher of the Committee ; further Examined. 620. Mr Wilson.] Looking at the tenor of your former evidence, am I right in supposing tliat you consider tliat tlie main duty of a banking establishment in the management of its business is to see tliat, under all circumstances, it maintains a sufficient reserve to meet its liabilities ?— Yes. 621. And that beyond that duty, a banker is not called upon to look to any extraneous circumstance, or to govern himself at all in relation to the trade of the country ^ — No, certainly not, in ordinary cases ; but as far as the Bank of England is concerned, its reserve is acted upon by different causes. It has the reserves of other bankers. 622. That would lead the Bank of England to regard with greater circumspection all the various circumstances which might act upon its reserve ? — Precisely so. 623. But its main duty is to watch its reserve, and to see that its own credit is maintained, and that its own liabilities are met under all possible circumstances ? — That is its duty. 624. Are you of opinion that the Bank of England on its part, and other bankers on their parts, in so attending to the maintenance of their own credit, and taking care that it shall not be endangered under any circumstances, are taking the best course they can to maintain the credit of trade generally? — I think that is so. 625. Any discredit falling upon the Bank of England or upon banks generally, would react upon trade so much that the injury to the trade of the country would be as great as it would be to the Bank itself, probably ? — Yes ; I think that would be the eflfect. 626. And would produce a pressure upon trade more detrimental than any temporary means that the Bank may take, it order to protect its reserve ? — I hold that opinion, certainly. 627. Taking a bank of issue like the Bank of England, of what do the liabilities of the Bank consist ? — The liabilities consist of the notes issued, and of their deposits. 628. That is, the notes in the hands of the public and the deposits of the public placed with them.? —Precisely. 629. Those two heads constitute the liabilities of the Bank ?— Yes. 630. Supposing the deposits to be, as they are at the Bank of England, payable upon call, and net payable upon notice, the circulation in the hands of the public and the deposits belonging to the public then have an equal claim upen the reserve of the Bank at all times?— Yes, they have so. 631. And there is no distinction to be made between claims that may be made for the payment of its notes, and claims that may be made by its customers for the withdrawal of deposits ?—I know of no distinc- tion. 632. Of course, in speaking of deposits, I distinguish between deposits in the ordinary banking sense payable at call, and deposits which are now very frequently lodged with bankers at interest subject to a notice ?— We have none such, with the exception of bank post bills, which have a certain date to run, which is a third class of liabilities. 633. Bank post bills are not in the form of deposits, but they form a species of circulation ? — Yes. 634. With regard to the question as to what a banker ought to con- sider a reserve ; should not his reserve be in something in which he can legally pay his obligations ? — Certainly. 635. For country bankers, who issue notes and are holders of de- posits. Bank of England notes are a suiBcient reserve, because in their hands they are a legal tender ?— Yes. 636. In the case of the Bank of England itself, Bank notes cannot be a reserve, because they are not a legal tender ? — No. 637. Therefore, the only reserve which the Bank of England can be said to hold is bullion, in which alone it can pay its obligations ? — Precisely so. 638. Therefore, the real reserve of the Bank of England is the bullion which from time to time it holds ? — The bullion beyond the amount which is necessary for the bullion guarantee of the active circulation ; beyond the 14,500,000^ issued upon securities. 639. Is that portion of the bullion supposed to be appropriated to any special description of liability .' — According to the spirit of the Act of 1844, the amount of gold upon which notes have been issued beyond the 14,500,OOOZ is specially, I think, devoted to the guarantee of th^ active circulation. 640. But looking at the liabilities of the Bank for its whole circula- tion on the one hand, and its deposits on the other hand, both of which the Bank is equally liable to pay on demand, and in bullion, is not the bullion as a whole in the Bank the only reserve which the Bank holds for its liabilities as a whole, consisting of circulation and deposits ? — No doubt, whatever demand is made upon the Bank, the Bank must meet it in gold. 641. If a person comes to the Bank of England and presents a thousand pounds of notes for payment, you must pay them in gold. You have no other means of satisfying the demand ? — No. 642. If a person comes to the Bank of England with a cheque upon a deposit account for 1,000/, and he says, " I want gold," you must pay gold .?— Yes. 643. You cannot ojQfer him Bank of England notes ? — No. 644. Therefore, in either case, gold alone will meet the two sets of liabilities ?— It is so. 645. The circulation of the country, or of the Bank of England, may be either entirely metallic, or it may be a circulation of mixed paper and coin ? — Yes. 640. The object of using paper to a certain extent instead of coin, is simply for the purpose of economising that coin, and economising to that extent the capital of the country ?— I conceive that is the only object of issuing paper. 647. The greater the extent to which that can be done with perfect safety to the community, the greater is the advantage which the country derives from the adoption of a mixed circulation of gold and paper? — No doubt it is so much capital saved. 648. Supposing you had in tliis country a purely metallic circulation, in that case the whole of that which now forms the active circulation of notes, as well as the circulation for small purposes, which now consists of gold, would consist of sovereigns or other gold coins?— Yes. 649. Do you apprehend that in that case the question of your reserve to meet the purpose of a foreign drain would be in any way altered in principle; would it not be as necessary for you to keep a reserve for the purpose of meeting the demands of foreign trade, as it is now with the present description of circulation ? — The same. 650. The only difference would be that the 38,000,000/ of paper that is now in circulation in the whole country would be replaced by 38,000,000/ of sovereigns?— That w^ould be the only difference. 651. The circulation of a country, if I understand it rightly, is the smallest amount of money which, under the particular circumstances of the country, is necessary for conducting its trade?— That, I think, is the true explanation ; no more circulation is required than is necessary to conduct the trade of the country. 652. In point of fact, the circulation of the country is so much abstracted from the portion of its capital yielding profit for the purpose of performing the duty of circulating commodities and making pay- ments ? — Yes. 653. Any notes or gold that are in circulation are of no use, except for the purpose of carrying on the transactions of trade from day to day?— No, they are unproductive. 654. Therefore, no person has any inducement to retain a larger amount of circulation, whether it be metallic or whether it be paper, than is actually necessary for the purposes for which circulation is required ?— Certainly not. 655.— The more perfect a banking system is in the country, the greater will be the opportunities afforded for economising circulation by the use of cheques, by the use of bankers' accounts, and by all the means by which the portion of capital required for circulation can be saved ? — Yes. 656. With respect to the case of a foreign drain, supposing that we had a purely metallic circulation, and that all issues from the Bank of England were in coin, instead of being in coin and paper, and supposing we had such a foreign drain as we had last year, is it your opinion that any portion of that drain could be satisfied by abstracting from the metallic circulation in the hands of the public ? — No doubt it would be very difficult to satisfy the foreign drain from the circulation in the hands of the public ; the ultimate effect must be, that the Bank would then have to economise its circulation in order to supply that foreign demand, or else the country could not have the means of importing what was necessary for it. 657. But you have already stated that, in the event of a metallic circulation, you would be obliged to keep a reserve of bullion, precisely as you are obliged to keep it now ?— Then it would act upon the reserve, no doubt. 658. The foreign adverse exchange would, in the first instr.nce, act upon the reserve of the Bank of England, as it does now ?— No doubt of it. 659. Supposing there is any discredit attached to the adverse exchange, as there frequently is when a commercial crisis is caused by overtrading, would there not be, in proportion to the discredit which might prevail at such a time, a tendency on the part of country bankers and others, rather to increase and strengthen their reserves than to reduce tliem ?— That would be the case. 660. Therefore, that of itself would tend to create difficulty at such a moment if an attempt were made to withdraw from the active circula- a 2 tiou in the hands of the public, some portion of coin necessary for the uses of trade, and for tlic purposes of exportation ?— Yes, I think so. ' 6G1. Then, taking the actual state of your circulation now, mixed as it is of coin and paper, does not the same principle apply, that if you have an adverse exchange, and in consequence of that a drain for bullion, the whole pressure of that drain comes upon your reserve in the first instance ? — No doubt. 662. From your knowledge and experience of. the management of the Bank of England, do you believe that it would be possible in the case of an adverse exchange now, to abstract notes from the hands of the public, and to reduce the circulation of notes in order to meet a drain for bullion 7 — I think I can see no material difference in the active circulation, in consequence of the high rate of interest charged of late years, or of the restraint put upon accommodation for com- mercial purposes. 663. In point of f-'.ct, is not the amount of circulation nearly a fixed quantity, lixed by causes and circumstances altogether irrespective of the state ©f the exchanges from time to time, or of the larger or smaller quantity of bullion in the Bank.^ — I think, as far as we have had experience of late years, it is so. 6G-i. A mixed circulation of gold and paper under those circumstances will fluctuate, and follow the same rule precisely as if it were a metallic circulation ? — Yes, I think so. 665. So long as those notes are always convertible into gold upon demand ? — Yes. (^'6Q. So long as convertibility is maintained with ease, a mixed circulation of gold and paper will follow the same rules precisely as a circulation exclusively of gold } — Precisely the same, I conceive. 667. In both cases the drain for foreign payments must be made upon the reserve of bullion in the Bank of England? — That is the effect in both cases. 668. Supposing the pressure continues for a considerable period of time, so as to cause a depression in trade, and a reduction of prices, after some time a contraction of the circulation, whether altogether metallic or mixed, might take place in consequence of the reduction in the amount of trade ?— That, I think, would be the ultimate effect of a long continued pressure. 669. But would not the first effect of the drain rather be to increase the circulation, in consequence of the slight discredit that it might create in the country ? — I am inclined to think that it would have that effect to some extent. 670. The circulation of Bank notes, I apprehend, consists chiefly of the reseiwes of other bankers to meet their liabilities .'—It is not very easy to ascertain to what extent the reserves of Bank notes by country bankers go ; we can tell partly from the denominations of the notes, what notes we may think to be in the hands of the public for retail transactions. The larger denominations of notes we consider to be held by bankers, principally for their reserves. 671. But the great transactions of trade now are carried on by means of cJieques and transfers of credit between one bank and another, and to a comparatively small extent by Bank notes ; is not that so ? — By far the larger amount of transactions are carried on in that way, by cheques. 672. Take the London circulation, which is more particularly within your own knowledge, do not you conceive that by far the largest por- tion of your notes out of the Bank, and in the hands of the public, are notes which constitute the reserves of the London bankers ? — Not the larger portion. J think the larger portion are notes which are in the pockets of the public, which are used for the daily expenditure of the public. 673. But, in either case, is it not the fact that their amount is very even, and fluctuates very little?— It fluctuates to the extent every quarter, as I have noticed, of about two millions and a half. At the time 'Of the payment of salaries and dividends, the notes in the hands of the public amount to about two millions and a half higher than they do at the lowest period of the quarter. G74. With regard to the payment of dividends alone, the largest por- tion of the dividends is paid to bankers?— It is about, I think, 4,000,000/ out of the 0,000,000/. 675. Inasmuch as it is now the almost universal practice for persons to keep banking accounts, the notes received for the dividends will immediately pass into the hands of bankers?— Those 4,000,000/ do; the action upon the active circulation is principally owing to the other 2,000,000/, which are received by the general pu))lic, and which we con- ceive remain in the pockets of the general public until they are dis- persed for their daily expenditure. We therefore notice that those notes come back in"^thc course of the quarter by driblets, aiid the active circulation goes down from 20,000,000/ to about 18,000,000/. There is the same oscillation in the sovereigns that we issue. We issue to tlie public for dividends from 300,000/ to 500,000/ of gold. That gold comes gradually back in the course of the quarter, through the bankers ; so that during the quarter we may always calculate upon the amount issued for dividends coming back from the public. 676. Does it not appear that by far the largest portion of the increase takes place within a week of the payment of the dividends, and that the largest portion of that increase is again returned within a fortnight of the time ? — No. I think you will find that the increase to the active circiilation commences about a fortnight before the payment of the dividends, and continues for about three weeks after the dividends. In about three weeks after the dividends the active circulation reaches its highest point; from that period it begins to decline. The reason why the active circulation goes up a fortnight before the issue of the dividends is, that at that time various payments are made for salaries and other things, which cause a great issue of notes to persons not keeping banking accounts. The dividends arc then taken out by the general public in the course of about three weeks; for the general public do not come immediately, as the banlvers do, for their dividends, and that causes a demand tending to increase the active circulation during the three weeks sxibsequently to the payment of the dividends. When the dividends are all paid to the general public, then we find that our active circulation has attained its highest point. From that period the notes find their way back in driblets through the bankers and other channels, and the circulation goes down. 677. But all this is an efteet upon the circulation over which the Bank has, in fact, no control? — No control whatever. 678. In all this the Bank is a mere agent, acted upon by the public wants ?— Certainly. 679. In your evidence on a former day, j'on stated that if a further economy of the circulation Avere efiected by the use of notes of small denominations, you apprehended that an evil of this kind might arise: that we should have, as in Scotland, the whole of the small payments made by notes of a low denomination instead of by sovereigns, and that in consequence of that we should have a much smaller amount of bullion in the country, and therefore have a much smaller reserve with which to meet either the calamity of war, or the calamity of a bad harvest. Now, supposing that, for the purpose of economising capital, it were considered desirable to save the use of coin, to the amount of 40,000,000/ or 50,000,000/, as is done in Scotland, would it not be the case then that, in the event of a drain of bullion, either for a war or for a bad harvest, no relief whatever could be given from that coin in cir- culation Avithout abstracting it from the circulation, antl thereby re- ducing it too low ? — You could only obtain the gold coin now in circu- lation in the hands of the public by issuing notes to represent it; therefore, if there was a large circulation of gold in the country, and a contingency of the kind which you referred to was to take place, there might tlicn be a power of issuing 1^ and 2/ notes to an amount which might be deemed desirable, which would do the duty of the gold coin in circulation, and enable you to use that gold coin for the purpose of meeting that foreign payment. 680. What you mean is this, that at the present moment, while we have a metallic circulation of gold, in the event of a severe pressure we could get relief by substituting at the moment 1/ or 21 notes for the gold in circulation? — That is my meaning. 681. Then you keep the metallic circulation as a reserve ?— That is my object ; to keep it as a reserve for those contingencies. 682. I quite understood your former answer to mean that you regarded that as a reserve in case of difficulty; but what I want to know is, under the present state of the law, would that reserve be under any circumstances available ? —In the present state of the law it would not be, because we are not allowed to issue notes the circulation of which would act as a substitute for that. 683. But if you abstract the gold from the circulation, and substitute for it notes, under circumstances which render them at all times con- vertible into gold, do you not by that means render available for the trade of the country all that additional amount of capital ?— No doubt it is an addition to the capital of the country to the extent to which you substitute notes for gold; but we are supposing that you are using that power only in the contingency of a bad harvest or of war, both of which assume a very considerable destruction of capital. I think the right policy is to reserve that power for those contingencies. 684. Whatever destruction of capital might take place, that destruc- tion of capital would of course be felt more or less in proportion to the amount of capital that you had in reserve. Supposing that your capital represents 1,000,000/, and that the destruction of capital is 600,000/, that would be a destruction equal to half your capital. But if you suppose that the effective capital is 1,500,000/, the same destruction of capital would not have so serious an etfect upon 1,500,000/ of actual capital in the trade as it would upon 1,000,000/ .>— No doubt of it. 685. If you abstracted from the circulation 500,000/, to add it to the entire capital, then whatever destruction of capital might happen by a calamity, you could bear better than you could have done if it had still remained idle in circulation ? — No doubt you would have utilised the circulation of the country for that particular object. 686. But although you had utilised it for a particular purpose at that particular moment, it would still remain eifective for all purposes of trade, such as paying for a supply of corn, or anything else ?— It would remain effective capital so long as its credit remained perfect in the country, and so long as it was used for internal circulation. 687. Then I rightly understood you as expressing an opinion that the gold in circulation may be regarded as a reserve in the event of any great calamity, and that you would contemplate the use of notes of a small denomination at such a time, for the purpose of meeting any particular emergency ?— That was the view I had in the answer that I gave. 688. Would not there be great difficulty at a particular moment in changing notes for gold." If you wanted to change the circulation of the country by substituting notes of a low denomination for gold, would not it require a long period to effect that ? — No. I apprehend that if the Government were to issue for its payments 1/ notes, persons receiving wages from the Government would take those notes, and that gradually, by the Government retaining the gold which it received, and issuing \L notes for wages and other payments, a very considerable amount of 1/ notes might be i-ubslituted for gold through the agency of Govcnmient payments alone; the Government would collect its taxes in notes and gold; it would retain the gold, and nuike all its payments in notes. 689. But a pressure for the importation of corn is a thing that is sometimes confined within four or five or six months, and you could produce by those means but a very small effect upon the 40,000,000^ or 60,000,000^ of gold in circulation during that period ?— I think the mere occurrence of a bad harvest, of which we have had many instances, would be hardly a sufficient cause to alter the circulation of the country in the manner suggested. AVhat I had in my mind was some such calamity as an entire failure of the harvest, when, in order to prevent the starvation of the people, it might be necessary to make use of every means we had to facilitate the importation of corn. 690. But in point of principle, you have no objection to make to any denomination of note in particular, whether a large denomination or a small denomination, so long as the convertibility of the note is main- tained?— No objection in principle. 691. So long as the convertibility of the note is maintained, you can- not conceive that any depreciation of that note could take place ? — No, I can conceive of none. 692. The value of the note and the value of the corresponding coin must always remain the same, as long as the convertibility is main- tained ?—l think so ; but I think it would be necessary to retain a larger proportion of reserved bullion in case of issuing 11 or 21 notes, than yon do upon issuing the present donomination of notes. 693. No doubt the reserve of the Bank must be in relation to the amount of its liabilities, and if you substituted notes of a small deno- mination for coin, you would thereby increase the liabilities of the Bank, and in that proportion you ought to increase its reserve against those liabilities? — Yes, You must assume a higher proportion of liability when you make an issue of a low denomination of notes. The holders of a low denomination of notes are subject to panic, and to sudden influences, which do not affect the holders of a higher deno- mination of notes ; there might be a run for gold, and I think it would be necessaiy that a much higher proportion of reserve should be kept if you issued a low denomination of notes, than for a higher denomi- nation of notes, 694. You \yould keep a larger amount of bullion to represent the same amount of circulation?— Yes. 695. Have you ever known or heard of an instance where a panic, which has been met effectually by the payment of the notes, has ever led to any material inconvenience as affecting the credit of a bank like the Bank of England, which has always stood high above all sus- picion?— In 1825 the Bank issued 1^ and 21 notes at a time when it was nearly drained of bullion, and those notes were certainly accepted by the public with perfect confidence, and they were the means of immediately alleviating the great want of circulation which existed at the time, in consequence of the failure of so many country banks, whose circulation was entirely discredited. 696. They supplied the place of the circulation withdrawn by the failure of the country banks ? — Yes. 697. But what I meant to ask was this: have you ever known an instance with respect to a bank like the Bank of England, standing in high credit, whose circumstances were well known by the publication of their accounts, of the capital they held, and the securities they held, where any discredit or panic has not been immediately allayed in such a case by the payment of the notes as soon as presented ? — I have no instance in my mind ; of course the payment of the notes would alleviate the panic, but I am afraid that in such a case nearly the whole of the bullion might be drained before the panic was relieved ; we had an instance lately, of the National Bank of Ireland ; there was a run upon that bank for no particular reason, and in many cases the deposits of their branches were entirely drawn away in gold. 698. Are not bankers much more liable to a serious run of that kind from their deposits, than they would be from their circulation ? -That drain, I believe, took place through the medium of their deposits. 10 699. Was it a bank of issue ? — I believe it was. 700. It was a drain of their deposits, in consequence of the failure of the Tipperary Bank, and the discredit thereby caused?— Yes. 701. I understand you to hold the opinion that the coin tluit is now in circulation in England could not be of any use to the country in the event of an emergency, excepting that for the moment it could be used to give relief, by substituting paper for the gold?— No; I think there would be no other means of utilising it. 702. You do not agree in the opinion which some hold, that the coin in active circulation at any particular moment could ])e got in for the purpose of making a resei-ve, without substituting paper for it ?— No, I think not. I think that after a long period of pressure the active cir- culation even in coin might be diminished, but certainly the immediate effect would not be materially to diminish it. 703. There would be a diminution through contraction of trade ?— Contraction of trade, and economy generally. 