j aji i iHr
 
 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 

 
 THE 
 
 
 THEORY OF MONEY; 
 
 BEING AN ATTEMPT TO GIVE 
 
 A POPULAR EXPLANATION OF IT. 
 
 AN EPITOME 
 
 HISTORY OF THE BANK OF ENGLAND, 
 
 THAT CORPORATION, 
 
 WITH ITS CHARTER AND EXCLUSIVE PRIVILEGES, 
 
 TO BE AN UNJUST, IMPOLITIC, AND 
 
 PERILOUS MONOPOLY. 
 
 HontJtw : 
 
 PELHAM RICHARDSON, 23, CORNHILL ; 
 
 AND 
 
 JOHN OLLIVIER, 59, PALL MALL. 
 
 1844.
 
 LONDON : 
 RICHARDS, PRIN ll:K, ST. MARTIN'S LANK. 

 
 \ 
 
 
 CONTENTS. 
 
 PART I. 
 
 CHAP. PAGE 
 
 I. Of the precious metals — of their 
 diffusion throughout the world — and 
 of certain peculiar properties apper- 
 taining to them, which have led to 
 their universal use for making money 1 
 
 II. Of the fallacy or delusion of the 
 mercantile system called the balance 
 of trade — under which it is assumed, 
 that gold is drawn from foreign 
 nations by what is called a favourable 
 balance . . . . . .13 
 
 III. Of Exchange .... 32 
 
 Digression concerning the coins and 
 money of England .... 43 
 
 IV. Of the power of money — and of the 
 value of the ivhole money of the United 
 Kingdom — as an item or component 
 part of the national property or wealth 51
 
 CONTENTS. 
 
 CHAP. PACE 
 
 V. Of inventions j br abridging or dis- 
 pensing with the use of money — and 
 for giving velocity to its circulation — 
 in order to lessen the quantity of coin 
 necessary to be retained in the circu- 
 lating medium or currency . . 67 
 
 VI. Of paper-money. — Of the benefits of 
 the proper use of it — and of the evils 
 of the abuse of it, by arbitrary or 
 despotic interference in its creation 
 or issue ..... 82 
 
 Digression concerning the deprecia- 
 tion of the paper-money issued by the 
 bank of England during its stoppage 
 of payment from 1797 to 1822 . 94 
 
 VII. Of the regulation and restraint by 
 
 law of the issue of paper -money . 112 
 
 VIII. Of seignorage on coin and its effects 
 — particularly of pr eventing the melt- 
 ing or exportation of the coin of the 
 realm . . . . . .129 
 
 I X . Of issues of paper-money — and of th e 
 different qualities or properties of 
 accumulated capital and of circulating 
 medium . . . . .145
 
 CONTENTS. 
 
 PART II. 
 
 chap. 
 
 Preliminary observations . . 157 
 
 I. Of the origin and constitution of the 
 bank of England . . . .101 
 
 II. Of the bank of England as a national 
 
 institution . . . . .167 
 
 ITT. Of the renewal of the charter of the 
 
 bank in the year 1800 . . .177 
 
 I V. Of the last renewal of the charter of the 
 
 bank in the year 1833 . . .188 
 
 V. Of the capital of the bank . .195 
 
 VI. Of the issue of papers-money by the 
 
 bank of England . . . .202 
 
 VIT. Of the profits of the bank . . 217
 
 PART I. 
 
 THE THEORY OF MONEY : 
 
 BEING AN ATTEMPT To GIVE 
 
 A POPULAR EXPLANATION OF IT.
 
 CHAPTER I. 
 
 Of the precious metals, — of their diffusion through- 
 out the world, — and of certain peculiar proper- 
 ties appertaining to them, which have led to 
 their universal use for making coin or money. 
 
 That mixture of coins of various metals, and of 
 paper (issued by banks or bankers, promising to 
 pay to the bearer on demand various quantities of 
 such coins), which constitutes the money of the 
 United Kingdom, and of almost all civilized nations, 
 has in this country acquired the name of " the 
 circulating medium," or of " the currency"; upon 
 which much has been ably written and eloquently 
 delivered, and very much written and delivered 
 to no practical or useful purpose. 
 
 The value of coin depends entirely upon the 
 quantity and purity of the metal contained in it :* 
 
 * Seignorage, fairly and properly imposed at the mint, forms 
 an ingredient in the value of coin in though not out of the 
 kingdom or nation where it is current by law. But any con- 
 
 B
 
 and paper money has no value, but in as far as it 
 is a true representative of the quantity of coin 
 promised by it to be paid ; of which value, if there 
 be indeed any other unquestionable test, there is 
 none so conclusive or so satisfactory, as that of the 
 paper being convertible at the pleasure of the 
 holder into the quantity of coin promised by it to 
 be paid. 
 
 The metals now in use for making coins, in this 
 and most other civilized countries, are gold and 
 silver variously alloyed, and copper; the two former 
 being known or distinguished by the name of the 
 precious metals. 
 
 Those metals have great intrinsic value ; but it 
 is not necessary to the present inquiry to investigate 
 that value. They derive great value from being 
 the substances in universal use throughout the 
 world, as a standard for measuring the value of all 
 other things; that is for making coin or money. 
 
 There are two very peculiar circumstances to be 
 always kept in mind in considering the value of 
 those metals. 
 
 sideration of the value of coin derived from seignorage imposed 
 on it, is purposely omitted in the text here, for the sake of sim- 
 plicity of statement. 
 
 Seignorage is charged on the coinage of silver and copper, 
 but not on the coinage of gold, at the royal mint of the United 
 Kingdom.
 
 First, gold and silver,* being so precious, are so 
 carefully preserved ; that the gold which formed 
 part of the riches of Abraham ; the gold of which 
 the Israelites, at the termination of their bondage, 
 spoiled the Egyptians ; and the gold which was used 
 in the building of Solomon's Temple, is much of 
 it probably in the world, in some shape or other, 
 at this day. — The quantity of gold accumulated 
 during so many past ages has secured a supply of 
 that metal for countless ages to come, even if 
 mankind should cease to ransack the bowels of 
 the earth in search of it. 
 
 This vast accumulated quantity of gold is 
 distributed among the nations of the world, 
 according to their wealth and to their effectual 
 demands severally and respectively; — parts of it 
 flowing from nation to nation continually, in con- 
 sequence of changes of their fortunes or circum- 
 stances; but, under all changes of place of its 
 component parts, the accumulated mass endures, 
 from the unconquerable propensity of man to ac- 
 quire and to preserve it. 
 
 Secondly, the value of gold does not depend 
 upon its quantity and the effectual demand for it 
 in any particular nation or country ; but upon its 
 
 * Gold will be mentioned singly, to avoid the eonstant 
 repetition of the word silver.
 
 quantity and the effectual demand for it throughout 
 the whole world. 
 
 The superabundance of many commodities in 
 any given country has, in many cases, no effect on 
 the actual or comparative scarcity of similar com- 
 modities in another given country; but the super- 
 abundance of gold in any one country, will have 
 effect upon the comparative scarcity of it in 
 every country of the known world. 
 
 This peculiarity is owing to the very great value 
 which gold comprises in exceedingly small compass. 
 
 For example, sixty or eighty head of cattle may 
 be purchased in South America for a single pound 
 weight of gold ; which cattle, in England, would 
 probably sell for twenty pounds weight of gold, — 
 yet this very great difference in the value of cattle 
 in South America and in England, does not occasion 
 their being sent from the one country to the other. 
 A ship would be necessary to transport sixty or 
 eighty head of cattle from South America to 
 England, the hire of which, and the risk of the 
 voyage, would be equal to, or might exceed, the 
 value of the twenty pounds iveight of gold, which 
 the cattle might sell for, if they arrived in England, — 
 but the pound of gold (the value in South America 
 of these sixty or eighty head of cattle), being in 
 bulk little more than one cubical inch, might be
 
 conveyed from that country to England, free of 
 any expense and at very little risk, in the pocket 
 of a merchant performing the voyage. 
 
 A difference of five per cent., in the value of 
 gold, will cause it to flow from one end of the 
 world to the other. 
 
 This very near approach to universal equality, in 
 the value of gold, has established it as a standard 
 for measure of the value of all other commodities 
 throughout the world. By reference to that stand- 
 ard, the value or price of any given commodity, 
 against a given weight of gold, in every market 
 of the world, can at all times be ascertained ; 
 and ivhen that, or any commodity, can be bought 
 in the market of one country, and sold in the 
 market of another country, with a profit. 
 
 Without such a standard, it is not easy to conceive 
 how commerce between distant countries could 
 be conducted; such a standard has, therefore, 
 in the precious metals, been beneficently provided, 
 in the nature and order of things established by 
 divine Providence. 
 
 Gold is an article of merchandize, as iron or tin, 
 or any other metal or commodity is ; but the trade 
 in gold, unlike the trade in other metals, or in 
 commodities which are being continually produced 
 and consumed in irregular and fluctuating quantities,
 
 is confined to the transmission, according to ever 
 varying circumstances, from country to country 
 of parts of an existing mass, (which, though kept 
 up to its accumulated quantity, has most probably, 
 for ages, neither increased nor decreased, either 
 in quantity or in value), — and to the diffusion 
 among the nations of the world of the new sup- 
 plies which make good the waste or consumption 
 of that mass. 
 
 What the absolute value of gold is, is a very 
 abstruse inquiry, which it is needless here to pursue; 
 the subject in hand not being affected by variations 
 in that absolute value. 
 
 The abrasion or wear of coin, of plate, of utensils 
 and ornaments of gold ; what is consumed in the 
 art of gilding ; what is lost in the ocean or other 
 waters ; and what, in times of war or civil commo- 
 tion or from avarice or other cause, is again commit- 
 ted to and continues hid in the bosom of the earth, 
 constitute nearly the w 7 hole of the actual consump- 
 tion or waste of gold throughout the world. 
 
 If the supply of that metal from all the mines in 
 the world, be just m tHiy-rrp arJy equal to the whole 
 consumption or waste of it throughout the world, 
 the mass accumulated must continue the same in 
 quantity. 
 
 If that supply be greater than the whole con-
 
 sumption or waste, the mass accumulated must, 
 in quantity, be increasing ; and, if that supply be 
 less than the whole consumption or waste, that 
 mass must, in quantity, be decreasing. 
 
 There would seem to be valid reasons for 
 believing that the absolute value of gold has not, 
 in point of fact, sensibly varied for more than two 
 centuries last past.* 
 
 The belief, that gold has not varied in value for 
 more than two centuries, seems to be much at 
 variance with the received opinion, that there has 
 been a great decrease in the value of money in the 
 United Kingdom. 
 
 In the three centuries between the 28th of Ed- 
 ward I, and the 43rd of Elizabeth, money was so 
 debased or degraded at the Royal Mint, — that 
 coins of the same denomination, current in England 
 after the 43rd of Elizabeth, contained less than 
 one third of the silver (the only precious metal 
 then coined) which they contained before the 
 28th of Edward I. 
 
 That circumstance alone would cause all com- 
 modities (cseteris paribus) to be treble the price , 
 though of exactly the same value, that is to say, 
 would cause them to cost three times the quantity 
 
 * See note A, Appendix.
 
 8 
 
 of money by talc, though only the same quantity 
 of silver by weight, after the 43rd of Elizabeth, 
 which they cost before the 28th of Edward I. 
 
 But a much greater error in that opinion 
 prevails ; from ascribing the universal rise in the 
 price of commodities, to variation in the value of 
 gold, and not to variation in the value of other 
 commodities. 
 
 Let it be for a moment supposed that fifty 
 millions of taxes, now annually levied in the United 
 Kingdom, could be, and were by statute, all at once 
 abolished ; and let any one consider the effect 
 which such an abolition of taxes would have in 
 immediately reducing the price of all commodities — 
 (the duties on some articles being equal to, and on 
 some exceeding the whole cost of their production 
 and freight ; the tax on tobacco amounts to £600 
 per cent, on its prime cost), — while such abolition 
 of taxes (as the value of gold cannot be varied by 
 act of parliament) could manifestly have no effect 
 on the value of gold, — and on reflection, upon the 
 proposed supposition, error in such received opinion 
 will be palpable. 
 
 After such an abolition of taxes, the value of all 
 other commodities in the United Kingdom would 
 be measured by a much smaller quantity of gold 
 than before : not because gold had become dearer,
 
 but because those other commodities had become 
 cheaper. 
 
 The mass of gold, accumulated in the world, is 
 distributed, and exists therein, in three very notable 
 and distinguishable portions or component parts. 
 
 First. — Plate, ornaments, and utensils of that 
 metal, — which, once separated and set apart from 
 the mass, seldom revert thereto ; on the contrary, 
 from the increase of population and wealth, in 
 almost every nation of the old world, and the birth 
 and rapid growth of nations in the new world, 
 there is probably a very considerable continual ab- 
 sorption of new supplies of gold arising from a con- 
 tinual effectual demand for new supplies of plate. 
 
 This portion or component part of the mass, 
 being fixed property, passing, in its various artifi- 
 cial forms, from party to party or handed down 
 from generation to generation, unaltered, is a 
 dead stock of gold in the hands of individuals. 
 
 The quantity of plate, ornaments, and utensils 
 of gold in the United Kingdom, possessed by the 
 Crown, nobility, gentry, and other ranks, probably 
 exceeds, collectively, the quantity of that metal in 
 such forms in all the other countries of the world. 
 
 Secondly. — Coin, which when it has once, at the 
 
 c
 
 10 
 
 Mint, become separated from the accumulated mass 
 of gold, does not revert to that mass, (being, in 
 its new shape of coin, necessary in every civilized 
 nation to be retained unceasingly in use, for the 
 circulation of all other commodities in each nation 
 respectively), except when by contrivances for the 
 circulation of other commodities without the in- 
 tervention of coin, — or by discovery of substitutes 
 for it, — or by devices for increasing the velocity 
 of its circulation, whereby a less is made to have 
 the power or effect of a larger quantity ; — a surplus 
 of coin, ceasing to be longer requisite in any 
 country, is ejected from its circulating medium or 
 currency. 
 
 The coin ultimately necessary to be retained in 
 every country for the circulation of other commo- 
 dities within it, must itself be continually circu- 
 lating or changing hands. 
 
 In that respect coin differs from plate, which 
 changes hands but seldom, and does not circulate ; 
 but coin, like plate, is dead stock, with this dis- 
 tinction, — that coin is dead stock in the hands 
 of the nation, while plate is dead stock in the 
 hands of individuals. 
 
 Coin also differs from plate, in that plate is 
 subject to little waste ; while coin is subject to 
 very considerable waste, by abrasion or wear,
 
 11 
 
 which must be made good, from time to time, out 
 of the mass of gold accumulated in the world, or 
 out of the new supplies of that metal from its 
 mines ; in order that the coin, indispensable for 
 use in every country, may be kept perfect as the 
 measure of value of other commodities in that 
 country; just as scales and weights aie kept in it \$dUfc> 
 for measures of weight ; yards or ells for measures 
 of length ; and bushels, gallons, quarts, &c. for 
 measures of capacity of those other commodities. 
 
 Thirdly. — The gold of commerce,* which is the 
 surplus of the mass of gold accumulated in the 
 world, ultra those two other portions or compo- 
 nent parts thereof. Of the quantity of this third 
 portion or component part of the accumulated 
 mass of gold, it is impracticable to form any accu- 
 rate notion, — but it is probably very much less than 
 the vague idea of its magnitude in the minds of 
 sensible persons, who have never seriously or 
 philosophically considered the subject. 
 
 The fertility of the gold-mines of South America 
 having made it unprofitable to work the gold 
 mines of the old world, — all new supplies of gold 
 come, therefore, from the mines of South America. 
 
 * By the word commerce, throughout the text, is meant 
 trade between or among foreign countries.
 
 12 
 
 These new supplies of gold derived from South 
 America (which, as before mentioned, are consi- 
 dered to be just or very nearly equal to the waste 
 of the mass accumulated in the world) all, in the 
 first instance, fall into and pass from the gold of 
 commerce, to their destination in the other two 
 component parts of that mass throughout the 
 world, — and those new supplies of gold continually 
 in transitu, from the torrid zone all over and 
 throughout the world, no doubt heighten the idea 
 of the magnitude of the quantity of the gold of 
 commerce, of which, at first sight, those new 
 supplies seem to compose a permanent or integral 
 part. But being mixed with the gold of commerce, 
 merely in transitu, — if we leave those new supplies 
 out of account, — -and suppose the dead stock of 
 plate and of coin (made good to the extent of 
 their waste) to be stationary quantities, — then it 
 follows, that the gold of commerce, as the third 
 component part of an unvarying mass, is itself an 
 unvarying or stationary quantity, — which being 
 composed mostly of ingots, or of coin out of 
 circulation, may be said to perform its office sub- 
 ject to no abrasion or waste whatsoever.
 
 13 
 
 CHAPTER II. 
 
 Of the fallacy or delusion in the mercantile system 
 called the Balance of trade, — under which it is 
 assumed, that gold is drawn from foreign na- 
 tions, by what is called a favourable balance. 
 
 From indefinable associations of vague ideas, it 
 has been a received opinion in almost every civi- 
 lised nation, that it is most beneficial and advanta- 
 geous to have and retain within it a great quantity 
 of gold. 
 
 But after the demand in any nation, of indi- 
 viduals, for their dead stock of gold in plate* 
 and of the public for its dead stock of gold in coin, 
 is fully supplied,— the desire to possess more of that 
 metal cannot arise from demand for it, for any use 
 within that nation or realm. 
 
 To hoard it, as property either of individuals or 
 of the public in chests or in vaults, would be dead 
 loss. 
 
 * The word plate is here and throughout the text hereinafter 
 used singly, for the sake of brevity, to signify plate and orna- 
 ments and utensils of gold.
 
 14 
 
 As an article of commerce, a given value of 
 gold is much less desirable to be possessed by any 
 nation, than an equal value of inferior metal, e. g. 
 of iron. 
 
 A piece of gold, of the size of a common brick, 
 such as is used in London for building, is worth 
 nearly £3900 (£3897- 12s. \0d.) ; it would weigh 
 very nearly 84^ pounds troy ; and would pur- 
 chase, at £5 a ton, 780 tons of bar-iron. 
 
 Such a piece of gold might be transported to a 
 foreign country in a post-office mail-bag, — while 
 to transport beyond sea its value in iron, two or 
 three ordinary-sized merchant-ships, fully freighted, 
 victualled, and manned, would be requisite. 
 
 To extract from an iron-mine ore sufficient to 
 yield 780 tons (two or three ship loads) of that 
 metal, — from a coal-mine, coal (converted into 
 coke) sufficient to smelt the ore, — and afterwards 
 to manufacture the iron into bars, would give em- 
 ployment to very many times the number of miners 
 and workers in metal (giving subsistence to others 
 supplying all their necessities and effectual de- 
 mands) that would be required to extract from a 
 gold-mine, and form into an ingot, a piece of that 
 metal of the size of a common brick, — which is 
 manifest on the slightest reflection.
 
 15 
 
 To possess mines, and a continual and enduring 
 trade in exportation of iron, must, therefore, 
 be much more beneficial to a country, than to 
 possess mines and such trade in exportation of 
 gold. 
 
 It is, indeed, much to be feared, that the passion 
 
 of nations to possess a great quantity of gold for 
 
 indefinite purposes, ultra their effectual demands 
 
 for that metal respectively, is only the auri sacra 
 
 fames. 
 
 But however that may be, it was for many ages 
 attempted to secure the retention of gold within 
 any realm or country into wiiich it had once found 
 its way, by laws highly penal, and even barbarous 
 and sanguinary, prohibiting the exportation of 
 gold in any and every form, and the melting of 
 coin. 
 
 Such laws were always abortive, except of now 
 and then effecting the levy of a penalty, or the in- 
 fliction of personal punishment on some human 
 victim : but were nevertheless not finally abolished 
 in the United Kingdom, until the year 1819, by the 
 act of 59 Geo. III. cap. 49 ; whereby it was "made 
 "lawful for any person to export the gold and silver 
 "coin of the realm, and also to melt the same, and 
 " to manufacture, export, or otherwise dispose of the 
 "bullion produced thereby;" and by the same act
 
 16 
 
 all former statutes prohibiting such exportation 
 and melting were repealed.* 
 
 Gold comprises so much value in such small 
 compass, that it can always be, and has always 
 continually been, exported, or sent overland, from 
 country to country at pleasure, without the 
 knowledge or consent of any sovereign or ruling 
 power whatsoever. 
 
 The insatiable thirst for gold having excited in 
 realms or states the desire to know how much of 
 the metal was from time to time possessed by them 
 respectively, — and it being, by reason of the fact 
 above mentioned, impracticable to get, in any 
 country where such penal laws as before mentioned 
 were in force, a direct account of its imports or 
 exports of gold, — recourse was had, with the view 
 of obtaining the result of such an account indi- 
 rectly or inferentially, to computations whereby 
 it was held, that that result was obtained or arrived 
 at, by showing what was called the balance of trade, 
 which was assumed to be paid by foreign nations, 
 and to be so paid always in gold. 
 