704. And reduction of prices, probably? — Yes. 705. The circulation of the country must depend upon the extent of its transactions ; and it must be affected not only by the extent of its transactions, but by the price of commodities from time to time requiring a larger amount of coin or notes to represent the sahie amount of transactions ?— No doubt, according to the condition of its population. 706. In using the term '* circulation " with regard to banks of issue in the country, do you confine that term to the notes which they have in the hands of the public? — Yes, the country bankers are not at present enabled to avail themselves to the full extent of their authority to issue: they are authorised to issue in round numbers about 8,000,000/, but they are not ena])lcd, owing to some provisions in the law, to avail themselves of that authority to a greater extent than 7,000,000/. 707. But the circulation of a country bank you would call its notes in the hands of the public?— Yes. 708. If it has a portion of its legal circulation in its own-till unissued, you would not call that circulation?— No. 709. It would not derive any profit from the notes in its own till?— Certainly not. 710. Only from those in the hands of the public?— Certainly. 711. Therefore, it is only the notes in the bands of the public that could in any way be said to affect trade, or to give facilities to the public? — That is the only portion that could affect trade, I should say. 712. Do you believe it is in the power of a country banker to regu- late the amount of his issues by any means whatever, so as either to increase or to diminish them at his own pleasure?— He may diminish thcnj, but it is hardly in his i)0\vcr to increaije them, except by the gradual influence of his credit and position, and the extension of his business. 713. Do you think that he could diminish his circulation, if he had a large amount of deposit belonging to his customers, below the amount required for the convenience of his customers?— Of course he must substitute some other medium ; if he did not issue his OAvn notes, he must issue Bank notes or gold in payment of his liabilities. 714. He can only diminish the circulation of his own notes by sub- stituting notes of the Bank of England, or by substituting coin, as a legal tender for his obligations?— Yes. 715. But he could not, by any power that he possesses, either contract or increase the amount of his circulation as a whole ?— No, I apprehend not. 716. That Avould be detennincd by causes over which he had no power? -Certainly. 717. Therefore, as long as a lianker has n bank of deposit as well as 11 of issue, the jimount of his notes in the liands of the public must be determined by the wants of liis customers, Jiiul not by his own wiii?- Ycs ; the amount of his circulation of course depends upon the wants of the public, not upon the wishes of the banker. 718. And the banker, if lie would not issue his own notes, must issue s(unething else, which his customers have a right to demand from him?— Yes. 719. Will you have the goodness to direct your attention to Returns No. 19 and No. 20, Avhich have been laid before the Committee. I will ask you to look at No. 20 first. On the first page of No. 20 you will find an account of the number of banks which have been established, banks of issue and banks of deposit, in each year since 1819 to the ])resent time. Now I want to call your attention to the first period of the introduction of joint stock banks in lose, would not the effect of that be, that each of those private bankers, keeping only a sufficient reserve of notes in their possession from day to day to conduct their business, Avould have to send to the Bank of England for the 50,000/, in order to give them to the customer or to replace their reserve ? — Yes, that would be the effect. 753. Therefore, in point of fact, the whole effect of a sale of securi- ties at such a time would not be to diminish the notes in the hands of the public, but merely to diminish your liability upon deposits, and to diminish the securities you held against those deposits in the shape of Government stock.' — That would be the sole effect. 754. And if A. B., the purchaser of 30,000/ of the securities, banked with Jones Loyd and Co., and Jones Loyd and Co. gave a cheque upon you, the same effect would be produced ?— Yes. 765. In fact, it would simply act upon the deposits in the hands of the Bank, not upon the circulation of the Bank ?— Certainly. 756. Therefore, you would have no power of contracting the circula- tion by that means ? — It would be quite nugatory, 757. An opinion has been held that the Bank ought to regulate its circulation according to the state of the exchanges, and that if there is a drain for bullion caused by an adverse exchange it ought to contract the circulation in the hands of the public; do you believe that to be possible.'— No; I think that is not possible. The drain acts upon our reserve of bullion, and Ave are obliged therefore to attend to the causes of that di-ain, so as in some measure to protect the reserve; but as far as the active circulation in the hands of the public is concerned, I !iave not been able to trace any material effect from all the measures of restriction which we have been forced to take during the last three or four years. The active circulation in the hands of the Bank has re- mained very much as usual, though our reseiwe has been acted upon so as to reduce it to 3,000,000/. 758. Previously to 1844, in all the evidence that was given before Committees of the House of Commons, and in the various publica- tions that were brought out upon the subject, it was held as a rule that the circulation of notes in the hands of the public ought to fluctuate in the same way as bullion in the Bank of England fluctuated ? — I believe that was assumed. 759. Has your experience, since the passing of the Act of 1844, which was assumed to gi\ e force and effect to that principle, enabled you to say whether there has been any difference in the principle of the fluctuation of notes in the hands of the public generally, as com- pared with bullion ?— No ; I think that the notes in the hands of the public have fluctuated exactly in the same way as before. You arc aware that the holders of that particular theory now include the reserve of the Bank of England in their definition of circulation, in which case there has been a dillcrence in the amount of circulation. 760. But we are taking what Avas meant bj the Avord "circulation," in the evidence before the Parliamentary Connuittee of 1840 ; what 15 was meant by " circulation " in tliosc days was notes in the hands of the public ? — It was. 761. Tlierefore, comparing the same thing in each case, namely, the circulation in the hands of the public, before 1844 and since the Act of 1844, yon are unable to discover any difference whatever in the principle which regulates the fluctuation now, as compared with that which regulated the fluctuation pi'ior to the Act of 1844? — No, I should say not. 762. Supposing the Bank were to attempt to give effect to the principle of contracting the circulation in the case of an adverse exchange, would not the effect be an immediate drain upon you for gold for internal circulation, for the purpose of replacing your notes ? — I think it is likely. 763. Supposing you were to attempt to withhold the notes for the purpose of reducing the amount of the circulation, your depositors would claim gold instead of notes ? — Yes. 764. The effect, therefore, of any attempt to carry out that principle, would simply be very greatly to aggravate the drain of gold at that moment takingplace for foreign purposes ?—Itwouldprobably aggravate the drain of gold for internal purposes. 765. More gold would be required for internal purposes at the very moment that more gold was required for external purposes ? — I think so. 766. What has been called the bullion theory, in all the discussions that have taken place in the various Committees of Parliament, has simply been, if I understand it rightly, tlie principle of maintaining cash payments, and the convertibility of the notes, by an adequate reserve of bullion from time to time ; do you understand it to be any- thing more than that.? — 1 thing it results in that; the object of the framers of the Act of 1844 was to make the circulation fluctuate as a metallic circulation would do, including of course, the reserves of the bankers. 767. Can you point out to the Committee any possible way in which a mixed circulation of gold and notes can fluctuate in any other way than a metallic circulation would fluctuate, so long as those notes are easily convertible into gold at the will of the holders ? — Xo ; I imagine there can be no distinction between the two. 768. Then, so far as that was one of the objects of the Act of 1844, that object is sure to be realised so long as notes are convertible easily into gold.? — So long as you have a sufficient currency, and the notes are convertible on demand. 769. The whole resolved itself into a security for the convertibility of the note ? — I think so. 770. As long as the note is practically convertible, the fluctuation must be identical in both cases ? — I think so. 771. You have given some evidence with regard to a central bank of issue, as distinguished from a bank of deposit or any other business ; is it your opinion that a bank purely of issue would have as much facility for managing the circulation as a bank of ordinary business, including a deposit business, like the Bank of England ? - No ; my opinion is, that it would not have such facility of issue as the Bank of England. 772. Are you of opinion that there would not be either the same facility of contracting the circulation according to the wants of the public at any particular moment through the operation of natural causes, nor would there be the same facility of extending the circula- tion .to meet the wants of the public as those wants might increase ; inasmuch as a large banking business affords greater facilities for conducting and managing the circulation than could be possesssed by an establishment which should be purely a bank of issue ?— I think so. 773. Through the action of your deposits, your discounts, and your repayment of Inils falling due, and so on?— Yes. 16 774. Your general hnsiness affords facilities for managing the circula- tion of the notes which any pure bank of issue could not possess?— I must make a reservation there; according to the law of 1844, the issue of notes may be said to be automatic, it is self- acting. The business of the Bank might proceed, no doubt, in the same way as it does now, if the issue department were entirely separated from it ; but I do not think it would be so convenient if the issue department were separated from the Bank of England, because there would be no inducement to change the notes for gold, or the gold for notes ; there would be a greater amount of trouble and inconvenience in doing so. At present the change is effected through the medium of the banking business of the Bank. 775. But at the present time, when the bank of issue is a part of the Bank of England, you have not two bodies to deal with, it is all one body with one common liability and one common set of assets. You have a distinction between your departments which may be important or not, but still it is not at all the same distinction as it would be if the issue were conducted by a different body?— There is a virtual dis- tinction. 776. Is it not simply a distinction en paper?— It may be said to be merely a separation and division of the accounts. 777. Simply in the form of keeping the accounts?— It may be so called. 778. If there was a separate bank of issue at the west end of London, or even in the same street in London, if it were a separate body with separate and distinct liabilities, and under separate and distinct management, for which the Bank of England was in no way responsible, and with which it was iu no way connected, would not the thing be totally different ? — I do not conceive so ; I think there would be no real difference, provided the bank of issue was conducted upon the same principle upon which the issue department is conducted at the Bank. 779. Have you not more facilities now in managing the whole business of the two departments, the issue and the deposits, than you would have if you had a separate body to deal with for your notes ? — I think it is a much more convenient arrangement that the two should be under the control of one body. 780. You have pointed out some disadvantages which would be ex- perienced from a central bank of issue; are there any advantages which you can see from such an establishment ? — I can see no advan- tage in the change, and so long as the Legislature are satisfied that the Bank of England does not issue more notes than are warranted by law, there can be no advantage, I conceive, in removing that department from the Bank of England, and placing it in any otiier locality. 781. But speaking of the issues to the public, which you have said are the only effective issues for the purposes of trade, the Bank of England you have told us has no control over the extent of the issues, but is acted upon by demands from the public, or by circumstances over which the Bank has no control ?— I think so. 782. Therefore, the Legislature could have no object in passing a law to put a limit upon the amount of the circulation? — Not upon the amount of active circulation; it would be impossible for anything that the Legislature could do to have any effect of that kind; all that the Legislature can do, is what it has done ; namely, to say that a certain portion of the active circulation only shall be a credit circulation. 783. All that the Legislature has done, is to say what amount of bul- lion you are to keep against your circulation; is not that the effect of the law ?— Yes, that is the effect. 784. A central bank of issue has been recommended, upon the ground of the greater security which it is supposed that it would afford, inasmuch as a central bank of issue that had the business of issue only, would have no other liabilities against the securities and bullion which it held. Suppose there was a separate and distinct bank of issue now, which held a certain amonnt of securities, and a certain amount of bullion, the same that your issue department contains, and that it had no other business, then the notes in tiie hands of the public would have a lien upon those securities and that bullion, and no other claim could be made upon them, except for the notes ; therefore, there would to that extent be an additional security for the notes, taking the notes separately. Would not that be the case?— They would have less security than they have now, not an additional security ; they would have the Government securities and the bullion. 785. At the present time the securities and the bullion which are placed in the issue department are part of the general assets of the Bank of England ; and in the event (supposing such a thing possible, which of course we know is not possible), of a bankruptcy of the Bank of England, those assets in the issue department would not be appro- priated for the note-holders exclusively ? — I think not ; I think there is nothing in the Act of 1844 which distinguishes the security of one portion of the business of the Bank from the other, whether as a bank of issue or a banking department. 786. You have two or three classes of creditors; you have your depositors, you have the holders of your seven-days' bills, and you have the holders of your notes ; and you consider that all the assets, bullion and securities in the Bank of England, whether in the issue department or i:.i the banking department, are alike liable for the pay- ment of those liabilities ? — I know nothing in the Act which distin- guishes between the different securities. 787. But if there was a separate body whose business was only the issue of notes, in that case the notes in the hands of the public would have a lien upon the bullion and the securities in the possession of the Bank, and no other creditor could come against them ; there would be that distinction in their favour ?— The holders of notes would be the only creditors. 788. Therefore, as against the disadvantages which you have described as belonging to the plan of a sole bank of issue, as compared with a bank of issue combined with a bank of deposit, the only advantage of such a plan would be the additional security, imaginary or otherwise, which that bank would afford to the holders of the notes ?— That is all. 789. If the establishment to which the issue of notes is entrusted be one of so unexceptionable a character as the Bank of England is known to be, possessing so large a capital and so large an amount of securities, and conducting its affairs with so much publicity, that question of security is a very unimportant one ?— I think entirely unimportant. 790. Supposing the suggestions made in the evidence in the year 1840 were to be cari'ied out, and a common bank of issue were to be established, with the view of absorbing the whole circulation of the country, would not there be immense practical inconvenience in fur- nishing the country circulation by that means ? — I think that would be the effect ; I think a great portion of the country circulation would be abandoned, and, perhaps, coin would be substituted for it. 791. To that extent there would be a great public loss by wasting the capital represented by that amount of metallic circulation, which is now performed equally well by paper? — That is my opinion. 792. Would not the only way in which that could be avoided be by the central bank of issue having branches in every small town and every country village, as in Scotland ? — Yes, you must attend to the supply of the country if you are to maintain the circulation. 793. Supposing branches were established for such a purpose, and not for the general purpose of doing banking business, would not the expense of those branches be very great, probably much greater than the profit to be derived from the circulation ?— I think so ; moreover, I think that branches of a simply issuing bank, unless it entered into other banking business, would have no power of issuing its notes. A country banker now issues his notes in the course of his banking business. 18. 794 In point of fact, it is only by the ordinary daily transactions of a 1janl<, that the circulation can be issued and talten in, as the wants of the public require?— I think that is so. The payments and receipts of the Governraent, of course, might maintain a country circulation to a considerable amoimt. I am not prepared to say what would be the necessary establishments in order to maintain that circulation. 795. Must not one of these two consequences arise from an attempt to establish such a system, namely, either that the notes now used in the country by the country banks would be lost, and gold substituted for them, and thereby great waste of national capital would take place, or that you would have to establish branches in every village and small market town, the expense of which would be more than the profit of the circulation, if separated from other banking business?— I think that would be the effect. 796. Therefore, the great profit which it is supposed by some persons would attach to a Government circulation, if the Government attempted to absorb the whole circulation of the country, would in point of fact amount to nothing; at least it Avould be very much diminished, if not altogether absorbed, by that expensive machinery ? — I doubt very much whether the public would make the profit which they now derive from the allowance made to them by the Bank of England of 180,000^ a year. 797- Is there, in your opinion, a great exaggeration on the minds of the public as to the profit derived from the issue of notes ? — I conceive that there is ; I think it is demonstrable that the Bank under certain circumstances even loses by its circulation. When as at present con- ducted there is a large amount of bullion in the country, and conse- quently a large amount issued upon bullion, sufiicient not only for the guarantee of its active circulation, but also for its reserve against those deposits, it is clear then that there is no profit upon the circulation upon securities; and the Bank has to pay for that privilege to the Government 180,000/ a year. 798. At such a time you have as much bullion in your possession lying idle as will represent the whole circulation ?— Yes. 799. At such times, when you have a large amount of circulation, your deposits are much larger than usual, are they not ? — They are so. 800. Therefore, you require to keep a reserve against your increased deposits as well as against your circulation ?— No doubt. 801. You could not part Avith your bullion safely ? — You could not part with a great portion of it. 802. Is there not also a great advantage to the public in the issue of notes by such a bank as the Bank of England in this respect. If bankers derive profit from the issue of notes, does not that profit find its way in another form to the public by a diminished charge for bank- ing facilities ; Avould not that enter into the ordinary calculation of the profits of banking, and induce the banker to do the business upon more favourable terms to the public than he would do if he had not that profit? — Of course he is more ready, I suppose, to grant accom^ modation in his own notes than he would be if he had to provide capital from other sources; to that extent probably it may be the case. 803. Is it not the fact, that when there is open competition in business, bankers, like other people, Avill do the business at the lowest possible rate that pays thein, and if they have a source of profit derived from circulation, that will enter into their calculation, and the public will indirectly get an advantage from it ? — No doubt. 804. Competition will make them do the business as advantageously to their customers as they can ? — No doubt. 805. For example, in Scotland the terms upon which banking business is done are notoriously more favourable to the customer than they are in any part of England, and that has been attributed to the profit which the bankers in Scot! and derive from their circulation ; you 19 are aware that in Scotland there is no such thing as bankers charging a commission to their customers for keeping an account, but on the other hand, they give interest upon balances left from day to day in their hands ; now, if you were to take away from them the profit they at present derive from the circulation of their notes, do not you think they would be obliged to diminish the rate of interest that they allow upon deposits, or to charge commission upon their banking accounts ? — I am not aware what the terms of their business are with their cus- tomers ; but I should have supposed that as far as the diminution of any interest allowed upon deposits went, they would not venture to reduce that very much, as long as there was the competition of the London money-market in existence ; I was not aware that they did not charge a commission to their customers upon accounts. 806. When peeple talk about the profit which would be derived by a Government issue of notes, do not they overlook, not only in the first place the great expense that the Government would have to incur in managing such an issue, but also the indirect advantage which the public at present derive from the better terms upon which the country l)anker8 now do their business, by reason of their having the profit of the circulation, than they would do, if they had not the profit of the circulation ? — I think they do. I think the profit of a Government issue of notes is very much exaggerated. 807. Do you think it at all likely that if the Government were to attempt to absorb the whole circulation of the country, as was recom- mended in 1840, by a central bank of issue, and if that circulation were carried on as conveniently to the public, and were as well distributed over the whole country, as it is at present, it would be possible to do that without considerable additional charge ?— I think it must involve very considerable charge. 808. Would it not require very numerous agents over the country, whose offices being very responsible, would require to be well paid, thus causing very large expenditure ? — I conceive so. 809. Do you think that the profit derived from the notes could possibly pay for so large an expenditure .? — I think that the difference between the profit that could be made then, and what the Government receives now, would hardly be inducement sufficient for a change. We have an example how a circulation is extended and maintained in the Bank of France, Avhere the circulation has been of late years much ex- tended through the medium of banking operations in the country. 810. The Bank of France conducts its country business by local banks, which, like the banks in Scotland, derive profit from general banking business ; but a Government bank of issue alone would be deprived of those advantage? ?— I think so. 811. Will you refer to your two answers, 164 and 165, in your first day's evidence before the Committee in the last Parliament. Mr. Wilkinson asked you : " With regard to the division of the two systems, the issue and the banking departments, I understood you to say that the two are practically entirely distinct ; are they likewise legally distinct ?" your reply is, " Quite so." In answer to the next question, you say also, " Certainly." You say they are legally distinct, as well as practically distinct. Now, that answer would appear not quite to conform to the answer you have given to-day. Do you mean that they are merely distinct according to the provision of the Act of 1844 ?— That was the meaning of the answer I gave to Question 165, where Mr. Wilkinson asked, whether, supposing the Bank had been driven so close as to stop payment on such an occasion, it would not have had any right to take any portion of the 8,000,000^ of gold legally. According to the provision of the Act of 1844, it could not help its banking reserve by taking any portion of those 8,000,000?, which had been issued against the circulation in the hands of the public. That was what I meant. 2a 812. You only meant by that, that under the provisions of your charter, you could not with propriety take the bullion out of the issue department for the purpose of paying the depositors ?— Certainly not, under the provisions of the Act. 813. But with regard to your legal liabilities to your creditors, there is no question, I apprehend, that the bullion in the issue department would be liable to pay the demands of the depositors ? — I suppose, if we came under the Winding-up Act, that would be the effect. 