 In order to come at that balance, an account 
 was directed to be taken by the officers of cus- 
 toms of the value of all goods or commodities ex- 
 ported and imported, except gold. 
 
 * Note B Appendix.
 
 17 
 
 If upon such account, it appeared that the value 
 of the exports exceeded the value of the imports 
 of any country in any year; the difference was 
 called the balance of trade in its favour : which 
 was assumed to have been received in gold, it being 
 held and considered to be irrefragably ascertained 
 by that account — that, if the merchants of that 
 country did not receive back the value of their 
 merchandize exported, in merchandize imported, 
 (of both and all of which account was taken at the 
 custom-house) the difference must have come in 
 and have been received by them, in imports of gold 
 of which alone no account was taken! and, vice 
 versa, if the value of the merchandize imported 
 was greater than the value of the merchandize 
 exported, that the difference must have gone out in 
 exports of gold. 
 
 It was considered, therefore, much for the inte- 
 rest of every country, that such account should 
 always show a much greater value of merchandize 
 to have been exported than imported. 
 
 According to the public accounts, compiled by 
 the officers of customs, the value of the exports 
 exceeded the value of the imports of Great Britain, 
 in the century ending with the year 1800, by 224 
 millions. 
 
 By the " balance of trade account," there was, 
 
 D
 
 18 
 
 therefore, in the year 1800, accumulated and then 
 existent in Great Britain, gold of the value or 
 amount of 224 millions, ultra the gold possessed in 
 plate, in coin, or in other form, by the people of 
 that country in the year 1 700 ; whereas, in the 
 month of February 1797, the Bank of England, 
 for lack of gold, stopped payment ; the bullion in 
 its coffers being then reduced very nearly to a 
 single million (£1,086,170). 
 
 That million (the issue of any and every part 
 thereof being prohibited by law) remained locked 
 up in those coffers during all the war which ended 
 in the year 1815, and thereafter, for nearly a 
 quarter of a century in the whole.Va^Trvvv.> , \C|vUjiL \si2_. 
 
 During all that time, instead of there being an 
 annual influx of gold into the United Kingdom, 
 gold disappeared from the circulating medium of 
 the realm, it having all (except the single million 
 in the Bank, and what was added to that small 
 hoard, and what was hoarded by individuals) — in 
 consequence of the issue of notes for one pound by 
 the Bank, and of the law making the depreciated 
 paper op that corporation legal tender for the pay- 
 ment of all taxes and of all debts throughout the 
 realm — been added, melted or unmelted, to the 
 gold of commerce, of which, consequently, there 
 must have been a great efflux from the United 
 Kingdom, notwithstanding the penal laws then
 
 19 
 
 contained in the statute-book, prohibiting the 
 melting or exportation of the coin. 
 
 It would be idle to argue in proof of a fallacy 
 detected by figures and by facts which are incon- 
 testible and notorious. 
 
 The fallacy or delusion of the balance of trade 
 is founded on the assumption, that the profits of 
 foreign trade are paid by foreign nations. 
 
 But the inhabitants of any given foreign country 
 contribute no more or otherwise to the profit, e.g. 
 of British merchants — than the inhabitants of 
 Great Britain contribute to the profit of the mer- 
 chants of that foreign country. In that respect 
 both countries are on a footing, and very little 
 reflection will show, that the merchants of all 
 countries derive their profits exclusively from the 
 inhabitants of their own country.* 
 
 A merchant having exported goods or com- 
 modities, imports goods or commodities in return — 
 and his profit is realized, only when and after he 
 has sold his imports to the inhabitants of his own 
 country, for a greater price than he paid to them 
 for his exports. 
 
 * Any consideration of what is called the " carrying trade" 
 is purposely omitted in the text, being so fettered and confined 
 by the navigation-laws of Great Britain and other countries, as 
 to be entirely unworthy of notice on the present occasion.
 
 20 
 
 The merchants of any foreign country lose 
 nothing by the exchange of the productions of the 
 soil and industry of their country with British mer- 
 chants, for the production of the soil and industry 
 of Britain ; on the contrary, they gain thereby, 
 otherwise such exchange would not be made — and 
 the custom-house-accounts, both of the foreign 
 country and of Great Britain, may be, and most 
 probably are, so made up, as to show, as the result 
 of the exchange of the same identical commodities, 
 a balance of trade, such as is called a balance in 
 favour of both countries, or on both sides. 
 
 In any country carrying on a gaining foreign 
 trade — upon a true account of the value of its 
 exports, entered or set down at the price paid for 
 them to the producers, the inhabitants of that 
 country — and a true account of the value of its 
 imports, entered or set down at the price received 
 for them from the consumers, the inhabitants of 
 the same country— the value of the imports must 
 always very much exceed the value of the exports, 
 and that not merely by the profit of the merchants 
 of that country, but also by all the costs of the 
 exportation of the exports ultra the price paid for 
 them to the producer, and of the importation of 
 the imports ultra the price paid for them to the 
 foreign merchant — that is to say, by the amount of 
 the expenses of lading, freight, insurance, and all
 
 21 
 
 other charges on the exports out — and the amount 
 of freight, insurance, expenses of unlading, and all 
 other charges on the imports home, together with 
 the charges thereon in transitu from the ship, over 
 the wharf, and through the warehouse to the 
 market. 
 
 It is not easy to imagine, why an excess of the 
 value of imports over the value of exports, caused 
 by charges paid to British ship-owners, insurers, 
 wharfingers, warehousemen, and to British la- 
 bourers employed about the merchandize, in tran- 
 situ from the producer out, and from the foreign 
 port of shipping home (all which are paid by the 
 consumers of the imports, together with the profit 
 of British merchants ultra), should be called or 
 considered a balance of trade against Great Britain ; 
 or why it should be alleged or held, that excess, 
 so caused, of the value of imports over the value 
 of exports, must have gone in gold to some foreign 
 country ! 
 
 Even if the merchants of any foreign country 
 were so kind as to permit British merchants to 
 import a greater value of commodities, than British 
 merchants exported to them, for some consecutive 
 years; that is to say, in other words, if the merchants 
 of any foreign country were to give British mer- 
 chants a great credit for foreign commodities, there 
 is no reason for believing, that the debt of the
 
 22 
 
 British to such foreign merchants would ever be paid 
 in gold. If there were no hoard of the gold of 
 commerce in Great Britain, such debt of British to 
 foreign merchants could be paid in gold, only by 
 the inhabitants of Great Britain consenting, either 
 to part with their coin (which, under proper 
 regulation, would be all continually and indis- 
 pensably necessary for their own use), or to the 
 melting of their plate for exportation. 
 
 Such liberal foreign merchants would, in the 
 case supposed, be under the necessity of waiting 
 for payment, until such debt to them could be 
 liquidated by degrees, by means of surplus pro- 
 ductions of the soil and industry of Great Britain 
 in future years ; just as foreign merchants actually 
 cause British merchants to wait for payment of 
 the debts of the nature of that now imagined, 
 which foreign merchants are continnally incurring 
 and lie under to them. 
 
 Even on the supposition that British merchants 
 paid for an excess of the value of imports over the 
 value of exports by them, by export of an annual 
 stream of gold — as gold is not indigenous in Great 
 Britain, the flow of such a stream could be kept up 
 only by the gold composing it being first imported 
 from South America or some foreign country, 
 which gold could be imported and paid for only by 
 export of other commodities, productions of the
 
 23 
 
 soil and industry of Great Britain. Such an annual 
 stream of exports of gold, so continually fed and 
 supplied, would therefore be a beneficial and not a 
 prejudicial trade of the merchants of Great Britain. 
 
 To keep up in this realm " the fond delusion" 
 of the balance of trade, the Custom house accounts 
 were framed or compiled, without regard to truth 
 or reality, and continue to be so kept down to 
 the time now present, although the delusion be 
 now nearly, if not entirely, dispelled. 
 
 In the Custom house accounts, the exports were 
 often and still continue to be entered or set down 
 at much more, and the imports at much less than 
 their real values respectively. 
 
 Those accounts for the nine years ending with 
 5th January 1843 condensed, for the sake of 
 brevity, into annual averages for periods of three 
 years, show for example, as follows : 
 
 PERIODS OF THREE 
 YEARS EACH. 
 
 OFFICIAL ANNUAL VALUES OF ALL 
 EXPORTS. 
 
 OFFICIAL 
 
 ANN. VALUE 
 
 OF ALL 
 
 IMPORTS. 
 
 Produce and Ma- 
 nufactures of the 
 United Kingdom. 
 
 Foreign and 
 
 Colonial 
 Merchandize. 
 
 Total. 
 
 1st, ending 5 Jan. 1837 
 2nd, ending 5 Jan. 1840 
 3rd, ending 5 Jan. 1843 
 
 £ 
 
 79,146,040 
 
 87,470,001 
 
 101,715,330 
 
 £ 
 12,250,491 
 12,913,643 
 14,027,205 
 
 £ 
 
 91,396,531 
 
 100,383,644 
 
 115,742,535 
 
 £ 
 
 49,835,107 
 59,336,540 
 65,671,885 
 
 
 268,331,371 
 
 39,191,339 
 
 307,522,710 
 174,843,532 
 
 174,843,532 
 
 
 Deduct Imports . . 
 
 
 Surplus official value exported more than ) 
 imported in three years ) 
 
 132,679,178 
 
 more than 
 
 
 
 
 1 32 millions in three, or more than 396 millions in
 
 24 
 
 those nine years, which, according to the custom- 
 house accounts, flowed in streams of gold, as 
 balances of trade, into the United Kingdom in the 
 nine years ending with 5th January, 1843 ! ! 
 
 But, however safely it may be inferred, that 
 those Custom-house accounts must be full of error 
 and deception ; that is not a matter of inference 
 merely, as proof thereof is furnished by other 
 accounts of the officers of customs themselves. 
 
 For fiscal purposes, it was required by law, that 
 a declaration of the actual value of all exports of 
 the produce and manufactures of the United 
 Kingdom should be made at the custom-house on 
 exportation thereof; and by the accounts there 
 kept (laid annually before parliament), of the real 
 or declared value of such exports, that value differs 
 from the value set upon the same commodities 
 in the " balance of trade account " kept at the 
 custom-house, during, e. g., the three last of 
 the above-mentioned period of nine years, as 
 follows, viz. : 
 
 EXPORTS OF THE PRODUCE AND MANUFACTURES OF THE 
 
 UNITED KINGDOM. 
 
 Declared, or real 
 Years ending Official value. value. 
 
 £. f. 
 
 5th January, 1841 102,705,372 51,406,430 
 
 5th January, 1842 102,180,517 51,634,623 
 
 5th January, 1843 100,260,101 47,381,023 
 
 £305,145,990 £150,422,076 
 
 whereby it appears that the official value of the
 
 25 
 
 exports from the United Kingdom is set down in 
 the custom-house accounts, (compiled to show the 
 " balance of trade" for those three years), at more 
 than double the real value of the commodities 
 exported. 
 
 It would, moreover, be a mistake to suppose, 
 that in such official value of exports, all commo- 
 dities are treated with equal favour, and are over- 
 valued in the same proportion. 
 
 Cotton was always a favourite commodity with 
 the balance of trade reasoners ; and is still a 
 favourite commodity in the eyes of those who 
 thrive or have thriven by the spinning and 
 manufacture of, and trade in, that wool and its 
 fabrics. 
 
 Cotton is accordingly favoured in the custom- 
 house accounts to such an extent, that in the three 
 years ending with 5th January 1843, the official 
 values and real values of cotton manufactures and 
 yarns are set down as follows : 
 
 Years ending Official value. Real value. 
 
 £ £ 
 
 5th January, 1841 73,124,730 24,658,470 
 
 5th January, 1842 69,777,021 23,492,489 
 
 5th January, 1843 68,667,909 21,670,127 
 
 £211,569,660 £69,821,086 
 
 whereby it appears that the official value of cotton 
 wares is set down at more than treble their real 
 
 E
 
 26 
 
 value ; although the official value of all exports 
 collectively be set down at only about double their 
 real value — and on comparison of this last with 
 the next foregoing table,, it appears that the official 
 value of cotton-wares exported, is set down in the 
 custom-house accounts at very nearly once and 
 a-half the amount of the real value of all the ex- 
 ports from the United Kingdom ! 
 
 The delusion of the balance of trade has been 
 here so much dwelt upon, because that delusion 
 has been drawn or introduced into theories of the 
 Government, and of the Legislature of this country, 
 touching the " circulating medium." 
 
 The Government, acting under delusion in its 
 transactions with the Bank of England ; the Legis- 
 lature enacting, under delusion, laws giving exclu- 
 sive privileges and powers to that corporation ; 
 and the Directors of the Bank, acting under delu- 
 sion, or abusing such exclusive powers, by ex- 
 pansion and contraction of the issues of its 
 paper-money, have caused great and often irre- 
 parable injury to the general, and often extensive 
 ruin of the commercial and trading interests of 
 the country. 
 
 To a question put to three Directors of the Bank 
 under examination before a committee of the House 
 of Lords, in the year 1 797, after the bank stopped
 
 27 
 
 payment ; viz., whether they received any answer 
 from the Chancellor of the Exchequer (Mr. Pitt), 
 when from time to time they stated to him their 
 apprehensions from the diminution of specie in the 
 Bank ? the reply given was, " We had no precise 
 " answer, but the Chancellor of the Exchequer 
 " sometimes expressed hopes that the balance of 
 " trade in favour of this country would restore 
 " our affairs, and thereby bring back specie ! !"* 
 
 It will be attempted hereinafter to be shown, 
 that neither the real influx or efflux of the gold of 
 commerce nor the imaginary influx or efflux of 
 gold the balance of trade, has any influence in 
 adding to or diminishing the quantity of coin 
 necessary and existing in a well regulated cir- 
 culating medium, in this or in any other country — 
 and that new supplies of gold to such a circulating 
 medium are necessary only to supply the waste of 
 the coin therein by abrasion. 
 
 Before taking leave of the subject of the balance 
 of trade, it may interest and give food for specula- 
 tion to the reader, to lay before him the figures 
 following (which, for the sake of brevity, are 
 condensed into average annual values, upon periods 
 
 * Report from the Committee of Secrecy of the House of 
 Lords on the affairs of the Bank, ordered by the House of 
 Commons to be printed, 6th February, 1810. Appendix, p. 14.
 
 28 
 
 of three years each), from accounts printed by 
 order of the House of Commons. 
 
 Declared or real 
 annual value of all 
 Periods of 3 years each. exports of the pro- Annual Revenue and Expenditure of the 
 
 duce and manufac- United Kingdom, 
 
 tures of Great 
 Britain.* 
 War. Expenditure. Revenue. 
 
 £ £ £ 
 
 1st, ending with 1812 42,850,260 82,191,070 65,785,312 
 2nd, ending with 1815 48,316,^33 101,283,881 70,697,793 
 
 The like of the 
 Peace. United Kingdom.* 
 
 3rd, ending with 1818 43,343,451 56,674,940 56,022,752 
 4th, ending with 1821 36,096,283 52,541,252 54,255,329 
 
 A glance at the foregoing figures shows, that the 
 real value of all the annual exports of the pro- 
 duce and manufactures of the United Kingdom 
 in the six last years of the last war. was not equal 
 to half the amount of the annual expenditure, and 
 was equal to just about two-thirds of the amount 
 of the annual revenue of the United Kingdom ; — 
 and it may be seen, by reference to the accounts 
 annually laid before Parliament, that the real 
 annual value of such exports has never, in any 
 year, down to the time present, been equal in 
 amount even to the diminished peace revenues of 
 the United Kingdom. 
 
 * The exports of the four years ending with the year 1813 
 include the exports from Great Britain to Ireland, the exports 
 from the United Kingdom not having heen kept in a consolidated 
 account until from and after the year 1814 inclusive.
 
 29 
 
 And yet it is a received opinion among many 
 sensible persons, who have never sufficiently con- 
 sidered the subject — that the wealth, power, and 
 prosperity, of this mighty realm are derived from, 
 and depend for their existence and continuance, 
 entirely on a foreign trade in commodities ex- 
 ported, the gross annual value of which — not the 
 profits of the trade therein, far less the taxes upon 
 those profits — but the gross annual value of all 
 which commodities themselves, w r as, in many years 
 of the last war, not equal to half of the amount 
 of the public expenditure — and which has never, 
 in any year, been equal to the whole amount of 
 the public revenue ! 
 
 When it is further considered, that a vast pro- 
 portion of those exports go to colonies and posses- 
 sions which are strictly our own — the trade in the 
 remainder, which are exports to parts strictly 
 foreign, sinks into still greater comparative insig- 
 nificance. 
 
 England, single-handed, and often at war with 
 the kingdom of Scotland, with Wales, and with 
 Ireland, and when she had scarcely any foreign 
 trade at all, carried her victorious arms into the 
 continent of Europe, and subdued, and long held 
 in subjection, powerful states upon that con- 
 tinent.
 
 30 
 
 If, instead of the ocean for a barrier between 
 her and the other European powers, her territory 
 w T ere conterminous with theirs ; having, like them, 
 only lines of forts on her frontier for her defence ; 
 she has brave hearts and strong hands enough, 
 (although resort to cotton and riband factories 
 would be in vain for muster of the latter) by whose 
 courage and power she could keep her ground, as 
 the people of those states do each against other. 
 
 But when it is considered that the three king- 
 doms are now united into one mighty realm, 
 around which, 
 
 " Safe in the love of heaven an ocean flows," 
 
 it is, indeed, a singular creed to hold or to propound, 
 that the power, grandeur, and dominion, of that 
 realm, have been attained and are upheld by trade 
 in the exports of such surplus production$of the 
 soil and industry of the country as are not wanted 
 by the people for their own use — the gross value of 
 w T hich exports, including all exports to the colonies 
 and foreign possessions of the Crow r n, was never, in 
 any year, equal in amount to the public revenue ! 
 
 Those facts and brief reflections are offered, 
 because the delusion of the balance of trade (the 
 subject which has given rise to them) has been 
 introduced into considerations on the circulating
 
 31 
 
 medium ; but are offered without intended dispa- 
 ragement of the true, real, and great importance 
 of the traffic in the exportation of British produce 
 and manufactures— a subject on which clamour for 
 " free trade," and on the " corn laws," is now rife, 
 and on which so much contention is going on, both 
 in and out of parliament. 
 
 Into the merits of the questions agitated in that 
 contention, the present is an unfit occasion to 
 enter ; but it is consolatory to believe, in whatever 
 way that contention may end or settle down, that 
 although in the result, the peace and well-being of 
 the industrious classes of the community may 
 undoubtedly be, the mighty power and the safety 
 of the Crown and Empire cannot be affected.
 
 CHAPTER III. 
 
 Of Exchange. 
 
 Inquiries on the subject of " the circulating 
 medium " have been much embarrassed, not only 
 by introduction into them of the delusion of the 
 balance of trade, — but also of what has been dig- 
 nified with the title of the doctrine of exchange ; 
 which has very generally - been drawn into such 
 enquiries, although it serves only to confound 
 them with a subject with which they have no 
 necessary or proper connexion ; the establishment 
 and regulation of the circulating medium, by 
 the sovereign or by law, within any given country, 
 having nothing to do with the circulating me- 
 dium of any other country ; and the learning of 
 doctors of exchange consisting of making com- 
 parisons of the different circulating mediums 
 existent in all the countries of the world. 
 
 Exchange, in the language of commerce, means 
 the quantity of money of one country which must 
 be paid at a given time and place in that country, 
 for a given quantity of money of some other 
 country, to be paid at a given time and place in 
 that other country.
 
 33 
 
 In the doctrine of exchange, gold is used as the 
 touch-stone. Let it be ascertained how much of 
 the circulating medium, existing at any given time 
 in different nations, must be paid at a given time 
 and place in each nation, for an ounce, a pound, 
 or any given quantity of pure gold, and the real 
 and the comparative values of such circulating 
 mediums, at the given times and places, are dis- 
 covered. 
 
 If all the sovereigns and states of Europe, or 
 throughout the world, had agreed to coin gold 
 only into pieces all of the same weight and purity, — 
 such coins, whether impressed with the insignia of 
 imperial or royal dignity, or with the less illustri- 
 ous heraldry of a Hanse-Town, would, necessarily, 
 be all of the same intrinsic value — and (if in equal 
 good condition as to abrasion or wear, or if made 
 legal tender only by weight in every country,) it is 
 manifest that the only difference which could sub- 
 sist, in the value of any given quantity or number 
 of such coins in one country, and of the same 
 quantity or number in another country, would be 
 the expense of the transportation of them from the 
 one country to the other. 
 
 In such a state of things, if a person in London 
 desired to have the command of 1000 pieces of 
 such coin in St. Petersburgh, if he could find a 
 
 F
 
 34 
 
 merchant in London, who, for 1030 pieces in 
 London, would give him an order or bill for 1000 
 on his house of trade, or on a Russian mer- 
 chant in St. Petersburgh, he would give those 
 1030 pieces ; unless he found that he could trans- 
 port the 1000 pieces to St. Petersburgh, say for 
 1020 pieces, in which case he would send the 1000 
 pieces of coin himself. 
 
 The exchange between London and St. Peters- 
 burgh would, in the case supposed, be two per 
 cent, which the merchant had made an essay to 
 raise to two-and-a-half per cent. 
 
 But the sovereigns and states of Europe, and of 
 the world, having all coined gold into pieces 
 capriciously differing in size and in purity, and 
 which are often in different condition, compara- 
 tively, as to abrasion or wear, — intricate calculations 
 are requisite, in order to ascertain the price to be 
 paid in one nation in the coin of that nation, for 
 a given quantity of the coin of another nation, to 
 be paid in that other nation. 
 
 Sovereigns have often committed great frauds by 
 altering the value of their coins, when indebted to 
 their subjects, in a great quantity of them — some- 
 times by changing at their mints the size and 
 weight of the pieces ; and, at other times, by 
 mixing a greater quantity of alloy with the gold
 
 35 
 
 contained in them, continuing to call the coins so 
 diminished or debased by the same name — and 
 paying their debts to their subjects in the same 
 number of pieces of the diminished or debased 
 coins by tale, as were due of the heavier or purer 
 coins — insisting that the debts were so many coins of 
 the given name by tale — and in later days, by 
 issuing pieces of paper impressed with promises to 
 pay a certain number of their coins at some future 
 day ; and then proclaiming, or enacting, such pieces 
 of paper to be, in discharge of their debts, lawful 
 tender for the number of coins promised thereby to 
 be paid — whereby any given number of their coins 
 are rendered of no more value within their own 
 dominions, for the payment of debts, than those 
 paper promises to pay the same number of those 
 coins at some future day. 
 
 Such despotic and fraudulent interferences with 
 their coins by sovereigns and states — and the fear 
 or apprehension thereof — give rise to further and 
 speculative calculations, in the doctrine of ex- 
 change, touching the comparative value of the 
 coin and paper money which may happen at any 
 given time to compose the circulating medium of 
 different nations or states, respectively. 
 
 In the balance of trade delusion, — it seemed to be 
 assumed, that nations were in the practice of
 
 36 
 
 casting up their accounts once a year, and of 
 paying or receiving in gold, the balance due from 
 nation to nation, respectively. 
 
 But the real practice was and is always quite 
 different. 
 
 Consider, e. g. the trade between or among three 
 of the nations of Europe. 
 
 If Russia export in any year more value to, 
 than she import from, England — for the balance, 
 England becomes debtor to Russia. 
 
 If Russia import in the same year more value 
 from, than she export to, Germany — for the balance, 
 Russia becomes debtor to Germany. 
 
 If Germany import in the same year more value 
 from, than she export to, the England — for the 
 balance, Germany becomes debtor to England. 
 
 Suppose the balances so due by England to 
 Russia, by Russia to Germany, and by Germany to 
 England, to be equal. 
 
 In such supposed state of trade between those 
 three countries, there are six different ways, by 
 which the balances due to and by them respectively 
 may be paid or liquidated, without the intervention 
 of gold or money whatsoever. 
 
 First. — If Russia draw bills of exchange upon 
 England for the balance, and remit them in pay- 
 ment to Germany, and Germany remit such bills 
 in payment to England.
 
 37 
 
 Secondly. If England draw bills of exchange 
 upon Germany for the balance, and remit them in 
 payment to Russia, and Russian remit such bills in 
 payment to Germany. 
 
 Thirdly. If Germany draw bills of exchange upon 
 Russia for the balance, and remit them in payment 
 to England, and England remit such bills in pay- 
 ment to Russia. 
 
 Fourthly. If Russia direct Germany to draw 
 bills of exchange upon England for the balance due 
 to Russia by England — and Germany draw such 
 bills, and then remit them in payment to England. 
 
 Fifthly. If England direct Russia to draw bills of 
 exchange upon Germany for the balance due to 
 England by Germany, — and Russia draw such bills 
 and then remit them in payment to Germany. 
 
 Sixthly. If Germany direct England to draw 
 bills of exchange upon Russia for the balance due 
 by Russia to Germany — and England draw such 
 bills, and then remit them in payment to Russia. It 
 is manifest, that in any of those six ways, those sup- 
 posed balances of trade might be paid or liquidated 
 without the intervention of gold or money what- 
 soever. 
 
 In some or other, or partly in some and partly 
 in other, or partly in all of these ways — are the 
 real balances of trade of all the nations of the 
 world actually paid or liquidated ; but not cle
 
 38 
 
 anno in annum, yearly — as in the case supposed 
 for the sake of illustration — but from month to 
 month, or from time to time, — and not for balances 
 all equal, but for balances continually fluctuating 
 and varying. 
 
 If the consideration of those various modes of 
 settling or adjusting balances of trade, between 
 or among only three of the nations of Europe, be 
 extended to a consideration of the settlement or 
 adjustment of the balances of trade among all the 
 nations of the world, — it must be evident, that the 
 variety and complication of bills of exchange drawn 
 by merchants upon merchants of all nations, and 
 the calculations of the exchanges of sums of circu- 
 lating medium, to be paid in one country for sums 
 of the circulating medium of other countries to be 
 paid in those other countries, must be infinite. 
 
 There is another cause which operates on ex- 
 change, — namely, when any given country is in- 
 debted to another upon the real balance of trade, 
 and it is desired, nevertheless, to remit monies to 
 the debtor from the creditor country, e. g. for loans, 
 or, in time of war, for subsidies. In every such case, 
 an extraordinary rate of exchange, higher than 
 that which may be called the natural rate, is 
 required and paid. 
 
 And again, most of the planters and traders in
 
 39 
 
 our colonies, being indebted to merchants of 
 the parent country — when bills of exchange are 
 nevertheless drawn by the colonists on the mer- 
 chants, increasing that debt, — the exchange on such 
 bills is often very high, and is sometimes called 
 premium upon bills, which is only another name 
 for a high rate of exchange. 
 
 During the stoppage of payment of the Bank of 
 England — that corporation was permitted (by a 
 sort of transfer of the royal prerogative of coining 
 from the mint at the Tower to their workshop in 
 Threadneedle-street) to issue pieces of silver called 
 tokens, which were by law (madness of the legisla- 
 ture and of the government on the subject of the 
 circulating medium then " ruling the hour") made 
 current with, or in place of, the royal silver coin of 
 the realm. 
 
 Those tokens were bank-notes, stamped upon 
 silver instead of upon copper, or the still cheaper 
 commodity, paper — and were principally Spanish 
 dollars, worth at the mint, or in exchange for 
 gold, about four shillings and four pence each. 
 
 They were first issued by the bank to signify 
 
 five shillings ; and four of them were given for a 
 
 bank-note promising payment of one pound in 
 
 the coin of the realm, nominally on demand, but
 
 40 
 
 of which payment was prohibited by law for an 
 indefinite term, namely, until the end of the then 
 war. 
 
 On the 19th of March, 1811, the directors of 
 the Bank determined, on a sudden, that they had 
 set too high a value on their notes— and that the 
 same dollars, issued from their workshop in 
 Threadneedle-street, which had theretofore passed 
 at the rate of five shillings, should, thereafter, 
 pass at the rate of five shillings and sixpence in 
 exchange for their notes, payable in coin of the 
 realm at the end of the war — and that the corpo- 
 ration would, thereafter, give no more than 3n of 
 such tokens for each of their notes, so promising to 
 pay one pound, for which they had theretofore 
 given four of such tokens. 
 
 A bill of exchange, drawn by a foreign upon 
 a British merchant, falling due in Great Britain 
 previous to the 19th of March 1811, was payable, 
 and was paid, in Bank of England notes, worth 
 four Spanish dollars for every pound of the bill — 
 but such a bill of exchange falling due in Great 
 Britain after the 19th of March 1811, became pay- 
 able, and was paid in such notes, worth only 3n of 
 such Spanish dollars for every pound of the bill. 
 
 All foreign merchants who had drawn bills on
 
 41 
 
 Great Britain, or the holders of such bills, which 
 were accepted and running before, but not due, 
 until after the 19th of March 1811, when the 
 directors of the bank proclaimed that the tokens 
 from their workshop in Threadneedle-street should 
 be raised in value in exchange for the notes of the 
 corporation, from jive shillings to five shillings 
 and sixpence, were by that manoeuvre cheated of 
 sixpence in every five shillings, or of ten per cent 
 of the money expressed to be payable by such 
 bills, which had some time before the 19th of 
 March 181 1, been drawn, remitted, and received, 
 on the faith of being paid in bank notes, worth four 
 dollars, and not 3^ dollars only, for every pound 
 thereof. 
 
 The directors of the Bank of England, who 
 themselves, by that act (which was afterwards 
 recognized and sanctioned by law !), suddenly and 
 fraudulently so debased the circulating medium of 
 the United Kingdom, affect (as appears by the 
 evidence given by them, repeatedly ad nauseam, 
 before committees of both houses of parliament, in 
 which evidence they assert that they possess much 
 knowledge and skill in the doctrine of exchange) 
 to be at all times guided in the issues of their notes, 
 or paper-money, by the state of the foreign ex- 
 changes — on which such effects as that produced 
 
 G
 
 42 
 
 by the last mentioned very dishonest proceeding 
 of the directors of the Bank themselves, are often 
 produced by the like, or other tricks and frauds of 
 sovereigns and states as hereinbefore mentioned. 
 
 The directors of the bank (as appears by the 
 same evidence) intimate that they have power, by 
 the expansion or contraction of their issues of 
 notes, or paper-money ; and that they often exert 
 such power ; to govern or control the exchanges 
 between the United Kingdom and foreign countries 
 — as to which, their power is about as effectual as 
 that of a child to stop the current of the Thames 
 with its doll's teaspoon. * 
 
 The learning of doctors of exchange is acquired 
 by study of the state of the actual balances of trade 
 between country and country throughout the world, 
 of loans, subsidies, and tariffs ; and of the tricks 
 and frauds practised by sovereigns or states upon 
 their coins, or upon the circulating medium of 
 their respective dominions — the study of such 
 doctors being, how to turn their learning to profit 
 in pounds, shillings, and pence. 
 
 But in an enquiry whether the circulating me- 
 dium, in any country, be in a sound and healthy 
 state, or otherwise — no reference is necessary to 
 
 * Note C, Appendix.
 
 43 
 
 the actual or comparative state of the circulating 
 medium in any other country — with which such 
 inquiry has no necessary or natural connexion. 
 
 It ought, therefore, to be made without any such 
 reference or comparison, which serves only to con- 
 found and perplex the subject. 
 
 It would be unprofitable here to inquire into 
 what number of pieces, and of what weight or 
 purity, other nations have coined any given quan- 
 tity of gold or other metal, or what have been the 
 interferences of sovereigns or states with their 
 coins respectively. But the subject in hand may, 
 perhaps, be elucidated by a summary history of 
 our own coins, which is here subjoined. 
 
 Digression concerning the coins and money of 
 England. 
 
 A pound sterling is a denomination of money 
 which (until the latter end of the reign of King 
 George III, when sovereigns were first coined) 
 never existed in a single coin in England. It is 
 the highest denomination of our money of account, 
 and originally was a pound troy weight, of which 
 1 lj ounces were silver, and I of an ounce copper. 
 
 A pound sterling, meant a pound in weight of 
 that composition — genuine, or that had passed the 
 test — at the English mint ; such pound was origi-
 
 44 
 
 nally coined into twenty pieces, called shillings ; 
 and into two hundred and forty pieces, called 
 pennies; each penny weighing, therefore, that 
 division of the goldsmith's pound-troy, still called 
 a penny-weight. 
 
 Those coins passed by tale, at the rate of twenty 
 shillings to the pound sterling; and the pennies 
 by tale in proportion — twelve to the shilling. 
 
 The pound of sterling silver came afterwards to 
 be coined into sixty-two pieces, called shillings ; 
 twenty of these degraded shillings, by tale, con- 
 tinuing to be, and being now called a pound 
 sterling* 
 
 Such alteration in the division at the mint of the 
 pound of sterling silver, is very minutely described 
 by Lord Liverpool,-)" as having been effected by the 
 monarchs ; from Edward I, who, in the twenty- 
 
 * The pound of silver has, in point of fact, since the year 
 1816, been coined into 66 shillings, of which 20 by tale pass by 
 law for a -pound sterling. But four of those 66 shillings being 
 taken at the mint for seignorage on the coin, the 62 lighter 
 shillings which have paid such seignorage become, and are of 
 the same value within the United Kingdom as the 62 heavier 
 shillings, for coinage of which no seignorage was exacted ; that, 
 therefore, was no debasement of the coin, but, on the contrary, a 
 most salutary, just, and wise provision and arrangement, as will 
 be shown and will appear hereinafter. 
 
 f In his " Letter to the King" (George the Third) " on the 
 Coins of the Realm."
 
 45 
 
 eighth year of his reign, first debased the coin — 
 to Elizabeth, who, in the forty-third year of her 
 reign, last debased it. — That debasement therefore 
 was, it appears, effected in the three centuries, from 
 1301 to 1601. During the two centuries, and nearly 
 a half, which have elapsed since the 43rd of 
 Elizabeth, the division at the mint of the pound 
 of sterling silver has, by law, remained unaltered.* 
 
 A promissory-note of the corporation of the Bank 
 of England, payable at end of the war, was, in- 
 deed, for about a quarter of a century, commencing 
 from the year 1797, made legal tender for pay- 
 ment of a debt of one pound sterling in money — 
 and that corporation, for some considerable time, 
 refused to give more for each of its promissory-notes 
 for one pound than 3/j pieces of silver, which, if taken 
 to the mint to be coined, would and by law must 
 have been coined into silver money of the realm, 
 of the value of fifteen shillings and ninepence — 
 which would have been equivalent to coining at the 
 mint the pound of sterling silver into 78i 9 3 shillings. 
 That, as it was the last, so it was also the most 
 degrading debasement of the pound sterling. 
 
 That the series or succession of frauds at the 
 English mint, whereby the weight and value of the 
 pound sterling were reduced, in the proportion 
 
 * See Note * page 44.
 
 46 
 
 of 62 to 20, or more than two-thirds (20 of the 
 62 shillings not being one-third of a pound Troy 
 weight) — could not have been perpetrated at one 
 stroke, without risk of rebellion or revolution, will 
 be evident to any one, who will consider how a law 
 would at this day be received, which should now, 
 all at once, degrade a sovereign to the size and 
 consequently to the value of a six-and-eightpenny 
 piece, — still calling the degraded coin a sovereign ; 
 and enacting that it should be lawful tender, as 
 and for a sovereign, in fulfilment of all contracts 
 and in payment of all debts. 
 
 Such a degradation of the sovereign or present 
 pound sterling, would not be quite so great a 
 degradation, as the pound sterling underwent in 
 the three centuries between the 28th of Edward I 
 and the 43rd of Elizabeth. 
 
 After the enactment of such a law, all debtors 
 would pay their creditors in money of one third 
 of the value of the money in which their debts 
 were contracted. All creditors would therefore, 
 by such a law, be defrauded of two thirds of the 
 debts due to them. 
 
 A six-and-eightpenny piece being not only called 
 by the name of, but being moreover made legal 
 tender for payment of every debt of a sovereign — 
 the money-rents of lands and of houses let upon
 
 47 
 
 leases — fixed rents, and all fixed incomes and 
 annuities, including the dividends on the public 
 stocks or funds — would, by such a law, be reduced 
 by two thirds in value. Every sovereign's-worth 
 of them wonld continue dischargeable only on 
 payment of a sovereign — but the sovereign would 
 be reduced to the size and value of a six-and- 
 eightpenny piece. 
 
 On the other hand, the price of provisions, 
 of the necessaries, comforts, and conveniences of 
 life, and of all commodities would (ceteris paribus) 
 be trebled — they would not cost more gold— but 
 would cost thrice as many sovereigns as they cost 
 before the supposed degradation of that coin. 
 
 It is not easy to conceive how far public indig- 
 nation might be carried, or how be expressed, 
 against a law r so flagrantly iniquitous — or how 
 much distress and misery it would occasion : but 
 after it had produced its full effect, no more evil 
 would result from it. The next generation and 
 their successors would {cceteris paribus) only 
 reckon the value of their commodities at thrice 
 the sum which the last generation and their pre- 
 decessors did — the money rents of lands and of 
 houses and new annuities of the same value as old 
 annuities before the supposed degradation of the 
 coin — the price of provisions and of all commodities
 
 48 
 
 would be reckoned in thrice the number of sove- 
 reigns or pounds, but in the same quantity of gold, 
 as they were reckoned by the last generation. 
 
 The interest or dividends on the public stocks, 
 would become payable in those degraded sovereigns, 
 but new purchasers of such stocks would not suffer 
 by the change. The annuity carried by the public 
 stocks being the thing bought, new purchasers 
 would pay for such annuity with similar money to 
 that in which the annuity to them would be paid. 
 3 per cent, stock would continue to yield three 
 sovereigns for every £ 1 00 stock, but the sovereign 
 would be only one third of the size and value which 
 it formerly was. 
 
 But the holders of the stocks at the time of such 
 degradation, would be defrauded of two thirds of 
 their property therein, both principal and interest. 
 The public debt of eight hundred millions of old 
 sovereigns, of the value of twenty shillings each, 
 would become payable with eight hundred millions 
 of new sovereigns, of the value of six shillings and 
 eight pence each. 
 
 The degradation of the pound sterling to less than 
 one third of its value, in the three centuries afore- 
 said, by the various sovereigns, whose reigns were 
 tarnished by such acts, for the purpose of defrauding 
 their creditors, was therefore effected, not at one
 
 led 
 
 s. 
 
 d. 
 
 * into 
 
 20 
 
 3 
 
 . into 
 
 22 
 
 2 
 
 . into 
 
 22 
 
 6 
 
 . into 
 
 25 
 
 
 
 . into 
 
 30 
 
 
 
 . into 
 
 37 
 
 6 
 
 . into 
 
 45 
 
 
 
 into 
 
 60 
 
 
 
 into 
 
 62 
 
 
 
 49 
 
 stroke, but step by step, or by little and little. 
 The following is a brief summary, taken from Lord 
 Liverpool's "Letter to the King" (George III), "on 
 the coins of the realm," showing in particular the 
 perfidy of different monarchs in their dealings at 
 their mints with the pound sterling : * 
 
 J . Edward I, in the 28th year of his reign, coined 
 
 a pound in weight of sterling silver into 
 
 2. Edward III, in the 18th year of his reign 
 
 3. 20th 
 
 4. 27th 
 
 5. Henry IV 13th 
 
 6. Edward IV 4th 
 
 7. Henry VIII 18th 
 
 8. Elizabeth, in the 23rd year of her reign 
 
 9. 43rd 
 
 Whence it appears, that the total debasement of the 
 coin, from the reign of William I, (when a pound 
 sterling by tale was, and continued through the 
 reigns of several of his immediate successors, a pound 
 sterling of silver in weight), was more than two- 
 thirds — 20 of the 62 shillings, not being one-third 
 of a pound Troy weight. Lord Liverpool gives an 
 account of several propositions made in subsequent 
 
 * Distinction of the Tower pound and the Troy pound, and 
 distinction of debasements of the coin effected by diminution of 
 weight, or by increase of alloy, are purposely omitted in the 
 text ; and also any description of the real coins, there all calcu- 
 lated as shillings. The present intention being only to gratify 
 curiosity, such minute details would be at once uninteresting and 
 useless. 
 
 H
 
 50 
 
 reigns for further debasing the silver coins, which 
 were all rejected. 
 
 The greatest debasement of the coin by any 
 single monarch before Elizabeth, appears, by the 
 foregoing table, not to have exceeded seven shillings 
 and sixpence, while that queen appears to have 
 debased the coin no less than seventeen shillings 
 in the pound sterling. It is not easy therefore to 
 discern her title to the merit which is said to have 
 been ascribed to her, for her interference and 
 dealings at her mint, as thus described by Lord 
 Liverpool, in his letter last mentioned. 
 
 " The parliament and people, in their addresses 
 to Queen Elizabeth, always mentioned the reform- 
 ation of the coin, after that of religion, as one of 
 the principal merits of her reign, and it is recorded 
 as such in the epitaph on her tomb." Lord Liver- 
 pool adds, that her historian Camden, speaking of 
 that measure, distinguishes it as "Magnum sane et 
 memorandum quod neque Edwardus potuit, nee 
 Maria ausa." 
 
 Silver coin was for many ages the money of 
 highest donomination, in use in England ; but as 
 the population and wealth of the country increased, 
 gold coins, being more portable and more convenient, 
 came into circulation, and are now for all payments 
 above forty shillings the only lawful coin of the 
 realm.
 