814. Mr RicAKDO.] Have you ever had a legal opinion upon that point, or is that simply your own opinion, that the bullion in the issue depart- ment would be liable for the debts of the banking department?— No, it is only my opinion. 815. Mr Wilson.] Are you aware whether the Government have ever taken an opinion upon the subject? — I am not aware that any opinion has been taken upon the subject. 816. Mr M. T. Smith.] Is there anything in the Act of Parliament which would lead to the opinion that it is possible that any difference could be made in that respect between a note-holder and a depositor ? — According to my recollection, there is nothing whatever to distinguish between the two. 817. Then, in the case^of your coming under the Winding-up Act, they Avould all rank pari passu? — I think so. 818. Mr RicAKDO.J That is your impression ?— That is my im- pression. 819. Mr Wilson.] If a man carries 100,000^ of gold to the Bank of England, and sells it to the Bank of England, it is placed in the issue department, is not it ? — It is. 820. The man would, in all probability, not take notes, but have the 100,000Z put to his credit in your books ? — That would happen, probably. 821. Therefore that 100,000/ woald immediately be converted into a deposit ? — In such case it would. 822. Supposing any other version of the Act from that which you have supposed were the correct one, the effect would be to place the gold which had been put into the issue department by your customer as a distinct security in favour of the note-holders, and to deprive him as a depositor entirely of the security which that gold afforded ?— Yes, that would be the eifect. 823. If he placed that 100.000/ in another bank, the whole of the assets of the bank would be liable to him as a depositor in common with the other creditors? — Yes. 824. In point of fact, are you aware of any distinction of right exist- ing between the different creditors of the Bank towards the assets of the Bank? — I think there is no legal distinction in the event of a winding-up. 825. Will you look at Paper 21, before the Committee. This is the form in which the Bank accounts are now kept, in order to bring about the division of tienartments, as contemplated by the Act of 1844 ?— ("The following paper was handed to the witness] : — BAJs^C of ENGLAND, Mat 9, 1857. ISSUE DEPARTMENT. £ Notes issued ------ 23,r3G7,945 £ Government Debt - - . - 11,015,000 Other Securities ... - .3,459,900 Gold 9,092,945 Silver • £23,567,94.'> 21 BANKING DEPARTMENT. Capital 14. 553, 000 Rest 3,328,670 Public Deposits - - - - 5,163,140 Other Deposits 10,081,864 Seven-day Bills 740,046 £33,875,732 £ Government Securities - - 10,303,838 Other Securities - - - . 18,.630,357 Notes 4,220,365 Gold and Silver Coin - - - 715,182 £33,875,732 Yes. 826. This is an exact copy of the Return presented on the 9th of the present month ? — Yes. 827. The issue department consists, on the credit side, of Government debt and securities to the amount of 14,475,000^, and of hullion to the amount of 9,092,945/, making a total of 23,567,945Z ?— Yes. 828. That is balanced by what are called notes issued to the same amount ? — Yes. 829. Do those notes, to the extent of 23,567,945/, constitute the liability on the part of the Bank of England ? — No doubt. 830. Not to the Avhole amount, do they? — With the exception of the amo unt which we hold in reserve. 831. But then the Bank of England hold in reserve 4,226,335/ ?— Yes, of those notes. 832. Therefore, in point of fact, the only liability which you have in respect of those notes is for the portion of them which are in the hands of the public ? — That is the only liability. 833. The difference between those two sums, the notes issued from the issue department, and the notes held by the banking department, represents the amount held by the public ? — Yes. 834. Therefore, the real liability of the Bank, as a Bank, is 19,341,590/ ? — Yes ; that is the liability. 835. Then the 23,567,945/ of notes issued is not the real liability, but a nominal account ? — Yes. 836. Then, coming to the banking department, on the debtor side of the banking department, you, first of all, have properly placed the pro- prietors' capital; next is the rest, constituting the entire available capital of the Bank ; then you have the deposits, and the seven-day and other bills ; those constitute the whole liabilities of the Bank, except- ing the circulation in the hands of the public ? — Yes. 837. If to this you add the net circulation in the hands of the public, then you come to the gross liabilities of the Bank ? — Yes. 838. So that the liabilities of the Bank to the public would be 53,217,322/.?— Yes. 839. On the other side you have Government securities, other securities, and the remainder is notes and gold and silver coin ; those, with the securities and the bullion in the issue department, would come to the same amount of 53,217,1522/, and would constitute your whole assets ? — Precisely so. 840. Taking the whole of those liabilities on the one hand, and the whole of those assets on the other, is there any real division between the one and the other in any way corresponding with this division in the return as it is published ; are they not all common assets on the one hand, and all common liabilities on the other hand.? — I think they are; they are div'ded, for the pui*poses of the Act of 1844, as a matter of account ; but I think the legal effect is, that they are all liabilities to which the assets are applicable in the same proportion. 841. In the banking department your reserve is represented here by 4,226,355/ of notes, and 715,182/ of coin; those constitute your reserve, making together 4,941,537/?— Yes. 842. You are aware that the public are in the habit of looking at those notes in the banking department as being the reserve of the Bank b 2 22 of England, and as representing the whole of its power to give facilities to business or otherwise ?— Yes. 843. In an early part of your evidence, you stated that the reserve of a bank ought to consist exclusively of that in which it can legally dis- charge its liabilities ; now, seeing that you have a reserve of notes almost exclusively in your banking department, which are not a legal tender by the Bank of England, do you not think that it is a contradic- tion in terms, that the reserve of the Bank of England should appear to consist of its own notes which it cannot offer in payment, unless people chose to take them ?— I think you must take that in connexion with the issue department, and when it is known that the reserve held by the banking department is issued upon gold, the result you arrive at is, that that is a bullion reserve, though it is stated as notes ; they arc bullion notes in point of fact. 844. In point of fact are thesQ in reality notes, or do they not in fact represent part of the bullion in the issue department ?— There is no doubt they represent part of the bullion in the issue department. 845. If you have a demand upon you, either for the payment of notes, or for a drain of bullion from your deposits, in neither case are those notes applicable to meet the demand, but must you not fall back upon the bullion in the issue department ? — No doubt. 846. Therefore the reserve of the Bank to meet its liabilities, either in the issue department or the banking department, is the 9,092,000^ of bullion, plus the gold and silver coin in the Bank of England? — That is the reserve, no doubt, against its total liabilities. 847. Unless you combine these two accounts and read them together, they are all a contradiction. You have notes which are not a legal tender passed off as the reserve of the Bank ; and in order to make them a legal tender, and to constitute them a real reserve, you are obliged to combine the banking department wath the issue department, and to adopt the bullion in the issue department as the reserve of the banking department ? — It amounts to that ; at the same time it is a convenient division of the liabilities of the Bank. 848. This reserve of the banking department which you have got here as " notes " is a mere indication of the bullion which you have in excess, which you are obliged to hold against the notes in the hands of the Bank ?— Yes. 849. Will you have the goodness to look at this paper, which exhibits the same account in another form ? — [The following Paper was shown to the Witness] :— BANK OF ENGLAND, May 9, 1857. Dr. £ Capital 14,553,000 Rest 3,328,676 Public Deposits 5,163,146 Other Deposits 10,081,864 Circulation Notes ... - 19,341,590 Seven-day Bills ... - 749,046 £53,217,322 Dr. £ Government Debt - - - - 11,015,100 Government Securities - - 13,763,738 Otlicr Securities 18,630,357 „ ,,. (£4,866,590) Bullion - - •|£4;94i;537[ 9,808.127 £53,217,322 The paper I have now handed to you represents the same account, stating the whole assets of the Bank on the one side, and the whole liabilities on the other, in the way in which we have been talking about them, does it not ? — Yes. 850. You see that on the one side the liabilities of the Bank are stated as the " capital" in the first instance, the " rest" in the next ; and then the '* public deposits," " other deposits," " circulation in the hands of the public," and " seven-day bills ?"— Yes. 851. Those together amount to 53,217,322/ ?— Yes. 2i) 852. That is the whole of the liabilities of the Bank of England brought into one account ?— Yes. 853. On the other side we have the whole assets of the Bank con- verted, in the same manner, into one account. There is the "Govern- ment Debt, 11,015,100^." " Government Securities," brought together instead of being separated into two, '' 13,763,738Z." " Other Securities, 18,630,357/." Then there is " Bullion," as a whole, " 9,808,127^?"— Yes ; that balances the account. 854. "And there the reserve of the Bank is the amount of bullion ? — Yes. When you say the "Reserve," that is the amount of bullion which is immediately applicable to the demands upon it from its liabilities. 855. That is the amount of bullion which Is applicable, as a whole, to the liabilities, whether of deposit or of circulation ?— Yes. 856. The Act of 1844 requires that all notes in circulation above a certain amount shall be represented by bullion. Now, dividing the bullion into two parts, the amount of 4,866,590/ corresponds exactly with the difference between the 14,475,000/ of fixed circulation and the actual circulation ? — Yes. 857. And the amount of 4,941,537/ represents the notes and the coin in the Banking Department ?— Yes. 858. Then the whole of this machineiy amounts simply to this : that the whole of the liabilities of the Bank, on the one hand, having an equal legal claim upon the whole of the assets, whether they consist of securities, or whether they consist of bullion, you have 9,808,127/ as the reserve against those liabilities ?— Yes; you must except, however, the capital and the rest as having an equal claim; the deposits and notes, and seven-day bills, of course, have the preference. 859. The proprietors' capital and the rest, n0 doubt, are claims which would not rank until the other claims were paid; but still, in making out the account, those ought to be put as a debit to the Bank ? — Yes. 860. Do you not think that an account furnished in this form would be much more intelligible to the public, and much less likely to mislead, than the double account as it is at present given, and which, in point of fact, contains upon the face of it an inconsistency very difficult to understand ? — If you retain the same limitation, as regards the issue, that the Bank is allowed to make upon securities, I think it would be more advisable to retain the present statement of account, which clearly points out the amount of notes, or of bullion, according as you read it, which is applicable as the reserve of the country. This statement of account is very good, provided there is no limitation upon your issue. 861. Assuming that the same limitation is to be kept, and supposing it were to be enacted, that on the one hand, under no circumstances, should the Bank of England hold less bullion than the difference between the circulation in the hands of the public and the fixed amount of securities, and that on the other hand they should never hold a less amount of Government securities than that fixed amount, the rest being left in the discretion of the Bank of England as at present, would not all the objects of the Act be gained? — The public would draw the same inference as they do now from the statement of our reserve. The public would feel, the moment our bullion came down to 10,000,000/ or 9,000,000/, as the case might be, that the power of the Bank to issue to the public was becoming more and more limited. They would recollect, that in 1847, when the bullion was reduced to 8,500,000/, the p®wer of the Bank was then restricted to about 1,100,000/. Whatever statement of account is adopted there will be the same eflfect from the same series of causes. 862. But it is not at all desirable that such an effect should not be produced. Is it net desirable that the public should know from time to time when the Bank is getting low in its reserve, and would it not be a great object that the public should understand why it was that the Bank was getting low at the present time. According to the present 24 form of account, the public, who do not understand these questions very well, are misled by the belief that it is of notes that the Banlc is scarce, and not of bullion. Now, do not you think that if 'he account were given in such a form as to show, not an appai-ent deficiency of notes, but the actual deficiency of bullion, there would be a more intelligent view taken of this subject by the public than is the case at present ? — I was not aware, as a matter of fact, that there was that misconception on the part of the public. 863. You are aware than whenever there is a pressure upon the Bank of England, the common complaint is that the notes at the Bank of England cannot be had ; that the notes are getting low ; that there is a small reserve of notes ? — No doubt that is the cry ; but I presume that is merely the expression of the public feeling of alarm that the gold and bullion at the Bank of England has descended to so low a point as to restrict the power of issuing more notes. 864. Do not you think that it creates an impression in the mind of the public that it is a scarcity of notes, and not a scarcity of bullion, that causes the pressure ; and does not it very frequently create this impression against the Government, and also against the Bank, that a remedy whick you could easily give, by the issue of notes, Avhich appears to be in your power, is not given ; whereas, if the public saw that the evil really was a scarcity of bullion, over which the Bank had no control, they would be more satisfied, because they wonld see the real cause of the evil ?— INIy impression is, that the eftect Avould. be rather in the opposite direction ; they would sa.y, " Why, here the Bank has got 9,808,000^ of bullion; certainly, with that amount of bullion, they might accommodate the public with more notes." I think that would be the result of this statement of the account. 865. But, according to this, you would have 9,808,000? of bullion; now, if people saw that that bullion was desending from 15,000,000/ down to 9,808,€00/, they would understand exactly what Avas the cause of the drain npon the Bank ; that it was for the purpose of making foreign payments, and that it had nothing whatever to do with the issue of notes ? — Yes ; I conceive they would draw that inference ; they must do so. 866. Do not yon think that it is very advisable that there shonld be no misapprehension in the public mind as to the nature of an account of this kind, which they look to with so much anxiety? — I certainly think it is very desirable that there should be no misconception in the mind of the public; biit I am not quite satisfied but what the present state of the account, distinguishing the liabilities of the Bank, does not render clearer to the public the position of the Bank as regards the demands upon it for foreign payment than would be the case under that which was formerly the form of statement, and which you now propose. 867. Yon think, that as long as the law imposes upon you the necessity and duty of keeping a certain amount of bullion in j)r()por- tion to yoTir circulation, and securities for the remainder, it is much better that that should be shown in the account?— I think so. 868. If it is much better that that should be shown in the account, will you look at this form ? — [The following Paper was handed to the Witness] :— Dr. £ Capital 14,-553,000 Rest 3,328,676 Public Deposits 5, 1 63,1 4 (J Other Deposits 10,081,864 Circulation 19,341,590 Seven-day Bills -..--- 749,046 £53,217,35^2 BANK OF ENGLAND, May 9, 1857. Cr. £ Public Debt - £11,015,100) Securities - - 3,459,900 \ Bullion - - - 4,860,590) Public Securities - - - - Other Securities Bullion Kcscrve 19,341,590 10,303,838 18,630,357 4,941,537 £53,2 J 7,322 1 25 That form you will see is exactly the same thing as the last, only in the division you will see that the whole assets of the Bank are placed on one side as before, and you will see that the liabilities of the Bank are. public debt, securities, and bullion, making together a total of 19,341,590/, and which represents your liability under the Act to hold securities and bullion to a certain amount ? — No doubt. 869-70. Then it shows the other securities, public and private, which you hold, and the remainder the bullion ? — Yes. 871. The fluctuation in that account would show the precise fluctua- tion of the bullion, and it would show your reserve in bullion, and not in notes ? — Yes. It appears to me that this fonn of account is simply a substitution of the term "bullion reserve" for "notes" and "gold and silver coin" in the Banking Department. 872. Is not that an actual account according to your actual liabilities ; and is not the other, using the word respectfully, a fictitious account, which does not represent, in truth and reality, the state of the Bank of England as a whole ?— I must say I do not see any great advantage in massing the two statements together, except to point out that the reserve held by the Bank of England is of necessity a bullion reserve, which may be inferred, indeed, from this statement of the account. 873. It may be inferred by a circuitous process of reasoning, and a circuitous process of arithmetic ? — Yes. I cannot conceive that this statement of account would be very desirable ; provided the law said that the Bank should hold a bullion reserve against its active circula- tion of a fixed proportion, say one-fourth or one-third, then this state- ment of the account, I think, would be perhaps better than the present ; but the law does not state that; the law states only that you shall issue a certain amount against securities, and that the remainder shall be against bullion. 874. But the balance between the fixed securities and the actual circulation will always represent the bullion reserve ? — Yes. 875. And therefore the only difference between the case which you have stated and that which exists upon this paper is, that it would fluctuate from week to week according to the circulation, instead of being a fixed amount ; but it would equally show the truth?— Yes. 876. If the account stood in that way there could be no misapprehen- sion as to the liability of the whole of the assets of the Bank to meet the whole liabilities of the Bank ?— No. If there was any misconcep- tion upon the mind of the public about it, or if they cared at all about it. 877. I understand you to say that the whole eff"ect of the Act of 1844 has been to compel the Bank to hold a larger amount of bullion than it otherwise might have held, inasmuch as it rendered it necessary to keep the amount of bullion at all times bearing a certain relation to the circulation .?— It had the effect of forcing the Bank of England to keep a certain amount of bullion which should be a guarantee for the active circulation in the hands of the public, and also to keep a certain amount, of bullion which should be a guarantee to their depositors. 878. The Act does not compel you to do that; the Act leaves that to your discretion ? — Yes, that is at our discretion, no doubt ; but it forces us to keep a larger amount of bullion, inasmuch as it forces us to keep a certain amount of bullion against our active circulation ; whereas, under the former state of the law, we were not required to keep any reserve of bullion against our circulation. 879. You have stated that you consider it the duty of the Bank to hold an amount of bullion reserve adequate to cover the liabilities of the circulation, and of the deposits, and you have also stated that the management of the Bank during the last three years would have been just the same without the Act of 1844 as it has been under the Act of 1844, and that the whole resolves itself into the discretion of the managers of the Bank ? — The management, I think, would have been the same, if properly conducted, but the Legislature thought it not 26 desirable to leave that discretion in the hands of the Bank Directors; they have therefore placed a limitation npon the amount that they are alloM'ed to issue against securities. 880. I want to call your attention to another misconception on the part of the public, arising from the accounts being in this form. Will you turn to the Bank Returns for 1855 and 1856, in Paper No. 14, p. 21. You will observe, that during June 1855 the reserve of notes in the hands of the Banking Department exceeded 11,000,000^ during the whole month ? — Yes. 881. Then you will observe that they sink as low as 4,000,000? in the November of that j^ear ? — Yes. 882. Now during the whole of that period, while there was an apparent diminution of notes in the Banking Department from 11,000,000? down to 4,000,000?, there was no increase whatever in the circulation of notes in the country, or in the use of notes ; in point of fact, that diminution from 11,000,000? to 4,000,000? had taken place without the Bank parting with a single note; but it took place entirely (as you will see, if you turn to the bullion) by the reduction of the bullion from 17,000,000? down to 10,000,000??— Yes. 883. Is it not a contradiction of terms, very much calculated to mis- lead, if people see from week to week a reduction in the quantity of notes in the hands of the Bank, while in point of fact not a note has left the Bank, and they have not their attention drawn to the reduc- tion in the bullion, which is rapidly going out of the Bank ? — They may draw wrong inferences from it, but I think a little reflection would show them that they were bullion notes, in point of fact, which have been cancelled, against the abstraction of bullion. 884. Your notes in the banking department may be diminished in two ways, either by an increase in the circulation of the Bank, or by a with- drawal of bullion from the issue department ? —Yes. 885. Do not you think, that if in your published account the real reserve was expressed in bullion, and not in notes, so as to show the reduction taking place from week to week in the amount of the bullion, and not apparently in the amount of the notes, that would be a more truthful expression of the fact to the public mind, and more likely to inform them correctly of the state of the case .? — I think it would point out at once the cause of the scarcity of money ; that it was by the abstraction of bullion from the Bank. 886. I will mention one circumstance, in order to ask your opinion whether such a state of things has not a prejvidicial effect upon the public mind. You will remember that during the last autumn when there was a great pressure upon the Bank for bullion, which appeared only from week to week by the diminution of its note reserve, great anxiety was felt on the part of the public mind as to whether certain ships that were knoM'n to be on their way from Australia to London would arrive or not within a certain period, that anxiety being caused by the known fact that an addition of bullion at the Bank would be likely to give them ease; but in many of the public prints it was commented upon as a very unreasonable thing that the mere accident of a ship arriving with bullion this week or next week should have the effect upon the Bank of determining whether they would issue notes which the trade of the country required, or whether they would refrain from issuing them. Now, supposing that the account had been published in its real form, that is to say, that "bullion" had been there instead of "notes," Avould not the public have seen that the bullion in the Bank was reduced to a very low point, and would it not have been very intelligible to them that the arrival or the non-arrival of bullion materially affected the power of the Bank to make advances of capital which really consisted of bullion, and not of notes?— But they surely see that upon the present account ; they see, in the issue department, that there is only so much bullion on a particular day here. 887. No doubt, those who thoroughly understand the operation of the Act, iim.st know that those "notes" in the banking department, in point of fact, do really represent and are converti1)le into tlie term " bullion," in the issue department ; but with regard to the great mass of traders and others, who do not understand these questions, would it not be infinitely more intelligible to them if, instead of this bullion being expressed as " notes," it was expressed as " bullion ;" and if the variations which take place in the bullion were so represented, instead of being represented in this roundabout way, in the form of notes ? — It is difficult for me to give an opinion upon what the effect would be upon the minds of the public, when I have been accustomed so many years to look at this account in this particular form. To me it appears the clearest statement that can be made, and I cannot judge whether another statement of account to persons out of the walls of the Bank Avould appear clear or not. "When once you have been accustomed to a certain system of accounts which you clearly understand, it does not appear so clear to you if stated in a different manner. 888. The effect of the Bank Act of 1844 upon the Bank of England is, in the first place, merely to divide the accounts into those two heads? — That has been one effect. 