 CHAPTER IV. 
 
 Of the Power of Money — and of the Value of the 
 ivhole Money of the United Kingdom as an item 
 or component part of the National Property or 
 Wealth. 
 
 In every enquiry it is very important to come to 
 the consideration of the subject of it, free from 
 associations of ideas with words having, in the 
 mind of the reader, a meaning different from that 
 which they are intended to express or convey. 
 
 It has been said, that "there is great virtue in 
 a definition" — of which, perhaps, few words stand 
 more in need than the word money, which is the 
 subject of the present inquiry. 
 
 In the dictionary of Dr. Johnson, the only defini- 
 tion of money is, "metal coined for the purposes of 
 commerce" — which excludes paper-money. 
 
 If commerce, in that definition, be understood to 
 mean not what that word has, hereinbefore, for 
 the purpose of this inquiry, been limited to mean, 
 namely, foreign trade (in which money is very 
 little, though gold be, much used), but to mean 
 the dealings and traffic carried on in any nation,
 
 52 
 
 by the intervention of money, by or among the 
 inhabitants of that nation — the definition of Dr. 
 Johnson, for the purpose of this inquiry, would 
 be good. 
 
 Money, in its strictest sense, means coin only ; 
 but the word money is continually used to signify 
 the " circulating medium," or " currency," com- 
 posed of a mixture of coin and paper-money. 
 
 Money is also used, in common parlance, for 
 riches or wealth ; a rich or wealthy man is said to 
 be " worth a great deal of money" in whatsoever 
 his riches or wealth may consist. In that use or 
 abuse of the term, the word money is used as 
 synonimous with " property" or " possessions." 
 
 The great land-owner, the great merchant, and 
 the owner of great accumulated capital, (e. g. in 
 the public stocks or funds) are commonly said to 
 be " worth a great deal of money," although they 
 may none of them possess or perhaps see any 
 money, from year's end to year's end, except what 
 may be called the spending or pocket money of 
 themselves and their families. 
 
 The riches of the great land-owner lie in his 
 acres ; of the merchant in his wares and merchan- 
 dize; and of the owner of accumulated capital in his 
 public stocks or funds, his mortgages, bonds, or 
 other real or personal securities, or in his shares
 
 53 
 
 of mines, canals, docks, railways, joint-stock 
 companies, banks, or some other the various 
 investments, in which accumulated capital is 
 employed — of all which, (except when capital 
 in any of them is sold), the annual or other 
 income only comes into circulation in money, 
 even that income itself, being but seldom paid in 
 coin, and very often not even in the circulating 
 medium or currency, but in drafts or checks upon 
 banks or bankers. 
 
 According to the return required by law to be 
 made and published in the London Gazette, the 
 average aggregate amount of promissory notes, 
 payable to bearer on demand, which were in 
 circulation in the United Kingdom during the four 
 weeks, ending on the 6th January 1844, was less 
 than thirty-six millions. * 
 
 Assuming the quantity of coin to be of value 
 equal in amount to the sum total of all the paper 
 money in circulation within the United Kingdom, 
 which is probably very near the truth, but certainly 
 near enough to the truth for the present purpose, 
 
 The Bank . . . .£18,904,000 
 
 * England- Private Banks £4,822,675 > „ „.- „„ . 
 
 Joint Stock Banks 3,234,999 \ ' B > u&7 > b74 
 
 t lon j S Tlle Bank • 3,489,650) .„.„„„„ 
 
 Mand} other Banks . %&&&) ' °' 850 ' 839 
 
 Scotland ..... 2,901,746 
 
 £35,774,259
 
 54 
 
 the coin would be of the value of another sum of 
 thirty-six millions, and the circulating medium of 
 coin and paper money together, would be of the 
 value of seventy-two millions. 
 
 There are very probably thirty-six individuals in 
 the United Kingdom, whose property collectively 
 exceeds in amount thirty-six millions, the value of 
 all the coin in circulation — and there are probably 
 seventy-two individuals whose wealth or property 
 collectively exceeds in amount seventy-two millions, 
 the amount of all the circulating medium within 
 the realm. 
 
 If an inventory and valuation were made of all 
 the property of the people of the United Kingdom, 
 the amount would be so enormous as to be incon- 
 ceivable by inspection of the row of figures, which 
 the sum total of such inventory and valuation 
 would exhibit. 
 
 Let some of the items be considered (that is 
 to say) 
 
 The value of all the land and of the timber 
 growing thereon in the United Kingdom. 
 
 The value of the produce of the land growing 
 therein or thereon (exclusive of timber), of the 
 flocks, herds, and other animals fed thereon, and 
 of the farming stock and utensils, and stock of 
 produce in store or on hand for use, and sale to 
 the people for daily consumption, till the next 
 harvest. ........
 
 55 
 
 The value of all palaces and houses, and of all 
 plate, statues, pictures, china, linen, books, fur- 
 niture, and utensils therein. .... 
 
 The value of the raiment in wear and in store 
 of 26 millions of people, including jewels, watches, 
 rings, and all personal decorations and ornaments. 
 
 The value of the ships and vessels of war and 
 in the merchant service, with their munitions of 
 war, tackle, apparel, boats, and other furniture. 
 
 The value of all the wares and merchandize in 
 such ships or vessels, and of the stock of wares, 
 merchandize, and commodities of all sorts, in store 
 or on hand, for use or consumption of the said 26 
 millions of people, or for exportation or re-expor- 
 tation. ........ 
 
 The value of all mines of copper, tin, lead, iron, 
 coal, and other mines, and the stock of minerals 
 wrought thereout, on hand of the proprietors or 
 tenants of the mines, and all the buildings, engines, 
 and machinery appurtenant to or used in or about 
 the working of such mines. .... 
 
 The value of the capital embarked in all the 
 docks, canals, railways,* gas-light companies, and 
 the buildings, works, materiel and machinery, be- 
 longing to such companies. .... 
 
 The value of all the accumulated capital em- 
 
 * By the return to Parliament, No. 159, of the present 
 session, the capital embarked in railways in the United King- 
 dom, between the 1st day of January 1826, and the 1st day of 
 Jan. 1844, is shewn to be more than 79 millions (£79,626,317) 
 exclusive of the capital embarked in railroads before the year 
 1826 ; and there are now in the present year, 1844, bills in Par- 
 liament for very numerous new, and for extension of existing 
 railways.
 
 56 
 
 barked in banking, assurance,* and other joint- 
 stock companies, in private banks, and in all other 
 the various miscellaneous investments of capital in 
 the United Kingdom, not included in any of the 
 foregoing items. ...... 
 
 The value of the public debt, the property of 
 individuals, which alone amounts to 800 millions 
 
 . The value of by far the most, if not of each of 
 
 those several items in such supposed inventory, 
 
 would exceed in amount several hundred millions ; 
 
 and the value of the whole would amount to many 
 
 thousands or tens of thousands of millions. 
 
 In such inventory would have to be set down as 
 an item the value of the coin in the United King- 
 dom, viz. . . . . . . .36 millions 
 
 The paper-money, if set down in such an inven- 
 tory, being of no more value than the paper com- 
 posing it, could be set down only at its worth as 
 waste paper. 
 
 Thus it appears, that the value of the stock of 
 coin, as an item of the whole stock or property 
 of the people of the United Kingdom, is so com- 
 paratively insignificant, as to be indeed won- 
 derful. 
 
 Small as that comparative value is, — in as much 
 as coin is not only a dead stock, but moreover is a 
 
 * The single company, called the Equitable Assurance Society 
 of London, has an accumulated capital of more than ten millions.
 
 57 
 
 dead stock in continual decay by abrasion or wear, 
 and by parts of it being sometimes lost ; it is 
 manifestly the interest of the public, to abridge 
 and confine that item of dead and unproductive, 
 and to convert it into active and productive capital, 
 by all ways and means consistent with the full and 
 perfect service and convenience of the public. 
 
 But if the absolute value of the whole quantity 
 of coin seem comparatively so very wonderfully 
 small and minute an item of the amount of 
 the absolute value of all the property of the people 
 of the United Kingdom, considered and valued as 
 capital on hand at any given time, — the power of 
 that comparatively small value or quantity of coin, 
 in giving circulation to all the property and com- 
 modities which are continually changing hands 
 among the same people, will seem infinitely more 
 astonishing. 
 
 If one single item of the foregoing supposed 
 inventory, e. g. the 800 millions of the public 
 stocks or funds, be supposed the property of 
 one individual, and to be brought to sale on a 
 given day, — all the coin in the United Kingdom 
 would not purchase or pay for the twentieth part 
 (800 -r 36) of that one item! In point of fact, pro- 
 bably not less than 200 or 300 millions of such 
 stocks are actually bought and sold in every year. 
 
 i
 
 58 
 
 The whole 36 millions of coin would pay very 
 little more than two-thirds of the annual public 
 taxes, (52 millions) which must be paid five or six 
 times over in every year, before they find their way 
 from the subject through the collectors, receivers- 
 general, and others into the Queen's Exchequer, 
 and from thence to defray the expenses for which 
 they are imposed and levied. 
 
 Little reliance can be placed on political arith- 
 metic ; but, for the present purpose, the state- 
 ment may safely be admitted that 5'2 millions of 
 quarters of grain* (although many millions of the 
 people subsist chiefly or entirely on potatoes) are 
 annually consumed in the United Kingdom, — the 
 value of which grain cannot be less, on an average 
 of years, than 80 millions of money .f 
 
 All the wheat, and much of the other grain, 
 after it is grown, reaped and stored in the granary 
 of the farmer or grower, must pass, from the 
 grower to the corn dealer, — from the corn dealer 
 to the miller, — from the miller to the baker, — and 
 
 * Wheat 12 millions, other grain 40 millions of quarters. — 
 M'Culloch's " Dictionary of Commerce," art. Corn and Corn 
 Laws. 
 
 f Wheat calculated at 50s., other grain at 25s. a quarter, give 
 80 millions as the value of the above-mentioned quantities of
 
 59 
 
 from the baker to the consumer, — that is to say, 
 must change hands for money four times before it 
 reach the consumer, when it vanishes from the cir- 
 culation of money and commodities ; leaving the 
 money behind to repeat its office or service for 
 generations to come. 
 
 If the whole grain went, as by far the greatest 
 part of it does go, through as many various hands, 
 the 80 millions, the value of it at prime cost, 
 increasing at every change of hands by the 
 profit of the several dealers, would have to be paid 
 four times over (and as to such part thereof as 
 finds its way from the baker to the consumer, via 
 the chandler's shop, the club, the tavern, the 
 boarding house, or the eating house, jive times over) 
 in the time which every year's crop of grain takes 
 to find its way from the producer to the consumer, 
 and, therefore, instead of 80 millions 320 millions 
 of money (80X4) would be requisite upon those 
 data, annually, to circulate the single item of grain 
 from the producer to the consumer within the 
 United Kingdom. 
 
 The value of the meat consumed in the United 
 Kingdom, is probably not less than the value of 
 the grain ; the ox or the sheep passes from the 
 farmer to the cattle-dealer or drover, — from the 
 drover to the wholesale butcher, — from the wholesale
 
 60 
 
 to the retail butcher, — and from the retail butcher 
 to the consumer, — and, like grain, therefore changes 
 hands for money at least four times (and much of 
 it Jive times, through the chandler's shop, the club 
 the tavern, the boarding house, or the eating house), 
 before it finds its way from the producer to 
 the consumer, and, therefore, another sum of 320 
 millions (80x4) would thus be required annually, 
 to circulate the single item of meat from the 
 producer to the consumer within the United 
 Kingdom. 
 
 For those two items only, of which the demand 
 and supply are incessant, the 36 millions of coin 
 would have to perform the office of 640 millions 
 (320X2) within the year. 
 
 It would be easy to multiply instances, by 
 taking other items of demand and supply in the 
 same way ; till the work to be performed by the 
 36 millions of coin within the year would seem 
 to be utterly impracticable, or rather impossible. 
 But instances will occur, on reflection, so fast and 
 thick, that it would be idle to multiply them — and, 
 therefore, only one more shall be adduced, viz. : — 
 
 In the year 1810 there were 79 bankers 
 carrying on business in London. 
 
 In evidence given before a committee of the 
 House of Commons in that year, it was stated that 
 46 (of those 79) bankers then used what is
 
 61 
 
 called the " clearing-house," hereinafter mentioned 
 — and that, on what is called a " settling-day " of 
 the dealers on the Stock Exchange, the drafts, for 
 payment and receipt of money, taken to the clear- 
 ing-house, amounted usually to about 14 millions* 
 
 In the year 1810 (the bank being then under 
 stoppage of payment, and the notes of the corpora- 
 tion depreciated) gold in coin had disappeared — 
 and the legal circulating medium of Great Britain 
 then consisted of about 22j millions of notes 
 of the bankf and of the then deteriorated Royal 
 silver coins and the " tokens " of the bank herein- 
 before mentioned — all which, collectively, did not 
 probably amount to so much as 35 millions. 
 
 Those 14 millions paid and received in one day, 
 " at the clearing-house " — all other the receipts 
 and payments over the counters of those forty-six 
 bankers — all the receipts and payments over the 
 counters of the Bank of England and of the other 
 33 (of the 79) London bankers who did not use or 
 avail themselves of the clearing-house — all the 
 receipts and payments of all other bankers in Great 
 
 * Report of the Select Committee of the House of Commons 
 on the high price of gold bullion, ordered to be printed 8th June 
 1810. — Minutes of evidence. Examination of William Thomas. 
 
 f £22,541,523 on an average of the year 1810, 2d Report of 
 the Committee of Secrecy of the House of Lords on the affairs 
 of the Bank, printed 12th May 1819, App. B 2, p. 323.
 
 62 
 
 Britain — and of the nobility, gentry, merchants, 
 tradesmen, shopkeepers, and all other the inhabi- 
 tants of London — and of every city, town, village, 
 and place in Great Britain, were performed on that 
 day, by means of that amount, comparatively so 
 minute and insignificant, of 35 millions of "circu- 
 lating medium." 
 
 It is manifest, therefore, that the power of 
 money, or of the circulating medium or cur- 
 rency, does not depend merely on its quantity — 
 but upon its quantity operated upon by some im- 
 pulsive force, seemingly marvellous, and that force 
 is the velocity given or imparted to its circulation. 
 
 The power of the circulating medium is then 
 the result of the co-operation of two forces — the 
 quantity multiplied by the velocity of its circu- 
 lation. 
 
 If to circulate all other commodities in the 
 United Kingdom a power of currency were requi- 
 site, represented by the figures 10,000 — a quantity 
 of currency represented by the figure 4, circu- 
 lating at a velocity represented by the figures 
 2500 (2500x4), would give that power of 10,000. 
 
 If the velocity were diminished by one-fifth 
 (2500—500), or to 2000— it is evident that the 
 quantity must be increased by one-fourth (4+1) or 
 to 5, to have the same power (2000><5) of 10,000.
 
 63 
 
 If the quantity were diminished by one half 
 (4 — 2) or to 2, — the velocity must be doubled 
 (2500x2), or become 5000, to give the same power 
 (5000x2) of 10.000. 
 
 Any and every measure, therefore, which pro- 
 motes or causes an increase of the velocity of the 
 circulation of coin — by causing a lesser to perform 
 the office of a greater quantity of a dead-stock of 
 gold — must be beneficial to the interests of a 
 nation — and e converso — any and every measure 
 which impedes or causes a decrease of velocity 
 of the circulation of coin, by causing a greater 
 to be necessary to perform what was previously 
 performed by a lesser quantity of a dead-stock of 
 gold — must be injurious to the interests of a nation. 
 
 The wealth of a nation cannot be estimated or 
 conjectured merely by the quantity of money pos- 
 sessed by, or in use amongst its people. 
 
 That nation, which, by inventions and institu- 
 tions for giving greater velocity to the circu- 
 lation of its coin, required less coin than another 
 nation which lacked such inventions or institutions, 
 would (cseteris paribus) become the richer of the 
 two. 
 
 Just as if two tradesmen, each with a capital of 
 £1000 were to set up shops, one laying out £500 
 in his stock in trade and £500 in the fittings up
 
 64 
 
 and utensils of his shop — the other laying out 
 £750 in his stock in trade, and £250 in the 
 fittings up and utensils of his shop. 
 
 At the time of their setting up, each of them 
 would be worth £1000 — but as the fittings up and 
 utensils of their shops would be dead-stock — if 
 their dealings were equally brisk and successful, 
 the one, who had £750 active-stock in trade and 
 £250 dead-stock in his shop, would soon be 
 richer than the other who had only £500 active- 
 stock in trade and £500 dead-stock in his shop — 
 which dead stock, moreover, would have to be 
 maintained and kept in repair in the proportion of 
 £500 to £250 — or of two to one. 
 
 Coin is part of the dead-stock of a nation. 
 If all the property of a nation were brought to 
 sale, its coin would, like every other item of its 
 stock or property, sell for its value — but in as 
 much as coin is retained in a nation merely as a 
 measure of value, that is to say, merely as an 
 instrument to buy and sell with — the first cost and 
 maintenance of it are as much an expense to a 
 nation, as the first cost and maintenance of instru- 
 ments for measures of weight, of length, or of 
 capacity, are expenses to a tradesman keeping a 
 warehouse or shop. 
 
 It would be as irrational to estimate the wealth
 
 65 
 
 of a nation merely by the quantity of money (the 
 measure of value) at any time existing in it, as it 
 would be to estimate the wealth of that nation by 
 the number of measures of weight, of length, or 
 of capacity, at that time existing in it. 
 
 It may here fitly be remarked, how impolitic, 
 perilous, and insane would be measures of the 
 legislature or government of any nation — in which 
 the velocity imparted to the circulating medium 
 has given to the quantity an enormous, incon- 
 ceivable, and uncontrolable force or power— per- 
 mitting or suffering a quantity so endued, to be 
 meddled or tampered with by any person or 
 persons, body politic or corporate whatsoever — 
 more especially if that person or body, by tamper- 
 ing with that quantity, reckless of consequences, 
 could make enormous gains or profits. 
 
 Such power has hitherto been given to the cor- 
 poration of the Bank — and its directors, actuated 
 by cupidity of gain to themselves and their cor- 
 poration, so tampered with that power, that in 
 the year 1797 they caused the corporation to stoj) 
 payment, which stoppage of payment was con- 
 tinued during a quarter of a century from and after 
 that year ; and by their reckless and unscrupulous 
 dealings and proceedings with the quantity of the 
 circulating medium deranged and disorganized 
 
 K
 
 66 
 
 during all that time — caused mischief and misery 
 incalculable and irreparable throughout the land, 
 and almost to every individual member of the com- 
 monwealth, except themselves and their partners 
 in the bank, whose profits, in consequence of 
 that stoppage of payment, were swollen at the 
 expense and loss of the public, to the enormous, 
 unnatural, and incredible amount hereinafter to be 
 mentioned.
 
 CHAPTER V. 
 
 Of Inventions for abridging or dispensing with 
 the use of money — and for giving velocity to its 
 circulation — in order to lessen the quantity of 
 coin necessary to be retained in the circulating 
 medium or currency. 
 
 A circulating medium of coins necessarily causes 
 two very considerable expenses to a nation, viz. 
 first, the capital employed in the purchase of the 
 dead- stock of metals of which such coins are made 
 or composed, — and secondly, the cost of such quan- 
 tity of the same metals as may be requisite to 
 make good the continual wear or abrasion of the 
 coins. 
 
 In the United Kingdom there is a third ex- 
 pense — namely, the coinage of gold — which is 
 performed at great expense and loss to the public — 
 seignorage being charged at the Royal mint only 
 on the coinage of silver and of copper. 
 
 All convenient arrangements or contrivances 
 for abridging or dispensing with the use of coin 
 must therefore be beneficial to the people of every 
 nation or state.
 
 68 
 
 Two important and very effective arrangements 
 or contrivances for such purposes are the follow- 
 ing, viz. 
 
 First. The credit in open account — by means of 
 which, tradesmen and others, instead of receiving 
 payment in money upon the supply of every 
 demand of their customers, set down in a bill or 
 account, the cost of the various items of their 
 commodities supplied — and receive payment of the 
 same, yearly, quarterly, monthly, or otherwise, as 
 the case may be — whereby their customers are 
 saved the necessity of keeping stocks of money 
 always in their possession, ready to pay for every 
 item of supply on delivery ; and are moreover 
 enabled, in very many cases, to pay such account 
 or bill, without the intervention of money of the 
 debtor, by a check or order on a bank or banker. 
 
 If the effect of the credit in open account, e. g. 
 with the baker, the butcher, the grocer, the 
 mercer, the tailor, &c, in economising the use of 
 money, be considered — and how vast a stock of 
 money would be indispensably kept in circulation, 
 if every item supplied by such and all other trades- 
 men were paid for in money on delivery — the 
 powerful effect of this arrangement in abridging 
 or dispensing with the use of money, will be 
 evident.
 
 69 
 
 It is carried a step farther between or among 
 those and other tradesmen themselves — by debiting 
 and crediting each other in open account for the 
 items of their commodities supplied to one an- 
 other, and receiving in money only the difference 
 at stated times of settlement. 
 
 To sanction and encourage the credit in open 
 account, the law allows the right of " set off" in a 
 multitude of cases. 
 
 Secondly. The credit upon security — by means 
 of which transactions on a larger scale are effected 
 without the use of money, by the substitution of 
 bills of exchange or promissory notes to supply its 
 place. 
 
 Such bills or notes, payable at a given time after 
 date or after sight and accepted, pass from party 
 to party in place of money — each party, through 
 whom any such bill or note passes to another 
 party, adding to the security of it, by indorsing his 
 name thereon — whereby he renders himself res- 
 ponsible to the holder of such bill or note, for the 
 sum of money expressed to be payable by it. 
 
 For instance, A, a merchant in London, buys of 
 B, a cloth-factor of that city, £1000 worth of 
 cloth, A granting to B in payment for the same his 
 promissory note for £1000 payable six months 
 after date thereof. — B, the cloth-factor, sends that
 
 70 
 
 note (indorsed by him, B) to C, the manufacturer 
 in Yorkshire, in payment of cloth consigned for 
 sale to B by C. — C the manufacturer, sends the 
 same note (indorsed by him, C) to D, the wool- 
 stapler, in payment of wool purchased by C from 
 D. — D, the woolstapler, sends the same note (in- 
 dorsed by him, D) to F, the farmer, in payment of 
 wool supplied to him by F. — That note for £1000, 
 acquiring as it passes from party to party additional 
 security by successive indorsements, is thus made 
 to perform four payments of £1000 each, without 
 the intervention of any money whatsoever ; and by 
 F, the farmer, putting it (indorsed by him, F) into 
 further circulation, such note for £1000, gaining 
 additional security every time it passes, may, in 
 the six months which it has to run, perform ten, 
 twenty, or more payments of £ 1 000 each, without 
 the intervention of any money whatsoever. 
 
 It is well known that the use of bills of exchange 
 and promissory notes by or among the merchants 
 and traders of the United Kingdom is very great 
 and extensive — but it may assist the mind, in 
 forming some idea of the power of such bills and 
 notes as substitutes for money, when it is con- 
 sidered — that the small stamp duty imposed on the 
 paper on which such bills are originally written, 
 amounted in the United Kingdom in the year
 
 7i 
 
 ending with 5th January 1843, to the sum of more 
 than 579 thousand pounds.* 
 
 To sanction and encourage the credit upon 
 security by means of bills of exchange and pro- 
 missory notes, the law has made several provisions — 
 such as that the drawer and every indorser of such 
 bill or note, and the estate and effects of each of 
 them dying or becoming bankrupt, shall be liable 
 for the whole sum expressed to be payable by it — 
 until the holder receive twenty shillings in the 
 pound for the same — and that the bill itself shall 
 in many or in most cases be held as proof of the 
 debt for which it was given — that the drawer or 
 indorsers shall not be liable for the payment of the 
 money expressed to be payable by any such bill or 
 note if dishonored, unless due notice of its dishonor 
 be given to them severally and respectively, &c. &c. 
 
 The circulating medium, or currency, is to be 
 understood, in this inquiry, to mean money, which 
 is either coin itself, or paper, by law, convertible 
 into coin, at the pleasure of the holder. 
 
 * Great Britain . £491,500 4 
 
 Ireland . . 87,775 8 
 
 £579,275 12 
 
 Finance accounts ordered by the House of Commons to be 
 printed 23rd March, 1843.
 
 72 
 
 The use of bills of exchange and promissory 
 notes economises the use of the circulating medium 
 of the realm, of whatever sort of money it may 
 consist — but such bills and notes cannot properly 
 be considered as an addition to the circulating 
 medium, as some theorists consider them to be. 
 They are contrivances of individuals to save them- 
 selves the use and expense of money ; and are 
 representatives of other commodities (namely, the 
 commodities bought and sold with them), rather 
 than representatives of money ; into which such 
 bills and notes are not convertible at the pleasure 
 of the holder, until the day on which they become 
 due. 
 
 The use of bills of exchange and promissory 
 notes gives velocity to the circulation of other 
 commodities without the use of money; but it 
 would seem to be a contradiction in terms to say, 
 that they form an addition to that of which they 
 occasion the disuse. 
 
 The effect of those two inventions or arrange- 
 ments for abridging or dispensing with the use of 
 money or the circulating medium will be strongly 
 felt, on reflection on the extent to which the credit 
 in open account, and the credit upon security of 
 bills of exchange and promissory notes, are carried 
 in the United Kingdom.
 
 73 
 
 But the power imparted by velocity of circula- 
 tion to the quantity of money necessary (after the 
 abridgment of its quantity by the inventions and 
 arrangements before mentioned) for the circulation 
 of all other commodities within the United King- 
 dom, is so astonishing in its effects, that it may 
 be said to be indeed marvellous. 
 
 The increase of jwwer imparted to quantity of 
 money, by giving velocity to its circulation, and 
 the effect of bills of exchange and promissory 
 notes in dispensing with the use of money, have 
 been illustrated to the effect following,* viz. : 
 
 Let the 24 letters of the alphabet represent 24 
 persons. A owing ten sovereigns to B — B the same 
 sum to C — C to D — and so on — and Z owing the 
 same sum to A. 
 
 First. If A pay 10 sovereigns to B — B pay the 
 same sovereigns to C — C to D, and so on — and Z 
 pay them back to A himself. 
 
 Secondly. If A draw a bill of exchange, pay- 
 able some time after date, for ten pounds upon Z, 
 and indorse and pay it to B — B to C — C to D, and 
 so on to Y — and Y deliver it up to Z for the ten 
 pounds due by him to Z. 
 
 Thirdly. If A grant his promissory note, pay- 
 able some time after date, for ten pounds to B, and 
 
 * In Mr. Gale's Essays on Public Credit.
 
 74 
 
 B indorse and pay it to C — C to D, and so on, and 
 Z deliver it up to A for the ten pounds due by him 
 to A. 
 
 Fourthly. If the 24 persons agree to cancel their 
 debts to one another by common consent — it is 
 evident, that the same effect is produced in all the 
 four cases. 
 
 In the first case it is produced by velocity given 
 to the circulation of coin — the same ten sovereigns 
 being made to pay debts amounting, collectively, 
 to 240. In the second and third cases, by the 
 substitution of a bill of exchange, or promissory 
 note {the credit upon security), for coin or money 
 — and in the fourth case the use of money is sup- 
 plied without its presence, or the presence of any 
 substitute for it, by " set off," i. e. the credit in 
 open account. 
 
 The most powerful contrivance for giving velo- 
 city to the circulation of money is the trade or 
 business of bankers — with whom the nobility, 
 gentry, merchants, tradesmen, and others, deposit 
 their money, as it comes in — being repaid by the 
 banker, upon orders to bearer upon demand (called 
 checks) in sums of any amount, great or small, as 
 the depositor chooses or has occasion. 
 
 By the employment of a banker, the depositor 
 saves the trouble of weighing, of counting, and the
 
 7b 
 
 wear of money ; and also the risk of loss by coun- 
 terfeit-money, by fire, robbery, or other misadven- 
 ture — all which, when a banker is employed, be- 
 come the business, and are at the peril of the 
 banker. 
 
 If 1000 parties, having dealings with one 
 another, were to employ the same banker, the 
 banker is also, quoad them, saved all trouble and 
 risk ; having only to debit and credit in his books 
 the accounts of those 1000 parties with the vari- 
 ous sums of money for which orders or checks 
 on him are given by them to one another ; the 
 money of those 1000 parties being appropriated 
 among them by the book of the banker, which 
 shows daily and hourly the sum remaining or 
 standing at the credit of each of them. 
 
 If the deposits of such 1000 parties be supposed 
 to amount to only £500 each, on the average of 
 the whole — the sum of them would be 500 thou- 
 sand pounds — and as the banker would not have 
 to part with any of that money to pay the checks 
 of the 1000 parties upon him, but only to write 
 their checks backwards and forwards in his books, 
 a new velocity is given to the circulation of the 
 deposited money, by its being put out to interest 
 by the banker, whereby he gains the profit of his 
 trade of banker.
 
 76 
 
 By the trade of bankers a nation is therefore 
 benefited, not only by the velocity imparted to 
 the circulation of money (whereby a lesser is made 
 to serve the purpose of a greater quantity circu- 
 lating with less force, saving thereby first cost and 
 wear of money) but also by birth being given to a 
 new and important class of labourers in the general 
 division of labour, who, by their industry and 
 accumulation of capital, materially increase the 
 national wealth and prosperity. 
 
 That the trade of bankers operates on the power 
 of money, — by giving velocity to its circulation, 
 and not by substituting any thing in the place of 
 it,— becomes evident, when it is considered, that the 
 customer of a banker merely deposits money with 
 him, reserving the power of drawing out the whole 
 of it, at his pleasure or caprice, at any moment, 
 without notice to the banker — so that a banker is 
 liable to pay, at a moment's notice, the whole 
 monies deposited with him. Yet so admirable is 
 the system upon which bankers conduct their 
 trade, that notwithstanding the immense increase 
 of velocity which they impart to the circulation of 
 money — their banks throw out, and draw in, in 
 infinite variety, sums of all amounts, at the moment 
 they are demanded, or paid in by their customers, 
 whether in coins, or in whatsoever other form, with 
 the utmost celerity and exactitude.
 
 77 
 
 There is in the London Post-office Directory for 
 the present year, 1844, exclusive of the Bank of 
 England and the Bank of Ireland, a list of 70 
 banks or bankers in London, and of 1638 other 
 banks (reckoning their branches) or bankers in the 
 United Kingdom, whose vast power collectively is 
 incessantly exerted in giving velocity to the circula- 
 tion of money — and the effects of that power, in con- 
 tributing to cause the comparatively minute and 
 insignificant sum of 36 millions of coin to circulate all 
 other commodities in the United Kingdom, to the 
 enormous and inconceivable extent, of which it was 
 attempted to convey a faint idea in the preceding 
 chapter, is indeed astonishing. 
 
 An ingenious contrivance for giving velocity to 
 the circulation of money has long existed among 
 certain of the bankers of London — which is, in 
 effect, the establishment of a bank of and for 
 those bankers themselves only. 
 
 Of that contrivance, called the " clearing house," 
 the following is a brief account taken from evidence 
 given in the year 1810,* when there were in 
 
 * Before the Select Committee of the House of Commons on 
 the high price of Gold Bullion, ordered to be printed 8th June, 
 1810. Minutes of evidence of William Thomas, inspector of 
 the clearing-house in Lombard Street.
 
 78 
 
 London 79 bankers, of whom only 46 used the 
 " clearing-house." 
 
 The bankers and most of their customers agree, 
 that the drafts or checks drawn by such customers 
 upon them, and the drafts or checks which such 
 customers receive on other bankers and. pay in to 
 their own bankers — shall not be demanded in 
 money to be paid over the counters of the bankers — 
 but only at a certain hour (4 o'clock, p.m.) every 
 day — when all drafts and checks, drawn that day 
 upon or held by these 46 bankers upon one an- 
 other, are taken to the " clearing-house" and ex- 
 changed backwards and forwards, — each of the 46 
 bankers receiving or paying only the difference 
 between all the drafts or checks held by the other 
 45 bankers upon him, and all the drafts or checks 
 held by him upon them. 
 
 In the same evidence, it was stated, that the 
 average amount of drafts so brought into the 
 clearing-house daily was £4,700,000 — and that 
 the average amount of money by which that sum 
 was settled daily was 220 thousand pounds. 
 
 It has been already noticed that by the same 
 evidence it was stated, that on " settling days" at 
 the Stock Exchange the whole amount of drafts 
 paid at the clearing-house on those days was about 
 14 millions.
 
 79 
 
 If the sum of £4,700,000 were paid in coin from 
 party to party on any one day in London, the 
 streets would be crowded with clerks and porters 
 to make the payments. 
 
 That sum. if all in gold, would weigh very nearly 
 37 tons, and even with artificial helps, the mind 
 can hardly conceive the magnitude of it* 
 
 It is to be noticed, moreover, that with respect 
 to this average amount of £4,700,000 daily, 
 settled by the average sum of £220,000 daily — 
 that if payment of the drafts composing it were 
 required to be made daily over the counters of the 
 46 bankers — such payment could not be made with 
 £4,700,000 in money, nor by means of less than per- 
 haps three or four times that amount — for bankers 
 in the City who had drafts to receive upon bankers 
 in Westminster, could not wait till their clerks 
 went to Westminster every or any day and returned 
 with money for such drafts to pay in the City the 
 drafts on themselves — for payment of which they 
 would needs have to be provided with other 
 money — and vice versa, the Westminster bankers 
 could not wait till their clerks went to the City and 
 
 * It is curious to observe, that to count 4,700,000 sovereigns 
 at the rate of 100 a minute, would employ one person, working 
 1 2 hours every day, for eleven weeks all but part of a day.
 
 80 
 
 brought from thence money for drafts held by them 
 on City bankers to pay in Westminster the drafts 
 on themselves, for payment of which they also 
 would needs have to be provided with other money. 
 
 There is in the British Almanac for the year 
 1840, a list of 75 banks or bankers then in London 
 — the total amount of drafts passed by 28 of 
 which establishments at the clearing-house in that 
 year, amounted to the sum of nearly a thousand 
 millions* which is stated to have been cleared by 
 the average sum of 200 thousand pounds daily ! 
 
 Those thousand millions being only a part of 
 the payments of 28 of the 75 banks or bankers in 
 London, among which 28, the names of none of the 
 bankers in Westminster appear, the transactions of 
 
 * Barclay & Co. - - - £107,000,000 
 
 Glyn & Co. - - - 105,000,000 
 
 Jones, Loyd & Co. - - 104,000,000 
 
 Masterman & Co. - - - 90,000,000 
 
 Kobarts & Co. - - - 80,580,000 
 
 Smith, Payne & Co. - - 64,000,000 
 
 Williams & Co. - - 56,000,000 
 
 Barnett & Co. - - - 50,000,000 
 
 Lubbock & Co. - - - 33,760,000 
 
 Stone, Martin & Co. - - 33,700,000 
 
 1 1 Prescott & Co. - - - 30,000,000 
 
 17 Firms under 30 millions each - 224,456,800 
 
 28 Total £978,496,800
 
 81 
 
 some of whom are most extensive and vast — what 
 then, it may be asked, can be imagined to have 
 been the sum of the receipts and payments of all 
 the 75 banks or bankers in London, including the 
 Bank of England, in the year 1 840 ? If part only of 
 the payments of 28 bankers amount in a single year 
 to nearly 1000 millions — what row of figures ? how 
 many tens of thousands of millions ? would display 
 the sum of all the payments and receipts — of all the 
 banks and bankers (70 in London, and 1638 in the 
 country, in the year 1844), of all the merchants 
 and traders, and of all the people of London and 
 of the United Kingdom on the 301 working days 
 of any and every year ?— all accomplished or effected 
 by the comparative driblet of 36 millions of coin ! 
 for it is to be remembered, — although most of that 
 amount was paid and received in paper-money, — 
 that paper-money is itself all circulated by the same 
 36 millions of coin. 
 
 But it is useless to multiply instances ; those 
 adduced so forcibly show the effect of velocity of 
 circulation in giving power to quantity of money — 
 and thereby saving the first cost and the cost of 
 the wear of coin, by economising the use of it, that 
 nothing further need be added upon that head. 
 
 M
 
 CHAPTER VI. 
 
 Of Paper money. Of the benefits of the proper 
 use of it — and of the evils of the abuse of it, by 
 arbitrary or despotic interference in its creation 
 or issue. 
 
 The manner in which coin was supplied to meet 
 the demand for it in England, and in which gold 
 coin is now supplied to meet any demand for it in 
 the United Kingdom — was (with a few exceptions 
 in modern instances, and until of late years, when 
 seignorage began to be charged on the coinage of 
 silver and copper) by private individuals or parties 
 taking bullion to the mint ; where it was coined 
 without charge ; the importer into the mint re- 
 ceiving out, in coin, the same weight of pure metal 
 sent in by him, increased by the weight of the alloy 
 for which no charge was made. 
 
 Before the use of paper -money, which is com- 
 paratively a modern invention (the Bank of Eng- 
 land was first established in the year 1694) coin 
 was diffused and flowed, as the circulating medium 
 or currency now flows, in the several districts of a 
 nation, in quantities varying in proportion to the
 
 83 
 
 quantity of other commodities circulating in those 
 districts respectively. 
 
 There would be, for example, as there now is, 
 always more coin in Middlesex or Lancashire than 
 in Amdesea or Merionethshire — more in London 
 or Manchester than in Beaumaris or Harlech. 
 
 The channels of circulation throughout the 
 country would always require, and necessarily have 
 in them, the requisite quantity of coin, which 
 would flow and circulate steadily, or in even 
 tenour, unless impeded or agitated by some dis- 
 turbing force. 
 
 The supply of coin would regulate itself in the 
 districts or divisions of a nation, just as water in a 
 number of cisterns of various dimensions, all on the 
 same level, and all connected with each other, by 
 tubes differing in length and diameter, would 
 regulate itself throughout the whole of such a com- 
 bination of cisterns. 
 
 If the contained water were acted upon by some 
 disturbing force — if a quantity of it were suddenly 
 withdrawn from one or more of such cisterns, and 
 poured into any particular one or others of them — 
 the disturbance could only last during the time 
 required for the water to flow through the con- 
 necting tubes by which it would restore itself to a 
 level in all the cisterns, leaving the contained water
 
 84 
 
 in each cistern when restored to rest, in quantity 
 in proportion to its size and capacity below the 
 line of level.* 
 
 The collection of heavy taxes, e. g. might disturb 
 the distribution of coins in a manner similar to the 
 disturbance of water in such a supposed combina- 
 tion of cisterns. Coin withdrawn from the chan- 
 nels of circulation throughout a country and sent 
 to the public treasury, w r ould, as soon as let loose 
 from thence, immediately flow back to its former 
 channels, or force other coin into them, to supply 
 the place of the quantity withdrawn. 
 
 That such a reflux of coin would necessarily take 
 place — will appear evident, if it be supposed, e. g. 
 that half the amount of the annual taxes of the 
 United Kingdom were to be paid into the Ex- 
 chequer in London in a single week. 
 
 Taking the taxes at 52 millions, and the coin at 
 36 millions — more than two-thirds of all the coin 
 in the United Kingdom would be requisite to pay 
 half-a-y ear's taxes — and if two- thirds of all the 
 coin in the United Kingdom were poured into the 
 Exchequer in London in a single week — it is ma- 
 nifest, that it would, as soon as let loose from the 
 Exchequer, flow rapidly back in all directions to 
 
 * This idea is taken from Mr. Gale's Essays on Public Credit.
 
 85 
 
 the districts from which it was sent, to quiet the 
 disturbance of the circulation of other commodities 
 caused by two-thirds of the coin necessary for that 
 circulation having been suddenly withdrawn from 
 its accustomed channels. 
 
 If, in the United Kingdom, paper-money had 
 not yet been invented — and coins to the value of 
 100 millions, circulating with the velocity which 
 they had acquired, were necessary to be maintained 
 for the circulation of other commodities within 
 the realm — that value of coins would be continually 
 in the channels of circulation, performing their 
 daily and hourly office — but at a vast expense of 
 capital for prime cost of such a deadstock of 
 coins, and at no small continual expense of keeping 
 such a deadstock of coins in repair. 
 
 If, then, any mode could be invented, by which 
 70 millions of paper-money could be substituted 
 for 70 of those 100 millions of coins, there would 
 thereby be a saving not only of the first cost and 
 the cost of the waste or abrasion of a deadstock 
 of 70 millions of coins — but there would be a gain 
 moreover by 70 millions of dead being converted 
 into 70 millions of active-stock. 
 
 If 70 millions o>{ paper -money could be and were 
 substituted for 70 of the 100 millions of coin, the
 
 86 
 
 30 millions of coin (upon the supposition of 100 
 millions of circulating medium being necessary to 
 be always in the channels of circulation) would 
 suffice to enable the issuers of the 70 millions of 
 paper-money to convert, on demand at the pleasure 
 of the holder, such quantities of those 70 millions 
 of paper '-money, as could be diverted from their 
 accustomed channels of circulation, and be brought 
 to be exchanged for coin (excepting in the cases of 
 a panic or run) — because if 100 millions of coins, 
 circulating with a given velocity, were necessary 
 to be always in the channels of circulation — the 
 70 millions of paper-money and 30 millions of coins 
 (composing the new circulating medium) circulat- 
 ing with the same velocity as the 100 millions of 
 coins previously circulated, must always indis- 
 pensably be out performing their office, excepting 
 in times of panic or run, which are in their nature 
 momentary. 
 