889. And next to enforce upon the Bank the keeping of a certain amount of bullion, which, under any circumstances, it would be prudent that the Bank should hold ? — That has, also, been another effect. 890. The principle upon which that compulsion has been put upon the Bank of England was, as I understand from the evidence taken in 1840, with the view of securing, under all possible circumstances, the convertibility of the note ? — Yes. 891. It appears that the circulation of the Bank of England may be said to be about one-half of the circulation of the whole country, in- cluding Ireland and Scotland, being about 19,000,000Z or 20,000,000^ out of 38,000,000/?— Yes. 892. The Bank Act, with the view of securing the convertibility of the Bank of England note, placed this limit upon the Bank, and took these securities from the IJank of England, the solvency of which everybody was satisfied with, possessing a capital, including its rest, of nearly 18,000,000/, and holding securities to the amount of 17,000,000/ or 18,000,000/; did the Act take any steps with the view of securing in like manner the remaining half of the circiilation ? — By limiting the amount of the circulation to the amount then issued. 893. But it took no security for the convertibility of the notes? — None, I think, except from the Bank of Ireland. 894. It merely limited the circulation to the actual circulation which the banks had at the time ? — Yes. 895. Will you refer to page 3, of the paper number 20, before the Committee ; there you will find that there were in England 208 private banks of issue and 72 joint stock banks of issue : without any inquiry into the solvency or condition of those banks, the Act of 1844 gave them an actual monopoly of the circulation which they then had, and with- out taking any security whatever for the convertibility of those notes ? —Yes. 896. So that while it took security from the only Bank of which we knew anything, it took no security from the 300 banks of which we knew nothing, and had no means of knowing anything ? — That is so. 897. This paper gives also an account of the number of banks that have since stopped payment. I think there appear to be 21 private banks that have failed (this account is made up to January) and six joint stock banks, so that there are 27 of those banks that have since the passing of the Act of 1844 failed, and 1 think the aggregate amount of their circulation appears to have been about 800,000/, which has been partly replaced by Bank of England notes?— That statement does not represent merely the issues of banks which have failed : there ar© 26 a certain number of banks that have abandoned their issues, and a certain number also which have been consolidated with other banks, Avhich, by a clause in the Act of 1844, also caused the abandonment of their issue. 898. It appears that there were 208 private banks in existence at the time of the Act of 1844, which continued as banks of issue, and that there are now in existence 157 of those banks ; that there have ceased to issue by compounding with the Bank of England eight, and that there have ceased by failure 21 ; and that the remainder have either ceased to carry on business, or have been joined to other banks, or are now carrying on business as non-issuing banks. So that the 21 private banks and the six joint stock banks are those which haA^e failed? — Yes. What I said was that the 800,000/ of notes which have ceased to be issued, must be spread over the whole, 899. Can you conceive that the framers of this Act could intend that such a state of things should be permanent ; that while they were pass- ing an Act, the main object of which was to secure the convertibility of the note, and while they were applying to the Bank of England very stringent regulations with that view, they should actually contemplate leaving the other half of the whole circulation of the United Kingdom in this state ; not only to let them go on without any knowledge of the solvency of the banks, and without any guarantee or security for the payment of the note (which Avas the object of the Act), but also to give to those banks, whether good or bad, an absolute monopoly of the issues of the country P — I have no doubt that the intention or the ex- pectation of the framers of the Act of 1844 was, that the compensation clause by which the Bank of England is empowered to compound on certain terms with issuing banks would have had the effect of absorb- ing a great part of the English circulation. I believe that another reason why the circulation was left in the anomalous state which you describe was, that Sir Robert Peel felt that he could not carry through Parliament a Banking Act which would absorb all the circulation of the private bankers throughout the country; he relied more upon the gradual operation of that compounding clause, which he expected would, after the expiration of 10 years, have had a much greater effect than it has had. 900. According to this Return, which we have had from the Board of Inland Revenue, that expectation must have been greatly disappointed ; because, from this Return, it appears that there are only eight private banks out of 208, and not one joint stock bank out of the Avhole number, that have availed themselves of the compounding clause? — Yes, that clause has been a failure. I conceive that the Scotch and Irish banks were altogether treated differently ; in short, they are under separate Acts. 901. You arc aware that, in this respect, they were brought under the Act of 1844; that the clause in the Act of 1844 which prohibited the establishment of new banks of issue in England extended to Ireland and Scotland ? — Yes. 902. Would not that state of the law, with respect to country banks, have a prejudicial effect in two ways upon the public. In the first place, if there was an old badly-conducted bank in any place a good bank could not come into existence there, because, not having the right of issue, it could not compete with the bad or inferior bank which had the right of issue. Or if there were two banks in the place, the one a decaying private bank, and the other a young energetic joint stock bank with abundance of capital, the circulation of the declining private bank could not be supplied by the natural increase of circulation which the increasing business of the joint stock bank would hare given to it ?— No. I conceive that the circulation of a small bank must be of no very great advantage to it. The liabilities connected with it must be con- siderable; and, taking that into consideration, I doubt very much whether it tan be of any great advantage. 29 0U3. Without taking into account to what extent it is profitable, would not that be the effect, that the circulation in a town or in a dis- trict might be lost in consequence of its having been misconducted by a private bank, whose profit was not large enough to induce it to con- duct the circulation well, and at the same time no other bank might be established to take its place ?— I think there has been a loss of circula- tion of notes by the failure of those banks. 904. We have seen that the aggregate circulation of the coimtry re- mained pretty nearly stationary from 1833 to the end of 1837, but dur- ing that time the circulation of the joint stock banks increased from 1,115,521^ to 3,657,415/; therefore, while the aggregate circulation re- mained nearly the same, the circulation of those banks which con- ducted their business most to the advantage of the public, and with the greatest energy, increased? — Yes, apparently that is so. 905. Then if you take the circulation from the 3rd of January 1846, when both Acts Avere in full operation, you will observe that the cir- culation of the private banks is 4,505,823/, and that of the joint stock banks 3,162,742/. Now, if you look at the end of the last Return, you will find that the circulation of the private banks has fallen from 4,505,823/ to 3,761,062/, and that the circulation of the joint stock banks remained exactly what it was, 3,159,608/. So that it appears that the private banks have been decaying, and going dow'n during the whole «f that time; but their place has not been filled up by joint stock banks ; whereas previously to the Act of 1844, you find that Avhatever the private banks lost, the joint stock banks gained ; but since 1844 it appears, that what the private banks lose, the joint stock do not gain? — No ; the total circulation remains about the same. 906. So that, in point of fact, by giving a monopoly to the existing banks in 1844, the Act took from the public all the convenience and advantage of improved banks taking the place of old and eftete banks ? — I should be led rather to draw an opposite inference ; namely, that as the business of the joint stock banks, which you consider to be the yoimg and enterprising banks, has increased so materially, to the prejudice of the private banks, which you look upon as effete, I should consider that the effect must have been the opposite to what you state. 907. Prior to the Act of 1844, you will observe that the circulation of the joint stock banks increased in proportion as that of the private banks diminished ; but after 1846, when the Act limited to each bank a specific amount of circulation, the circulation of the joint stock banks did not increase in proportion to the decrease of private banks ? — Prior to 1844, I see that the private banks remained very much the same, notwithstanding the increase of the joint stock banks. 908. You will observe that the private bankers had a circulation, in 1833, of 6,163,037/; and you will observe from the next column, comprising banks from which no return was received, that that amount of 6,163,000/ did not include the whole, but that the private bank circulation was at fhat time 8,500,000/. You will observe that, before the Act of 1844 was passed, the private bank circulation had become reduced, in the be- ginning of 1844, from 8,500,000/ to 4,822,675/; whereas in that time the joint stock banks had increased from 1,115,521/ to 3,234,999/.?— It certainly appears that the circulation of the private banks has diminished very considerably since 1833, but that includes the banks from which no return was received. The private banks now are only 3,761,062/; they were then 8,500,000/. 909. The private banks, in point of fact, have decreased very much below their fixed amoimts under the Act of 1844, while the joint stock banks cannot increase theii's? — The private banks have diminished about 700,000/, and the joint stock banks have remained very much the same as they were at that time. 910. Then the effect of this Act of 1844, as far as country banks arc concerned, has been to check the natural transition from old banks to 30 new banks, and to deprive the country to that extent of the advantage which the country would have possessed if the trade in hanking had been left to its natural course ?— Tliat is assuming that it is any great advantage to the country to carry on the circulation with notes issued b}"^ country bankers. 911. To whatever extent notes in lieu of gold economise capital, to that extent that advantage has not been gained, be it less or more ?— That is the whole extent of the advantage to the country, generally speaking. In 1844 the country monthly circulation was 7,400,000/, in- cluding the joint stock bank circulation, and it is now 6,800,000/. So that the whole difference is about 600,000/ or 700,000/. 912. But we have now had 10 years' experience of the Bank Act of 1844, and that has been the effect of it during that period. Then I want to ask you, supposing this Act were made permanent in all its parts, as some have advocated, would you think that effect, which in course of time would go on to a much greater extent than has already been produced, a desirable thing to take place? — We must first of all con- sider that, of that lapsed circulation, a certain proportion has been issued in Bank of England notes. Whether they have practically taken the place of that lapsed circulation I am not prepared to say. There is no doubt a tendency of the country circulation to decrease. It cannot increase, its tendency must be to decrease. I believe that was the view which Sir Robert Peel took of it, and which lie considered a desirable result. 913. Sir Robert Peel, I think, contemplated that that Act of 1844 should last for 10 years, and no more ? — He thought that by that time the ceuntry circulation would be so diminished, that it would be possible to deal with the remainder by legislative enactment. 31 MAY 29, 1857. Sir Francis BARixa. Mr Disraeli. Mr Ennis. Mr Fergus. Earl of Gifford. Mr Gladstone. Mr Glyn. Mr G. A. Hamilton. Mr Hankey. PRESENT. Mr HiLDYARD. Mr Hope Johnsto^Te. Mr Puller. Mr Spooner. The Chancellor of the Exchequer. Mr TiTE. Mr Vance. Mr Weguelin. Mr Wilson. The Right Hon. the Chancellor of the Exchequer in tlie Chair. Thomas Matthias Weguelin, Esq., a Member of the Committee ; and Sheffield Neave, Esq., Governor of the Bank of England ; further Examined. 914. Mr Wilson.] In your last day's examination we had arrived at the conclusion that the Bank Act of 1844 prescribes very strict rules with regard to the liabilities of the Bank of England, as far as its cir- culation is concerned, and imposed upon it the necessity of keeping a certain fixed amount of securities and bullion for the remainder of the circulation, whatever it may be, in the hands of the public ; and I think we had also found that the Bank Act, while it gave a monopoly to 208 private bankers and to 72 joint stock banks in the country, took no security of any kind whatever, either for the solvency or for the regulating of those banks, beyond limiting their issues to the amount which then existed. I think that is a fair statement of the result of the last day's examination, as far as regards those two descriptions of banks ? — I think so. 915. We also saw, that of the 208 country banks which were so pri- vileged, 21 have stopped payment, and that of the joint stock banks six have stopped payment in the meantime ? — Yes. 916. And that, if the Bank Act of 1844 were allowed to go on, we should have, in point of fact, one-half of the circulation, or nearly one- half, represented by notes of the Bank of England, all covered by sufficient security, while the whole of the remaining half of the circu- lation, including Scotland and Ireland, is covered by no kind of securities whatever under the Act ? — None that are specially devoted to that purpose. 917. Of course I do not mean that there are no securities in the hands of those banks to meet their liabilities, but that as far as the Act goes, while it takes a precaution with regard to the Bank of England, it has taken no such precaution with regard to the whole of the remaining half of the circulation of the United Kingdom ? — Yes. 918. So that if the Bank Act were to go on without alteration, the country would still be exposed to indefinite losses from the failure of existing banks, for the solvency of which the Act makes no provision ? — No doubt, there is no precaution taken against the failure of those banks. 919. We also saw by returns which have been laid before the Com- mittee, that the tendency of the circulation of those private banks has been to diminish from a variety of causes, other causes as well as as failures, and that the amount of their fixed circulation was gradually being reduced, considerably below tltc amount which the Bank Act of 1844 prescribed ? — Tlie tendency niTist be to diminish the number of banlcs. As there are several i)rovisions which enforced an abandon- ment of their issue, and there are no provisions to allow of their increase, the tendency must be to diminish them. 920. We saw also that, prior to the Bank Act of 1844, there had been a gradual diminution of the circulation of private banks, from about 8,000,000; dovm. to 4,000,000?, and that there had been a corres- ponding increase in the issues of joint stock banks, which had taken their place in the countiy, down to the time of the passing of the Act of 1844?— I think that was so. 921. But from the time of the passing of the Act of 1844, while the private banks still continued to diminish their circulation, no corre- sponding increase took place in the joint stock banks, in consequence of the limit put upon them in the Act of 1844 ? — Yes. 922. Therefore the tendency of the present regulation is to prevent good and substantial and ilourishing banks taking the position of old and worn out banks, as they may disappear from the list of bankers? — But the Act has provided, that the substitution should be by the Bank of England notes, to the extent of two-thirds of the lapsed issue. 923. There is a provision that the Bank of England may substitiite to the extent of two-thirds, and that to a certain extent has been acted upon ? — Yes. — (Mr Neave.) There is a little more than 100,000if still outstanding, beyond what we have taken up, still open to be taken up. 924. Mr Glyn.] That is by the voluntary withdrawal of certain banks ?— And part by failures ; about one-half of the lapsed issue has been by failures. 925. Mr Wilson.] (To Mr Weguelin.) I understood you to say that if the circulation of country banks has materially reduced, the mere permission to the Bank of England to issue a larger amount, as a substitution for their lapsed circulation, by no means effects the purpose of supplying the country with Bank notes, in the same way that the country banks have done?— It is my opinion, to a certain extent, that Bank of England notes inefiiciently supply the place of the country notes, the circulation of which has been abandoned. 926. For example : you have a number of country banks scattei*ed throughout small country towns in the conntrj', which give up their circulation either through failure or otherwise. Now, if in consequence of that, permission is given to the Bank of England to increase their circulation in a given proportion, do you believe that that permission alone would enable you to keep a larger amount of notes out? — No, I do not think so. I cannot trace any increase in the active circulation of the Bank of England notes consequent upon the permission to issue to the extent of tAvo-thirds of the lapsed circulation. 927. Then the only effect that that really had upon the Bank of England was, that it enabled you to reduce your bullion by that amount more than you would have done if you had not been enabled to make that issue upon the amount of securities ?— I think that was the only effect. 928. Therefore the power given to the Bank of England to issue notes in substitution of those notes in the provinces, was at the least a very imperfect mode of supplying that demand?— Yes, I think it is an imperfect substitution. 929. Then, although the professed object of the Act of 1844 was to secure the convertibility of the note. under all circumstances, and for thiit purpose imposed these restrictions upon the Bank of England, it appears that not only no security has been taken for the convertibility of one-half of the notes (that is the country issues), but that, in point of fact, it has left them in a condition more dangerous than they would 33 have been had the circulation of the country followed the natural course of events, and had l>anlvS had been absorbed by good banks? — I should hardly tliink they are in a more dangerous position, inasniucli as their circulation is limited now ; they eannot exceed a certain amount, and therefore their liabilities must be, of course, in each individual case, diminished. 930. Have you not observed, that up to the time of the passing of the Act of 1844, the private banks were rapidly diminishing, and the joint stock banks were rapidly absorbing them ?— Yes. 931. But, on the passing of the Act of 1844, it gave to the 208 private l)anks a monopoly of the circulation up to that extent at that moment ; and therefore it arrested the progress of the absorption of those private banks by joint stock banks?— I doubt very much whether the law of 1844 made any difference in that movement. The absorption of the country banks by joint stock banks has been, I think, principally owing to the smaller credit of the private banks, which has caused them gra- dually to decline, and the increased efficiency of the joint stock banks. That action, I think, would have continued, and will continue, not- withstanding the Act of 1844. 932. But, prior to the Act of 1844, any joint stock bank could issue notes at pleasure, and therefore could make an arrangement with any private bank to take over its business ; or a private l)ank might be, as was very commonly the case, converted into a joint stock bank, and made the basis of the business of a joint stock bank ; but, under the Act of 1844, that could no longer take place, because a private bank cannot dispose of its circulation to a joint stock bank? — It must abandon its circulation ; but there is still the same power, of course, of several private banks consolidating themselves into a joint stock bank. 933. Was it not frequently the case, that if a private bank was in a very weak state, sometimes even in difficulties, a joint stock bank would take over its business, and would make arrangements whereby the private bank might be suspended and absorbed, without incon- venience to the public, and with some advantage to the joint stock bank? — I think that arrangement has taken place since the Act of 1844, as well as previously. . 934. Since the Act of 1844 is there not this impediment to that arrangement, that the monopoly of the circulation is given to the identical bank, and therefore it is unable to transfer it to another bank ? — Yes ; they must abandon their circulation in the event of such an arrangement as that. 935. We have already seen, by the Returns upon the table before the Committee, that the circulation of the private banks had within a few years, down to the time of the passing of the Act, fallen from upwards of 8,000,000/ to about 4,000,000/, while the joint stock banks had increased in nearly a similar proportion ; whereas since that period, although the private banks have gradually fallen in circulation, the joint stock banks have not increased? — Yes; that is owing to the operation of the Act, no doubt. 936. You stated, that you understood that the expectation of the framers of the Act of 1844 was, that in course of time the Bank of England would absorb the circulation of the country banks, and that they regarded it rather as a system of regulation for a transition state ? — Yes ; that was my opinion. 937. You refer to the provision by which the Bank of England was to allow a commission of 1 per cent, to country banks circulating their notes ? — Yes ; Clause 24 of the Act, by which the Bank of England is permitted to allow each banker a composition, at the rate of 1 percent, per annum, on the amount of Bank of England notes which shall be issued and kept in circulation by such banker. 938. That provision of the Act has been very little acted upon ? — Very little. S4 939. I think by the Returns, it appears that it has only been acted upon in the cases of eight banks? — It has been very little acted upon ; for in the first place it is not generally' desired by the issuers who have the power now of issuing, and in the next place it is by no means pro- fitable to the Bank of England. 940. Has your attention been called to the evidence taken before the Committee of 1840 (upon which evidence the Bank Act of 1844 was framed), with respect to the formation of a central bank of issue, or the possibility of the Bank of England absorbing the whole circulation in course of time ? — I have not examined that evidence lately. 941. Mr Norman gave evidence before that Committee, and after describing at great length the advantages that he thought would arise from a central bank of issue, which should regulate the whole issues of the country, or some plan by which the Bank of England should absorb the whole circulation, he proposed, in answers to a series of Questions 2092 to 2129, that the Bank of England should enter into voluntary arrangements with the country banks to pay them at the rate of 15s per cent., which he described as being of the nature of payment for good will, or as a sort of compensation for the loss of the advan- tages which the issuing banks then had ; and upon that occasion Sir James Graham put to Mr Norman this question : " But you have contemplated the compulsory suppression of the issue of local notes on terms to be granted to those who now issue, those terms being 15s per cent., to be allowed by the Bank of England; for what term ought that payment, in your opinion, as an equitable arrangemement, to endure ?" The answer is, " I have some little difficulty in answer- ing that question ; it would seem, on the one hand, that if the arrangement was general, it should be on the existing amount of the circulation of each particular bank, and to last during the period of the charter, or something of that sort ; but unless all country issues were put an end to, or unless this arrangement voluntarily was made general, I think the Bank would be liable to a great loss from arrangements of the kind founded on the actual amount of the circulation of each par- ticular bank, for it might happen that a bank which now circulated 100,000^ of its own notes, might not, five years hence, circulate more than 50,000^ of our notes; so that, to make the scheme complete upon that point, a good deal of consideration would be requisite, and more* than I have given to it." The Chancellor of the Exchequer then asked this question: "Was not your plan rather adapted to a permissive arrangement than a compulsory arrangement?" The answer is, "It was a suggestion to the Committee which they might adopt either way : my own view was that of a voluntary arrangement." Sir James Graham then asked this question: "A permissive arrangement would never concentrate the circulation of the country in the hands of the Bank of England ?" The answer is, " Probably not." Then the Chairman said, "Would not that depend upon the amount of inducement held out to country banks to give up their circulation?" The answer is "Yes." Then Sir Robert Peel put this question : "Assuming, for the sake of argument, that it was desirable for the Bank of England to possess this exclusive control over the circulation, upon that assumption, do not you think that it would be a preferable arrangement to make a provi- sion of this kind, that hereafter no new bank of issue should be formed ; that 10 years hence the existing banks of issue should not be allowed to issue their own notes ; and that in the meantime it should be com- petent to the Bank of England and to the existing banking companies to make an arrangement, in the discretion of each, for the substitution of Bank of England notes for the present notes?" The answer is, " That, in point of fact, is my own suggestion exactly. I suggested that no new issuers should be allowed ; that the existing issuers should have a licence given to them to terminate at the end of a certain number of years ; and I also suggested, feeling that competing issues are a great evil, that they might be abolished at an earlier period than contem- 35 plated in the second suggestion, if the Bank held out to them all the inducements that it could afford to hold out, to withdraw their circula- tion previously to the expiration of that period." Does that question and answer, in your opinion, precisely describe the provision of the Act of 1844 ?