 But after the invention of paper-money ', it would 
 soon be discovered — though 100 millions of coins 
 were necessary for the circulation of all other 
 commodities before — that much less than 100 
 millions of circulating medium composed of a mix- 
 ture of paper-money and coins would be necessary 
 after that invention. 
 
 It would soon be discovered that paper-?noney is
 
 87 
 
 susceptible of such immense velocity of circulation 
 compared with coin — that less perhaps than 20 
 millions of the newly-discovered paper-money, 
 multiplied by the velocity of circulation of which it 
 would be found susceptible, and which could be 
 imparted to it, would suffice to do the work of the 
 70 millions of displaced coin, multiplied by the 
 velocity of circulation which those 70 Millions of 
 coin had acquired or could have acquired. 
 
 Little more than a century ago, it took ten days 
 to perform the journey from Edinburgh to London. 
 If a sum of £1000 a-day were then required to 
 pass to and fro between traders and people of those 
 two cities, viz. £1000 from London to Edinburgh, 
 and £1000 from Edinburgh to London, each way, 
 daily, — twenty sums of £1000 each must have been 
 always on the road at one and the same time, to 
 effect such remittances. 
 
 As that journey can now be performed in one 
 day, such remittances, formerly requiring to effect 
 them twenty sums of £1000 each, can now be 
 effected by two sums of £1000 each, by increased 
 velocity of circulation of money derived merely 
 from increased celerity of locomotion — and it may 
 be observed, by the way, that the invention and 
 adoption of railways, and of steam navigation, 
 must have very considerably increased the power,
 
 88 
 
 and, therefore, diminished the quantity of circu- 
 lating medium in the United Kingdom, by the 
 increased velocity imparted to it merely by celerity 
 of locomotion. 
 
 But £1000 in coin, however rapidly it may be 
 transmitted, must be counted and weighed, packed 
 and unpacked, taken to and brought from the 
 terminus at each end of its journey — the cost and 
 risk of all which, and of carriage or freight, 
 are very considerable — while a bank-note for 
 £1000, or ten such notes for £1000 each, can be 
 folded up in a letter, dropped into a post-office, 
 and wafted, at the cost of one penny, all over and 
 throughout the United Kingdom, from the Land's 
 End to John O'Groat's House, without the trouble 
 of weighing or counting, packing or unpacking, 
 and at risk so small that it may be said to be quite 
 insignificant. 
 
 Paper-money, by its capacity of representing 
 large sums in a single piece— the value of which is 
 ascertained merely by inspection — by the facility 
 of counting and transmitting it from place to place 
 at great distances — and by the great ease with 
 which it can be kept and preserved, possesses 
 great advantages in comparison with coin. The 
 invention and use of good paper money is, there- 
 fore, of great benefit and advantage to indivi-
 
 89 
 
 duals — as the saving of the first cost and of the 
 maintenance of a dead- stock of coin displaced by 
 it, and the conversion of that dead into active 
 stock, are of great benefit and advantage to a nation. 
 
 But so great benefits are liable to be, and often 
 have been, perverted, with the most deplorable and 
 calamitous results, both to the commonwealth and 
 to the subjects individually, of states or nations. 
 
 Coin has value only in proportion as it is a true 
 representative of a given or certain quantity of 
 gold, and paper-money has value only in propor- 
 tion as it is a true representative of the quantity 
 of coin, i. e. of gold promised by it to be paid. 
 
 The safest and best way in which paper-money 
 can be maintained, so as to be always a true 
 representative of the quantity of gold promised by 
 it to be paid — is to make it, by law, always con- 
 vertible into that quantity on demand, at the plea- 
 sure of the holder ; and paper-money purports, for 
 the most part, to be so payable. 
 
 But sovereigns and states have often made sad 
 confusion and wreck, by edicts or laws suspending 
 the payment in coin of the paper-money of their 
 realms or countries — or by issuing paper-money, 
 payable at some future indefinite time — and by other 
 edicts or laws, enacting that such paper-money 
 shall be of equal value as the quantity of coin 
 
 N
 
 90 
 
 promised thereby to be paid in payment of the 
 debts of the sovereign or state, and of the debts 
 due from their subjects or people to one another, — 
 and then, by issuing such paper-money, with pay- 
 ment thereof so suspended or deferred, in quantity 
 ad libitum for their own profit. 
 
 When great quantities of such paper-money are 
 issued by a sovereign or state, in payment of the 
 debts of the Crown or of the community — their 
 subjects or people, who are constrained by edict 
 or by law to accept and take such paper-money 
 in payment to them, as creditors of the crown 
 or of the public, — immediately and of course avail 
 themselves of those other edicts or laws, making 
 such paper money lawful tender in payment of 
 the debts due by the subjects or people to one 
 another, — and constrain their creditors to accept 
 payment in such paper-money, — who again con- 
 strain their creditors to take the same, and so on. 
 
 The effect of forced issues ad libitum, of such 
 paper-money, must evidently of course be, as it 
 always in point of fact is., to drive coin out of the 
 channels of circulation. As fast as such paper- 
 money is forcibly poured into channels of circula- 
 tion already full, it displaces the coin in them, no 
 longer wanted, which is melted, and added to 
 the gold of commerce.
 
 91 
 
 By such edicts or laws, and by forced issues of 
 such paper-money, any given quantity of coin 
 is made of no more value, for the payment of 
 debts, than a piece of such paper-money, pro- 
 mising to pay that quantity of coin at some 
 future indefinite time. The coin, while it re- 
 mains coin, unmelted, is brought down to the 
 value of such paper-money, which soon becomes 
 depreciated ; and coin, consequently, all disappears, 
 and is melted, and such paper -money becomes the 
 only or the principal circulating medium of the 
 realm or state — its depreciation in value being in 
 proportion as the forced issues of it have been 
 more or less excessive. 
 
 That such paper-money must become depre- 
 ciated by forced over-issues of it, is evident, be- 
 cause, although sovereigns or states may, by edicts 
 or laws, declare and enact, that such paper-money 
 shall be of equal value with their coins in payment 
 
 Gv (?V*W CVf cty ttv* 
 
 of debts of the public, and of the debts of their 
 subjects to one another, — they must be omnipotent, 
 to make paper-money, issued in any quantity at 
 their pleasure or caprice, equal in value to the 
 quantity of gold itself, ready weight, promised by 
 such paper money to be paid some day or other. 
 
 That would be the easiest alchymy ever dreamt 
 of.
 
 92 
 
 The value of such paper-money would be, not 
 the quantity of gold promised by it to be paid 
 some day or other, — but the quantity of gold actu- 
 ally obtainable in the market for any given quantity 
 promised by such paper to be paid, — the difference 
 between the quantity promised to be paid — and 
 the quantity, ready weight, obtainable in the 
 market for that promise, being the measure of the 
 depreciation of such paper-money. 
 
 Such paper-money in any realm or state cursed 
 with it, would pass among its subjects or people, 
 in exchange for commodities, at its depreciated 
 value only. 
 
 It would be a painful and unprofitable task, to 
 inquire into the frauds, cheats, and villanies, which 
 have been perpetrated by sovereigns and states by 
 forced issues of paper-motiey, by edicts or laws, 
 made lawful tender in payment of the debts of the 
 Crown or of the community — and, as an inevitable 
 consequence, by other edicts and laws made lawful 
 tender in payment of the debts of their subjects or 
 people to one another. — Every body has heard of 
 the assignats with which France was deluged 
 during the revolution. 
 
 But as many sensible persons, who have not given 
 a proper attention to the subject, are impressed 
 with an opinion, that paper-money never was
 
 93 
 
 depreciated in the United Kingdom — and as the 
 House of Commons attempted to establish that 
 opinion, by its memorable resolution of May 1811 — 
 viz. " that the promissory notes of the Bank of 
 England had theretofore been, and then were, equi- 
 valent to the coin of the realm'' — it may not be 
 unprofitable shortly to recapitulate the facts and 
 arguments, which prove to demonstration the error 
 of that opinion ; — facts and arguments, which 
 would seem to be so palpable and so conclusive, 
 that it is impossible not to admire the sophistry by 
 which men argued and deceived themselves into 
 such an opinion ; for as to the House of Commons, 
 it must be considered doubtful at least, whether 
 the resolution was an honest expression of the 
 mind of that assembly, or only a probatum est by 
 his majority, of the opinion which it was the plea- 
 sure of the minister of the day to put forth. 
 
 If ridicule might be permitted on such a subject, 
 that resolution might be likened to Lord Peter's 
 argument to prove to Martin and Jack, that a crust 
 of bread was a slice of mutton, — " It is true 
 natural mutton as any in Leadenhall market, and 
 confound you both eternally if you offer to believe 
 otherwise"
 
 94 
 
 Digression concerning the depreciation of the 
 paper-money issued by the Bank of England 
 during its stoppage of payment, from 1/97 to 
 1822. 
 
 It has been before observed that as coin or money 
 has no value, but what it derives from the quantity 
 of precious metal contained in it* — so, paper-money 
 has, and can have, no value but what it derives from 
 being a true representative of the quantity of such 
 coin, — i. e. of such metal, — promissory by it to be 
 paid. 
 
 A pound of standard gold used formerly to be 
 coined at the English mint into 44i guineas, or 
 £46. 14s. 6d., and is now coined into sovereigns 
 of that value. Whoever possesses, therefore, 
 £46. 14s. 6d. of the gold-coin of England, is the 
 possessor of a pound Troy-weight of gold. 
 £46. 14s. 6d. is another name for a pound weight 
 of gold. 
 
 There is, perhaps, no mode in which paper- 
 money can be secured from depreciation, except 
 by the holder being able always, at his pleasure, to 
 obtain on demand from the grantor of the paper, 
 the quantity of coin promissory by it to be paid ; 
 
 * See note, p. 1, ante.
 
 95 
 
 or if there be indeed, any other mode, there is at 
 least none so satisfactory and so conclusive. 
 
 That was always the case with the paper-money 
 of England, before the stoppage of payment of the 
 Bank in 1797 : and such is now, and has been, the 
 case since the Bank resumed payment in 1822. 
 
 But during that stoppage of payment, if the pos- 
 sessor of notes of the Bank promissory to pay 
 £46. 14s. 6d., or a pound-weight of gold, offered 
 such notes for payment on demand, according to 
 their tenor — he was presented at the Bank with an 
 act of parliament excusing and prohibiting such 
 payment until the end of the war, — that is to say, 
 for an indefinite time. 
 
 If he wanted the pound of gold, he was, there- 
 fore, under the necessity of taking to market this 
 promise of the Bank to pay him that weight on 
 demand, but with payment deferred until the end 
 of the war, — where he found, that all that could 
 there be obtained for this promise to pay a pound 
 of gold some day or other, was three-quarters or 
 two-thirds of a pound, ready weight; more or 
 less, according to the estimation of the value, i. e. 
 according to the depreciation of the notes, in the 
 market. 
 
 That difference of value the Bank-directors and 
 supporters of the non-depreciation doctrine attri- 
 buted to a rise in the price of gold. Gold (said
 
 96 
 
 they) has risen in price, for the notes of the Bank 
 promissory to pay gold at the end of the war, are 
 no longer worth, ready weight, the quantity of 
 gold promised to be then paid by them ! ! ! 
 
 In the year 1813, when the price of gold had 
 advanced from the mint-price of £3. 17s. 10J>d. to 
 the market-price in bank-notes of £5. 6s. l^d. — 
 and the Bank-paper had reached its greatest de- 
 preciation, the possessor of notes of the Bank 
 promissory to pay £46. 14s. 6d., or a pound of 
 gold, at the end of the war,— so far from being 
 able to obtain that pound, ready weight, for such 
 promise then to pay it, was obliged to give — for 
 the pound of gold, ready weight — £63. 13s. 6d. 
 of such notes, promissory to pay at the end of the 
 war a pound and more than a third. 
 
 Statutes were, indeed, passed by the legislature, 
 by which it was made a misdemeanor to give or 
 receive less of the Royal coin, for the notes of 
 the Bank, than the quantity of such coin pro- 
 missory by them, to be paid at the end of the 
 war ! ! 
 
 It is needless to observe that such statutes were 
 futile, not to say absurd and ridiculous, as all 
 statutes which affect to overrule or control the 
 laws and order of nature ever were, and ever 
 must be. 
 
 But in as far as they affected to fix the value of
 
 97 
 
 the gold coin, they soon had reference only to a 
 nonentity ; for all gold coin necessarily disappeared 
 from the circulating medium of Great Britain, 
 when by melting it, every pound, and every greater 
 and less quantity in proportion, was raised in value 
 from £46. 1 4s. 6d. to £63. 13s. 6d., in payment of 
 existing debts. 
 
 Any quantity of gold, as long as it remained 
 coin, was, under penalty of misdemeanor, by law 
 exchangeable or payable for no more than notes of 
 the bank promissory to pay a like quantity of coin 
 at the end of the war, — it being absurdly supposed 
 that, by such a law, the bank-note would be 
 maintained of the same value as the coin promised 
 by it to be paid — and not that the coin would 
 thereby be brought down, as in fact it was, to the 
 value of the bank-note. 
 
 A pound of gold, when it cost £63. 13s. 6d. in the 
 market, was legally of the same price, whether it 
 were paid for in guineas or in bank-notes — the 
 guinea, so long as it remained a gui?iea, bemg legally 
 exchangeable for no more than a bank-note for a 
 guinea. It requires, however, no great stretch of 
 credulity to believe, that nobody ever, in fact, paid 
 £63. 13s. 6d. in guineas for a pound of gold; or, 
 in other words, that nobody ever gave a pound 
 and more than a third of gold, for a pound 
 
 o
 
 98 
 
 only, of metal similar in all respects except the 
 coinage. 
 
 Here, then, is in one scale of a balance, a pound 
 of guineas, and in the other scale a pound of un- 
 coined gold or bullion, of equal fineness — two 
 things exactly similar (the coinage having cost 
 nothing) in all the qualities constituting their 
 value. One of those pounds legally exchangeable 
 for £63. 13s. 6d. in notes of the bank of England, 
 and the other for £46. 14s. 6d. only of the same 
 notes — the pound weight of guineas being by 
 law of no more value than the bank-notes for 
 £46. 14s. 6d. 
 
 Break the fetters of the law — melt the pound 
 weight of guineas, and it immediately becomes 
 legally of the value of £63. 13s. 6d. in bank-notes — 
 of the value of uncoined gold or bullion. Has a 
 miracle been performed in the melting pot ? Melt 
 the bullion — will it come out of the crucible changed 
 in value in any respect ? 
 
 Again, coin the pound of bullion, and it sinks in 
 legal value from £63. 13s. 6d. in bank-notes to 
 £46. 14s. 6d. of the same notes. Who, it may be 
 asked, would ever subject his gold to such a trans- 
 mutation ? 
 
 Once more — a pound weight of uncoined sterling 
 gold, legally in the morning worth £63. 13s. 6d.
 
 99 
 
 in bank-notes, is taken to the King's mint, and 
 being there coined, comes out in the afternoon 
 legally worth only £46. 14s. 6d. in such notes — 
 and yet the gold is the same identical gold, and 
 the notes the same identical notes ! ! 
 
 Did the directors of the bank and the minister 
 of the day not know the cause of this effect on the 
 value of gold, by its being made to pass the test in 
 the Royal mint ? 
 
 The cause which was assigned by them for this 
 effect was a rise in the price of gold. To the 
 owner of that metal, however, who should take to 
 the mint gold, worth £63. 13s. 6d. in the morning, 
 to be converted into coin, worth £46. 14*. 6d. in the 
 afternoon, it would, surely, be a fall in the value of 
 his gold — viz. a fall of more than 26^ per cent, in a 
 few hours ! ! — a fall occasioned by having his gold, 
 ready weight, brought down by law, by under- 
 going coinage, to the value of the same quantity 
 of gold, promissory by the Bank to be paid at the 
 end of the war* 
 
 * Much confusion has been introduced into disquisitions on 
 this subject, for want of a more accurate distinction being made 
 between the terms, value and price. 
 
 Even the reference by the House of Commons to its memora- 
 ble select committee, was " to inquire into the cause of the high, 
 price of gold bullion," thereby assuming, that gold bullion then 
 bore a high price, while, in fact, gold bullion, at that time, bore
 
 100 
 
 Surely it were needless to accumulate other 
 facts and arguments to show that bank-notes 
 were, in such a state of things, depreciated. If 
 notes of the Bank of England, not payable for an 
 indefinite time, were capable of being made by 
 statute equal in value to the quantity of gold pro- 
 missory to be paid by them some day or other, 
 and the corporation of the Bank might issue such 
 notes ad libitum, without any depreciation of their 
 value, the Bank directors would be indeed al- 
 chymists. 
 
 Gold being coined at the Mint into sovereigns, 
 half-sovereigns, and other pieces, at the rate of 
 £46. 14s. 6d. for every troy-pound weight, the 
 twelfth part of that sum, £3. 1/s. 10jd., is there- 
 fore called the Mint-price of gold per ounce-troy. 
 
 During the stoppage of payment of the Bank, — 
 bank-notes, with the debased tokens and silver- 
 coin, and the copper-coin, being (after the disap- 
 pearance of the gold-coin) the only existing legal 
 
 no higher price than it had borne for two centuries theretofore, 
 in exchange for any commodity whatsoever, excepting only in 
 exchange for the notes of the bank. 
 
 The reference should have been " to inquire into the cause of 
 the difference between the value of gold in bullion and gold in 
 coin in this kingdom." 
 
 Considering the statements in the text, surely there could 
 have been no doubt of the fact of the existence of such a difference.
 
 101 
 
 circulating medium in the United Kingdom, the 
 following table shows — the price of gold in that 
 circulating medium — the lowest amount (in the 
 nearest half-million) of bank-notes out — the price 
 which hank-stock attained — and the average an- 
 nual amount of the public expenditure — during 
 that period, viz., from 1797 to 1822, both years 
 inclusive ; the price of gold per ounce having 
 been invariably £3. 17s. 6d. from January 1792 
 to August 1797 — the highest amount of bank-rtotes 
 out, in the same interval of time, never having 
 reached 12^ millions— and the price of £100 
 bank-stock in 1797 (the first year of the stoppage 
 of payment) having sunk to £115. 10s. 
 
 Average Lowest. Price of £100 Average amt. 
 price of gold amount of bank-stock. of the public 
 per ounce- bank-notes annual ex- 
 troy, out. penditure. 
 War. £. s. d. Lowest. Highest. 
 In /oar years ending with 1800 3 17 9 10 millioyis 115§ 176 53§ millions 
 
 In three years 1803 No price 15 millions 148 207 55§ 7iiillions 
 
 In too years 1804 and 1805 4 16% millions 146 197 54 millions 
 
 In four years 1809 No price 16% millions 168 288 69 millions 
 
 In three years 1812 4 13 8 20% millions 173 276 79 millions 
 
 Intheyear 1813, thehiyhest price 5 6 1§ 24 millions 211 242 86 millions 
 
 In tftree years, ending with 1816 4 9 8 25 millions 215 266 101 millions 
 
 Peace. 
 
 Inthe/ouryrs.endingwithl820 3 19 4 23 millions 210 294 55% millions 
 
 In the year 1821, the mint price 3 17 10§ 18% millions 221 240 52% millions 
 
 In the year 1822 3 17 3 17 millions 235 252 53 millions 
 
 From the above table* may be seen at a glance, 
 
 * The table is made, as to the price of gold, from a return
 
 102 
 
 the varying quantum of depreciation of the paper- 
 money of the Bank during the time of its stoppage 
 of payment — in consequence of the unrestrained 
 over-issue of its notes for the profit of the corpo- 
 ration — that quantum being the difference between 
 the price in the table and £3. 17s. 10|d., the mint- 
 price of an ounce of gold. 
 
 That depreciation in the year 1813, when it was 
 at the greatest, exceeded 26J> per cent., it being 
 necessary to deduct more than 26j per cent, from 
 £5. 6s. l^d. to reduce that sum to £3. 1 7s. lOjd. 
 
 The great fluctuation, appearing by the table, 
 in the price of bank-stock during the time of the 
 stoppage of payment, shows how extremely un- 
 settled the opinion of the public was, touching the 
 value of that stock — depending, as it did, on the 
 capricious issue of paper-money by the Directors 
 
 made to the House of Commons by the Bank, ordered to be 
 printed 12th August 1842; as to lowest amount of bank-notes 
 out, from the Appendix, No. 82, to the report of the Committee 
 of Secrecy of that House on the Bank of England Charter, 
 ordered to be printed 11th August 1832; as to the price of 
 bank-stock, down to the year 1809 inclusive, from the report of 
 the Committee of that House on the high price of gold bullion, 
 ordered to be printed 8th June 1810; and from 1810 to 1822, 
 from the Annual Register ; and as to the public annual expendi- 
 ture, from the report of the Select Committee of that House on 
 the Public Income and Expenditure, ordered to be printed 26th 
 June 1828.
 