— I think so. 942. That question of Sir Robert Peel's exactly describes the pro- vision that he made in the Act of 1844, except that it did not provide at the end of ten years for an absolute prohibition of countiy issues ? No, it did not ; it provided only for a cessation of the composition paid up to that time by the Bank of England to the issuing bankers, who had relinquished their circulation in favour of the Bank of England. 943. Then that question and answer would appear to show that Sir Robert Peel intended the Bank Act of 1844 as a mere transition state, with the view of introducing ultimately in this mode one common bank of issue ?— I believe, not only from the questions which you have read, and from the provisions of the Act, but also from the recollections of Mr. Cotton, who negotiated the Bank Act with Sir Robert Peel, that that was his view. 944. The actual result of the voluntary inducement which was held out to country banks, and which was regarded as necessary in order to give effect to that plan, has, as you have stated, very much disappointed the expectation entertained respecting it ? — Yes. 945. Then the whole of the objects or expectations of the framers of the Act of 1844, as far as regarded this anticipation, having been dis- appointed, do you think it would be consistent with the principles which have been laid down by the Act of 1844, to continue the existing arrangements with regard to country banks?— It certainly would not be consistent, I think, with the intentions of the framers of the Act to continue the present system, or, I may say, the present composite structure of our circulation ; but, on the other hand, I do not know that it can be said to have worked ill for the country, although un- doubtedly there have been a certain amount of failures amongst the present issuers. 946. If it is the policy of the Legislature to require security for the convertibility of-the note, and if no kind of security whatever is taken now from country banks, which nevertheless have a monopoly of issue, is the present arrangement consistent with that principle ? — No, I con- ceive not. 947. If there is any object in taking security at all, would not that object be much less in the case of the Bank of England than in the case of country issuers ? — It is known that the Bank of England offers greater security than country issuers do. 948. And greater publicity altogether ? — Greater publicity. 949. The country issuers at the present time furnish no pub- lished accounts of their condition at all, except of their issue of notes ? — No. 950. They furnish no account whatever of their assets and liabilities in the manner that the Bank of England does ? — No, not by law; they are not obliged to do so; the joint stock banks of issue of course state their liabilities and assets to their own proprietors. 951. The joint stock banks furnish what accounts they please to their shareholders periodically ? — Yes. 952. But they are not compelled by law to furnish any account to the public, except an account of their issues, while the Bank of England furnishes an account of its assets and obligations weekly ? —Yes. 953. Is there any reason that you can suggest why those country bankers which happened to be in existence at the time of the passing of this Act should have a monopoly of circulation as against all other bankers, while they give no security, and no means of satisfaction to the public as to their solvency ?— I know of no reason. c -^^^^^ LfBf^^^ UNIVERSITT 954. If the object were only to secure the convertibility of the note, would it not be a better arrangement, that country banliers should be permitted to deposit with the Government public securities, stock to any amount they pleased, and to have a licence to issue up to that amount ? — That would be a contravention of the spirit of the Act of 1844, so far as the amount is concerned. The principle of the Act of 1844 was to limit the amount of credit circulation, not only of the Bank of England, but of country issuers. 955. But I think we have seen already, by a reference to the returns before the Committee (and which you have fully admitted), that a re- gulation of that kind affecting to restrict bank issues is, in point of fact, inoperative ; that if there were no restriction the bankers could not in- crease the circulation ; they might supplant each other, but they could not increase the aggregate circulation?—! think that requires con- sideration ; I should hardly be prepared to state that as an absolute opinion that I have come to, but I conceive that on a review of the facts since 1825, that opinion is borne out. 956. But we h^ave seen, by referring to the returns before the Com- mittee, that notwithstanding the establishment of 76 joint stock banks of issue in England in about four years, although those joint stock banks succeeded in supplanting a certain number of private banks, and in taking part of the Bank of England circulation, yet the aggregate circulation of the country was not increased by their existence ? — That is the result shown by those returns. 957. In your former evidence, you stated that you had found by ex- perience in the management of the Bank of England, that the Bank had no power of its own, either to increase the amount of notes in the hands of the public or to diminish them at any particular moment ? — No, I think that is independent entirely of the management of the banking department of the Bank. 968. Do you know of any reason why a different rule in that re- spect should apply in the case of country banks ; do you think they have more power over their issue than you have over yours ? — ^No, I think not. 959. When you say that bankers have no power over their issues, do you mean that they have no power to increase the permanent aggregate amount, or do you mean that they have no power to increase the amount at any particular time ? — I think that as bankers they have no power to increase their circulation ; I think it is possible that at times when there is a great spirit of speculation in the country, the circulation of bank notes may increase by reason of the increased wants of the country to support that speculation. 9 GO. That is when there is an increased 'activity of trade, whether it be speculative or real ? — Just so ; such as large works going on. 961. And high prices? — And high prices. 962. But the increased circulation would be the consequence, not the cause of such a state of things ?— Just so. 963i If it is admitted that country banks cannot increase their cir- culation, except as the demands of the public call upon them, does it not follow that all the effect of a free competition in the issue of notes in the country would be, that the banks doing the largest amount of business would obtain the largest amount of circulation, but that it would not increase the aggregate amount of circulation ? — Supposing the wants of the country to remain as before, I think that would be the effect. 964. Is it consistent with your experience, that even in periods of great excitement of trade and speculation, the notes in the hands of the public have materially increased ? — Not as affects our circulation ; I should say certainly not. 965. We have seen already, by referring to an excited period, from 1833 to 1836 and 1837, that even during a period of very great exten-. 37 sion of trade, and very great speculation, notwithstanding the efforts of those 76 new banks, yet, even under those circumstances, the cir- culation did not materially increase ?— No, the aggregate circulation certainly was not much affected. 966. Is there not rather a tendency, by increased competition amongst bankers, to diminish circulation, by economising it, by means of their constant exchanges with each other ?— Yes, there is. 967. If country bankers, as a whole, have no power to increase the aggregate circulation, would it not be much more consistent with sound principles of trade, that they should be allowed to circulate their notes according to the demand from their customers and the amount of their business, provided they lodged with the Government security for the amount of their circulation ?— I think it still would be advisable that a portion of their circulation should be represented by gold. 968. The present law makes no provision either for securities or for gold in the case of the country circulation ? — It does not. 969. What would be the advantage of the country bankers depositing a portion of gold, or holding a portion of gold, against their circula- tion ? — The advantage, of course, would be the insuring of the con- vertibility of their notes upon demand. 970. But the ultimate convertibility of the note would be secured by the Government Stock lodged with the Government ? — The ultimate convertibility possibly might be secured in that way, but not the immediate convertibility. 971. But if a bank was in such good credit, or in so good a position, as to be able to lodge with the Government a large amount of securities to represent their circulation, they would necessarily have means to protect the convertibility of their note, that is, in point of fact, giving small change for large notes to their customers ; do you see any difficulty in such a bank retaining, as at present, only a suffi- cient amount of coin for carrying on its business from day to day ? — Provided there was no discredit to their note. 972. Would there be any chance of discredit if the public knew that in the hands of the Government was deposited public stock to represent the circulation ; would not that of itself be almost a guarantee against discredit as far as the notes were concerned ? — No doubt it would tend to check any feeling of alarm in case of difficulty. 973. Would not the chance of any run upon the bank be very small if the public knew that for those notes in their hands the Government held a security against them ? — Provided that the security was made liable for the payment of the notes, and was not also a security for their depositors as well. 974. We are speaking only now of the effect upon their circulation, irrespective of the general liabilities of the Bank. As far as circulation is concerned, do you see any necessity, under those circumstances, of their holding bullion in a different way than they do at the present time, to meet the wants of their trade from day to day ? — I should not like to abandon the principle of insisting upon a certain amount of bullion being held as a guarantee of the immediate convertibility of the note. 976. With country banks Bank of England notes are a legal tender, and they at present hold Bank of England notes as their reserve, answering every purpose that they can possibly require ; would it not answer their purpose equally, then, to hold Bank of England notes as a reserve against their circulation ? — No doubt, if that would meet the case. 976. Seeing that the whole demand for bullion, beyond the ordinary circulation of the country, is to meet a foreign drain when it arises, and that the whole of that demand falls on the Bank of England, can you see any advantage; on the contrary, is there not manifest disadvantage, in having a large quantity of bullion scattered over the country — There is a resolution recommendatory of a change in those regulations, and that resolution I have placed in the hands of the Chancellor of the Exchequer. 1261. Mr Glyn.] I understood you to say, that you prefer operating upon the date of bills rather than upon the rate of discount for the pur- pose of regulating your operations in the discount market; do not you think that that mode of dealing sometimes produces a harsh effect upon the internal trade of the country, so many of the operations of the country being earned on in three months bills ? — I think it may pro- duce a severe effect undoubtedly, and it causes, I have very little doubt, after a time, a restriction of credit ; but according to my view, the only way of getting out of a monetary difficulty, which is the consequence of too great an extension of credit, is by reducing that credit generally. 1262. Might not the same effect be produced, without interfering so much with the internal operations of the country, by raising the rate of discount to a high point, rather than by limiting the character of the bills you discount ? — There is no doubt that raising the rate of dis- count sufficiently high, has the same effect. It gives a premium to the creation and negotiation of shorter bills, rather than of longer dated ones; but I have an objection to raising the rate of interest generally upon all species of securities, because it affects a variety of interests which have really nothing to do with the state of the monetary diffi- culty at the time. For instance, it affects all mortgages, more or less ; it affects too, in ray opinion, the deposits of bankers. A high rate of interest would, I conceive, have the effect of causing the deposits of bankers to be drawn upon very heavily for the pui-poses of investment. Therefore my views are rather to operate upon the term of bills, giving a premium, as it were, to shorter dated bills, and affecting, as much as possible, longer dated ones, in order to produce that reaction which is necessary to bring matters again to a healthy state. 1263. But you are doubtless aware that the mercantile business of this country between the manufacturing towns and London, is in point of fact carried on almost entirely by means of three months' bills. Now is it not imposing a great amount of hardship upon those mercantile classes who are only following the natural course of trade to refuse the discount of their bills in the ordinary course, and so to force them into unusual, and perhaps very difficult channels ? — It is a hardship which, according to my view (which I may state as my individual view ; I do mean to say that it is the view of the Court of Directors generally speaking) ; according to my view, it is a hardship which is necessitated by a regard to the monetary interests of the Kingdom. I think it is in reality no hardship to an individual that he should be called upon, if he gives credit at all, to give it from his own resources, and not from the resources of his banker. There is nothing in the circumstance of a banker giving a premium for short dated bills, or refusing to discount long bills, that prohibits any individual 63 from giving any length of credit he pleaf?cs from his own resources ; all that it implies is, that if a man gives long credit, he must be prepared to do it from his own resources, and not from the resources of his banker. 1264. You do not think tliat it operates as a hardship upon particular classes of trade, or if it is a hardship, you think that it is one that necessarily follows the course of events ? — If my views are carried out, I think that will be the effect. 1265. Mr Hankey.] Are not your views in a minority in the Court of Directors on this point?— The action of the Court of Directors has been various. At times the Court of Directors has followed this principle in cases of great pressure, I think, upon more than one occasion. In 1840, after having tried all other means in the power of the Court, the Bank reduced the term of the bills which they discounted to 60 days, and that had an effect which no other previous measure which they had taken had produced. In the crisis of 1847 the Bank pursued the course of charging a differential rate upon long dated bills ; and again in the late pressure during the war they pursued the same course, and they also pursued other measures of restriction with regard to the bills which they discounted for the brokers. 1266. Mr Gi.YN.] When you say that it worked effectually and im- mediately for its object, does not that power prove that the measure is a severe one, and one that acts in a way which is very detrimental to the traders themselves ? — If you will look back to the period of 1840, you will find there was then no panic; there were no commercial disasters at that time, nor was there any great amount of pressure upon the money market at that time, but those measures had the effect of righting the foreign exchanges. 1267. The Bank notes issued on securities were increased, I think, 18 months back, to the extent of 475,000?, to make up for the deficiencies in the country circulation, and a certain amount was to be paid to the Government annually for that new circulation ; could you favour the Committee with the calculation upon which that amount was fixed ? — It was fixed by arrangement with the Government at 2 per cent. The Bank paid to the Government 2 per cent, upon the 475,000?. 64) JUNE 5, 1857. MEMBERS PRESENT. Sir Francis Baring. Mr Blackburn. Mr Ennis. Mr Fergus. Earl of GiFFORD Mr Gi.YN. Mr Hankey Mr HiLDYARD. Mr Hope Johnstone. The Right Hon. the Chancellor of the Exchequer in the Cliair. Mr Puller. Mr John LE^^^s Ricardo. Mr. Spooner. The Chancellor of the Exchequer. Mr TiTE. Mr Vance. Mr Weguelin. Mr Wilson. Thomas Matthias Weguelin, Esq., a Member of the Committee; further Examined. 1268. Mr Puller.] I see that in your former examination you expressed an acquiescence in an opinion which has been advanced, that the Act of 1844 did not effect a legal appropriation of the assets transferred to the issue department, to the ultimate payment of the notes, at all events, in case of the insolvency of the Bank ?— That is my opinion. 1269. At the same time you expressed an opinion, notwithstanding, that the effect of the Act was to restrain the Directors from taking any bullion out of the issue department without either bringing in or cancelling notes for it ? — No doubt. 1270. You do not find in the Act any direct words which restrain them ; do you ?— No ; but by implication. 1271. Can you point out what the words of the Act are upon which that implication is founded, in your opinion "> — I conceive these words : "From and after such transfer and appropriation to the said issue department, as aforesaid, it shall not be lawful for the said Governor and Company to issue Bank of England notes either into the banking department of the Bank of England, or to any persons or person what- soever, save in exchange for other Bank of England notes, or for gold coin, or for gold or silver bullion received or purchased for the said issue department under the provisions of this Act." 1272. That, you say, limits the issue of the notes, but it does not, in words, limit the withdrawal of the bullion ?— No ; I see nothing that actually restrains us from taking the bullion, except the general con- struction of that clause. 1273. You consider that the avowed object of the Act was to secure, first of all, that Bank notes should at all times be actually converted into gold ; and secondly, that there should be a thorough feeling of confidence in the public mind as to their convertibility ?— Yes, I think that was one of the objects of the Act. 1274. So as to give a mixed circulation to the country, which should combine as much as possible the security of a metallic circulation with the economy of a mixed ? — I think that was the object of the promoters of the Act. 1275. Looking at these words, that the Bank notes " shall be deemed to be issued on the credit of such securities, coin, and bullion so appro- priated and set apart to the said issue department " ; can you give any 65 meaning whatever to those words, which shall not include the notion that the noteholders shall have a claim upon the assets so appro- priated and set apart, which they would not have had if those words had not been used?— I conceive that the object of this clause was, if I may so express it, a political object, and not to interfere with the rights of the creditors of the Bank. It was intended to restrain the Bank from issuing more than 14,000,000^ upon securities, the rest of that issue being upon gold. I do not think that it was at all intended by that to interfere with the rights of the classes of creditors of the Bank. 1276. But, assuming that to be the primary object of the Act, that object must be carried out by appropriate words. Now those words, " to be issued upon the credit of certain assets," have a well-understood meaning, have they not, in the commercial world ? If I were to ask you to lend me 1,000/, and to say that I would set apart out of a large bulk of wheat, for instance, 1,000 quarters of wheat, in a particular ware- house, and that the money you lent should be deemed to be lent upon the credit of that wheat, would not you consider that that gave you a preference over all other creditors as regarded that wheat ? — That would be a specific pledge of a certain property for the repayment of that particular loan ; but here, I conceive, there is no specific pledge. There is certainly the debt of the Government to the Bank mentioned, but there is no other specific pledge of any securities whatever ; there are only such securities as the Bank Directors may from time to time see fit to place there; thereby, I think, showing that the intention of the clause was rather to restrain the Bank from increasing their credit circulation than to interfere with the rights of creditors. 1277. Does not it come to this, that the security would attach not upon certain individual securities or sovereigns, but upon such as should be at any particular moment found in a particular place ? — I am not, of course, competent to argue the legal point ; I can only give you the construction which appears to me to be the intention of this clause. 1278. Not to argue the point at all, but assuming your opinion to be that there is no ultimate appropriation of assets, in the case of the Bank becoming insolvent, are you not still of opinion that, so long as the Bank continues solvent, there is an appropriation of assets, and that the noteholders have, as it were, during that time, a preference over all other creditors ; and that, in short, the Directors could not take the bullion out of the issue department for the payment of depositors ?— That question involves the consideration of the possible failure of the banking department of the Bank of England. I am not prepared to say, if such an event were to happen, although the Directors at the time might not feel themselves competent to make use of the bullion in the issue department, yet that any constituted power would feel themselves restrained by that clause from so doing. 1279. Without going to the ultimate' contingency of insolvency, there might be such a thing as the transfer of bullion to the banking department, for the purpose of keeping up the banking reserve, and keeping the depositors satisfied ; and that I understand you distinctly to say, that you think you are restrained from doing? — I think we are entirely restrained from so doing. 1280. Is there not this good reason why the noteholder should have a special security, namely, the fact that Bank notes are a legal tender, and that therefore the noteholders are creditors of the Bank, by com- pulsion, as it were, while the depositors are voluntary creditors ? — I have stated that I think they ought to be placed upon a better footing than the depositors. . 1281. Are the depositors at all prejudiced by the arrangement effected, or supposed to be effected by the Act ; are not the depositors in a better condition by the notes being entirely provided for, than they would be under the old state of things, where the whole was one fund ?~I thinlc 6^ that their position is not prejudiced or altered, supposing the Bank to remain solvent. 1282. It has heen suggested in argument, in order to prove that there is no such appropriation effected by the Act, that in the Scotch and Irish Acts there are no words which effect such an appropriation ; that there are no such words as " issued upon credit" in the Scotch and Irish Acts. Is there not this difference between the English noteholder and the Irish and Scotch noteholder, that in the one case the bank note is a legal tender, and in the other it is not ? — I do not think that that alters what I consider to be the fair construction of the clause in this Act ; but it so far alters the position of the noteholder, that he may reason- ably look for a greater amount of security, where he is forced to accept the note, than in cases where he is not. 1283. Supposing, therefore, it was the intention of the framers of this Act to give the noteholder that security, that distinction of the one being a legal tender and the other not being so, would explain the difference between the English and the Scotch Acts ?— I think that would be a fair reason for the difference. 1284. Assuming that the appropriation, if there be such appropria- tion, is only during the solvency of the Bank, and that your vicAV of the case is a correct one, that in case of insolvency there would be an equal distribution amongst all the creditors, would that make any practical difference in the operation of the Act, or ceuld it affect the confidence entertained by the public so long as you consider your- selves prohibited from transferring the bullion out of the issue depart- ment ? — Certainly not, I should say. 1285. You would consider that the insolvency of the Bank was one of those remote contingencies which you might quite dismiss from your calculation ." — Yes. 1286. That it is not likely to happen even in the case of such a drain of bullion as should exhaust the Bank of its gold, but that still the Bank would be supported by the Government of the country and by the magnitude of its resources ? — Yes. 1287. Then is not the practical operation of the Act this : first, that every Bank note issued is considered by the public as an equivalent for so much gold, without any doubt as to its convertibility? — No doubt. 1288. And secondly, that the convertibility of the note being so pro- vided for by the machinery of the Act, your attention as a Bank Director and the attention of the public is drawn away altogether from the circulation and fixed upon the banking department : in short, that the circulation under the Act takes care of itself, being as you expressed it, a self-acting machine? — Yes, as far as that is concerned. 1289. You do not consider yourselves, in the general way, bound to take much thought for the convertibility of the note; you consider that as amply provided for by the Act ?— Yes, no doubt it is amply provided for by the Act ; but the Act requires a certain amount of discretion in carrying out its provisions. 1290. In the banking department ?— In the banking department. 1291. Your attention is directed to the exercise of sound discretion in the banking department ?— No doubt. 1292. And the attention of the public is drawn to the same thing, namely, to your operations in the banking department?— Yes. 1293. Is not that a desirable and convenient state of things, that the attention both of the Directors and of the public should be so fixed upon that without the matter being complicated by any thought about the circulation ? — I think the question merely resolves itself into the obligation that the Bank is under, not to have more than 14,000,000^ of credit circulation. In every other respect the conduct of the Bank remains, I think, precisely as it was before the passing of the Act of 1844. 67 1294. That is to say, as it ought to have been ?— Yes. It has still to regard the effect upon its resources which the exchanges of the country may produce, and also the effect which the internal circulation of the country may have upon the resources of the banking department. It therefore cannot dismiss from its consideration those various causes which affected the circulation in former times before the passing of the Act of 1844. Those causes are as operative as ever, with this single reservation, that now the credit circulation of the Bank is limited to 14,000,000?, and therefore they are obliged to conform to that particular stipulation. 1295. But when you say that the Bank regulates itself by the same principles that it did before 1844, are you prepared to adhere to that quite as matter of fact, or do you mean to say merely that it is now obliged to regulate itself by the same principles by which it ought to have regulated itself before, that is, principles of sound discretion ? — I think that is the better explanation of it. 1296. In point of fact, are you prepared to say that the Bank Direc- tors did, previously to 1844, always act with sound discretion? — That I leave to the judgment of the public. 1297. Does not the present form of the account help to fix the atten- tion of the public, at all events, upon the banking department ? — I think it keeps before the public the limitation upon the issue of the Bank of England, and therefore brings to their attention that the resources of the Bank of England are represented by the reserve in the banking department. 1298. It has been suggested that the form of the account ought to represent and to correspond with the legal liabilities of the Bank. In your opinion, which is the most important consideration, the legal position of the Bank in the very remote possible case of insolvency, or the actual position of the Bank in its every-day business, according to the practical view taken of the Act and carried into execution by the Directors ?— I certainly prefer the present form of account, as ex- pressing more clearly the present working of the provisions of the Act. 1299. Assuming that your view of the legal operation of the Act is not the correct one, and that the intention was to give the noteholders a preference, but that by some error the language of the Act has failed to carry out that intention, would not it be a more consistent course to correct the Act, so as to make its meaning clear, than to alter the form of the account in order to make it square with the im- perfect language of the Act? — I can give no opinion upon that. 1300. But you acquiesce in the suggestion that the form of account prescribed by the Act is adapted to the construction of the Act, which supposes that there is an appropriation of assets ?— Yes ; it may be said to conform to that construction; at the same time it does not imply that that construction is the legal construction. The forati of the account, I may be allowed to add, is expressly for the information of the public ; it is published for that purpose, and it is published in a form considered likely to be the most clear to the apprehension of the public. 1301. You have acquiesced in the suggestion that the Bank has no power to extend its issues at its own wish ? — I think not ; the extension of its issues, whenever it does take place, is caused rather by the demands of the public than by the intentions of the Bank. 1302. Assuming that to be clearly true, does it not seem to follow that the restriction placed by the Act upon the extension of the issues can do no harm?— I see no objection to the restriction upon the credit circulation. 1303. If the Act only restrains you from doing that which you could not do, supposing the Act did not exist, it cannot be said that the Act does you any harm by the restriction ?— No, it merely places a legal obligation where before there was a moral obligation. 1304. If the operation of natural causes prevented you from doing it, then you would not put it as a matter of discretion on the part of the Bank, because however they might wish to do it, they could not do it ? — I think that my meaning has been a little misunderstood upon that point ; I think that there is no doubt a power, under certain circum- stances, for the Bank to increase its issues ; during periods of great speculation and so on, it might be possible for the Bank to extend its issues. Those issues, however, would not remain permanently in circulation ; they would return when that spirit of speculation had subsided. 1305. But still there is an important distinction between an extension of issues against the will of the Bank, whether the Bank wished it or not, and an extension of issues at the wish of the Bank ; an extension of issues which was drawn out by the power of an existing extension of trade, or an inflation of prices, would not be an extension at the will of the Bank ?— I agree with you so far that there is that dis- tinction, and I think that the Bank has in reality very little power to extend its active circulation at its own will. 1306. Then, if that be so, I come back to the question, does it not seem to follow that the Act does no harm, if it only restrains you from doing that which you could not do, even if the restriction did not exist ? — I think the Act is entirely inoperative as far as that question is concerned. The Act does not restrain the circulation in the hands of the public. It simply says, that if the public employ more circula- tion than they do at present, it shall be upon the security of gold. 1307. On the other hand, if that theory be wrong, and the Bank has the power of extending its issues at its Avill, I think you agree that there may be times when the Act will do good ? — In such a case, of course, there will be a security that the notes they issue will be upon the security of gold. 1308. Is your opinion that the Bank has no power to extend its issues, an opinion derived from a priori reasoning, or from the con- sideration of those returns relating to the years 1837 and 1847, to which frequent reference has been made ? — As far as the Bank of England is concerned, my views upon that subject have been gathered by con- stantly watching the active circulation and its fluctuations. Those fluctuations are attributable to well-known periodical causes, and they are not, in my opinion, attributable either to the will or intentions of the Bank. As far as the circulation of country bankers is concerned, especially in the years 1833 to 1837, which formed the subject of part of my previous examination, I think that it may be as well to say that there is, I think, evidence of an increase of circulation on the part of country bankers at a particular period. 1309. What paper do you refer to ? — It is Paper 19. In September, 1833, the aggregate circulation of country banks in England and Wales was 9,585,644^, in April, 1836, it was 12,403,634^; so that there was an actual increase of very nearly 3,000,000Z in the country bank circulation. 1310. Mr Wilson.] Would not you take the same month to make the comparison as you did before? — I think that is not material, because I think the country bank circulation is not affected by causes which influence the circulation of the Bank of England. 1311. Is not it affected by the harvest, for example? — This was before the harvest. The circulation in England was at the highest, 12,403,634?; now no doubt there was an increase of 3,000,000? upon the circulation, as compared with the period of September, 1833. There had been a gradual increase, especially during the years 1835 and 1836. Now, if we look back to the circumstances of that period, we shall find that there was a great amount of speculation in the country at the time, and, no doubt, this circulation was demanded by the wants of the country at that particular period. But the advantage of limit- ing the country issuers, in my opinion, consists in this : as that r,9 speculation prol)al)ly was, to a certain extent, supported by those extra issues, and as, no doubt, when that spirit of speculation sub- sided, those issues returned to the bankers, they must have had the effect of very much prejudicing the position of the banks by itheir sudden reflux. Thus, we find that, in 1836, there were a great many failures of those banks, principally brought about, I believe, by the subsiding of that spirit of speculation, and the reflux of their circula- tion. 1312. Mr Puller. J You confine your objection to the ultimate results, without admitting that it would be in the power either of the Bank of England or of country banks to originate speculation, or to help to inflate it at the commencement ?— I think it has not that effect: i I think it is the effect rather than the cause. 1313. In your former evidence you expressed an opinion that those ' periods of speculation were due, in a great degree, to the accumula- tion ©f capital which from time to time took place in the country ? — Yes. 1314. Would it make any real difference whether an addition of 5,000,000? was made to the capital of the country by a saving, or by an importation, or by an additional issue of notes to that amount by the Bank. Would not 5,000,000? of Bank notes issued by the Bank under a free system before the Act of 1844 have the same effect upon the various markets of the country, that a saving to the same amount would have ? — In as far as it is a creation of capital, to that extent I think it would have that effect ; but against that view it must be said that the total circulation of the country probably is not much affected, though pro- bably the country bank circulation may be increased at that particular period to the prejudice of the Bank of England circulation. I do not think entirely so, but it may be to some extent. The objection that I have to speculation being supported upon a credit circulation rather than upon an accumulation of capital is, that the credit circulation at the subsiding of the speculation must return upon the bankers, preju- dicing their position very materially, and producing a banking failure; whereas, if it were conducted merely upon an accumulation of capital, though the capital might be lost, yet still the position of the banker would not be prejudiced by the sudden return of his obligations upon him. 1315. You think that those evils are to a great degree restrained by the Act of 1844?— I think they are restrained by the limitation of issues. 1316. Putting the case of the Bank indiscreetly resolving before the Act of 1844 to make an additional issue of 5,000,000?, and to bring that into the market in the usual way, through the banking department, by extending their accommodation to the public, would not the first tendency of that be to lower the rate of discount ? — The public would fix the rate of discount at which it would take the notes. 1317. But as far as the Bank were concerned, they would lower their rate of discount, in order to force their notes out ? — That would have no effect, because the notes would again return in the shape of deposits. 1318. But the first step would be, as far as the Bank was concerned, the lowering of the rate of discount, and, as far as the public was con- cerned, it would be followed by a lowering of the general rate of dis- count ? — I think that would be the effect. 1319. If that continued for any length of time, would not that have a tendency to lower the rate of interest and to raise the price of the funds?— The existence of a quantity of unemployed capital always has a tendency to raise the price of the funds and to lower the rate of discount. 1320. Would not the tendency of such a state of things always be, to drive money abroad in search of foreign investments ? — It would have the same tendencv as an advance of capital has now under the pre- e 2 70 sent Act. It would be, in fact, the creation of a certain amount of capital for the time being. The ultimate effect would he, that the cir- culation would be returned to the Bank, and they would have to sup- port that extra issue by an advance of capital. In cases of country banks, where the issue is not so well secured, the consequence of the return of that credit circulation probably might be an inability to meet their engagements. That would not be the case with a bank so well secured as the Bank of England. 1321. But still would not the first ill effect or tendency of such a crea- tion of additional capital be to drive money abroad, either in the case of an adverse exchange increasing the eiflux of gold, or in the case of a favourable exchange retarding the influx of gold ? — I think it would have the effect of increasing the consumption of foreign articles, which would cause ultimately an adverse exchange. 1322. Would there not also be this effect ; that the creation of such an additional amount of capital would have a tendency to give an im- pulse to create additional trade in the country ? — Viewing the extra circulation as merely an advance of capital, its effect upon the trade of the country must be exceedingly small ; it cannot extend to above 2,000,000/ or 3,000,000?. The utmost effect in 1833 and 1837 was between 2,000,000? and 3,000,000?. An addition of 2,000,000? or 3,000,000? to the capital of the country cannot have the effect of so much encouraging the spirit of speculation or the consumption of produce generally, through any rise in the rate of wages, as to produce such important con- sequences as you suppose. 1323. You speak of the advances in 1836 being only 2,000,000? or 3,000,000?; but those figures represent only the increase of the active circulation, and, according to your own theory, that is no index of the amount of additional capital which was created by the Bank. Might not the amount of notes returned upon the Bank be an index of an increased capital^of 10,000,000? or 20,000,000??— No; I conceive that you must confine the increase of capital to the notes which remain out and employed ; that is the virtual increase of capital. As soon as they re- turn to the Bank that capital is destroyed, as far as the public is con- cerned ; indeed as far as the Bank is concerned. 1324. But be it large, or be it small, to whatever extent there was an increase of capital so created by the increase of trade, would not this consequence also follow, that a larger amount of gold and silver would be required for the payment of wages throughout the country, in con- sequence of the creation of additional capital ? — Not necessarily in con- sequence of that ; probably in consequence of the great increase of trade, there would be a great demand for an increased payment of wages. 1325. In point of fact, if you look at the Return, Paper 19, do you not find, on comparing the year 1853 with the year 1856, that there is a diminution of more than 3,000,000? in the average amount of the whole note circulation of the country ? — Yes. 1326. During the same time there has been a vast increase in the gold and silver employed in the country ? — ^Yes, I think there has. 1327. Consequent, no doubt, upon the great extension of trade, and various operations for which money is required ? — Certainly ; and also, I think, upon the improved condition of the population, generally speaking. 1328. Has there not been a great extension of trade in the last two or three years ? — No doubt. 1329. And a diminution of notes during the same time, with respect to which you have already expressed your opinion as to the increase of banking expedients which has been going on ? — I think the circulation in 1852 and 1853 was larger from peculiar causes than would otherwise have been the case. A great quantity of that Australian and Califor- nian gold was brought home by persons who probably at that period 71 had not banking accounts ; they sold it to the Bank of England, and took out Bank of England notes, which did not find their way at that time so generally into bankers' deposits as very shortly afterwards they did ; therefore, there was a very high amount of circulation kept lip at that period, which afterwards went down considerably. 1330. Upon the whole, I think you hare expressed that you are not prepared to recommend any material alteration of the Act of 1844 ? — No ; I look upon the Act as a fair settlement of the question ; and that, if the Legislature thinks it desirable to place a limit upon the credit issue of banks, the mode in which this limit is placed upon the issue of the Bank of England is probably the most convenient and the most effective ; and I think it is as intelligible to the public, or perhaps more so, than any other mode which you could adopt. 1331. Mr Wilson.] Am I right in saying that you did not, in any answer that you gave on a former day, support the notion that it would be safe to issue Bank of England notes without a reserve of bullion, or, in the case of country banks, without a reserve of Bank of England notes, which would answer the same purpose as bullion ? — Certainly, I should not consider it safe. 1332. You did not intend that such an inference should be drawn from your evidence, as that it would be safe to allow of the issue of bank notes by any party whatever, whether country issues or the Bank of England, without sufficient ample reserve of that commodity with which they could pay their notes : namely, gold in the one case, and Bank of England notes or gold in the other case? — Most certainly not. 1333. Mr PuLLER.J You informed us on the last day that you were not aware that any opinion had been taken by the Bank about the legal question. Do you wish to correct that answer to-day ?— I have ascer- tained that there has been a legal opinion given by Mr Freshfield, the late Solicitor of the Bank, which is, I think, in conformity with the views I expressed. 1334. Is there any objection to that opinion being produced to the Committee ? — I know of none. An Account of ihe Number of Private and Joint Stock Banks authorised to Issue Notes, and of the Aggregate Amount of their Issues in England, Scotland, and Ireland, respectively, as fixed by the Acts of 1844 and 1845. Number of Banks of Issue, Amount of Autherised Issues.' Eng and. Scot- land. Ire- land. England. Scotland. Ireland. Pri- vate. Joint Stock. 72 19 8 Private. Joint Stcck. Total. £ 8,087,209 208 1 £ 5,153,417 £ 3,478,230 8,631,647 £ 6,354,494 72 bfitO fco^ 5i "S "o" '"' ^ '^ 9. u fe C3 « O S s ■•- c !il^ '^'^ <; '^ o o J >'^'» oa§§ . 3 o3 5 o ^■^ s ill P5 O W t- I- 'i* O O t- t- -^ rH CO TJ< i-H •»!< t-< 05 O «» 73 M .« (1, •?; « a; SI'S 02' .S?Q i: >>o Eh" V. § rji C» O CO M 10 »0 CO O »0 fH •«*< C< O CO i-H CO Ci (N N ff< C< 5< (?< 0000 0000 0000 0000000000000 o__o__o__o__o__o o_^o_o__o 0^0 o t-^ r-J' Cf tS -ril tff 'f -rit r^ r-i C/^To'co" <»I^>-HOiriCO-^t-r-IOCOiO>c 00 CO -^lOCSCSlOC^t^lOCSOiJO tH" tJT 10' aj" "O" us so" CO" vo" >C riT co" CO 000000 oo< ! O O < ^oo_^oo^ CO us" 00 CO of co" i-l O >0 C3 00 >o h- •<** I> o (M ■« 05 •<* t- -* »o iO_ ;0 CO'ilSO t-T ^ CO t- l^ Ttl t-H O 00 CO r-ICOO'*COOSOajl. e<3_©_^50 t- t- rH >C T)H^O__0 tO^tN 0_ 0~ (M' ctT o" od" CO~ rH -r-T co" ?T cf o t-^ COOOO^Oi-lTjHT-O^aDCOfMC^'M 05>C?0'Mr-lT-iOSiOt-005DCO t-' of oo od' o" cT 00" oT as' cf o" 5^"" r4" CO CO CO corn Tj< CO CO CO CO ■*■*■* O CO t- CO O CO tC "O CO t^ 1-1 CO CO^f CD-CM-bO- tO >0 CO ^ O ■* CO 05 CO CO OS O 00 O t-o>.oio(r-i(Mcooo 10" ".-?'" o" >ra o" I-' CO co' c-f t~r CD crT r-T COi— ICOOl— IOSCOCOCO-*(MrtlrH ©__ rH i-H^ i-J_ O^ 00__ t» CD__ iC^ !.-;__ 05_ Tj<_ CO^ eo"eoco^co^co'(>fi^rcCO»ffli0>0l0Oi0 lOiOiOl- O'0i0!>>Ol^Oh-l:^C^C0t- ■ '" ' "^ "T o o co__-f o^ cd' c^r b^ -^j?" -^jT ^^rr:^: ko oi en o CO >0 00 o to-co'eo'eo" <— icoot'^co<>«cocor>.?-(oi 05_ 0_ 0__ 01^ 0__ O CO_ QC_ t- «> CTS^ CO_ TT eo" eo" co' co" tjT rt co" co" co" eo' co" nT ■o O O t^>ooc^o C-l^ 0>_ C0_^ o" oT iO o o >o 'O 10 C0__ CO CO__ (M_ CO__ CO CD O 10 00 >rs CD OS rH ■^ CD (M 00 QaOOOOOrHi-ICOlOt»T(»COr-l iO 'O O b- •«*< >.0 CO O 10 C5 l- CO CO Tj'Ot^iXfMS'tiOOSfflCOOCSO of O' Co' O' r-T t>r 1.0" co' co' rA' OO Co' ■<^' »01^C0>0O>000C0OTtlCT05O I— IO0i0iOC0Tff c4" so' so' ec' co' co' co' eo' co' co' C5 K5 (T^ rH t- C<» O IM 05 t^ 1-1 00 ■^ _«5 10_C?5_05 iC_5D K5 <0 CO O t- "t-Tt- t-'t-Tt'.'t-.'t-'t-rt-'t-.'t^t-r CO OS t^ 03 CO 1-1 CC^ OO «5^ CD_^ O^ 0» t^i--'t»'t>rcio t^ 0000 CJ "O of 00' CO ^» OTj i-TrH^'O 0000000000000 0000000000000 o © o_^ o^o_^o^©_^© o o__o ©__ o i-HOs'oo'Qd't/rt-^co' t-^i-n'o'co'io" Of-IOOCOl^COt-l--COCOC^COi-l eo^co__©^co__o O3_cr i—T r-T im' (>f r-T .-T co' cT oo©ooo o o o © o o © © © o © o S.I 4 0> CO Tj< F-( 05 CO CO C<« « ©< (N l-l i-( rl t-3 P-5 fH ^ <«! .^ ^t^ •* rH J») 0> CO TJH — ( 05 CO CO rH 00 CO CO r-l CO 00 "0 CO r-liH C^««C-< »- t^ 00 « O J< C^ C^ (>< (M C^ ooooooo iiiiiiiiiiiii oooooooooggooo ©©o ggggggg ©So Sg'S3S[S'^"2S?2§§SS siiiiiiiimiS iffi"cro" 00 05 CO C5 OO O -"tl rH 00 05 C^ 05 Oi C5 »o'>oo"«ru5'Ttr^ j«coc^'r-ros"orooara>'"oo'oo'"o'" c^ ,-5 CO CO CO l- rHiMT-lorocOOCOCOO«5i— ICO OC0a0©lO»>rH00(Ma0O-f05C0 t-05eo 2 'ffl ^ «> ;* 2> S Tj< t^ C-» ^ O Oi CO ^^gSSJSg^^^^SS tfS^IOO'OOi'M'MOCOiCCOiOCOCO ■*cooot-csiO,-i<»a)05C~.coooo gSS5::S^Ys'§-Sf?fSS'" co'^'o e^iot-asoOrMOOii— icoococoo co'eo'sC ??^^g3?§;ss§S3?§g3S^?s?s C© to l^ © © "5 lO t~ l-H 1-1 © X) CS © tH CO CO CO 55 OD >0 ef ©"co'-^'jc'o TjT MS C5 © CO CO © CO OO cc_co ;o__©_^Tj<_->^ cf e*" cT *f CO co' co" OJCOeOC005-<**i-ieO»0©eO'*rH CO*l©'^i-IO5C0'MO5'T^©->*Tj< ©COiOrHlMCOOSi-lt^ ■* ©1 _ . _ i>« 05 '- _ COr-'©aOt^COl-H©Oi©Cl' co' CO co" Cf fff fff irf 0*f rH (N" l?f cf ci" -COO5Tj0 CO^C» lO^t- CO CO 00_^t- CO^rH_ t-^ us" ©' co' ©" od" t>^ c^' T^T co" co" cc" t^ t>^ ©COiOrHlMCOOSi-lt^OO'Mi-lr-I'M r-*_r-H rH rH^© 00^t>^ t^ CO CO 00__i-H^l-<^© W' S« © UO U5 © U5 «C t- © t- t^ © <5-*Tj<. ©10©>0©«5©U5©10©1.0©10 ©C')©l>-©C^©'M©C^''3iT^>Ot- «>_■* IC 00^-* OO^^OOjrH ©_^00_^lO_a5_t- Tjj^ ot' 00 05^©' CO r-Tco'co o;'co"oi"r^rH cT ODO-.'COOiCOI>-COCOCOCOI^©>0>0 ©©coiososcot-coiococr. 00 1-- «>' co' co' c4" f ef cf {2S CO CO us CO © oo lO * CO to © OS I-- rH^(M_ aO_ OD © rn' co' >S >ri co" o 05 r-- 'ti CO CO OS «>_ eo_ CO__ ■* CC_^ t-;_ o»_ •O GO CO CO CO CO CO i-H-H©a0rf<^'«tCl-(rHlCCOC0>O ICiCO©Tt<^^4lrH(NiOo' co' t-' lo' o' t-' o' co' crH'*l05l00Ji0©C0 t~COi(5COCOiCCO'>tl-O 5^_^rH 00_ r-' r^ TjT rn' T^' r r t-' CO' US' r^ Co' Co' ©' CO' ■* lO cr uo " 1/5 CO © CO (M w © t- t- eOrH©OSOirH-^rH©OrHeO>0 0'> eo'eo'eo (N'e^'co'eo'eo'eo'eo eo'co'eo'w" IM C-) la CO lO CO © OS o> co'c^'*«" '^t ■^ N rH CO t^ CO rH © CO © CO CO CO 00 C*l CO CO_^CO_^00 os_ ■«t' of ■^ oT cf "M co" CD © 'M — (M C5 oo •CJ ■*< ^ lO © © t^ t»' t-T i-^ t-' t-' co' t^ «>US00rJ<«©O'*iM>CC00J© t-cOTt>fss r- (M CO © r-._^CO OS © rH^lC 1(3 00_^a>_ Tt<'co'i~'o5'rjrio CO cc'©'co' -^'t-'t-T COTt<-^00(>OCO coc5^-^^©aor><^o(^^rHTJ^co<^^ tdCt-'t^oo't-'t-^t^t-' l> i> t^co" © CO ■ I CO 1 © t- . "'^ ""1. '^l ^- '^- ^^ ^^ ^~ '™^ o5'©'ur co't^ o5"i-'t-rco'Tjrt-^fM'"©"Ttr coco-*t^rH(M-Mcna>>c>'^t-cot-. es Cv| rH rH CO CO IM ^,C*,0i,'^_t--^"^„O icftO CO"cD"co'cis'co'A"co"«o"«o'«o" CO o eo CO ■* 0> t~ lO >o (MrHO co'coco' eo" ■*' oo' (^^ •>#' -h o" lO 00 CO © © >o «s MS !M >0 rH rH IM O CTl-T rn' rH r-T (>»' rH*" e« c^i c^ M iM ss c« ©©©©©©©©©©©c© ©©©©©©©©©©©©o ©^©^© © ©^© ©^© o^©^© ©^o_ co'co'io't^ -^iTco'ocr© t-^CC'(M S^^r-T ■ — -H -"tl t- CO © rH 00 >0 CO l(MC^IMemMl-l— HrHrHrHC^M ©©©©©©©©©©©©©© ©o©©©©©©©©©©©© ©©©©©©©©©©©©©© cT t-' co' ©' im' co' eo' co' -i tjT ^ ©' im' co" 00COlO->*lrH0DKlC0iMCOrH|--.©© t-^OO^CO CO^^CO^^-* CO_(M a0^rH__lC lO t- o»_ 00©©QO©©QO©©©aO©GOl^ © 00 >0 IM © t- lO .M'IMO>t-Tjf rT O O50OT-< c« e^ c<) lo oooooooooo oooooooooo o o o o o o_o o o o^ . ofo o'co'«ro'"(--'"Ti<"oD lO" ©O O O O ! ©o kOTtl^lO^rHt-CCOOOJ «Db,cgTtico>ocoir»cC'* eO^ CO_ O^ -#_ rj< ©__ 0(3 M__ rH_ CO_ ^'co rfcdid © irro'oo "i" H{?ci^rtn05a5-*l m'co'oTcfoj'lM ofrtTcfi I coeowr- I 35 (?« m t>- c^ 5 CO CO CO CO I r-l 00 l>. 05 © t^ !0 c COO5CCrt»< ___ Tt<^(>> co^^cc ©^co^io_ii M © Tt< t^ ci C eo__co^!D_cn ■* tJ<^C0_^c1i co CC t-h t-H © cococococococococococococo C< CO © eo put — (00©t^lT<©00 00«0«0 t-00©©(Nt^t~O0©© O CO t- © S-l CO tH i-H^05 rH tcf »>.■"■* CO cTcrco'co't-Tod' oTt t-t^«DC3CS©©©r-l© t^> t^ CD^US-* T)<^u5 t-^ ©^O ©_ <3^_^< 1-f r-i rH r^ T-i^ r-i 1-^ si !tlCOOO> Cvt^MCOCOCCTfCOt^OOCC^iO o_^co_^(» co^^co «o^.-i rH o« rH t^ -^ eo oT «e" oo' sO(M «0 •»_■* -^^ CO CO^^ •*_«!_ so «D osT "ri" ?f cf fff c-r ch' *f es" e«r 8KS©iO©iOiCU»©iC©©© t^©iNWSiNl--(M©t^©iO© ooco>ra^Tt<.-(^i-Hb-c<<OlTt^ — — .» -I i<5 -.fi -^ O t^ O W ©o S8 c>fc< « 'C * c « lCa>'NTj'©C«-*Cft5O00 i-(00©CO N N >0 CO C5 i-H ■ I >Tl 00 t- OS i C5 l-H -* rt r o>r co' i>r od" -^ >o" r-^ uj u^ I— t wj i~- '.'J b» b» tH 1—+ C5 Tj^ l-<_O^OT©__i-H_-*_(N IM rH C^«_CO^ U0_eO COCOC^COCOCOSOCOffOCOCOCOCO Ol CO r-l >» 1-1 00 MS O C^ ff^ 1-H (N 00__-o t^ UO e-j-^jTco'-*' CO i?« cf od" C f»> "O OS C a O tn =!> c fl ost^t»csaiTfior-(,-iao -H^-*^S><^iO eo_^oo__co 'tl Th'© T-Tco'cf "5 Qt5"co © >o ( C0C^iM>C=O(N(Mi-l©(N5OC0i-( 1 •* t^ (M CO r- 05 c I (N i-l © (N 50 t" > CD"co"co"cD^5£rCD"< ©©©©©©©©© >5^'?'4l-* «D_rH CO_^CO ■* L-S 00_^O5^(M ©_ C5©aiCi©oicocso5Ci ©©©©©©©© ©©o©©©©© ©__© ©__© o © ©^© oi '»" 00 ori-Tco t-^ofto't-^oo'i^ COCOi— lUOOiMOO^r^uJGCUS •>ti-5 •-» eococo©ooioeo©i>«oHi-(iHi-t eOC* . CO CO CO <» 10 '.'