 103 
 
 of the Bank, under the influence of the Govern- 
 ment for the time being — the opinion of parlia- 
 ment being then merely (as was shewn by its 
 memorable before-mentioned resolution of May 
 1811) the opinion which it was the pleasure of the 
 prime-minister of the day to put forth. 
 
 The continual fluctuation in the prices of the 
 necessaries of life, and of all commodities, caused 
 by the continual fluctuation (always under par) 
 of the value of the paper-money of the Bank 
 during its stoppage of payment, was certainly very 
 inconvenient, but that inconvenience was com- 
 paratively ephemeral and insignificant. 
 
 All creditors being constrained by law to take, 
 in payment of debts contracted a year or two 
 before, money depreciated in value 10, 15, 20, or 
 more per cent, below the value of the money ad- 
 vanced or lent, was an inconvenience of a graver 
 and more serious kind. It was an injustice, more- 
 over, that all debtors should be exonerated by 
 law, as they evidently in effect were, from pay- 
 ment of 10, 15, 20, or more per cent, of their 
 debts, to the injury and wrong of all creditors. 
 
 But grants or bequests of annuities, jointures, 
 &c, provisions made for younger children, &c, 
 the rent of land (and of houses) upon leases, or 
 other fixed annual payments, made or contracted
 
 104 
 
 for in paper -money so depreciated — all afterwards 
 made by law payable in money restored to the 
 true and fidl value of the coin of the realm — 
 spread ruin and destruction far and wide ; it being 
 in many if not in most cases impracticable to meet 
 a liability to pay money of 10, 15, 20, or more per 
 cent, greater value, than the money in which the 
 liability was incurred; and as grantees of such annu- 
 ities &c, and landlords or lessors, did not, in most 
 cases perhaps, understand the cause of the impracti- 
 cability of payment to them in money so by law altered 
 in value — payment was insisted on in many, if not 
 in most cases, till the grantors of such annuities and 
 such lessees were ruined. Parties entitled to 
 residues under wills were reduced to poverty or 
 want : and mortgagors had to pay, in redemp- 
 tion of their mortgages, money of 10, 15, 20, or more 
 per cent, value than the money received from the 
 mortgagee — which caused the impoverishment of 
 many families. The distress and misery so caused 
 was extreme ; and in cases so numerous, that it is 
 sickening to recur to or remember them — nor is it 
 less so to think of the enormous national losses 
 caused, and now being endured, by aggravation of 
 the debts incurred for money raised by public loans 
 in the 20 years from 1801 to 1820 both inclusive, 
 by being incurred in depreciated paper-money —
 
 105 
 
 afterwards and now to be paid — the principal (if 
 ever such debt shall be redeemed) but the interest 
 now and for ever (unless such debt be redeemed), 
 by levies of taxes in money of 10, 1 5, 20, 25, or more 
 per cent, value, than the money received for such 
 loans, and in which the interest thereon was con- 
 tracted to be paid. 
 
 The irremediable public loss, upon that score, is 
 most enormous, — the amount of stock created, by 
 the loans contracted in the said twenty years from 
 1801 to 1820, being no less than nearly 400 mil- 
 lions,* after deducting what was repurchased 
 
 Millions. 
 * Capital-stock created for loans - - 740,106,891 
 Redeemed by sinking-fund - 345,713,282 
 
 Debt contracted between 1801 and 1820 £394,393,609 
 stated in the text at 400 millions. 
 
 Acting under the delusion of the sinking fund (a delusion as 
 strong as the delusion of the balance of trade), millions of 
 money were borrowed, de anno in annum, every year of the 
 last long war, more than were wanted for the public service, and 
 paid off again in the same year in which they were borrowed 
 at great annual loss. 
 
 The amount of stock created by such borrowings, and again 
 extinguished by such payings off in the same year, during the 
 interval from 1801 to 1820 only, amounted, as stated above, to 
 no less than 346 millions (£345,713,282). 
 
 The fancy of borroiving within the year merely for the plea- 
 sure of paying off within the year, money wanted for no other
 
 106 
 
 under the delusion called the sinking fund, and 
 the interest (calculated at 3 per cent, only) now 
 carried by that amount of 400 millions being 12 
 millions per annum. 
 
 In the single year 1814, the sum of 106 millions 
 (£106,146,907.) of stock was created, reduced by 
 2/ millions (£26,925,0/2.), of sinking-fund to 79 
 millions (£79,221,835), for loans in paper-money 
 of the Bank, at £54. 4s. 4d. per cent, on the 
 average.* 
 
 But the price of gold in 1814 being £4. 17s. 9fd. 
 
 purpose whatsoever than the indulgence of that fancy of a 
 minister said to have been heaven-born, and of his earth-horn 
 pupils and successors, cost the nation in the last mentioned 
 interval an enormous sum — the stock having been always re- 
 purchased at a price higher than was received for it when 
 created. 
 
 The loss of a million and a quarter on only 27 (of the 346) 
 millions of stock, borrowed for the purpose of being repaid, in 
 the single year 1814, is stated in the text. 
 
 The loss upon the whole 346 millions, the amount of the 
 sinking fund in the twenty years from 1801 to 1820, was most 
 enormous. The operation by which such loss was incurred was, 
 certainly very appropriately, called the operation of " the sinking 
 fund." 
 
 * The figures in the text, and in the foregoing note, are taken 
 from a return from the National-debt-office to the House of 
 Commons, ordered to be printed 4th March, 1829.
 
 10/ 
 
 or 19s. 1 l|d. per ounce above the mint-price, and 
 that paper-money being therefore depreciated 20 1 3 8 
 per cent., — the real worth of £54.4s.4d. of paper- 
 money was less by 20 per cent, than its nominal 
 worth — that is to say, was worth £43. 7s. 6d. only. 
 For every sum of £43. 7s. 6d. therefore of the said 
 sum of /9 millions of stock , £100 in present-money 
 is now due and owing, and must be paid by levies 
 of taxes if ever that stock be redeemed. 
 
 The loss of capital, in that single year, was there- 
 fore £56. 12s. 6d. (£100— £43. 7s. 6d.) on every 
 £ 1 00 of the 79 millions of stock created, amounting 
 to 45 millions in the whole (£44,733,750) by the 
 combined effect, of borrowing upon a 3 per cent, 
 stock when the rate of interest in the market was 
 more than b\ per cent. (£3 for £54. 2s. 2d.) and 
 in paper-money depreciated by more than 20 per 
 cent — afterwards and now to be repaid in money 
 of the value of the lawful coin of the realm ! 
 
 To that loss of 45 millions, is to be added a million 
 and a quarter (£ 1 ,263,3/5) further loss, in the single 
 year 1814, incurred by the delusion of the sinking- 
 fund — the 27 millions of stock (of the 106 millions 
 created for loans in that year) repurchased by the 
 operation of that fund — having cost above 4 J per 
 cent. (£4. 13s. 5d.) more on the repurchase of it
 
 108 
 
 than was obtained for it from the contractors for 
 the loans !* 
 
 Those enormous public losses, and that wide- 
 spread ruin of private individuals and families, 
 were caused by the lucri sacra fames of the Di- 
 rectors of the bank. 
 
 Regard being had to the vast unconscionable 
 profits hereinafter shewn to have been foraged 
 by them from the public, during the stoppage of 
 payment of the corporation for a quarter of a 
 century from 1797 to 1822, — it is surely fair to 
 say, that they, being sworn to exercise their power 
 for the support, i. e. the profit of the corporation 
 (without, as concerning the interest of the public, 
 any restraint upon that oath except the moral 
 sentiment of patriotism) were of all men the most 
 unfit and unsafe to be intrusted with a power of 
 issuing, during that stoppage of payment, ad libitum, 
 for the profit of themselves and their partners, 
 paper-money guaranteed by the state — and which 
 the corporation was by law not only excused but 
 prohibited from paying. 
 
 * f. s. d. 
 
 Cost of the 27 millions of stock redeemed 58 17 9 p. cent. 
 
 Eeceived for the 106 millions of stock created 54 4 4 — 
 
 Difference per return referred to p. 106 Loss A 13 5 p. cent.
 
 109 
 
 The Bank, which stopped payment for a quarter 
 of a century at one stretch, may stop pay?nent 
 again — which, considering the enormous profits — 
 the sweets — of the last stoppage of payment, the 
 Directors would naturally not be unreluctant again 
 to do. 
 
 Such a measure they have seriously contem- 
 plated — for in the year 1825 (only about three 
 years after the resumption of payment by the cor- 
 poration in 1822) a proposal was actually made 
 by them to the Government of the day, for another 
 stoppage of payment. 
 
 The Directors have asseverated, that in making 
 that proposal, they were influenced only by concern 
 for the interest of the public, and by no view r of 
 profit to the bank. — But when the public good is 
 proposed to be advanced only inseparably from 
 the private advantage of its promoters— it is not 
 uncharitable to doubt (particularly in the case of 
 men under such an oath as that taken by the 
 directors of the bank) whether the ostensible be 
 indeed the real motive — especially when a pro- 
 found remark of the late eminent judge, Lord 
 Eldon, is considered, namely, that " men are often 
 actuated by motives of which they themselves are 
 not aware" — and that the danger of men being 
 so actuated must be greater when their motives are 
 various, mixed, and conflicting.
 
 110 
 
 The Government of the day, however, had the 
 honesty and the fortitude to refuse compliance 
 with that proposal of the Directors — and the nation 
 was saved from a second infliction of a stoppage 
 of payment by the bank ; which, if it had again been 
 made by authority of law — who, it may be asked, 
 could foresee or foretell, considering the undue 
 profits, without risk or responsibility, which would 
 have begun to accrue to the corporation from the 
 hour that measure was adopted — when payment 
 would have been resumed ?* 
 
 The sum of public loss, and the distress and ruin 
 of private individuals and of families, inflicted by 
 the directors of the bank during its stoppage of 
 
 * The following is extracted from the minutes of evidence 
 annexed to the report of the committee of secrecy of the House 
 of Commons, on the Bank of England Charter, ordered to be 
 printed 11th August, 1832. — Evidence of Jeremiah Harman, a 
 Director of the Bank. 
 
 Question 2214. Were the Bank placed in great danger in the 
 month of Dec. 1825, in consequence of a short supply of bullion? 
 
 Answer. No question about it. 
 
 Q. 2224. Did any communication take place between the 
 Bank and the Government respecting an order in council to 
 restrain payment in gold at that period? 
 
 A. Yes. It was suggested by the Bank. 
 
 Q. 2225. What answer did His Majesty's government give 
 to that? 
 
 A. They resisted it from first to last.
 
 Ill 
 
 payment for a quarter of a century, from 1797 to 
 1822, may too truly be said to be incalculable and 
 most deplorable. 
 
 It would, however, answer no good purpose now 
 here further to expatiate on such miseries — but it 
 was a bitter aggravation of them to be told — as 
 w r as frequently alleged both in and out of parlia- 
 ment — that the corporation of the bank, — which 
 under stoppage of payment for a quarter of a 
 century, caused ills, so grievous, so extensive, and 
 alas ! irreparable — was the prop and support of the 
 nation of which it was the curse and bane.
 
 CHAPTER VII. 
 
 Of the regulation and restraint by law of the 
 issue of paper-money. 
 
 Suggestions, endless in number, and many of 
 them visionary, have issued from the press, on the 
 subject of the supply of paper-money in the United 
 Kingdom. 
 
 By some theorists, state-paper-money has been 
 strongly recommended : but the objections to 
 state-paper-money are great and, seemingly, insu- 
 perable. 
 
 First. Because there would be a want of effectual 
 restraint and control of the issue of such paper- 
 money ; of which over issues would cause depre- 
 ciation. 
 
 Secondly. Because there would be no tangible 
 property subject to the payment, nor individual, 
 nor party personally liable to the payment of 
 such paper-money — and, therefore, there would be 
 no means of enforcing the payment of it by law. 
 
 Thirdly. Because, although some security for 
 state-paper-money might be given, by making it 
 legal tender, in payment of all the public revenue
 
 113 
 
 — yet that would be no effectual security against 
 over-issues of such paper. If it were issued in small 
 notes, there would be great danger of forgery — 
 and if issued in large notes only, it would not be 
 available for payment of any material part of the 
 public revenue, except portions of the duties of 
 customs and of excise ; and, 
 
 Lastly. Because, in as far as profit is proposed 
 to be gained by the public by the issue of state- 
 paper -money — such profit can be secured by im- 
 post of stamps on paper-money issued by banks or 
 bankers, or in various other ways, from or upon the 
 issue of paper-money. 
 
 There now, indeed, exists a state-paper-money 
 in the United Kingdom, which seems to have 
 escaped the observation of many speculators on 
 the circulating medium — and to have been care- 
 fully kept out of sight by others, who cannot be 
 unaware of its existence. 
 
 That state-paper-money, constituted by statute, 
 is singular or unexampled — being issued by the 
 directors of the bank of England ad libitum— for 
 the profit, not of the state, but for the sole profit 
 of the corporation. 
 
 The statute 3 and 4 Wm. IV. cap. 98, in as 
 far as it makes the notes of the bank of England 
 legal tender for the debts due from individuals to 
 
 Q
 
 114 
 
 one another, is only a stretch of power to extend 
 the monopoly granted to the corporation — but in 
 as far as it makes such notes, amounting, say only 
 to 20 millions (with increment ad libitum), legal 
 tender in payment of all the public revenue of 52 
 millions a year — which, in not many weeks, w r ould 
 absorb all the paper-money of the bank — that 
 statute makes the notes of the corporation a state- 
 paper-money to all intents and purposes ; — but, as 
 has just been observed, unexampled in its nature; 
 the bank having the w T hole sole and unlimited 
 power of the issue thereof, ad libitum, for the sole 
 profit of the corporation. 
 
 The security which the public holds from the 
 bank for that singular guarantee of all its paper- 
 money or notes, is a deposit of capital, at present 
 amounting to 11 millions (£11,015,100) while the 
 amount of notes out and guaranteed as aforesaid, 
 since the said statute was passed in the year 1833, 
 has been more than 22 millions. 
 
 The theorists, who advocate the issue of state- 
 paper -money seem, as has just before been ob- 
 served, all to have either overlooked or kept out 
 of sight that there is a state-paper-money already 
 in existence in the United Kingdom, by such 
 guarantee by statute of the notes of the corpora- 
 tion of the bank.
 
 115 
 
 By other theorists it has been propounded, that 
 the issue of paper-money should be confined to a 
 single bank or institution, and be prohibited to be 
 made by any other body politic, or corporate, or 
 person whatsoever, within the realm. 
 
 But if only a faint idea of the effect of the 
 velocity of circulation on the power of the quantity 
 of "the currency" has been conveyed in the fore- 
 going 5th chapter — the idea of granting or com- 
 mitting by law, the sole power and control over, 
 or even the power of meddling or tampering with, Vke wwe&i i— - 
 that quantity — alw r ays whirling with so incon- 
 ceivable velocity — to any one body politic or cor- 
 porate, or any one institution, would seem to be 
 legislative insanity — and it would be stark mad- 
 ness again to give or commit such power to a 
 single joint-stock company or corporation, to be 
 exercised by its directors or managers ad libitum, 
 for the profit of themselves and their partners — 
 as was given to the corporation of the bank of 
 England, and that, moreover, during its stoppage 
 of payment for a quarter of a century, from 1 797 
 to 1822. 
 
 The proposed constitution of such one hank of 
 issue of all the paper-money of the realm, has not 
 been defined by any of those theorists — that is to 
 say, by what rules, or upon what principle, upon 
 what securities, or for whose profit, issues of such
 
 116 
 
 paper-?nq?iey should be made by the directors or 
 managers of such an institution ! 
 
 The banks or bankers, mentioned in the 5th 
 preceding chapter (70 in London, and, including 
 their branches, 1638 in the country), as carrying 
 on a trade which immensely increases the power, 
 by increasing the velocity of the circulation of the 
 quantity of money, are there considered as banks 
 or bankers of deposit only. But very many, if not 
 most of such banks or bankers (except those in 
 London), issue paper-money, in notes, payable in 
 coin to bearer on demand (but for payment 
 whereof notes of the Bank of England are made 
 lawful tender by the statute aforesaid), which are 
 by law limited to be for not less than — or to a 
 minimum sum — in England of Jive pounds, and in 
 Scotland and Ireland of one pound. 
 
 Banks or bankers issuing paper-money, have 
 obtained the distinctive name of banks of issue. 
 
 The issue of state-paper-money would very much 
 curtail, and the establishment of one hank of issue 
 would annihilate, the business and profits of every 
 bank of issue in the United Kingdom — and so 
 lessen the number of the industrious population, 
 and the accumulation of capital engaged in the 
 trade of banking, whereby the sum of the national 
 industry, prosperity, and wealth, would be di- 
 minished.
 
 117 
 
 Even if the issue of state-paper-money , or the 
 establishment, to the exclusion of all other such 
 banks, of a single bank of issue of paper-money •, 
 abstractedly considered, were wise or expedient — 
 (instead of being, as to a state-paper money, 
 dangerous and impolitic ; and as to a single bank 
 of issue without control — political insanity), if no 
 bank of issue had heretofore existed in the United 
 Kingdom — the injustice of curtailing or annihi- 
 lating the profits of all such banks now and many 
 of them long established in the United Kingdom — 
 especially for the sake of making a speculative 
 experiment in banking — surely deserves, at least, 
 most grave and serious consideration. 
 
 As the trade of banking is adapted to the enter- 
 prise of and has long been extensively exercised by 
 jjrivate individuals and ordinary copartneries — to 
 give a monopoly of that trade to one body politic, 
 or corporate, or joint-stock company — would be as 
 impolitic and unjust, as to restore the monopoly 
 of the sale of tea to the East India Company ; or 
 to grant a monopoly of the sale of sugar, of cotton, 
 or of any other commodity to one joint-stock or 
 other company. 
 
 After the invention of paper-money — that a mini- 
 mum sum of coin, for which it should be permitted 
 to be issued, should be prescribed by law, seems to
 
 118 
 
 be not only wise and politic, but indispensable ; as 
 it would, manifestly, be very inexpedient to permit 
 paper-money to be issued in notes promissory to 
 pay sixpence or a shilling* 
 
 The minimum sum for which paper-money is 
 now by law issuable is, as has just been noticed, 
 for England five pounds, and for Scotland and 
 Ireland, one pound. 
 
 The effect of a law prescribing five pounds as 
 the minimum sum of paper-money (as in England), 
 is to secure that all payments wider two pounds 
 ten shillings shall and must be made in coin. — 
 Payments of £2. 10s. can of course be made by 
 giving a £5 note, and receiving change of £2. 10s. 
 in coin — and all payments above £2. 10s. can be 
 made, by giving a £5 note and receiving change of 
 less than £2. 10s. in coin — but all payments under 
 £2. 10s. must, evidently of necessity, be made in 
 com, while the minimum sum of paper-money is £5. 
 
 By the same rule, the effect of fixing the mini- 
 mum sum. of paper-money (as in Scotland and 
 
 * The bank of England, during part of the time of its stop- 
 page of payment from 1797 to 1822, issued notes upon pieces of 
 silver (which might just as properly and honestly have been 
 issued upon pieces of copper or paper) for 5s. 6d. — 5s. — 3s. — 
 and 1 s. 6d. ! ! which were sanctioned by law, particularly by 44 
 of Geo. III. cap. 71, and 51 Geo. III. cap. 110.
 
 119 
 
 Ireland) at one pound, is to secure that all pay- 
 ments under ten shillings must, of necessity, be 
 made in coin. 
 
 Any opinion on the policy, expediency, or con- 
 sistency, of fixing the minimum sum of paper-money 
 in England at jive pounds, and in Scotland and 
 Ireland at one pound — making no distinction, in 
 England, between that minimum sum — in the me- 
 tropolitan district, or in the districts of great cities 
 and towns — and in Wales, Cumberland, or West- 
 moreland, or distant rural districts — is here with- 
 held. 
 
 All payments of two pounds and upwards may 
 be had in gold, if it be the pleasure of the payee in 
 the United Kingdom to have payment in coin — 
 silver money being lawful tender only for sums less 
 than forty shillings — the monstrous and absurd 
 law of making by statute the notes of the bank of 
 England " legal tender on all occasions on which 
 any tender of money may be lawfully made" only 
 constraining the holder of them — if tender of pay- 
 ment to him be made in such notes — to send them 
 to London, (or, in some cases, to a neighbouring 
 branch-bank of England) for coin ; where the 
 holder is entitled to demand, and may expect to 
 receive it, unless the bank of England should again 
 come to a stoppage of payment, as has been con-
 
 120 
 
 templated since the last stoppage of payment, as 
 before mentioned.* 
 
 All over and throughout the United Kingdom it 
 is free for any individual or co-partnery to issue 
 paper-money payable to bearer on demand, for the 
 legal minimum sum or any greater sum except in 
 London and within 65 miles of London, within 
 which district the issue of such paper-money is 
 prohibited to be made by any body politic or cor- 
 porate, company, or copartnery, exceeding six in 
 number, in order to secure an exclusive privilege 
 and monopoly of the issue of paper-money within 
 that district to the bank of England. 
 