^ 05«iiOCO'»50C^©Wi— cb».-l "tl^"i^^o cTo t^ tiT'N'h- «o •-J'co" c« cTr-'od"— ''•Tt<'r-< i^T-rit o5"oo"e-i o 00 io ■*! i« 10 OS CO h- 00 eo OS 10 ' Ci 05 OS OS OJ 05 OS 05 00 05 r-( CS C^ i-H 1— I i— I 1— I 0<« {^^ i-l rH r-( (M •* US O CO CO «3 M «5 P3 CO 05 10 OS >« >0 00 OS . »Ci-l CO "O CO CO (Z) ■>* 'X) «o 1-1 r t~-' ■>j<" CO*" CO oT o" •*■" oo' TjT r-T ico'>»oa)>0';ot^cc'<* ':-i •>< C3 m CO rH iC 5D O O —< CO •>» 'C "O -< CO t- C^-NIMI^iesiMCSC^i-li— ((NCOTl* t-«oocoi:^t^-HTj.0!>»COCOO'C'«*<-^-^rt>Tti'^i/3l~C50» 000000 000 00c 0000 0000 0000 00 CO ) so CO o t^ •* 0000000000000 0000000000000 o o o_o__o 0000 o__o ©_^o^ CO" O" t-' rjT Co' ic" h-" of r-i cf t-T O co" OOi-ti— luOOCOt^-OOlGO-^OO ;0__»0^iA «S_0 C0_^05 00,aD_t-^Tl<^CO_CO_ «> CO CS' oT O O" ^' l-T rH -3" r-T r-T r-T O o o o < O O O O 1 IrH 0( >o 00 - _ _ _ _> o o o o^o__o o o o^o__o ' Cf trf iO of CO '-!' -if r?0 «3 K5 us lO USC0OTflC0-»tli-lt--*0500 co'*ioseoo5>.OTjOCOi-IOiOt-(5D(MOii-( I CD O !M O t^ < USCpcOt^'^pCJCDTtiejCiOiOS t-^O CO^tCJ <0 rlT !»" co' Co' CO' • 00 t^ f-l ■?•) CO CJO < COCOi— ICO'«tl!-ICOIr->-l,-l»f-l us us lo'co't-'i-^t-^co'co oo'o''o < -- __ _- ._ _ _^ ., ^ J it^-HrHCOCOCOCOrHOi ■ OS i-l 1.0 CO TP "o'co'co't^-*" ■ Tfl O us O 1 CO CO c O OS us o'o5'~co''o''o''o''o''o'oro5 (n'o' a> ^■-•ocoT*iri<- O t-- Tjl OS_^(Ts CO — us to" os' TjT od' -j' irf oT os" o' oo' co" lOSOOUS «5 «0 TJH ( !<__-- ^ _^ • CO O_»0 rl ■* CO^^l us'o'co rn'r-n'oc'co us'jsrb-'us'o b-' OSODCOOUSrt,-IO^OCOl-ICOC<^ i-lrH!-lr-(000>COO(Nt^t-CO « (?f *f eo ■ I O t- O t' u» I US«0->tlIOC^i— It^CSCOrHIMOSOl US__US__l>^ US_CO^US^CD_^i-H .-H_?^^CO_US CO_ eo" o" us" co" of rjT 00 os" t>^ t-T us" TjT (^ 0SOrt3SC0CS-<*iTtlC0'*IC0C0ltS t- CO_^l>-__CO^CO us Tj* -^^US^^t^C^ (S) CO usususooooususous t-JU5COi-(OSOOOCOrfiiO •^TttTh-^USUSTjHUSUSCDGOCOOO o. 0»^-^_^Tt<_rH -^^OS CO © rfl rj< OS co"of •dTtjJ'us'tjJ us"co'co"©"cd" COCOuSl^rHi.-SOICOi— (OSUS ©__© 5^ ■^^^'-'^'-l, >-;.«> us CO eo'eo CO co'eo'eo eo""5>s"eo"eo'"co" coaoi-(i-ico©ajt^T* — ■ --) i-H © 00 OS © cc ©US-*0»0»U50T!j<©coOS»t» rH00C;OlO»Ol-*OS0SO<00CO0O t^0>00COC0O4CDO. OlOSCOOIt^CO — COQOCOt^COO* i-HO<-*iC500OICOTt(O<'»tiCOa0i-t «C us T*< •>* CO^O l~ t- t^ 00 OS o> t-» «r eo" to' eo so' ■<* eo' .rT eo" co' so" •* TiT r-IUSTfTft^eOOSOTflOCO t-__b^OS^O^CO rH_r-H t^ OS r-l CO of © © 05" Co' ©*" Os' of us' CO* os" t>h-UST-tCO©OOOCOCO'»*< 0__-*^0_CO__i-l © t- © Tt o< O CD co'co" co"" CO CO*" us co'co'co' co" t^r-IOOSe«OST( CO CO CO CO CO CO CO I ©©0©©©us©©© ____'©©©©©©_ o©©oo©=^ooo© ;gs § 8 CO©CDTt^eo"T*rTi<"co' OIO<0 US oJ TfOI0050t^TtIOTt<©CCt— {NeO:-W'0'0■ •*Ttl■*Tj^■^tl50^.'5l-'^■»tl■*«5aOOO t"»!O5O'»J--00t-5O«Ot"C5( I t- i-l O t- CO ( to-*! •x;Cicooco>ot~© SC C5 05 00 t^ C5 ':D^05_ (>f t>r 50 ©' of lo" CO i-T «o" «' ©" ■* US' OCS«0©ttiCiC0lfll<>J(MI-a5© rH^O O © « CO_00 CO OO 00 © C» M Cf (N si *f l-TrH'tHi-H i-TiH 0>r0.i-l OlC^CDt-ICOOCOlQlO'Me-l'C© iflT ?o ic TjT (>f co>OT-Hio-^T-tmTtici5T»< ©t-lO©>CCO©«Ot~>CCC>ir>rH m" of CO >o" "J" !>" 1-^ 'sT Ks" CO I-T 1-4" I-T >CO©r-(i-l(M©CO«< Tt<©CC'«?OflCC0 5OC i^00__CO__-*^S^J_ '(oqi'Ci CO ll-OCWOOi-IOOOi-KMCO 'OJOC^i— I50UT-IOCO ©_^rH CO_iO 05_>C -* CM tO_t-- i-H CC_ oo'oo'h-'b^cc t-'t-T CO h-''t-'"oj"©'t^ COCOCCCOCOCOCOCOCOCOCOCO CO •^ o< >«D©( »0 O »Ct CO C^ CO rH < © CO CO O Oi l« C< t *» t^ «o eo «o *■'! •<*< ■ — 00 »tl © «c t- (M C^ ?0 ?0 CO «(i oo" «' co' tS lo e^' c0 ec 00 >0 © (M ( _ T ^ © I , _ . _ _ Tj<_ (K <>J^ «0_ ■— _^ C_^ CO__ M us" cT «o" ic' 05 I-T to" p-T t-^ I-T -^ co" cT rHOit-Ttr-l«eaOO0l<5 0<©'»Oi©ai55t-M<©'><©os r-( r-i CO ©^50 © l-O lO -^ r- i-H Oi © Sfj 00 -*<'■«»< •^'t--'c;'©'(>rt--'©'c^'.-rco" Olt--^C0SOi-l(>»«05Dt-C0iCi-t 05_ 05_ 00_ X_ .CO > "2 «d tg >..2 i3 « g » S)S S c S -2 « oj *-> _ S » 0C>- '0«D(N«05b«C^>OUtll 00 OS (N «5 «o O CD (N « 05 •* rH -ifi *< rH © ^ 1-1 OS CO CO C^l lO uti CO © ( c^ 00 eo Co'oo'oTb- lo'rt' . ifl CO I--. © CO IM Oi00©©t-lO'*COU0i-l©O> 5© ?» «d' b-' t-^ «r 5o' «r <»' «r t^ tc «r »^©Ttit^cseoa5cococCr-i©Tj< COCO©OSCO-^©C><«DCOCO>Or-l C>l(N«D©l.O©'MiO005DCCi-IOS t^cT »'■*'©' 'M't>.'<:c~ CO T*r©'tM""cr ^rHC0CO©©C0O5©COC0©© © 00^ t-^© © © t-- CD_ lO^t^ IM i-<^OS_ tCco'co't-'t-'c© cd"co' ^Tco l> tCcD §S8S§; ©©©©©( i©©< ' © © < '© ©< «5 CO © © >0 O ( >©©©©©©©©©© >©©©©©©©©©© >©©©©©©©©©© 00C0COrH©>O©COi-H5OCD(N(>< im' co' i>f co' co' I-T ©' i-T r-T © i-T !-;■ ©~ m r-(OUCOOe- rH C< r lo" Co" W' "--5 t-^ O" I Oi 1-- l^ ►-- "O 1— 1 . la >c lo !0 o c< ri-rr-Ti-ri-riM c* I S^ Oi >0 r-l C I CO r^ I »o CD O CO I o o't-^'r-i 00 cc'aTcc ca'co'irT t^cocoo-*aoi>»T»Hi— (co»« M_rH O^i-KNMCOWIMCO 00 oil CD 00 ■- - O i-H M 00 W^"* '-^^'-f^-' CO of TO*" C^r p" CO C3 ^^ 1 O 00 ^ C^ «^ • CCCOOC 05 -"tl C5 t- "* r-l l©0O-^^":>IMt-C5Tt< o CO -^ ^ ":> '- - - •* t- o r-- i-H >0 CO TO ■ " o" cT •*" o" ©" r (>»" (m" im' cs of c^" (>f (N (n" c4CCCOOO'M05iOCO OS^l-H^rH Tj<'Nr-00OCO»«t» TtTco'co'co'CTTcft o"-*"'^'"c'ao>ooti tJ<^o__o CO o ©"©"©'o'cf o'c^Tc-ffff oTo oj o iH i-H 1-1 iH i-i rH t-t 1-H i-H i-l iH ©oooooooooooo ooocooooooooo o © o o o o o o^o ©__o_^o_^©__ to -^ Ci Ol" Cf CT CC" t^ tH iO b- 0 O t^ © CO 1-1 t--. (J5 iM O OS »«U5lO05O>(M05e0 O ■-0 I __ CO^ CO^ ©__ M_^ r-l^ 0_ of t-T (C t^ GcT hT t-^ t~r co" (--T oT of i>^ TOMTOMMTOTOTOTOTOTOTOTO O CO IM CC >C t- 1 »0>CQCiMCOOiOi>OCOCOIM©CO <0i-ia0-*TO*(_*<.'-i,i-l,o,o,®^*^„*~-_oc>,t-_ e>3 05 to" to' to' to' to' TO TO to' to" to" to" T*0_ ©__ TO_ !>)_ ih' co' I-T co" ©' Tji" i-T ■<^' ©' co" cc' TO to" ©C0r-IO5CO-*>OlO©TOr-ICC«>. CO^^CO CO >C '^,"*.'^„ '-*,'"' ^^"^ <^ f^ TOTOTOTOTOTOTOTOTOTOTOCOIM OCO>CTO«©t-'MCi— I'^CO OC©COTOt-tHO:>00 rH^O^ Tjt ocT -tjH" ■^" od" c' co' !>" r-^ t— ' to' o" r-OlOTt(iMTOTOCCi T*< -^.W <><,TO__(M_rH_rH^©__i-H_Ti<_i eo"e0«5 0iO»00000 (N©^01(Mt-©>C'(5 (M O CO "* © L-J^rH CO CO^C» r}<_ oTt-^© CO^<>f r-ToTrH (-^©"iflT i-(t-COt^>0-*liMCCC5-*>0 T rH © 05 © TO OSTOTOTOC0050TffOC005IMTO OOOOr-ICOOSlOr-IOOlOCOt-OOO t- il< 00 TO OS t-^rH -^ ■<*< CO^© b- TO *r t-T of TO 00 (M to' lo' I-T IM ctT -rt^' oT TtliOrHCOTOt-TOO-*©— (Tf■__ OJ^ ■«*<_ i-H_ ©__ 05_ ©__ (N^ t)<_ TO^ ^TOTOTOTO'^^'^TO'^Tf-^1^ 00O00i«'*asOt-t*C>i-H(NrH t*r-lt-00TOCO©t~OSTOiMIM'O rHC0-*«SCCrH©rt<01IM(Mfflo«^e<»os rJ((MTOOSt^O;r>-t— >Or-IT(« »O0000TOCOCO©'MO5TOIM o' t-T t-T r-T (m' t-T co' ©' to' im' c4" (Mrt't-^t-l-^TOOOIMCOCO © t- US CO 1 " " O5OS©TOiMiMr-(00TOCOt^t~C0 «0 © t^ -*^i-H_TO Oi 00 TO © 05^© TO_ cf fli" Its' co' oT (>f us" lo lo' oo' ■*" c:r t-T O3t>-Q000t-COt-.i-it^i-!O5CO'«*t OSt^COCSOOOt^t^ -*_«> o^os^t-^ «d" co' co' co" t-T co" co" co" co' co" t-^ CO co" TOaiOSOO'«)(N©CDt^(>IM t- (-- CO^CO__t~ TO__CO <* TO ©__00^t>.__O_ o"o5'oo"©co"©'co (m'tiT^o'to'im'to" t-.-IOO«STOlMrHOS<*«S^ l-l05TOOOOO©Ttf r4 I-T Tf' C^' I-T od" t-COi-lUSCOOllO-^i-ITOi-l 10COC005S^i-tC105CO©«a lo'io'o loco'co'io'ic'uscoco' 8§: ©©< O©©©©©©©© ooo©ooo©© © o o o^o ©^©__o o ©"■<*< CO"oO 1-H 00«s"oo"-^'©io">I5'qo"' i-ICOi-(iO«^>005TO01CO (Mt-lO«STO©'CTOTOCOOO ©©'©'©' ^'r-r©'iH'rH' ©' I-T (M5>.b Cl CO us (M © l<. ©< O t^ lO iM © t^ sag «3^_:s2SSc3 ob-c^ §s2 o o S S-S « a** as 5 3 g'U o o 5'S^ o-JS 33 3 3 »« 0;zip hb fiH S ■<) S f-s i-s OC<^ C5C0TtlrHOSCO- CC CO Oi «0 O lO CC -* ,-( M> » Oi 1ft a rf r> :C CO W* r- ("•' CO -H m' o" o" a O Tt< lO ?5 t.15 O >0 lO ■^__ M^ CO CO M M ?«_ -M^^ of 50 CO N OSOCOr-(COt>-:C(M US C^ C^ CO 5^CO lO 00 >o c<« ofocT coco'co co'"o'crco''a5' coco cocococo^cococo toco C5COCOOOS5^rHl,-r ■»!C'0>0»0 >0 O »0 l^ iM O I-- fM <>» t^ «D_h- (N -* Th CC_« CO O KS '^ b-'oT «r-*"t>roo'co'"io'"'o"oi too CO O C= i-H rH O rH iO co^co__ '^'^■^^■*,"* '•'' ■*, '^^'^^ co'co" co'co'co'eo co co'co'eo' O'MCOCOrHaOlMt- 00?OTt*< r- S^ OC i-H Oi C5 Tt< C^ r ■^ »>) i-H IM CO Tf <» rH h- OS OS C5^05_ C-J CO OI >0 0O__ rH lO lO i-T©" rH r-T rn'rH^IM-C^rJc^' (N (M Co o >o >o WS I O C O O "5 o o o Tt< O lO O rti OT O O -tl 00 i-H lO 50 00 : <»o5 - oo"od"o6'Qd"t^t^^^^^^i rfi(M00iH0J500oot»'W(M'Oeo — »;_. ; '«00»0J(TtlT*<_03_>0_5q_CO_OS^OO io~ la >o' o TjT TjT TjT ■"^ ■ TjT TjT TjT ■^' tjT •<*<■" TtT tjT Tji r-lrHi-lrHrHiHiHrHi-liHr-li-lr-lt-lrHi-lr-t I •<:»< i-( 00 O 00 i-H 05 o o^tT^^^cc^o (N^io ao_co o -* «o_rH |^3,co_o>^l^^_■T)<_«5_^- od t-' »>" t-' »-^ 00 00 00 00 oT oi" oT of C>»0 00 00 Oi" O O 00 00 CO lO 1-H 00 t~ < O OS CO CO t^CO'OOSi-HO^l^O oo oT ctT cj' o o" o i-T 0>0>OCOt--05^'>!*<'*'«*t--t— t~t>-t-«OCOCDCO . ■, TirTt''-*''rjrr(roo lO ic co^^^-^^o Ti<^>o_>o^i--j^>o^>« io^>«_ rjT T)< ■ ■^■" TjT ^■" co" lo" io~ us" '^ co" co~ co" eo' co' co' co" OC5C^0^lMO05050i05050i< -0-*tNCOTi<(MOO-*CO CDTj.t^05a>C0C005-*t-^ 00 00 «' 00 00 sT of oT o o' oT o' o OC0i-O05C0t->Oi- _ 00©CO!MCOS^T-HCOrHCOrt00»«t~i— ir»O500t-i— I CO'^fNOI^i— !05»0Tj «> CO 05 ''5,*^'-'^'-',s^,^,='^'^5»>,'-<,*^ cc" od" cf t>^ C-f L-f o" t-T co" of i-J" o" r-T cooicoaooi— icocot^t^'Ooi'M CO ri C>_1-- (»t-._^CO_^S^__ ->!(<_ 00^ ■'1'^ 00^ CO_ iC.^'eo'iyrfff co'"'*' afic" "fcoco" t-^ % 1 Tj^OOJiOCOWSOOt^COOOUSCOiOOi-^O (NC0r-(O":)'<*Ob-t~C0t-OC0C0O COCOl-Hi*lrH005'CCCOO'»*''*OOC0005 ,-, Co'co"rH"TjrTj>'"co'"t-'"co'"r-rco'"o"-*"r-r«r^!N O'gf ^OC005>CCOCOlOQOt-t-t-00050>kOCO© (MC»>CO5C^C0r-(CO00lOlO O^b- "^^'^^'-^.'-l rJ~ © ©*" O i-T r-T irf 5^f r-!" r-T i-T i-T © O" ©*" ©*" Cf COCOCOco(Nos«oeo©t^'Tj!-Hcp^rj!,-^«OiHo6»fti 80 •5 Q ■<*iiOOiOOiO>«uMO>0»«OiftOO»0«5iCV«»OOiOO«5«siAOO>««SOO cO't'r^ff^io-^-focoi-it-t^oot^i-iopoo^oioosooajoii-HOt-ir^t^co,- os"oo t-T 00' t-" 00 co' arcs' oi cs'oi oi'os'oo't-^ ^^b^t^t^t^'t>-'od 00 (»t»-'i> t-'>o us «s"io"»o" (Nt»oaO'j;_t- tO«>««5-<*(roeOr-l (xT 10" >o' >o' o" US ic' «r co' 50 <»' !o" ;o to CO 10 "5' u3 i« iflT ic <« ITS u^ O CO t- o OOCSUSC^CO-^COt^fMlOIMOeOSDiHr-lt^MOiait-l-li-ICOCOeClOSOOiUSWOOt^ r^C^aOr^COTjtOe00500(M«005C<)(Mt~C>lO>Ot-r-iaOCO-^0«OCDC^r-(rHCO^Oi^CC 05_->i<_CO_^-*_lM^i-H_CO__0_t-( 05^>0 CO 0_r-l OO0i05>0i-IC0'rTt<'<:o''^r-rr^''orod"w''o5'rH'ar-# i-T l>Ot-OaOi— It(USr-^C005Ci"!)0iC0ir^THrHi—(O!3>-*S^O ro'Ci'sTo O o'l-Ti-ri-ri-rc^ C-r-lrtCDCOU5Tji-t-Hr-(r^lr~COOOOOOOOOCOCC)CC':5SOM> '=«t^-»J<(:~(Mi-Hi-ICCa0CD00C0000D00OUS(M(>»C^'t^T»<-^Tt1_C0 »_■* 0^0_t-^0 rH US^rH_Tj<^US_^CO^i;O^C^^I>-_Tl<^00 C^^e^__r^ b- (N C5_GO CC 1-1 (--C^ rH . US'cO~rH"rH'u5'io'c£rt-^US"-r*<'u5^t^-^i-H'cO rjru5'o"t^Co'c*ri«^ < 1 Tt< us CO CO US CO t- 00 CO CO T-H -^ US •<+l US CO •<* CO CO t- O t^ O i-H r- ^ Tl<_t-^US^t-- C0__O^<>|_O_C0 U5^0S^rH^rH^O_C0__01^t-^Cn i--(^05_-*^US US CO rH 0_i-l -"fl CO Oi O i-H £ ©" r-T i-T o" o' o' ©' o" cT o^ cT cT ©" o" fh' cT o" (^cTod'ocTotrod'otrocrotr 00" of oi^otTar OS 00" • CO CO Oi CO < C0C0OQ0rHt>C0t»'*iMU5C0O050i00C0e0t>.e0C0rHUS O CO US rf ^ " ■ ' ~ ^ - - ^ - ^ . rH rH CO -f © TtlCO©rHrtlrff US r-T rH " - ' 'I -+< CO >C i-H i-H rt* Ci Tf* CO © t- 00 © CO' ■<*< co'us't** oi-co"© ■^of c-r(>fco'"'rrco''co'"t-'"©'"T(r COUSC0COr-ICOCOO5COt»i-lC^©©a0C0I^CO-^M C0^-*_<» Oi^l>>_©^Oi COCOTtlCOO^0Ot--t~-*COTticOU5 t-' eo" cf c^' CO TfT rjf us »« CO «> 00' 00 00 00" ■* rjT -^jT us csT ^USiHe<«CO»HQOb-«Sff»U5t»C<5ff«US«i6CpuSOCO(Hr-(Tj<005®U5ceQOt-uSU3rH COa0'^<>»©fHt-00©O5©i— IUSUSCO'^'^COCOtJ» (35T}-'<*USOii— IOOUS05t^©CO(N©f rn'rjl'co'aros'co oTco'oo 00 us'^-^^-'us'u5"co'o^o^"co'(^f orcrco'©"i-rotf o^'i> co'co't^ ^CO©i-ICOt-0CCDrHCOCOCOrHUSUSOiO50Oi-l©USt~©i-((MOir-C*r-lt~rHUSO5O> i-H CO us CO i*< rH^CD_'r C^' l>f Cf (>f (N' 0^ ^Tl5rHOOUSr4o6u» S rHrHi>< rH— KMCO rHlM(>» rHrHlM rHC^CO rHC^C^ rHrHlTJ l-l 81 »0>00>ftOO CO ■* ■* rh Tft «o OS^CC^CO CO CO 5fi «r e« so' oo" TjT b- CO ■* C «5 t-t O OS C5 lO t^ OS ©u5»OOOiOU50»OW50>«OiOOOOOi.'5©>CiOO©«50©OOii:i"flO«0 r-llOTt)C^U505i-II^05Ttlt^©Oe^«iOOi-tC00505C03^05t»!£>e« O OO t-_^eO_^00 CO©COTtC "O ®^0 CO O «0 GO "-^CO^ OO C^' Co' CO (TT CO •*' t^ -^^ <»' c^' cc' CO o' op' >A 00 (» ■ ^^ ■*-. >■« v^ >*^ VJU «J UIJ UU \^ I'* i-ir»C5rHr-(<:Ot^ODOSt»fHe000i-(50t-©C0C0t--i0'*<->*00-*t-O' O IM CO CO 05 I - ^ > CO ■* ^lO t^ "^^^ r 05 00 00 oo' 00 cT o5" 03 CO t^ 00 00 IC «0 CO CO CD t~. 03 IM I .•0©CDt->aCO0DCOT-lTtC'Mt^©"ti©t^«5i-'l>©(--eoi t-COt>-00T>l-<*i©(M©COO5O5CO(N-(Mr-|i r^ CO C0©C0COCOt-00!M ©CO lOiO©i-HOOOi rH Co" Oi" rf OO' >« t^ i-T lO t^' W5* Tfi" t-' u? C^' t-"' >o" Co' © TjT co' CO rH oT OO' O r^ O0O5CO©COCOCOli5t~00COCDCC*<-^ Wi-Hi— l(M(McOTj(COt-l>000505aO»OCOIr~t-OOi— !-<*o' >« «o' >« © •* Ol t^ IC rH 05 lO i-i CO 00 U3 CO © t^ CO C5 © TjTrHTiruScrS'f V5 t^ IM CO Ol "3 rfl « !>> rH CO_^««t-t-.-*r-li-!r co' co' rH' co' co' 1-h' cT (^r 00 co' co" i-h' oo' Qo' co' -t' r-T TjT c^r co' ©'--' c^' rjT ^-^ >o' co' c^' co' oo' COI^t~OOCOO'OCO-J0-*rfOOOOCO< 0»(Mt— CO'*05C>»lC(MrH05COi— I©-*' ---- •■— — -- .„.__ CO CO CO CO CO CO CO CO CO CO CO CO 00 00 OO CO 00 oo ©©©©©© C^) C^ C^ (M C^ M eo'co co'co" co'co" (Nt^t»t,t»t~t,t,(-)0©©.-OiOiO>OiCCDCO(Mb-©©>OU5»0 t^Tt0 b-_t~ t-^ C0'O5^©l>l0000©00a)Oi00a0COCOCOCOCCCO Tj<05iOCO©05OJ©0105©O5C:iO5 C5_C3 03_CS_0i_ eo' co" co" co'co"co"co"co"co'co'co"co"eo"co"-COi-HOOCNrHCOir^T-HOi©COCOOOb--*c»CO(M C^t> ©_^t-^CO_5 05_C^O5^©__O5^O3^rH CO >0_® <>»^CO © C0_C5 CO ■*„<^',"5i^ro"'>«"crio'l-J"oo"co'-*"s^r-rTtrio'o5"co"Tjr 0©COCOrHt^CZ)iOu;'Tt(COC^!-IOSCO©«0©©-*'OOS © 05 © © l^ Tfl CO CO^^__(N ©_^OJ_© O CO_aO ■r(<_CO__r-4^t- ©^t» CI t-^C^ CO 03 i-H_05^iO_C^ © •* CO 03_C0_^tJ<^'* l-^ cTod aToToo'od" oo © ph"'»j5"i> cooo' od oo ^^^'^^^ r^co'oo't>.' co'co' co'co" ifl'co~i«'ioo" otjT us •«j5"-«*<'co' of cT «> t>. 00 00 05 Oi COrHO©rHCOt-©CO'fl'><'MC^C^t^iMlOlOC^. CO © CS^OO 00 Tt< CO Oi^>C^CO_^«S^->*l_^CO__O^Oi^©^OJ -^^^CO 1-1 i-t CD ifJ^rH >«^00__lM^->t_CO_^T«<_^CO^CI_CO^ orrH'©"Tt<'cfTjroo'(rrco's^'Tf'o'orTtro"t^'oo'ao"rH"-*'oroo'co'r-'co'i--"-*"oi"ciOCOi-H00500COC005r^CO l©t--iM(MiOOO©CO©S^r-ICO«5©©00(Nt>'>OCOOOt-TtirHTt"Tireo"fff "t^eo'eo'eo TjTiGrco" CD 05 i-l< ■*©rH CO-* 05 KS Tt< rH 05 ■* © CO t-* 05 CO T-^ 00 CM T(< Oi CO 1-H 1— I O 00 US © © CO IS<(N(MrHr-l^©©©©©©r-lrHi IT-I©© ©©©©©© oo 05 03 CO CO CO t>. 05 CO -* e^ t- a s 82 .§ ^ •S Q O l^ O «5 i-< «D^rH t>^00 TO_i-<_!a5^CiJ^00 W CO^» •^__5D ^ Co" oT r^ ^ t^' ao ci" io~ 05 t-^ •<*r ■*' «r cT ic "m" co" rn' eo O-^CO-^i-lCOOOO'OCO'^OCOO'NOCltCrH liS ■* c^ CO 00 '>v*l^-'*„'~!.^^,'^'~i.'™„'*.^„*i.'*. oi of os' oT as" oT 00 oo~ t-" t--' w t^' ^^ CO oo so (» of cd" t--r lo" u-j" b-T co" o" t-^ «© i»" TjT TjT go"" «r C^r-Ol-0•^00 5DCOt^aOi-l5<<'^'*0O?DO»5OCOiMiMM)COCOi-( ^DOOOCOC^CO'M'T^OOSOt-t^t^i— I001O5OW , o"i»'c^o5'o'-'__oo os o o th i— i o (?^(Mi-(O00»^0i.-lTf»0i-l©< t-SOCOO«DCOM50C<3( CCOO0050l^i-Ht-05OTj<«C>l ■ C3 -^fH T+< IC Oi r-l 1 ■^ -^ f rH'rH i-^,-^ rtlt~O«0i-(t^iCUSt»O00a5irt)l«C00 0C5_Tri U5_00 © i-H t^ « a> t-^OS ©^S» 5OO0iMC»S.''oo'"of "o'co'io'co irTco'cf TjTTtT r-r-o cc c> -^ ^rH05'?<5^-*J000'Na0r-*t^'CS^"55Du-5t^Oi0 t»«iOCC©i-lt^COi-H©iO".'5(H ©TOi«05©©0(Mt-.C<«rH_iH>OOSUJ^COCOai'» ©■*Ttl^i-l©©©C0O5«WCO I0»0l0©©©©0050i0i05050205t^b-.t^03 (M«0«5«>05>Ot"05O3C5O50ia> C>503CCl505005D«Di— (l-Hi— (r-CCt--t^t-t^t>-t- t~t^r-COCO«05W rH rH rH r-* i-H rH r-( ■* ■^^'^^'^ COC<5M05lX>rH0500©©©0 H|;oiDOOOt:00'»©©©©00©©®©'M (MU5>5i'0'Mi-l©C505050SGiOS O5C5O5OJO>O3O5Oi0OGO 00^ CO 00 00 CO 00__00 00CO__ COI'-l^t^t^WrHOSOSOSOJOSOS c^-(N s^'-m'-m c^ f irTirfcf irfiM -jf cafes' -m-im" c^T (rTs^'irTcq ofi^f rH t-Ti-rrt'i-Ti-r «oooo5eort« <>,i;00©(Mt-Tt0JC^©t^ ©_C0 -H 'M__Oi t-^i-l ■» iM ■*,'^"» ■*,0 W "» '^►^'"I, •-H ^^ ip" ^ T^ i^T «i~ otf <«' i^ o' ^ OSt»OlO©>.-|iMCO»0<-H>. •occs^eoTfc^oiooiOJ'^Deo ost~b-aoo5i--co«!£>';oi-i ?0 iM ©_ .-^^ u? © C0 0> ■* I OS O^ OS OS Od C^'>»05©©t>-OC^©t~t^C0b»O©00rH50'^ rtlrHC:5C5«<> © rH rH © t- b- C5 ©» CO t- 00 t- 05 5C CO t- ■«*< rH CS CO CO GO «>. ©•MOS0OUSOlrH->iO'*->tll^C0 «O'»rH-*l00 co"5>rco'"co">o">c"5rrrH MTcTtrf cc't-'^Tt-^irf lO't^TrH' © ©"'* oo of - ■, CO 5>1 CO CO >0 OO rH CO rH t^ © >0 t- Ol cs ^ t~ t» 00 co__ao «D Tt< t- CO -"ti c of of of i« •*" ■* Its" to' t^ 00 5^ lO t^ rH CO T(< ■* _rH CO m_ , . (^ rH (M CO r- CSCOCOQOI>"COC5(MCOCOCO(MCO ■00!MlO>O'*t^rH!a(M O5CO«>'M'»rH-^©(M00l-»O0©Tt" TfT «r rH of of 00 ©' irf co' ^'' <©" . . --, ,^ ^ „• . CO Th la ,___., ^Of of of rJrH'rH'©"© 0 O O '.O 05 CO iC © CO Ol i-l-«*<-^t-. ©CD00O5 '*!©©•OC50lO'*<«0«OCOrHrH©050« © ^ rH rH" —'■©'©'■©"©'©'©'' of Cf (N(MIMO«0«0»OI(N010»(MrHO« 83 ©iO»0>(SO'OOiOOv«'ifflu*000«5'«>0»0>ff©iOOi«©0©Oi«OOiCO»«^0000 ©.-(r-lC50CCOCCO;CCi©Tt<>rjTOC0CO©-*t»"*-*5^'*CWOJOiOeCTOOC~0(MCO«D-*«lOM!MOO(K'00 iM^W 1^ r-l <>» >>;.© t-^O "S © t^^i-l i-" Ci of oo' CO 1-4 o CO o' od" oo' 'o" -^ o" oo' -h" rT to •^' «>' rT <» ©' of « im' of oT r-T ©' t-T ?o" ©' t^-' oc' tc" co op" i-T to" 05M. »Oi— IT^3-. O5C^O-tOO.i-H©(>)O3rtlt»CCiO^O^^-,'^l,«'5__iO^'*^U9_l--_ w'c4 c4e« 'Oo'o'iOTjTrjf'* CO co co"Tj''TjJ''^Tir tiT^'co eo' of r-T r-T of in •*'"'♦■" o'co't^i-^ ' >d -^ lO Ol OJ r-H I OCOr-i©t005e»>OTj<>«©t-©©h- rt.©©T-i- - ., _.ar>TOt^o;oo»ooo5i iO-*i"OC0aCC0O<0000tOWO5©'*ll--OT«r-t-- to^< © of "o" oo" ©' of oo" Oi 00 «r of of eo rt" «»" __ __ _ _ aOOOtO©CO-HCOO>>(5i— ICOCOOIOSCO 0» 00 CO 0< CO IQ 00 OS^rH 0> CO »0 K5 CO_^ 0_^ OS^ l-^ C«_ OJ 5^. <>«, ""^^ OS^ 05. OO '- "O ■>*<_ ■^ '.-O^ •>l)<^ t^__ 0«_ ©_^ iC O Tjt^O 0«_ r4cj cs OS of 05 'of of ©' ©'©'©' ©'©'©'oToT oToTofor of 00 00 00 00 00 oo so 00 00 00 or©*"© rn'^n'rHof I i« T*< to >0 05 rH ) CO t^ CO O «0 f-H •Tt< to 05 ■*■<*< ■* ©b-00t00iiC«Ot^0iTtltD00 00 l-4of lo'"-*" of r-T to" rtOO'co'©' .- _ ^ . -r-IO©-* • «500t^©O5-JCO© l-HtOr-ll-IOCOCOtO 'OSrtC0r-(t^r-li-Ht000-*00're-*li-llO.._ _ ____ to rH r-l © iH CO^tO^^iO © ©^i» OS^CO^^t- t-^r>-__CO_^t> CO_^tO__i-H b- >0^ GO l>» © 0« •* C5 rtl crj od" i>" to" to to to" to" b^" (^ t^ tC oo" oo" to" >o" «5" lis" to tp" to to" f- C50S©i-l — ©©00O> ©©■^©lOCOtOtOCr—ltOCiCOl^COlOt- ©" r-f T-T od" of ©" of of CO 00 oo^ 1-4" t-T to" 0<0»0Or-!i-(OOt^tO©©©©©©©0©©©©0©»^t-t»t^t~t^'<*<'t<'^'*r^ (^■^iHt-Hi— l-O©©©'O>H00-^'*-*Tj<00T*-tOtOtDtO'0 0>0010t ©'•<*rtCt4"i^'ao (x co'oi co'co oo't^'to' to' to' to' to" co" to"" to' r-T tc' to' ! Ot-l~-r-IOI©-^*<©i.OrJi-l©©©COCOCOCOtDCOCOi-ICOCO< c:iiotoi-(t~couOiOtot~t»i^(r-ootototctototctci>toto< i—'co'i-Tr-T© ©'cf i-Hl-f rHr-t r-Tr^"!-? F-rr-Ti-Tr-f rH r^ r-i t4 f-^ r-^ r^ r^ rH -frH ©*"©©"©■"©'©' ©'©"© t >tOr-!tO!»CSCOaDCOC0tOtOtO00«> lCO«00)a005rH05COCOTfTt<'>!t<03tO itctc-*©ootoo'otcosaiOiOso ^ -^ Oi Oi < ^©tOrHrHtOtt^C0^-u^r-^^--l— ItOi— 1( Ci-l Ol M" 1-1 OJ rH 05 05 CC_ to CO CO 00 O Oi I of r-T© Os"( I Ol •<*< 05 to to CO . 00 O CO t^ t>. © 1 -* iC OJ CO 05 O* t^«5 0^00-*OStO-*C0 00 05©t>(Mt^COt005«OOOtO©-<(*OIOOrHb.eO •»t0©000>i0©rH0S-O>-HrHl>t000t~tOOOCOtCOO>Ct"'*O> rH'-^'rHTj* of ©0> r-T t-'(M'co' 00 to" 00 '•'* 05 CO 00 ©' OC' ©' CO' of iff OJ t-^ 05 TfTto'tO to' r^ r-i Oi (X' cf 05 COlta" ©OOrHCOOit-rH'*l:^t^0^iOOiCOrt<0©Cl^»CCOOiO«tOT»©tOO<00e0r^OSt^tCOIl--l--OI'OiCl»OU3C000rH«>rHl--*ie0Tt"oo'o5 of of »OTt.'f to to t^^t'-'oo'oo' of of of us" TjT'^'"-^ uj" t-rtd>'oo"co'or ■^t»eO©CO©t^COrHa0'«©rHtOrHlO>«C?St^©O5iOtOt-t--©00O1'*l00X5Q0©M<-*O>«OO5eO e000»OO»C5rHOJCO-*t^©a!iOaOtOO»-*tOt^COt^tDO>rH00l^t^t^©COaOrH0Dt^'O00t^C0OS OJ^O^ C» r-_t> ©^OI^O)^» ira OJ^-* © tO^QO^© CO_^Ol 00_^© ©^lO t-.__© rH_^ C0__OI CO^C^r-l^©_^rH^tO__©__te__t^ rH^© ©_ uo'©'of bf©to'cO0dco'rH of r-'io' rH'rjTl^ofrH rff'^fco'iO of lOcfoo't^Co'co'io'TtToo'^^ of X5 ©" r-IO5iCOJ©©O5t--OIO0©TtlrHr-irHOi'i0i-l©©-*-M-*'OTt* 05©©tOt-.00'OlOOIO< t- C0__O5_rH_^(» t0^rH_^tO__tO_^ © rH' rH ©'©'©' Cf of CtT of of oo' CC" of of CrT of of of of oo' of Oi oo' 00*" 00 of of ©"" rH*" rH rH*" ©'©' of of of 00 od~ OlOlOIOIOlOJrHrHrHrHrHrHrHrHrHrHrHi-HrHrHrHrHr^rHrHrHrHrHOlOlO^OtOIOlrHrHrHi-Hr-l ) US (M 1 rH 0< I IOStOC<5©t*'*rHt^Tt00««>t©eO©tOCO©t-^>-ICCi* I s H i tS ■*C0Oi»C0e9^9d0^0^OOOO^C I rH Ol 0 00 1-1 «_00 C^O^t~_«3_OS_i-<_CO_C^50_t- f w w" w' -^ •*'" ■^ -^ ■* «o us" U3 •*' eiT m" cf ( ^ a\t-c^_ai -rf 00 o* a> r O eo us 10 oo rH ( - ■ - •ifleoiMOis^eocoiHe-ioeo^oeoi-iosioosi-oaoc^ooo* 0«>COGDUSI^^l;DQp«Cl'^^(^^(M05'OCD0505SS^l<■^^TJri;D'cf of'-Tio o" io'o'TtTod'Qo'od'ofso'io'o'o't-^i-rt-r '•»oo■^Ol-ll^>oo■<*>aD(^Sl-l>oo5lOco«=•*o•*(^»«Dl00o><^J"SO aiWHUSOSaDC0010Sr-i05CiOX>05TjOTI<(>«(S<0005QO «0 CO' us •^ -^ «r OT C>f CT w' Cf Cf I^' C^ S^ rt' i-f M i4" r4" i-T 1-H w 1 1 C^eOS05050SO>i-l©'000«OCOO«D«C«OiHO(Mr-lC-IOt^0100i— l(M©0©C^«0«0 ©05S^-*US>OUSiO>OUS>OU5'Wt^«et-Cg5lMaOiO-*Tj4 rH © i-T i-T i-H i-T rH r-T i-h' 1-H rH rn' rH t-H Cr C^ o « »'»CC©r-t^»OOOC5-^rH©00'*'(MC^MQO-*aOt-OOeO ©a000t^<»C^-«*.«005«001US-*(Mt-iOOO«5>tSC03"«S>OOOCOOO>0>OiOrHOO©t-eO«D-<*« rtl 00 «0 t^ t» (r<_Ci t^XS _'^ JO ©"©©■" CT CT of of of of of of of of r-T rH rH' —' Cf of of of of of of 00" of rH rn' rH' ©' of OT rH pH rH rH rH r-4 >-" rH iH rH rH rH r-i rH rHrHt^(N«SeOeOTf 00 © 00 CO I X)oooooeoeo>oeorH«9eoc<»50us'>(j•©© C^ ©CO_^>OrH^© 05^ **? rH'TjT^'rTrH TJ^f^f c>rt-^T^'eo't-.'e^'©'5D'© rH"co'«o'c^'>r-'«'t-'co'rH'©'co'eo'rH ©'co'co' rirHCOOOOt^OOCOt-ll--aOUS«5-<*laO(M(NOOCOTttrHCOrHirarH©©rHf c^^ * -3 •«* 0> CO as eo IN O CO 00 us ir« (-* OJ h- rH (N us CD rH © CO uST). t-' rH' 00' Cf Co' oo' us' I--' I rHOOOOCOrHCSOiCC! 00 CO CO us CD Tj< r - I 5^ CO 1 ^ © 00 000©i«0>Oi -_ - j>0>OiOOO»0000 O ■*' tJT ^' rH ^' rt' OO' lO' C^' CO' rf ■*' >o" to" OO" r-T ■» oT to" lOCOODi— (1— (l>Jt^Tt'0Q0C0t^'*O05 ^Ir-h-i— iir501i0W)TfOOII^00C<505©l--!MC0O 00 oo' oo' of o> oT oT 05' oo' CO od" oo" x" oT of cT o i-T r-T i-T o>aoo©ows«5iooi«»«i«)©>'50»o .'l<-*tOtOT»<-^-<*<'Mt-iOOit^Q00D(NC0«O l0JC-r-^OT©05Tj<05©e<3r-l<0C0«0wJ'o ©1 10 CO ■ ©■«*< < ic V i-H 00" so 00" 00" of 5^"" >o" co" oi" . aoi?<'for'0©©t^-»T0 ©■" of of of of ©'©'"©' of ©'"©''©''©' af 00 00' 00 oo" 00" t-5O(N5<»^i-'e0lHOHOe^W^©C©Oi©lJ*5OO> rtlCOtO0000CCC3Tt »0 to to 'tl to © Tti 5^ Oi^Ci rt 10 f- 05^« (M^«5 00 to to f-Tw'ofto'c^iocidt-^ofi^cc't-^ooofoft^coofcr-^ t^ © © to C^ to t^ I-H o to 1^ © I ~ I OT to M CC © "S r-4i-f*U5 00CKl'«.Hl--Oir of to*" 1-^ c^ of lo" t~r t-T c^'»*<-*Tt<©-05'Mt~o>coi><05t^©©aot-© ©_^05^© ©^'-H_^'^^^w^w^r^ c^^irj^co rH^« t-^io cc^iN co_ »o" -"jT >0 us "^ "j^ "if >« "O «5 «f wf >0^ ■*' T*r ■rjT -.t' •^ ^ I CO O 1-1 tH CO - © 00 tO^CO^^OO "^^r-t S^^0<^©^0 C^O_^'f©'-»j<'ofi>ft-^of«5adofTjrc^Qo"of-^t^ CDOStOS^C5COt-CO©^00©«OtOiOi-ltOtOr-(U3 COOOCOCOT*tDtO(»OS O" ©' i-T r-T r-T r-T r-T i-T rH ©"©'"©■"©■"©■"©'©©'©'"© © o©t^?-i-«i-lteOltO>OtO'Ni-l00t^COIM©rH ■'i't^i— t»OtOt"S^C^t^t^©OlCS"500C000C0r-« uf ■* (^^ ^-" Th' co' to' c^' o' 00 00 •>^'' orf TjT rt' «>r lo" r-T CO C^(M(r<(Mi-l-*i-ll:^05C5COi-lt^C^tO'»ti05i-Hr-l 00 to >0 TJ" CO ©_^as_QO^I-- tO^^tO tO^CS rH ©^© 0^i-H_0_ Cf © CT ©"©'■©'" of of ©©■"©"©" r- rH ©' ©"©"©" cT t- t- t- 1-- to © IS_^M ©_^©^©^©^©_^© ©^©_^©^©^rt 'C_ cf cs"c^c-f 'o"to"oi"(M'"io ©'©"of of 05 of of of of -^TfT 50tOtOtOt^t-»tOtOTt(©>OtOCSC^»OC^OJCS0001 ^■^■^•^tOt^OOOOOOTtiCll-COCO-^COCOCO-^US cf e^iM's^'"e4"(M'"s^i>rco'"co ,r-(«i-l00Qr>aD00Of'>i"c*c^'(>r cm" o^ M (>» t-Ttd 10' C5C^(M00QOS^3^t^l^t-t^t--t^t-iO>O>OeO0p »ototOQOoo©©©o©©©©coeoo50sc^© ©00©COtOt~»r-l©0000O5O5Tt<-^iOS^tC-<*OtOi-IOl tO__© ■* jo' >o" •^'" i-T ©" r^ «r co' tJh' ©~ rn" ic' 00 •^' Tj'QOt-t^tOr-l©tOt005t^tO©0500»C'><0-.00 - C< «5 iH © OJ O r © © © © © © OS 05 Oi 05 00 CO 00 f ^<^OOiO^O^dQif ©TfiC^t^0505i-l©Tj* © 00 ., — . rH © Tj< to l-l rj< 00 •* ■* 10 ir» to © rH © CS ."©'r-Tao'c •^ to (M tr> 01 05 © to 05 to I-H i-i OS ■* o> 1-1 to © f- oi i— to t^ i us CO © ■* »-H t» © OS^C^ 1-H to to ©_^r-i 05^^»-'oo'oo oo eo'co't to CO 00 CO OS us I lt-©r-IUS I ■* cjs CO 00 1 t- © t~ r-l C OS ■«ftOrHeOl-Ht> 1 I us t^ US^OS^t- ufto'ooco os'co'cd to ©'cf t-^ of t-'i*<' ■>*"©" (>i"i-r T-lCOt-OStO©OS-^CO©©t-uStOtO©rT.© 1-1^00 CD e^ us us CO to to tD^r-<_CO_^rt<^CO 05 t-^OO i-H^ os'oo oood'oo'oo'of OS os'of of 00' oo' 00 t-'t-'t-'oo" • us CO C^ ©_^OS_^© tO_^Tj<^-<)<_ -.-- _ -."©'r-Tcf CO'i-n's't-'co'to" tOuSUSOSC^'^©-» C^ rH rH C^ rH rH (N CO 9e c log •i Q I I us lOOO O W CS ■* - - Oi 05 (M O C-> ■* **? (rfo's^f 00 Tf r-.' © M 05 TlH CO o i/tiio©o>c©ooooo>«wi»aoo>«>'50>o«5ooooo r->i— lTt>iW«0©CO'005M<»CO«Or-l5D01v0 05COO;Cfl'MO' ' ■' "oi' c^' o^' ^o" ctT ©" 1-4" «o (^^'r-' 00^ 50" -^'cT-^ (^^^^r4 to' c^TrtT--', ~ ^ - © ICl TO f- -:«< -^ ,-H t - - CT>OT^U5t~rH-*iC©lCiTOI— -^i-tli-HtOTOSOCC^lS^I©!. __„ ^^«>^© TJ<_ro^aO_-*_rH C^^(M_^C5^t- TO_^'*_00 5000'Ot~-<*(©iO«©i^^© si'oT© ©■■ ©of 00 oo'oo'oo'oo'' (xTaToT 01' ©■"©'©"© 05 a>O©«OCO'N©rf-*00i-(IN T*os'0©oot^r>.ooi«ci(r<^ooi-(05ooi-i050-*< ■*_^« i-H^«0 QO_^aD^t^O0_^SS OS^-* 00 TO^OO -^i-HIMCSOS^J^-^t^S^^ '-o't-^t-'"© <>f ©"i-Toft© (n'© T*< TjTcKf csrcroi"io ©"t--r©"c^'"'N'"r-r©'' — ""^-MTOCOOOiOt^OCCrHiOi— lOOTjfiCt^iMTOOOrHt^OSOO vO-*_»o_ot~t>.ooooi— ic^>— l©©o^■>^oo©M»-'^^>o^© TO TO , _ _ TjT Tf' rjf Tf' ■*'" 10" 10 TjT TjT -^ ^ -^ TtT TjT TjT 02 i««OOS«5».Ol^©©< •^5^©TO©00TO'«©lO»O©TOi-l©tOC<* TO 00 -H Oi 1-1 UC CJ TO 00 i-l r-( CO O _^>«^O© too h^ Tji TO i-Ti— I 03 cTio'i^^sr©"!— I t-^oo'c^ca TO"i-rrH'ii:rco^t~lf^TO'^^TOl^^©(^^<^^^~TOl^^^■*''^TOCot^l— itscot" aooDoot~i-t-ascicc?acoioioo5a>t-(rHTj Oi ^ C^ O^ Oi O^ Oi cTcT© t-T (M 00 Oi 00 00 00 C • TO TO TO © © © - - - - --^ CD 1^ CO C3 OC ■ ■ ■ '0000'O(N(>»!M00iO'O( ^s^t>ic6-^-')*'-f'^>fi'^r:^:crj5^^cc r:^ v5' co cc ^ o Ci •0000©TOTOTOiOQ0COOiiM»(MTOTOTOlO>C«» (MC^TOTOTOTOTOTOTOi-H'M'T^'MlMTOTOTOTOTOTOCO o « OS©C0©00t^OS0000CDTO-^lOi-ll (M©t-lCTO»© CO__TO •* i-H 00 •— < > fiT lO" t^ co" CO co" co" jT 00^ of lo" to" to' ©^ co" ©" " O" I 1 (M (M i-H © © *« © 0 TO Ci t-^ t>- O O TO C^ O^ Cd Ci 0> O) 02 O^ ) © C>^ii3 05 ■* lO IM^©^© !MTO'**l3i-*COCOTf<«5©iO CDO»TOi-Ht— (■ < ■" rH CO -^^^l of ©'©■"©"©"© 05 Oi 05 of of of oi" .2 ^ 3 1 a a lftiCOiCOt~©'+llMt>-©iOCOTOTj'(N Tj©.-ITO i-IOOCOO-*05 0C<«!MOiOOOt^©«5 jj of ©'©' rH" i-T ©',-(' o' ^' of -T H<©t-'^O0TOO0C5O0®©TO ©©©COOiCO©©Oie<<0©l>.l005CDMif5©00©t^O<-^iO->* ©00C001>0C0©h-.>0Or-01©C00l0>t--Tj« •* t- t-.'of of oo't/Tof t^'co'oo't^'"— '~0D''co'"of ^'of to'os" -- ---, - _ -- -- CO^TOt^050»COO«COTO«0'+iM^05CO«0>COlO „'^,''*,"*.'^,'* ®.'^,'^'^ '^,'^°i '":,'*„ ® ® ■* t^ * w^ ^ ® ■* oi "^ ^ "5 •^' lo' lO cd' CO t^ b-' t^ to' (N to' CO ■* o' «©' !o' Co' t»' oo' of of o' TjT TjT o" CO*" t^ oo' go' co' of ©' o* II lOt-OiHWOt-TftuSOlCONOOi-l. ITOOI.-Ha0-H©COOOCO>OT-IT»<©05I , iTOO»(»00l--t^©i-ITO©COTOrH'-' OO' to'-*' cfoo" 00 ©'of of CO 'd'©' 00 co'. ( T-l T»< © 05 us »0 05 T i 00 00 c I^COff»Tt<©US©010*USUS©t^'. . ., of of of of of otfatTof ©'cTcTc'of of of of of cKTacTof oi 05 © © of of of of of of of oo' of M ill! j I Ol Ol r- rH Ol H-t00USO»O5COTO©t-< I 0< Ol rH 1-1 Ol 8-7 CT o' ©" 0~ O' O' i-T rM t-n' rJ' rn" r-T O O' Oi" of Cf Cf Oi" O' O' O' O' O .-T O O of Cf OT of OT ©' ©' O' O' O' iH r-T ©eoO' I05l«. lr-40«0>Oe5«5C<>ifti-l>0< . .- _,...__ -J ei5«5C<>ifti-l>0^05O0>W«9t»MWCCb»(M"^50<»i-l05MeCl'*00'* CO-0©rH<£l>OCC)THe« Tt<^© C<5_(M pH (><_C5 a5[»COi? t- CO^M 05_05_>O^Oi rH_«0 0<_ crT)i"«o"-»t< p-rcTof ofici CO CO Ci ao to Ci Oi fS >n ^ r^ ^ t^ ^ ci '^ t^ <30 "^ ©"i— i c^'im' ec'io'oT'O Ki'i-Tb^ C^r-<^^aOr-liraGO?D09COt— t-.t^CCiOC<-';O05©«l0?OI-t-C005050iaOCOOiCOCCOOCOGCl^l— l^OOl^ Wi-l©'M3su5t^iO©l^CO(35COrtl(M©t^«DiNe^eO00«>O5=OM©O»©U3r-tifflCOt"-l3>'*'C5CO e<|iO-*©C<5©«DWCOJ.O^rHlOC<5©-HTf<»-^'M05t-Tf'»CJ':0-CiCO'M'»'MO3<»0OTtit^CO<^©-*OS«O<^>C^t^-*'Na05OCOO5«l-t-'(M©-H'XiO5>Op^-^rH©'-Ot^-*t-05i— lOS fH© of 05 OT OT of of ©' ©"t-H'r-r(>r i-HOT of of of of OT OT of ©1-4" i-irH^i-H©' ©©'©"©©'©' rH"pH ^'(M-SiT »-l-*-*-*-«*<'*OOOOeOOM)eOMl«!t^I^t^t>.t-©©0 oo>ooiO"C>oco50o5«)ioioio-4i50t-i>.t~t^t~cc>aooot>.h-c^©ciooooooOTti-*aoco«-XK)':o «0>0l0>0'C>.'SMlC0t^t>-C00000C0OrHi— (^HrHrHi— lrHi-tt'.t^G0O5'OU3>O'O00CC'*TtlTtl Tl^lM (?<- loco^to i^i:o of of of of CO oD'oo'cfO o; ci cf sCOCOCO CD pH 05 00 © «5 oo t C»i— i:OQOt-'MI>©00©00"0«OOSCOW-*iOt~< lO'rn'o lo'rH ©'oToi l-riO'©'"«r<» ■*! of «D t^^of lO"'- ..__-_- . . _ . . e<5-*t-.©05^'tl-*0000!DTt»C0rHl>.©©'*-*Ttit^MaC©O00rt: "aficTcf 'w''co"t~r-rt''co'~i>i'-*~5o'b-"o5 h-Tr-rcrTri cp'i e«©i-l(Mi— l©©T-IO0U5*^(Ml rH©«o-<*<«io:icoe>ti©©cos-^©CO O^^^CO^t I-r-^'cf of t-' Cf t-TsTof ©-iM'rHrH lo" tC' r-T TO t-' © tjTi--' !>.'■<}<' lo'TO^OfTf^'cJ^io"' C^t^0505<>»l^OOOt)OriCOTt<-.tlt^if3rH5<)0505COCOCOt^'TOr--lt^^-.i:D05-^'^li^j>JU«5^i^ciuo'jjv-<«s C«OS>OTft-OOo'«ri-'"i>i>rrx''oo'"of of of t.-s"Tiro"»o"5C t^-'t-'co oo'of © o r-.©OJDXC0©r^C0 ^ lO lO r-l t- 00 -* CJ rH c^ t^ c; oo r»_ -h' b-' r-i >o' oo' '^<' -^ 0505-^050eO'*COpH05COt^C^0500l(5 0050lO«5©C<5-H>.'5 0C<0305iM05i005COC005MCO'M-<*< «0©COCOOVpH«OpHOO-*«!t-TO©TOt^-*fN'Oi-(-*Tj«Du:)rHOOi0500COC^'005^'OTOM'*'©©l>-?^-*05Utlr-HCC'*©©a3 W_C^lO 00 CO 'Ora©rH0505«0'fl-*P-^CO_CO i-H© •^(^^5<^Ms^c^<^^(^^l^^c^5^c^(^^T^l^^l^^l^^(^^o^s^|^^^^(^^ ^>ae^ai^ciaiidciit:iai^c6i'fic>'^c'3<^t^c6'St^-^rAt'-^'^'x> >0 r-l rH C^ i-H (M r"t (M CO fH S>» (N l-( iH SS ?H r» CN i-H S^ *l i-l iH I7< so i-< ?< ?< § I 88 308 2 ^ S «S O •« O O tfS o t^ CO •* QO t- T*4 ?o kOOi-ICJTtfi-ICOOOi «r •>f i-T od" •^'" co" t>r of CO 05' cd" .-<■ ■ cs QO b-'co'oo ocToo'ofod'oo oo'srodoo't^^ so 10 t-T I r^ 00 O <» 1-1 WSO«0r-lrHa0'*t--05MI 10 05 10 5D ■ -. . O 50 r-l rH (-. t-l O r-l «0 C^ O «0 - r 03" »c" »o" »o" ©" oT c^*" cT cT co" 'OiOOi-IS^OCSOO^SOT r 10 oT «5 CD <» to" 10 uo" «5" ■* 1 1^ 1-1 MS iH O cs eo 50 00 t- r- t» iO00C0!00550!005'M05( ojwoeoor-.oaoaosNb-QO OOT)lTJoc<5coiticot-!0 05 •* si (D cc o c> a> r-!' 17^ 00 s^'oT i'<*iQ0'Tj-i-l00I^TtCO :orH05ot-co>o»o":>o rri-TjOXiC005i-l00 « CO CO 05 to •^ I '*l CO OS f~ so TO ^. CO I— < t^ CO O Oi es' co' o" o i-T o" P i-i CO T* t^ CD 1 ■* t^ CO !» iji rHrHC105C0Tti00i.-5-f CT ■*'■ -"jT rH rH" i-J" r-T 1 0j«0;0CDC0C0C0CDC0CDOOOOC000>0Cmr* r-iirtiOiOOia5C505050JO>0'0'C05<~ ~ CO (M C< 1-1 CO CD CO cs !M •>< !M t^ t- Oi t o « 05 (-» rH 1— I l^^ CO I C^ O CO •* !>)^- o> a»CDeOOSU»OOOSCilOi?»COCOT)<©OCOCOr-<'-( i-l>O00Or-(l^t-i-IO05'T*.00»0C» C0C»t^C0COS^CD«0'OOCCSSSS00C0'O<3>t^0O ©■io-i-r^'t,"o"co t-Ti-Tco t^t^co'irf-^'co' im'co'co" COt-1— l'MOOCO(>O^CO C^0i_5^>0_i-*_i?<_C0 US os_ o o''o"aj"a>'05"os"os'qf oTof ooof oTo'o OS OS 00 3 a. 0H ^ t- '« o t- 00 < 5 -3 o o ^ -J? rH CO «*» CO (>« u» ! i-l>COC005-_. __. __ O OS 1-- t^ CO C0_0^0 00_l-^OS__r-J_O3^ ^i-li»as^0050t~t-.CO(?«_ t- CO cT o" r-T r-T i-T cT o os" os" of os" 05" oT |lN3SCO^ <><" i-T Os' O OS*" Co' C3 O' CO r-T os' lO" o" o" i-T 89 iiOU500><5000>«iOi«0000©>(5©UMOOi«OOW50wS«»»OiCi>0( l.-Hi-(OlM-3l'M0SC'»t^000<«0«>00t-.«Ct-l»0JIM-^«Si osao>«©t-'Nt^'»ascs t~t-»i-HO»»-ICO«>«)iO-'*<©r»OCr-Ht^'^TtifN'>«l-»«500 laoowi-c^jiio-ticc^! r-lt^'^Tt.«5CO0OrHr-CD«^©r-t-#C5--ICO©eOr-l© 1/5 © © ITS O ^ •«l< u5 eo o CO GO 05 1>- © OO rH »» i-H W C^T}l«5ict*«O5erH»O'^«it^e^O5C<«'NOJt^^©t»<35©?CT}<©-^OSb-00aO«>4l Ttl©0OUS00CO05t^lffl©h-00'Ol-00-*i:'5'*i-l'^TjcA e>S>OI:-00O5'-lCOi I t^ 00 f-l O t^ «> I I 10 'O 00 "M SS C^ 1 aOC^SSOO©COOOOD©!MTt(>(5-^©t-i-IOO t-' CO in oo~ 10" 00 oT oi" t^ tjT «o' co" . _ . _ C5 00 •* OD --I t-H 00 t^ -^ lO W Ttl >SOi-IT*O-*i?Sb- I 00 «C "5 -< fH 100 M c^ © ■>• I 1— 1 t^ PS "tl o> •* «o 00 «D o f-; .-I Tf OO CO >o 00 (>< t- C<3 eCi C^ fH 00W5O05i-Hi-(»H>/S^fHi-ii-li-H0«e«0«0«e«D«0C0?00000Q0000000000000©»» 00OTeOS^00a000eO'MC^e^C^CSr-lrHrHr-lrHi-li-H-H,-ICOCO?O5O'»«O'»?O«OS^e'S wi>>o»cci>)*<'M(>>©©©©©(r^*»ir)(X(NS<»(N(N!M(-.t-t~i>'t-.t-t^i^t-ir* Tf< Tt<"^'"i-ri-ri-r^'i-rf-4'i-r,-rTjr,_r C»0505-4l-o^u5 10 rp ■* -ii'^ •^^•^^•rf^-^^rti^-^ '*.'* ■* "^, 9^ 5^ ^ 'M <^^ ?» "M <^' '^>,'^^ «^^ eo'oj'co'co'eo'TO so 05"co eo cococo'co'eoec'co'coco'co'eo^co'co co'eo'eo eo'co'co'co'co'co'eo" 5^ CO 00 CO CO CO t- CO C5 OS <>» 5^ 05 t^ © ©_^« C» csnai 05'© c? 05 CO CO -^ tN (M CO CO CO CO CO CO ■ . CO CO CO 10 (M IM © CO *< rH O i-H OS 1?^ i-H 10 1^ O©O3C0t^00-- - -- . — iti_-^ Tj<_rH 1-1 © •* © OOQOOSiC-^t^C^COOO-^llO-HOO-^CO " h^ irf 05' t^ l-^io'^'co't-'oTco" 03 05' Tjl't-'OS 00©' oi of oo'©'.^ 01©rHrH©C^(MO:©(M»ClOOCOt-CO-*l©©«^CO>OCOaO ^^-. - _- - -©©t-COlOlOi-HrHS^lNiOCOCOT^eOlOeOIMrHlOCOCOC^ 00 00 00 00 00 00 of 00 ©' oT of 05 00 00 00 00 00 CO 00 00 00 00 ©■■©'©'" oT oj' oT of oj" of oT oT h- 05 CO N. ■»»< 00 I— I CS l~- t-- CO CO i-H 00 t^ i-( CD CO ,-<'rH CO't-'h-'oO t^ © 'O CO Tj< c« CO O_^C0rH CO^^fH of m' i-T in' cs' of r»05i-H»aooosuoiNooco>l-Ht-W300CO'^©O5«CTf<'Oa0CO — t-©CO00C^CO>O>OTJ.OTt0» t-Tc^ oo'co'of «r'c^ m'cf ^^"o 00 eo'co'i-H't-Tco't^co'co'io'cK CO «3'(^co 00 © lo't-^T^^ i^'c4"io'od'"co eo" I— IOOOOOO©CO©eOi-l«005>OrHSSCO©050COOO'OJ^Ot^COOOCO©-C001CSt~lCC0r-^C0©t-C000C0t^C0i-lTtl©C5C0b-©OC^C0 Tj<«v«r-.t^aoc< «ococo'^^^^oo'cfoo'T^<'eo'^'•<*^'« co't^b^ x' 00' of of of of oicfio' cc'co' t-T t^ 00 00' of of of ■«'*■*■»OrHTtlCO©(M eo of eo' r4" cT co' co' ©' Co' Co' rJ 10' r-T 00 t-T us' rn' cT r-T ic" t^ ■^■" -^ ^rHh-OOTfl^CO©COT-li-l.-(05r».05©OOT*< C^r-l-^OOOOiCOt-'""" " .-- - P ©" ©' CT of of © <© r-H rH I 00 ■># t- >ffl 00 00 CO rtl 00 t» © h- CO 00 I 0> t>. CO Tlf CO M CO CO © GO OO CO © iH 1©1— lUSr-COt-OSl— I C)05©CS-*© r©'io~-rtrx'i-r^Tjrt-r eoc^^©~cDofr^ iiOb-5'l05!-l->*lt»CO IMS-)r-IOOO0O> T^©05>OC0i— ICOl^l>-©C5t-r'.t-'OCO©©t^t- iC'^C^t^OOO 1-1 i-H i-TrH'cfcs ©'©<© «(NC^iM-H»i><*» s -< 90 I. S o O 'N0'-*i-(«o-3iao-«*.a>>rt) >0 >0 O ifS O LO 1-4 t- O 1-H o o o ■* t-- ■* -^ o> OiWCOCOTfCO'M© ^00C>»©>.'5i-4O5'C_©_l.-i_ifS_0O i-^_00_>O '»_tJ<^O^CM lO ■* CS t*< CO i-H «5_» 00 ifl> (M 'M t-©Tj<©Tj<© «0 TO ■>» h- - -- I- ©<51© COOO QO"© tHOi>Oi-(00©C-' >0 C>^5*< ?0 ■* O^C5_t- 0__b^© © ?0 TO I O io'©'t^rH'rH TlTcO cg'oO ^'uj" Cg't-Ts^) "«©TO»TOTO'MTOt^r-l © t^ «0 ■* S^ ■*! 1 ;t,Ttl©-^(MCD«tll--T*>OW( lt^rt<^Oi-*CCaD©TO©lN00TO00TO-^CiTOO0« oo"co aTos oTcrcTo aroi'o5''crcr©"©'cr©'r-rr-rcf l-^(^f t^©TOTO00O0iTOT»*r-l«i(N»ai-IMU5TO>O©>«t^OiHe<«l«Tt<0i©«t-«©S0 >«QoaooD©>o05T*<-^TOrHTOOioo(N-*t~e-no05«ow©aoirt>TO'0©c««ao-*eooo i-c00ai«<5>Oi-li5>Q000TO«OTO-*USas«Ol»©«OTOOi'*a>^'W»r-li-Ct»T»<<»i-"t^ O C5 50 -N. I I © r1 pH 1-1 rH I ©©lOC©0iS^00>0'M-^t^TO00OTOt^—l5^ai00505TOMt-i-IC«OW«C©©"-'5COir>'NC^'NC^ S TO Oi (N Oi 0^0t0S05(^l>iM«0 ~ ' ' ~ .-.-.- .-.-.- © © » iri lo >o ' > © OJ TO TO TO O ' >OiOiOlOCCi>Ct^t---*TOi-^i— li— trHi ■"iTto TjCoT-^-© ©"oj of oi of OS of L _ t-t— r)t^ooa:05COTO(»ooooaoco t^TOCOa500rHo< , cif 5C op TfT op ©"r^'r-Tc-f o'c^'ir?' ©'«©'<»' (^^©' CO ©'-^'oo'cfio'TH'^'^Too' I 00 00 ■* TO TO •* L-S -o 50 !» © )000Dt~r~TO00©TtOi>C©IM>Ot--«Jr-t !M>O©'*CSO:i©l^?OTOQ000Q0< l^TOTO'»C>>i-(tD©CC©-©TO©COf-<«5TOt--.— l-'5 05C5rHTO05C5';SOOOi-l(MTO©»00005Tl«5r-l<>)(N(M!>lT}O•i5 TO'TjTo'u^'i'f CO of of ■:£? ©'r^GO ^-^'^^o'TO Go'-^'oo _OS 0iOa>'»t-(>JOi-(l0CO<»03©00rH00a000TO«>IM©b- 91 WS «© Tj< O (M >0_05 CO 1-1 t^ 1-1 CD rrl «o' ui" c^' to' Ttl" i-T «r t^ «o' co' lo oo so" "iMrtci-f fh r-T o' i-T r-T (rf irf fff (m" c^' rH l(r»C0 60CCiiS5^0Ttf o' c^' oT CD TfT ■.jT ^' CO -"jT rH' to' r^' o' eg" COO©TjOCOCOt^(MCOt~500C20 0JC0O-«»'>CC0'^ttt0©«Di-lt-r-(000iO«0(N'*t^a0eC00©(NTf>0-<, eo'oo © TtToo lo'cc'r-Tt^'oo'c'io of «Ol-(t-.4l»OOit^C^©©rH«CM< USt-COINi-IOOSOCOl-- CfO_iO >H t- .-J" r-T r-T r-T r-T ©' r-T i-H i-T i-T i-T r-T cT IM rH t- OS »0 (N © I ■ lO (N © CO <0 05 ■* 50 i-l Tt* 1-1 t^ ■* b- 1* lO CO 0» COSS©r-ICOr-ICOi-(©rHr-lTfOJTflC0 01000i(MrH!>»-*COi— (5<00 COCO»«O5000OCOCDa0COCOrHOl->Jo C^CO-^©-"*!©©!— l0505l^«O'M©C^C5't)'OC^r-l»O'*'Ot-C0CD lOt-rH-»J<©t^'*C0rHtX)Cii— lt-l©(Nt^i^CO (>J_C^_^0S^05_O<^'i^CO_CO_ ©' of cT of oT oo co' 00 (» od QO' oT oj" o>" of co' <» 00 oo c» t-^ t>r ik' co' as" QO" C^i-Hr-(rHi— li— li— lr-lr-(rHi-tr-(i— lr-4?HrHr-(r-lT-li— li-li—lr-li-li— Ir-I 1 00 C^ © OS ) CO 1-- 05 t ' rH I— I C-» C ! CO 0 CO © © ! I rH 1-1 rH (>» (N < IM l^ © I— t~ t- ''5 ■=* '* W ^ OS "^ "-I * ^©-^^^•COi^lOiSt-H' f- lO >o r . - - - -^ . io'u:rt-r©'-.irio'©'t-'co'i-rco'"t-rrH i.o'io'io'ofcooio - t^e^iOb-io©ast^(M©os'*icoocr^aoc»5©©i-ico53co-*©< 00©t-lrHCOt^t^i— IOSTtOCO© CO^©^CO^C^t»_l us'io'tJh' t)<'co'co co' ■<*<"■*" "f'c'io us co'-'j'"'* CO co" CO TjrTjrTjrTjrTjrco ! COC000i«"»5O>-OU5CO0000000000CO OOCOt^t^b-t-CCODCOOOODOOOO f rH^CO__CO CO_^CO_^CD O^ CO_^ CC_^ CO^ CO__ CO__ of of O'© ©■'©■~(M'iM''(M'"(M""c^''(M~<>r COOOiCiO'.OlCCDCOCOCOCOCOO rH i—t^OiOiO^OiOiddOi^Oi •^ ^COCOCOCOCOCOCOCOCOCOCO rH CO CC t^ CO 1-1 < CO CO < ,___._ooiciokoiraiocococococococococ6d505^© rn' cf CT ©"©" rfT cc" of 00^ tH' -^ tJT tJT TjT i-T r-T i-H~ r-f i-T TlT T)?" •*"•*"•«*<" CO' od" COt-t~CO©COTtl'-iaOCOCOCOCOCOt~.e-4coososcocDi*Tf©~ ©rHireco©eoi>«co ■ ©C0©©C0C0O00t-C00SC0m©(M©0S0S0S© rH_ CO r CO C^' !^f C^' N C^' CO (?f C^" irf TjT ^f co' S^' C^ Ci rH -H Cf TjT CO c«" © b- CO CO rH t^ (M C»_© ■* t- © 1> t^ us'co'co'of •<*<"©'co'"rH QO'l-T'O 0O"t^ Mt^OS^CO^t-CCOCOlOrtlO: OS ©CO -^^CO ©^OS CO^S^_^CC^OS^CO_^(M_ 00 of ^' •*' ■v' us' us' 50' «> O' !>' CO of (MTjHOO-^COiCL •^iC'r eOO300t-OS5^C<©r «| OS rH Tj< O 00 »0 I t^ OS lO r- rH 1 I CO OS IM OS T i rH 00 rH IT^^'N © t^ CO CO co'o'-^'io' ■*'•*' •'l^' ■<*<'■<*<' ■*' co'co t-.'«*iccoooseo-<*icot^cce>s©(N©os«t~b-oou5oooou5'^ C0t-C0©-H©C0rHt-e0©C0l«C0©0St~-Oe0i— llOrHiMlO ■SSTi<05Tj •* CO 00 OS_ . 05"©"5rio'>o -^uo t^-*' co'co" c>f©' of t-Tcp" •<*'>«" Cifufc^fTjT . _ . — ^. . :± ^ -^ ■- —1 -^ CO 00 rH rH © U3 5^ CO S^ O) T*< > t^ ■* CO ! rH-^-*- l0STtOOS 00 Oq_-* O_0» r o' Tjl' TjT TjT eo' co' eo' eo' co' c« r(<' tiT -i*" -1*' co' CO TiT TiJ" T)<" CO CCC'JS(NOSCe(NOSCOe'3©t-'*r-iaO'*rHOOl«> KJ^eO rH5^S^rHr-«siJg rHC<» rHrK(M 92 HI! 00'0 1000>0 0>0 10 0>0»OOOC>OQ>0©0-O0ifl>«500 «ii ■^•" r-T -h' -m' o' of w' TfT >Ci iO Oi »> C" « i-T (^f ccT i-T cT uo' of o:' o' "O" ■*' co' ■m" 0©?0«t^!>«COTt>lOC5«C>t-W>Q?Ci— (i-ir-rHOiOrtcOt-e^i— lO oT cc t-.' t-^ t-' t^ ^^ ^-' t^ ^.' t»' «>' t-' 50 w" iC lo i« w ^^ t-. t-^ t-^ t^ w' oo' ad" ©b-'<*'l>05Dt-.0>l-l';Ci002CO«OCCt^OOOTtOOOC005iO-*05 C550TO(Mr-li.-t!iOt-.C5©TOOfb-'OC:Tt<'>»^>OtHCOO>rt O5'o'5>f r-Teo'cTiM'" »lCCC'r»5-ICO'^T'Ot~CCOOsDCOi-lT)l^t^«Or-ia>05T*<-*i-(US Lo (M c> CO o-^-* 'M.i-^^O'^'O.s^i.ao w ^,'^„'^ ^,'^,'*^*,°'° '^,'^ CO rf< 00 CO CC ao t-^»-^t-^»-^t^C0'«o";d"l0''O U5 io"lC •*'k O lO o o >« © rH 05 •>*< O t- t» b" t> «0 *» r» w •* eo t- 05 «0 1-H 00 © r-( iM C^i «> CO 50 OS CS IM 00 ©©Ol c<_ lo' to to" so' so" rH(»©C<5t'Si-lrH©iO-^t<-O»O?CT-He0i-l>CS^ K) 5-1 TO © (N^t-t~ 05^00 i-H^OO__i»^*» t» lO_©__-^__00 « t1<^50 00 00 (M © ?0 tH , (N ©" TjT TO co' =c" r-T CD © CO" h-' ©■" to" ■<1"'" i-T >o" tjT lO sf im" 05 lO" Co' o' t^" to' Cd" lt-.0DCOlCCC'Mr-lt^TO->f>A-OTt<'MCCaD0D.'O©t^i— lrH05"*e-<*"05TO>O>Oe^e<«O-^^^-^05'o^(3f o'o'oo'otfcc'i^ ci~c-f w'TO'TO'TtT TO'TjToTc-f t-T '*^1-HOSlCmTO'^^'^^'^^Or-r irT e-T 5)' c-f rf r-T f-i' r-T r-T i>r to' to' >«' o' lo' lo" Tti to' to' to' c4" c^r-i©c5or(M«^a5>CrHot^oocoao(M>or^TOCO©TOTt< toosotoo* COCOCOO©".-!©"©?!? TO__© OS_i-H^iO CO^0^^CO__CO^© t^C-l^-* rH © «0 05^0_ CD^ ■»}<^ IQ^ C-J^ a>_ jj •-f' OO' 5-r »' IC' >0' ©' to' to' t^C^r to' Os'iO to' r^'©'C^'rH'--'c-f(N'cro'05'h-' r-T ^'©'m<'cD OCT '^©©lMt-i«t^O5(MTOi-ICDiOTOa0TOCO©(Mt~00TOi-ICgr-IOi©-^ •>*'*©00© io>o-*i— t--*— i«C'-i©oo©oooocococoTOtHr^co© ■'t^Oi «^50_© t^^^ 00 -^ca iM'to'to'to's^'c^'w fH'fJ'r-'© r-T© i-H"rHS-rJOTOC^©lOCC>lCiTOrHrHi-lt-(MOOaD©TOOOb-©^-*©t-^b-© '^i-liO«-*t-i-li-(©©©iO©i-(TO'0®©C^t^©TOTO'(JC^©>0© CD©TO00i— l(MTO©COt^O<©t^t--aOt~©CO©©©'OCD©Tt1<'*'0TOTj<10©CD©«ST-Hr-(t~( i^©iO!Of-l5^COCO©->*<©©©iOT*<( . (T^ _ ,-( r-C ■* 1 i-l © -^ 5^ ■^ I t- J< lO TO «S ,©COCDTO©©CD-fi-HTOO0l-TOt^'*'C-ieDTt©i-i5S00©©© !'MrtC5Oi>-t05Tt-00rf.-li-liOO5-H0it^-<'*'^©-*--TOTO0000'O C^^O< (>»_©_^CO ©_IO^T»<_(?^_©_^CD__00 TO^S->^C-> ©_^l«_TO^© •*! 00__CO -^^^S^^^t- © 5^_ rh'i«'io'io'-<4ric"'jrTjr.^TO'TO'TO eOT^'-^'ift'TfTrjTTO to'oT (N 9it^THT-^9^ l©t-M©t-'l'TH00>O'N©lOi rH C^ i?< p-l T-< e I-l c^ c^ 9d ■*Oi-liy«-^ttr-l(550< I o 50 u-i ao i» «> >« 1 1- CO o t^ s^ e^ o> I OO ■* «> OS -"j* O t'- li2Soo6c'SodrH05H'd5'M«>-5b I eo r£' CO ^ 'fi^ of ■Si Ci c> 'f 'O cc Ci cfi c> Ci (^ Oi Ci ^ i-Tot co"Tircrt-ri-riocD r-Tos't ■N t^ C-« >0 t— O © 30 C-l ; O ?0 IN i-H «5 VO ■* CO t^ Ti^ 'M O Ci O O CO •* 00 W C» CD_ la to" t^ i-T TiT (>r t-^ c< cT «' to" 00 05 "^ I-* ■* Tf ■* O rH lO ■?< ri CO « CO Ttl ■<}< rco"«rT(<"u5 50 KO'Tj<''ti rt^TlTo lO O id «? >0 «5 50 5euS(MO«i-lt0«5Tj» 00 rH ■* O ^__05^U5 05 C^ O -^i-H a5_-0_l> 00 0."*^'*.<^,'>5.'»."*,"*,05^"^ 0_ 7* « «' to" od" 05~ -^ >c' r-T-^jT 05' TjT-^S'crOTjrcfo" of i-HOO CrroT'M't-^'rf t- '^C^tfiTir^ OS ^ _1. -. _ ^ QJ (^ ^ „, - - - - . - . .. I rH OT O -"l* O l^ r i ■* a so CO -^ -^ -^ »o~'* U5 1 I ■* lO lO c» l^t^ »ffl_rH 00_ -^ CO lO-* ^jT-^eo" i •* »0 CO © CO © o n o 1-1 it-O5t«(MO5O505i-H05©'Ot-t-MCOMMCa"3©CO00C0'>«IN' r-I^TOOiCOt-005©©©0005UaOi«)COOO OCT 00 OSt^t-^^'OiCiOi-tCOOJl I— ICDr-<0©CDCDT*<«''M'MWCOJOTj<00'M005050i'>«'*©' lCO«^!-l©OSOi©05aiC«^'MTH^rH©rH©©©©0^rHi-]rHO.-Hi I r-l rH i-Hl-l iH iH iH iH r-l iH iH rH rH iH r-l r-i iH r-t i-l r-l i-l i-H iH r-l l 05-ll000Oir)©';0r--('I^C04l«l05Q0-4irjt-05C0C005i-HC0iOTjO|--©C0C0i-iriC0 iMifSCDecCO'Mi— lOSCMiOOOiOO-rfi— 1<><1— l'^WCOTOC5e)00>'50D«5©CO ^ ^^ .^ < © ';o , . . ^ . -^ _ .^ ..... . , .5 CM >0 CO lO © r t-T ©' .rfT t," vo" -rf tC cT >o co' CO 00' 5t-«)-4lO0©O5CO ~ , . _ _. CM t~ CO CM_00_^"5 0D_^iO ©_^CO^ "r-r©"o f4' rH © tH' T-T pH « cm" CM i-T ©'"©'©'■©©"©''©'© i-T (>r --■" r-T Dt^©:OCOCOCMOJi-l 0©©OS©OiC5050i05rH t..t-l5)rHt-t>.t^QO->tOOOCMO>Oi-(©-^ut>'«i*t>COI ©©■rHCM00>0C0CM0>CMC0>O-t^05t-CM©l..j.^ SrHCOCOOOOOOt-t-COt^ThCC -^^^ 05_C0_^C0 CO^OO rH CO Oi_O^CO__iO_CM__r-< >0 •* l-» Ttio5t^CM-tiaocccor-tcO'*t>.ao'005i-( to !-(■*© ooTtHCil ^■^t-t-COCO-*-«J<«Ot^t^©COI:~COTjCM00C0O5'S©C0 t-f OMSM CM CM e<5'j<"-<*I"l?» r-Ti-rC^ CM Cm' Om" of cf 5M C<3 -^lOTircO Cf CM W ' OS t^ ^ t^ t^ ■'t* CO it-eot-'+io-o" co" 03" ccT cT ■ eo-*i'*ce.-ieoo»«s© ©00t^!--(«0O>C>-*<>«'*t-(©W5i-ICM^sOO5O5< CMOSCOINCOfr^t-'OTj.05«0©'-i.-Hur)«ooo5©< t>lO©l«OOt~>OCOCMi— l?-H( I © CO 05 © t~ r«4 li^S! CM CM CO CO CO « ::::::::::::;: .^iHCOXSCMOlUSirJOCOCMI s;iic?"^ ^:;^^ !-((?< CM ;::i5 ^9i^- Smcn ■';h«5) - ;:; ;ii a^ "^ ^ j 1 : J 1 Febru Marcl 1 . > 1 3 1 t -< CO 94 a ° o I 5 I fL4 : : :^ C lO o o o o »o tJi 0» t^ CO O !M CS © CO W Oi TO.W.t^ t^ (> t^ t^ GO 00 »> li USOOOUSiOOOiOOOOi 05 OS !>• o> r- C" ^ " "" «5«5«l«>Oi-lt^OOSi co'oo CO if r-^ cTtj; i^io OS i r U5 US US «e «5' i> t^ t^ t-T 00 Oi" <3> 00 t^ 00 od OiOO^SOOOiOt t- t- < ■* i-H 5D_ 1-H «0^ 05 (55^ t» 'T*^ « orofs4"t-ro"©"c>fioTjri ■ -- ri ■* © ^ ( b» CO ^ 00 ( "©'.-r,-r^', TfC©-*©«D5D-*©CClWt-a0C<«©O»aSi-l«Or-l!M00CO«O 00Oiri-*t^©lO OOi-H0500(MOOO(MCO(M-.^CO^QO ''S^ <>•, ''S^ "O^ 00 O^ U5 -"^^ (N^ i?<^ t>.__ t^^ rH ©__ r-_^ © ^iSSOt^O-NCOOS CDC<55C«605'C!CO->*005t-l-*-*COQ050«D!0 ■* t-._^OD ©__© rH 00__ '°,'^,'~l'^,':*^'^,^,®.'^''i.*i.«t'^,®,'-^* '*^'*-^^^® '■'^'^^'^ ci CO n -^ -^ -^ 1:^^ lOiO>OiO©CO'OSN©COO<©05t~->ai-<*'«>'*COMOO . 00 © »0 1-1 -^ ■* n •* ., cS S Ci »i 0Cii-H THi-Ht-OOOOOOC HltMCOi— (©CO©r-( r-(COCCl!MCO>0< •«JOUS©COC ©^US_^ OS O^ <7> OS OS © © •*C<«OOOOt»«>r-tlMt»OS(N005US«Ot-5<«i-lt~' CD © SM US ff« , - .— - . CO t- iM SVI t- < lOCD'<*<(Mt^OSWOOUS©r-.i-ll-OOi-l(^ _^ I CO CO US •>*< © 'iHSJnoousSsoot^'O^ ^'~!, iH C^' 5^' 00 Co' !>-' ■* of ^^ of us' CD*" C^r Co' CO' Os" Co' us' US*" ©' 'm' *f 00 l> •*■ 00-*Tt<©aOTt»US'#t>.eOt--«l'^cOM(— i -"tl rH -N CO •<*! 00 CO J us us 00 CO - rt'TtTt^-'t^ ©'co'ao''(S ' OS © >0 OS rfi CD !" © © I cc © us 00 © us © (M '-i,'-i.l^,l'^^_ ~©'-*i oo'"©'©''oo''t- os'oc cc'i-TtCco'cd' coao©-Nuscocccous©r-i^ooop COO»lM00W*<100D©aD©u;oS©t--*-*OSt~COr-ICeousi- C0~ OO" us" Co" us' cd" t-T uf r-T TjT us > •* © IM 1 ■<*CO00CO00Cip--rflr-(© ©' i-T i-T ©'©©"© ©' esw(MiMC 00 CO CD 1-1 © 00 © CO cc't> ©'oo - . _- . -_ . . _ - . . -_ (M 00 t- (M 000000COt~CO(MO:Cri t^ © lOr-l ( 1 1» © ■* I rrHOO t>^( I CO US Tf 1 00US(M©CO(>»©CDeO r-li-l!^ r-lr-(lHCO iH(MCl r-lrHS< ^ Q 95 lo la o lO «5 o I I 4i A 00 CO o t^ I •*■* Tj< •*■<♦< IQ us 1 I US ;o o o lo o o o "« ua C 00 t- us rji TjT -^JT us «£~ us" us' us' o us ua" .uS-*00-* b- OCDOiMCq-^USCOt^COtOUSt^COrH t-.«005>005(r00il--.00rHt-U5O(>>X USOCOi— l05t^iM35air-IC0"*5OC3-M 00 ■»f<"oo'-*''us''i-rus f^'irs cTt-Too x'co'arof o'co'cf 0>OCeOlM»JrHi003(M^(M03C^t-3<«eOiM'Nl>) oot-Tt- «o CO «o"w CO ur-^Ttrarcisc^cfi-rr-Tr-rrH'i-rr-r f- l> 00 00 US M) OS r-( (M n, o i-^ CO -^ -^ ous-H _ _ -_ CO IM - _ - -_ t-usiysooscoOTO^ir^OGO'M OS?OOS-4<5^00u5i ||||P|§|§^SS|||2§|SS^!5|3|S Tt<-*50WI>>0S 00 Oi~0r05"a0 00 QO't^ t-ToD 00 00 00 05 05 Oit-^JSOOOt-t-OSOiOOOSOO . 50 CO O as us «0 00 C I (M rt< ■* us us t^ -^H • ~ --I Oi C^ 00 < aorfioooooo-*Tj< <- - ' ©^ (N rH_ OS^ US__ 0_ CO ' i»"t^«f r-r'>f F-Tco o us -H 1-1 OS 00 us ' OSUSWBh-OSUSCOi-IC^COCOOSCSiMi, ___. 00 t-^» O^O 00 t- 00 O^O O t~ rj( r-l •* us «) CO < of CO CO co' co' eJ'M-^COi-H!-(rHrH C^rHOJCOgs-r^CO-^USUSUSUS I 05 "^ ■'^ ^ OS !COO50000-*5OOJQ0COl?<1 T*< OS >J C^ ■*! C C(S CO_ ■<}< ■* 00 O CC t— < "of- i(r.c« -' ■US-^-MOD'MOCOTtloOOOCOJOUSrH I 05 CO 05 O CO -M 0_l>.__CO^t-. i-*^^^'*,^ r cT "jT co' t-^ i--^ lis" -i"^ i>^ ■^h' to" co" os" Tjr os" cT i-T cT _. -_ ., _jt~-cor^coco-* OOUSC^uS'MC^i— ICO'MOUSO i-'t-'cf r-Tt-'cs ■*'(>)'" oo'ifs o't^ OCOi-ir-OTj<;ocOi-i<»oO COOSUSOOOOOOSt^ «» (N CO 1-t 'm'co''co'''M co'co^'n"-* CO CO ef ji" 0S©-*C000>HO0SUS0Sl-.r-H«*l00O-*05i-l©C0IM 05USi-ICO©iMCSCOS<)COCOC0050C^US'M-<*r CO" ■* rH CO' CO' Co' QO l©00t»ff<©l-»-*O>US©( OST>.0500©COCO^USOOOOt-'-r^(MOCOCO'M©-rtlT}>USrHCD©0>-l'0©S>»?S© IC0C0C0-5^C^e
  • » iH COT« OS us •* ioo«s >»oscousei»osco!o< a 3 96 log 0>aO©«S«50«SOO>OOOl«OOOU5iOC!©00©iO«5COOOOU5>C OOr»CiOTOC005COOOCOOl^i-ICOOCOC^0050V00050!M?— IC^t-t-I*»'OiW-)<>O'*IM00f-rHlM^ 0_0 'M C^CO t- US lO O 05 i-H .aao(NOsi«'r(«-at^b-©5<»'>«t>.t-.iMcot-« iCCiCi300COCOOOi-l05CD>0-*!M"50h-Tjo>-it»i— it'.cooDcoojoicioot^-*co5oaO':**<'?5r- IrHrHt-t^i— lt-?OlO«» ©"©'© oTof oTcR ar®'rj'i-H crsrir< c^Ti-i ©'o'oToi cToT iooei5«cai>-o«co««;<35rt.'OUSi-l(r)COM©(M05CCu5iOt^>OCO«>r-'C»i-(-^S^ r-foi'o'co r^©'^-'!g Mrt--'"^'«"w'"co"to'-*"co'"oo'o'!?f >c co' ^jTr^'co'^f cj -^'oco co • OSSVCT>-*'Nt>.CO©C003'<*S >0 'n ili ri -^ -^ -^ -^ ^f lii in n in -^ --f ^ -^ ^ ^ ^ CO Ci r-i' r-l OiOOOi 00 tHQOt^eis«M»»?o«o05«ooc>«oia-<*.t^irS'.TiOt^005-*Tj.-r«CO»-*'<05QOOOaOCO ^rHi-HOOt^OiO-r^OSOSO^T^COCOCO _ - O © !?< Tf •* ■* Tji -^ Tj" 00 05 O t- 5.ojcct~-«ji(?sco>o i-Ht~05r-l©OC^U5©COh-^iOi-(lMCDh->0 " — — ^ " uS'^»oa5x*ociC^it-t«-cD o 1-H ■*'■*' cc'cd'co'" so' 00 ^■" ■*'(>??«" .^- - . . __.-. .C0C0 CO Co CO tJ" «f CO t:^ (>r cj ^' t-.' t£ -^' .^ ^-' lo co' ^' © h-* ©' oT oT oi' rH © -H c^^ rHco©»H'»!t*Tt.Q0'O(Ma0CO?«CO CO cc' co' c^ -^ (» co' cf to els' eo •»!<'>#" us" •^ (N II «OC©*»t»ONI>»OSOO'*eOOi>^COUSr-lt>.useOIM©( O 05 F-( Oi © 1 ___ _-.-__- _ . _ _. ,, _,-,JT*'^'CO©co©T^O©CDCO'>)U5r-©'O00'OCO-^»<O(rqCO©© '^00©-Hi-ICC-tit-C>lt^(MCCOCDr-l03i-(--<(N©rH t-?^acoot^©t-eo©03co©©cot~0't-co-*i© Ol©© ©©rH < I-H w (N es e< r r-T rt' , 97 to Ot O r-< CO r^ Xl CO Utl IM « O ir» t- i-H aD_CC^-^^ >Ou9COU5U»i.'5i(SOOOOO>000©>«iO«»iOOOO>«0>000«500 i-lf-OC»-HCCWS^(Mt-'MCv(MOCSOUt>TfCC05000i-l C0rt<0:t^O(MCC'O0S00S^I:^r-<'*i— i(MOO«lCClQOOOOi«Oi-(aO'Cl^rH-»jr O' of t-' ■* OT Cs' 05 id' of pH CO b-' M<' t-^ 5D '>r 1-H t>^ 05^i— li/^OOJiO"Oi— ll--i:0'/3'NO->*<-^r-li0(r»iO t~5C>O'»t-0O(N'O lO^C^ iO Tt< ?0 lO O 5D >0 "--J(MC0l0t»(Ma>i-IOC0-*!0 OT S^ iO_ •^' T^' ■*' -^ 'dT •*' o' >o o 0«e>Ot-0»©6-«<»iGit'b.O>t'C«OS«ONO»«©0(NOO(N- « t- •* ;d (>) us t- «a t^ o "*coeOMcoa>co©«D>«>ooo ©"©©"©"© oT ©'©©'©©"©■■ oT of oT of oT os" oi" of oT ©'©■■ o' t» 5C Oa us CO © US rH ■<*«■* i-H ^ » us TiT i>r t-' of co' •*' 'tT us CO CO OO -N us ?0 00 C* rH TjH Oi ( © —4 © us CO ( iCOC«(M b-O t- r}( CO t>. CO CO I © Sv| us O Tt< I ! CO 50 1-1 1 usoo© rH t- us •«*< CO us©ususooe>i03-©©us - 03 ■* •* 00 O C-^ — ■ O C^ 50 CJ ■* t> t^ OS CS t^ 50 us us ooiMWCSi—it^icuseoi— t^o> (^OOCOt-OOOOr-IUSCOUSi-lt— ' ■<*< i-H_® 0^ CO ccT CO* co~ 00^ CO* •*CO-*COC0©CCt»' us' ©■ co'oo'co'co''co''us'co'co''co''©'"co'"of co'co co'co t-.' h-'cc'oo co'co'co eo" ©rHUSCCUS'>)-*COt>-t-OS->*i-l(rli— 10505050> coususususususiouscococDcocDcocococoeocococococococococ^usususua rH r-T t-Tr-i r-'r-Ti-TrH rHrH r-'rH r-TrM r-TrH i-Tph'© © ©©'©"©''©©'©■"©'"©■©■"© ©" CO us t- CO (>) CO us CO us tH C5 (M Oi us TO -^^ ^ rH 00 ©__ CD__ eo" us" ©" t-^ «-f co^ oT tH CO C^ Oi M* OS CO 1— b- CO__US!— i05COrS©r-iu3COCOi— (©COUSi— lOOTtf-^COirjTt"©!— c>— ICOOS rH^CO©^use^t^t-.--l O^r»i^r-(^00 OJ CO !>• i-H OO CC Tt< r-l «C OOTOS5:r050f-IO'M^C»>«>C>0-*ri500'0>-«t<'« O «'»Tji_ CO^rH-*^ 00^ CO^ OS O 00_ •^'oo ©"oToc© t-'co'i-Tcd » t-T «DCO'tiCnr-lt--HrH-.ir CO" CT Oi" O" i-T i-T r-" rH 'M' I !-H (^ CC 1-1 © ( i00«Q0 C>^-^^iO CO^'^^iO^© ?0 OJ^T)<_t-^>C t>^>0^©_i» ■* -* CO O-*«0t^r-(i-le0 CO C«" _ - _ - - iC ■* "O CO Ci OS t^ CO IM i-H 1-1 rj< » 00 CO lO ■ 't-'od x~Qo as r-Tiri © ©"im ?« ;©'©'' > li-lr-(i-lrHi-((?»S-IC^(M(M'r<(MCOl CO CO 5^ 0^1 (M (M (T) I >«i«5(NO5©©CSC0e0©C0CO r-IW:Oi.'5 00Ttros'ff»co!o©i-ico (?<^» oo_s^ © © o to '-<_=o ^^''S. ' no Co" SM f-; © CO t-T I IfMlMr-lrHr-lrHrHi-l ^ ^ ^ cc ITS uo •« '.': COt-OrHrHi— l-^OO-^t-t^lNiH! irauo>«'Cic>oic©©T}<'*-*©<>icoTi<-*'Ncoi (XliXiCDCCSDCDtOtOCOiaiOUOrlCOrH-^tD©!— (I I CO CC © Tj< Tj< ■ •»05a3a3«c>o«o>oiM-*©©'^co-rcs o«5ioio>oase^<>*c"io"«5 »o a5©0OCP005Or-IO5©US'«>O> < CO 05 OS >0 I— 1 CO Oi 1 1 -^^ 1 1 T— < t^ Ci C^ t^ ^*^ -J^ -^ . . •<*I5C310JCP>0©>0©©©0 JOJCO>0©>0©©©~ > t^ rH tH CS^iO t- OO^^OS^WC?^ &0^c^ososo^o^o> Oico5Da5i>-->*<©«-Tj<5Cf-IOOCC©05©'»C0X'0C.-IC0iO>0C0'*it^O so r- t- CO i-l©r-©»i-ISS-^050iCJ05'<*»TtO00O5?O'^>O< - !T»<©05^eO©t-Ci3S«aD05C^©COC rt ■>> CO T»< © OS ^__eo © t- Ci OS « 00 OS c^ < '^ Ci X ^" t-^ re tc -t -n Oi CO r^ C> T^ •* m co'^M oo'-^'oo" eoc;(NX>s-*«D-^©co«C5ct^i— ixcot^TT-^n '.ot^-»»<©oc-*5^'-oooooi-ia)co-*t>'©®05-* i« o » t-^ ^-' «" oo' go' oo' •c' ■*■' >« «s" «» ff_^ T(i_0^ "-^ ""I."^,^ ccT ©' tt' co" CO p^ CO ^"^ ■rf co" t-^ t>^ Tt'3500r-<-*>OlOlO©OSt»r>. ■* r^_^Ci CO C~<.«_(M ■* r-l r-l 0;^>O t-"" t-" (M' (N Co' CO' rf rf Uj" «5 Uj" »" ^ .s »ftt^Tj<'MOS»0'*'^©«5t^«MM©T)r (^f its' T)<" oT to" lo" to" co" co" t^" co" . — 1 t^ CO CO "O -* "!5 CO CO l«>-OCO©t-h-OS00COC<-*r-«ilOCOCCi-l'aSO (m' OT OO' rH © UO r-T to" ©" lO~ Os" OT ■*-*l.Or-ICOT»llC00CO-rJ*i "O CO^© CO © o" ©"©"©"©"©"© ©~ cT © cT cT ' T-( 1.-0 © CO "5OQOOOOOOOU9OiCO>«©©OU5 OOT©C«h»CO»-*t--30SOt>.CiOOO©aOeOi-HTj<^«)5^t~'00>iO-*'^OOJOOrH5S^«Di-l S«D,'^ie^,s^„^ Oi««ow<*«t-oc^t^c^ eo C^" r^ rn" rn" r-T r-T r-T r-T r-T lH~ i^' Cf (>f i-T _ c< e^ S ^ .„ >r >- O C^ t^C^^OO CD "O l-l <* t^O S^'^'^J.S*.'^'^**. o' ©' o' o rH' i-h" i-h' (n' (^f s^' (^^ c^' ih' i-T r-T rn" rn' e^' e^' ef eo eo" r-(rHrHp-l»Hr-(rHi-(i-tk«0>»«lr-!©?0>OI >© Tj-H(. aO 05 C«5 OT S_t^-* S S -* t- S^Tj^^r--^-^ COCOOSOOTrHe^COlOr-ITtlCSO-^-^OliO ■* 00__C« 05^M CO_rt « o»_ ' cr of 00 Th' o" «d' ?d" «f cr 00 o' cb" -h' rjT eg" rH«o-«tico'" «>" t>r oo" o(f of of of of of of od" od" Q(f od" otT od" os"o» It- T* -^ O © IN PS CO © "S <>< OS •* ?o I i-l©05 0SI«10 0(?^«>©t^lNTjO00i-lt001-*50a0Tt<>0l«©05© O»0(N©i-Hu;>00i—lt-.t-00'M'*r-(C^00CS05'<*<^..— _-_--- -_. 0000«eTjiiO-*(M(>»5OiOt^CO5D;O*t'^'9lCOi— l©Tj_'d« te"(;cf ;o" torus' io"u^u5'Tjrrjr TtTTtJ^TtTTir «o"«d' us" la'i'S^ift'wrio^ us" ua"us^»ffl^^ o I 00 Tt< eo I I 00 !0 >o I I l-H © Tj< I sT 050it^ab>«oooo?o«0!e';oTj<<»eo50rHt^t-t^co»c«o4iooi»i-Hoooo«o CJ 05 05 (N aO •<*<■* 0_ "OUS "O «5_rH rH 05 ■^_Tj<_-«tl ■* CO_© rHC«^e050«*l-<*<-<*-00>-iu;>t-0000CO©©©©©©©©©©© 0000©OSO»OSOii-iO0000000CCCCQ0 00_00 00 QO © cf cT ©'©"©■" cT cf cf © oT •-lr-ieOCOO»US©»«0««500©«0'»(Mt^t^t^ 0©»OTt)r-co>ot^050ooooo CS0SOit-00a0C>»''SlO>O'O«5?O«O«D?DU5U5lO of of of of of of ©"of ©'©'"©'' ©'©"©' ©'©'cT ©■"©©©"" ©""©■" ©'©"©■"©■"© r-i^"st»t»oOK5eecoeo«*'tit^e05 SlOi-ia000'*O5COlOIMi-llfl(Nt-?Or»<00©«D©eD-*T*0©05«Dt>.OOCO OS_lO_05_Tj< 000J?0C00STJo © ^i-Tco'io't^ I'-'io co'cf t-©COi— i©>oc^-»t©t-©©«DlOlMO»©C0t-«OiO*' »o co" eo' Tin" co' CO oo" ic' >«' TjT co' co' co" co' r (^^ tH" r^ © lO t^ ?0 © Ttt ■ O5COCO©t»tO"S00t^«Oi TlT of OO" r-T ©"©' rH Cf r-T f-T ^" gT i-Hi»©eO'*©505^©l>©-* O5"500COff^!M'«Q0-^«<»tH t^ CO I co" © oo" ©" •*" ©" im" ©" ic'i )C<'^OJ>OCO^Xlt-©i-lr-lt^F-I r-l©(M004lrHt-COt^00t^©'!DO0-^00U5(N-*»O©t-(M00t-00 •>OCO ' ui -^ irf as c> CO cc ao t^ t-T lo'r-T©" to" r-r<»"i-rcr to" co^i-T ,. ..... . . _ ..O5O5(N©->ti©«O©iONC0'S<-*a0'*lOCOCOt^t-lM «050©©COOO«Ot^t^a>©©©(MC005iOOO«>r-(l»©Ttl50 ».-»_© t^ 00 ■<}< W_'0_r-J_>« «:_Q0 t^t<^«o"c4"eo"eo"*(yrTirTjr>o «5«o ^-^^^«cC(^fe^f'*■«i^lo>c^«5"^^a HOt^»OOOC<Oi— (©lOOOWt-eOr-lWOit .0>r-COT)<©COrHCO C>»_CO CO U» ©^flO C<«_i r© rn't^M t-Tirf t;J"eO VO"o"cD"rH"^"rH"«D">0 Tt< ■ I «5 eo t» 00 00 t^^ eo t- 1-H oo ieo©oo«ot-©-*eot^ CO _© la^ r us us" ws" oo" «s co" »l-tlOCOCO-*< OOCDi-l©l--i-l>OCO©©00-*OOCS-r»«00< =^---^CO(M-*'Mr-l©©iOCOlMF-(©t-©t--l< i^ loo a> o 8 S5 H'e^f*^' iM c^ eo f<3^-Tf< ©* ^J3-> ■* t- O «0 « ■«*< !O5OJ »o oo o UB IMO CO < ^eoeo- o o'^Di-ro'ifli i-(iot»--HOi-iooi-ia>3 <-li-H«OrHTj<«>0505rHOtlOC>COTtr tC I 'N 50 h- • rH t- CM ■ co'r»'*rHOOsgs«coooos«i'*ooeoooi-iTj«'^s*Ttioesosiot^Or-ioscot»ao >C-*C50?Or-(eOOS050 r-lt^- — 05«>>OGC'*l-05t-OOSTt00'M(N'*©©'* •.tl0 005^©©iOt-ICOO©C05SU505©-0<»©>OM50»t>. «r 00 «o" !D «o eo" CO » so" «if <»" co' !0~ t-^ t-^ «d" co" ^^ of of of of of of oT c» oo" otT t^ t^ t-^ t^ od" rH .-I i-H '-<^^,'W^iw_'-<.'-i '"I.'-" «> w e«_eo eo eo^eo t» © (» so ?d us o_ ^0©050S05050505C50S05050S©Ot^t»t-t^OOOpoOOOOOOOaOOOQOC^t-t-©© iXi-^«eeo«05DC050so«050?ot-t^eoeoeocoff^c5'>»c^«^(M(M(Mt~'^c^rHo05u5( .-i©©oooa5t^«0(MeoeooD(_ to i-H 00 t^ CO_^i-H CS^OO^fH ©_^Cf TjH'oo't»"uj"©"f-<"i--rof ©"l-H r-r-CT*.i>)ooiMeo'Wt-, ..- -^_- OS>Ot-05©>OTfl>OC005-^OCOCO OS_^OS__iH_eO^OS_rH (M_^© oo^os__t^_^©_^os__»o^eo__05 os^eo f t>r r-T 1 ■ "~ lt>-Q05OCO©>ffll SS: . CO sot- "»■*!« (Nr^h-TjOSrJt-«3> ^ 5c'e4"oo'or©';D of ©'of lo'rH •*'o5"«p'of tc'of of oc'h4"'>f ^'r- os't4"-*'5^'i» rt'e^'oo'eo'^ ©eOrHSO(N(N'><'Mi-lrHr»i-H coso«5ir« so' ^•' Qo' os' of of •* T^ o' o" v.^ 0>cor-iiaoooeoeo*»eeeo©eoFHOot~oioeoiMi-H©osc»»-.co©t-05«5r»" (N'^©'0>oos0505t-'^»-<>'205C^iM©-*ao-^©-*|QOtoifteo«o<0'<*Ot-00«o o> oi © ua tJNI-VBBBlH 1 RETURN TO the circulation desk of any University of California Library or to the NORTHERN REGIONAL LIBRARY FACILITY BIdg. 400, Richmond Field Station University of California Richmond, CA 94804-4698 ALL BOOKS MAY BE RECALLED AFTER 7 DAYS • 2-month loans may be renewed by calling (510)642-6753 • 1-year loans may be recharged by bringing books to NRLF • Renewals and recharges may be made 4 days prior to due date. DUE AS STAMPED BELOW SENtONILL ' 1 JAN 1 1 1999 U. C. BERKELEY 12,000(11/95) YB 7025^ 1 UNIVERSITY OF CALIFORNIA LIBRARY