 The bank of England is an incorporated joint- 
 stock company, the members or partners of which, 
 with great exclusive privileges, are excused by law 
 from all liability for the transactions or for the 
 paper-money of the company, beyond each his 
 share of the joint-stock. — The legal capital of the 
 corporation is now eleven millions (£11,015,100), 
 and its paper-money, in notes out, 22 millions 
 (£22,066,000 in February 1844). 
 
 When exclusive privileges are demanded from 
 the legislature by the members of any joint-stock 
 company, however speciously they may be urged — 
 
 See note, page 1 10, ante.
 
 121 
 
 they are almost universally, in truth, mere pretexts 
 for securing to themselves some exorbitant power 
 or profit. 
 
 There are various trades, such as — the trade of 
 insurance of lives — and of houses and other pro- 
 perty, from fire — the trade in the purchase and sale 
 of annuities — the trade of conducting certain public 
 works, such as — canals ; railways ; the supply of 
 towns with water ; and now, in modern times, 
 with light, — which are not adapted to the enter- 
 prise of private individuals or ordinary co-part- 
 neries, and in which, accordingly, no private 
 individual nor ordinary co-partnery has ever em- 
 barked. 
 
 In all such trades, well-regulated joint-stock 
 companies, excused from any liability of the part- 
 ners beyond each his share of the joint-stocky 
 ought not only to be permitted, but, under proper 
 regulations and control, to be sanctioned and en- 
 couraged by the legislature of every well-governed 
 state. 
 
 But to establish such a joint stock company in 
 any trade which is adapted to the enterprise of 
 individuals or of ordinary co-partneries, is contrary 
 to every principle of sound policy. The attempt 
 would, indeed, from the nature of things, prove 
 always abortive, unless accompanied with some 
 
 R
 
 122 
 
 exclusive privilege ; the grant of which would be 
 contrary not merely to sound policy, but to reason, 
 justice, equity, and fair play to the other members 
 of the commonwealth. 
 
 The trade of banking stands, perhaps, on neu- 
 tral ground between those two classes of trade in 
 general. 
 
 The trade of banking has flourished in this 
 kingdom without the aid of such joint-stock com- 
 panies ; and, though fettered and restrained by 
 law, in order to secure a great monopoly and 
 exclusive privilege to the bank of England, has 
 reached a high degree of perfection throughout 
 the country. 
 
 The trade of banking is sometimes carried on by 
 a single individual ; but as it can be, no doubt, 
 successfully managed by joint-stock companies, 
 the establishment of them for the purpose of car- 
 rying on that trade, seems to be, not only unob- 
 jectionable — but, from the greater security which 
 a numerous partnership gives to its customers than 
 can be given by an individual or ordinary co-part- 
 nery, to be judicious and desirable. 
 
 It is foreign to the present purpose, to enquire 
 into the policy and expediency of exercising legis- 
 lative supervision of joint-stock companies excused 
 from liability of their members beyond each his
 
 123 
 
 share of the joint-stock, — established or sanctioned 
 by law, for carrying on the trades of insurance of 
 lives and of the purchase and sale of annuities — in 
 order to guard the public against the danger of 
 such companies being ruined, by carrying on their 
 trades on false principles ; either from ignorance, or 
 from excessive and undue competition for the 
 preference of the public — the ruin of any such 
 company (having extensively granted assurance of 
 lives or annuities) being most destructive — by the 
 reduction of widows, orphans, and other unfor- 
 tunate or helpless persons, to want and misery. 
 
 If all the members of joint- stock companies, for 
 the purpose of carrying on such trades, were held 
 liable each with the whole of his property or for- 
 tune, for the dealings of the company, — such su- 
 pervision might be unnecessary, or less necessary: 
 but no sensible person would risk his property in 
 such a company, without exemption beyond his 
 share of the joint-stock — the result of the transac- 
 tions, perhaps of most of the transactions, of such 
 companies, being in suspense during many lives 
 which must endure beyond the life of any and of 
 all the partners in such companies. 
 
 The exemption from liability, beyond each his 
 share of the joint -stock, of the members or partners 
 of joint-stock companies, established or sanctioned
 
 124 
 
 by law, for carrying on public works, is unexception- 
 able — because the work — the canal, dock, railway, 
 or other work itself, is security or warrant for such 
 exemption. 
 
 But in the establishment or sanction by law of 
 joint-stock companies, for carrying on the trade of 
 a bank or banker, the rule that every member or 
 partner shall be liable with the whole of his fortune 
 or property for the transactions and dealings of 
 such company, should be invariable. 
 
 The trade of banking being adapted to the enter- 
 prise of 'private individuals or ordinary co-part- 
 neries, — to give the members of any co-partnery in 
 that trade exemption from any liability as traders, — 
 would manifestly be a preference as undue — as it 
 would be to give exemption from any liability as 
 traders to the members of a company of book- 
 sellers, of wine merchants, of mercers, or of a com- 
 pany engaged in any other trade adapted to the 
 enterprise of individuals or ordinary copartneries. 
 
 The only joint-stock companies in the United 
 Kingdom, for carrying on the trade of banking, the 
 members or partners of which are exempted from 
 liability beyond each his share of the joint-stock, — 
 are the bank of England, the bank of Ireland, and 
 three banks in Scotland. The partners of all other 
 joint-stock banks in the United Kingdom are
 
 125 
 
 liable, each with the whole of his property or 
 fortune, for the transactions and dealings of the 
 company. 
 
 The bank of England, with a deposited capital 
 of eleven millions (£11,015,100) had on the 6th 
 January 1844, 19 millions (£18,964,000) of pro- 
 missory-notes out payable in coin to bearer on 
 demand — for the excess of which 19 millions of 
 notes beyond the 1 1 millions of deposited capital— 
 the holders had and have no security whatsoever 
 (except the guarantee of the state of such notes as 
 a state-paper' 7 /) but the prudence and discretion 
 of the directors of the bank, who had and have 
 power to issue notes ultra 19 millions out, to any 
 amount ad libitum. 
 
 The bank of Ireland, with a deposited capital of 
 2 \ millions (£2,630,769), had, on the same 6th 
 January 1844, 3^ millions (3,489,650) of promis- 
 sory-notes, payable to bearer on demand, out — 
 for which the public had and has no security 
 whatsoever beyond the amount of the deposited 
 capital — the notes of the bank of Ireland not being 
 legal tender for debts and taxes, as the notes of 
 the bank of England, by the. statute aforesaid, are. 
 
 The three chartered banks in Scotland, the 
 partners of which are not liable for the transac- 
 tions and dealings of those banks beyond each his
 
 126 
 
 share of the joint-stock, have made no deposit of 
 capital with the public. 
 
 By the appendix, No. 2, to the report of the 
 select committee of the House of Commons on 
 joint-stock-banks, it appears, that there are 148 
 joint-stock-banks in the United Kingdom, having 
 in all 1001 branches* — and by the appendix No. 1 
 to the same report, it appears that 107 banks and 
 banking companies (having 482 branches) made 
 returns to that House — from which it appears, 
 that the subscribed capital of those 107 banks or 
 banking companies, amounts to more than 65 
 millions — the paid up capital to nearly 13 millions 
 — and the number of partners to nearly thirty 
 thousand persons, who are liable, not only for the 
 subscribed capital of 65 millions, but for all the 
 transactions and dealings of the several banks of 
 which they are members or partners, each with 
 the whole of his fortune or property — these 107 
 banks, having 482 branches, being only so many of 
 the 1638 banks, including in that number their 
 branches, mentioned at page 77 • 
 
 
 Banks. 
 
 Branches. 
 
 * England and Wales 
 
 - 106 
 
 569 
 
 Scotland 
 
 - 26 
 
 314 
 
 Ireland 
 
 - 16 
 
 118 
 
 148 1001
 
 127 
 
 The members or proprietors of the bank of 
 England, probably between 2 and 3000 individuals, 
 are excused from any liability for payment of 
 the notes of that corporation beyond each his 
 share of the deposited capital of 1 1 millions. 
 
 Paper-money issued by 1638 banks or banking 
 companies, including in that number their branches, 
 the partners in 107 of which having 4 82 branches, are 
 thirty thousand in number — liable with the whole of 
 their fortunes and property for the payment of 
 their notes — and from among which 30,000, eleven 
 persons could probably be selected, who are, col- 
 lectively, worth more than all the deposited capital 
 of the bank of England — which is the whole pro- 
 perty of that corporation — must, surely, be a more 
 secure and safer paper-money than the paper- 
 money of the bank of England— leaving out of 
 consideration the guarantee of that paper-money 
 by the state. 
 
 The bank of England, having given security by 
 a deposit of capital for about half the amount of 
 the paper-money issued by it — in consideration of 
 which, among other exclusive privileges, the legis- 
 lature has granted (*. e. sold) to the bank the 
 exclusive privilege, that the notes of the corpora- 
 tion " shall be legal tender on all occasions on 
 which any tender of money may be lawfully made,"
 
 128 
 
 — suppose that any joint-stock or other banking 
 company were to propose to the legislature that 
 the same privilege should be granted to them in 
 respect of their notes, upon depositing with the 
 public (at the same rate of interest as the interest 
 paid on its deposited capital to the bank of 
 England) a capital equal to the whole amount of 
 notes issued by such company, without power of 
 increase, except by authority of Parliament, — 
 with what show of justice, of equity, or of fair 
 play, could the legislature refuse such deposit of 
 such company, for the sale of such privilege to 
 them — and accept for a sale of such privilege to 
 the bank of England exclusively, — a deposit 
 equal in amount to half the amount of its notes 
 issued, with 'power of increase ad libitum — the 
 partners of the bank not being liable for the pay- 
 ment of the other half of them beyond the assets 
 of the bank $ 
 
 The object of the present inquiry being — not to 
 offer opinions, but to state facts, and place them 
 in light as strong as the author is capable of 
 throwing upon them : the reader is left, from the 
 statements in this chapter on the regulation and 
 restraint by law of the issue of paper -money, to 
 draw such inferences and conclusions as may arise 
 in his own mind from the "premises."
 
 CHAPTER VIII. 
 
 Of Seignorage on Coin, and its effects — particu- 
 larly of 'preventing the melting or exportation 
 of the coin of the realm. 
 
 On the copper coined at the Royal mint seignor- 
 age is charged, varying in amount according to 
 the price of copper in the market ; but exceeding 
 on the average for about 30 years last past 100 
 per cent. — that is to say, the copper coin of the 
 United Kingdom contains less than half the 
 quantity of copper for which it passes current as 
 money. A pound of uncoined copper of the same 
 fineness may be purchased in the market for less 
 than half a pound of copper -coin. 
 
 But as copper-coin is lawful tender only for sums 
 not exceeding one shilling ; it is, under that limi- 
 tation of tender, made to serve only as an instru- 
 ment for subdividing shillings into pence, half- 
 pence, and far things. Twelve good copper pennies 
 are, however, really and truly worth a shilling in 
 
 s
 
 130 
 
 silver coin — because they cannot be had or ob- 
 tained from the mint or otherwise for less* 
 
 On silver coined at the Royal mint no seigno- 
 rage was charged, before or until the year 1816 — 
 from and after which time, in pursuance of the 57 
 Geo. Ill, cap. 68, a seignorage of four shillings on 
 every pound troy-weight has been charged for the 
 coinage of silver at the mint. The silver-coin of 
 the United Kingdom, therefore, contains a quantity 
 of silver less by 6 (6.06) per cent, than it passes 
 current for as money. 
 
 By the same statute, it is provided, that "no 
 tender of silver-coin shall be lawful for any sum 
 exceedingybr^/ shillings'' 1 — silver-coin, under that 
 limitation of lawful tender, is made to serve, there- 
 fore, principally as an instrument for subdividing 
 gold-coin into shillings, sixpences, groats, &c. 
 
 Sixty-six shillings weigh a pound-troy — but 
 for sixty-two of them, a pound-troy of uncoined 
 
 * Copper-coin is issued from the mint at £224 per ton. By 
 a return from the Mint-office to the House of Commons, ordered 
 to be printed 26th Feb. 1826, it appears, that the quantity of 
 copper purchased and coined from the year 1815 to the year 
 1835 was about 528 tons, which cost on the average about £95 
 per ton. The seignorage on that quantity amounted to £61,852, 
 which was carried (after deduction therefrom of the expenses of 
 the coinage of the copper) to account of the extraordinary and 
 contingent expenses of the mint.
 
 131 
 
 silver, of the same fineness, may be purchased in 
 the market— and the 62 shillings in coin are really 
 and truly worth uncoined silver of the weight of 
 66 shillings — because the coin cannot be had or 
 obtained from the mint nor otherwise for less than 
 that weight of silver-bullion. 
 
 It has been already mentioned that many bar- 
 barous and sanguinary penal statutes formerly 
 existed, prohibiting the exportation or the carrying 
 out of the realm and the melting of coin — and that 
 such statutes were not finally all abolished, until 
 the 59 Geo. Ill, cap. 49, passed in the year 1819 — 
 whereby "it was made lawful for any person to 
 " export the gold and silver-coin of the realm — 
 " and also to melt the same and to manufucture, 
 " export, or otherwise dispose of the bullion pro- 
 " duced thereby." 
 
 That statute makes no mention of the melting 
 or exportation of the copper-coin. If any one 
 were to melt the copper-coin, or to export it as 
 metal, he would lose by either operation more 
 than 100 per cent. He would be able to dispose 
 of the melted copper, or exported copper-coin, only 
 for half what it was worth in coin ivithin the 
 United Kingdom — copper in coin being worth 
 within the United Kingdom, 100 per cent, more 
 than uncoined copper.
 
 132 
 
 The same statute might, very safely, have been 
 equally silent on the subject of melting or export- 
 ing the silver-coin — because if any one were to 
 melt the silver- coin, or to export it as bullio?i—he 
 would by either operation lose six per cent, on the 
 quantity melted or exported — silver in coin within 
 the United Kingdom being worth 6 per cent, more 
 than silver in bullion. 
 
 That provision of the statute, therefore, which 
 gives leave to melt or to export the silver-coin at 
 a loss of 6 per cent., seems to be a provision not a 
 little superfluous. It might as well have gone on 
 to give leave to melt the copper-coin (about which 
 it is silent) at a loss of 100 per cent. 
 
 There is no fear — if that statute had never been 
 enacted, of either the copper-coin of the realm on 
 which it is silent, or the silver-coin of the realm of 
 which it speaks, being melted or exported — while 
 such coins can be melted or exported only at 
 certain and heavy loss. 
 
 The provision of the same statute which makes 
 it lawful to melt and export the gold- coin, — only 
 repealed in set terms all the absurd and nugatory 
 statutes, prohibiting under grievous penalties, the 
 melting and exportation of that coin. The Doctors 
 of Exchange, and melters and exporters of gold- 
 coin, only laughed at such futile and abortive sta- 
 tutes.
 
 133 
 
 There is, as there always was, however, an easy 
 and sure way to secure the gold- coin of the realm 
 from being ever melted or exported by Doctors of 
 Exchange or others — simply by making the melting 
 or exportation of it practicable only at a loss, at 
 which it never would have been, nor ever will, be 
 melted — nor ever have left, nor ever leave, the 
 realm. 
 
 If seignorage were imposed on the gold-coin, as 
 has been imposed on the silver and copper-coin, it 
 is manifest, if such gold-coin were melted and 
 rendered again into hullion — that such bullion 
 would be minus the quantity of gold taken from it 
 for seignorage at the mint — and therefore that such 
 coin could not again be rendered into bidlion (i. e. 
 be melted) except at the loss of that quantity of it. 
 
 And as that part of the value of coin which con- 
 sists of seignorage goes for nothing oid of the 
 realm — coin which had paid seignorage could be 
 exported as bullion (i. e. the gold of commerce) 
 only at the loss of the amount of that quantity or 
 weight of it which was taken or paid for seigtwrage 
 at the mint. 
 
 It has been a received opinion, or rather notion, 
 of certain theorists, that to impose a seignorage on 
 gold-coin, would be equivalent to debasing it, as 
 coin was debased by the monarchs of England in 
 the manner related in digression at the end of the
 
 134 
 
 3rd preceding chapter ; but it is easy to show the 
 error of that opinion or notion. 
 
 Gold is coined at the Royal mint of the United 
 Kingdoniybr nothing to all comers or customers — 
 whoever carries gold to the mint, has delivered out 
 to him the same weight of pure gold in coin as he 
 took in in bullion, and a present is made to him of 
 the alloy. 
 
 By the coinage, the weight and the fineness of 
 each piece of gold-coin is ascertained and certified 
 by Royal and legislative authority — and gold, 
 after being coined, passes by tale as money, with- 
 out the trouble of weighing or assaying each piece 
 at every transfer of it. 
 
 But why the weight and the fineness of gold-coin 
 should be ascertained and certified by Royal and 
 legislative authority ; by the metal undergoing 
 laborious, delicate, and expensive processes at the 
 vamt for nothing,— seems as incomprehensible, as it 
 would be to hear of a goldsmith who, being found 
 the metal, would form it into a teapot or a candle- 
 stick of gold for nothing ! The coinage of gold- 
 money at the Royal mint is attended with an im- 
 mense annual expense, after giving credit for the 
 profit of the seignorage taken on the coinage of 
 silver and of copper, for the indulgence of the 
 fancy of coining gold for nothing.
 
 135 
 
 The consequence is, that any given weight of 
 gold in coin, and the same weight of gold bullion 
 {the gold of commerce), of equal fineness, are of 
 equal value in the United Kingdom, for the purpose 
 of the goldsmith, or other worker in gold, or for 
 exportation, — and gold in coin, (as it can always 
 be commanded by constraining banks and bankers 
 to give it forth for their notes payable to bearer on 
 demand) is sure therefore to go first for exportation 
 — when there is any sudden demand of gold for 
 exportation, or when there is any scarcity of gold- 
 bullion — and the goldsmith, or other worker in gold, 
 throws the coin into his crucible, and so provides 
 himself with what gold-bullion he is in want of, 
 without the trouble of going to market for it, or 
 of weighing or assaying it * 
 
 If a seignorage e. g. of five per cent, were im- 
 posed on gold-coin at the mint, (including in that 
 seignorage the expense of the coinage), the gold- 
 
 * Gold in coin— though, as stated in the text, to be of only equal 
 value for melting or for exportation, with the same weight of 
 gold-bullion — is, in fact, really of greater value, possessing, as it 
 does, the extrinsic value of the coinage, by which the weight and 
 fineness of each piece of coin is ascertained and certified by 
 Royal and legislative authority. The Royal mint is, therefore, 
 by the fancy of coining therefor nothing, kept at work to pro- 
 vide, at an immense expense to the public, gold for melters and ^wtajfivUi MMxttt 
 exporters of that metal.
 
 136 
 
 com would never be melted nor exported — because 
 that seignorage — though it would be a com- 
 ponent part of the contained value of the coin 
 — while it remained coin within the realm — would 
 be of no value whatsoever at home, if the coin 
 were melted — or in any foreign country if it were 
 exported — just in the same manner as £20 paid 
 for duty on a pipe of wine, is, within the United 
 Kingdom, a component part of the value of that 
 pipe of wine — Such pipe would be worth more by 
 £20 in the United Kingdom, than another pipe of 
 similar wine lying by its side, on which no duty 
 had been paid — and yet it is manifest that both 
 pipes, if exported to a foreign country — would be 
 of equal value in that foreign country, that the 
 pipe which had paid the £20 duty in the United 
 Kingdom, would not, in the foreign country, be 
 worth a single penny more than the pipe on which 
 no such duty had been paid. But the wine on 
 which £20 of duty had been paid, would be worth, 
 within the United Kingdom, £20 more than the 
 prime cost of it — because not obtainable — not to 
 be had — within the United Kingdom, without pay- 
 ment of that duty. 
 
 Seignorage paid on coin is as true and effectual 
 a component part of the contained value of coin 
 within the United Kingdom, as the metal itself
 
 137 
 
 in the same coin is — just as duty paid on wine is 
 as true and effectual a component part of the value 
 of wine within the United Kingdom, as the first 
 cost of the wine is. 
 
 If coin can be obtained only at the Royal mint, 
 and be not obtainable there ivithout payment of 
 seignorage, — the seignorage is effectually incorpo- 
 rated with the metal of the coin — and the value of 
 the coin is the cost of it ; which is the sum of the 
 value of the metal contained in it, and of the 
 amount paid for seignorage thereon at the mint. 
 If seignorage be exacted for the coinage — coin 
 cannot be had without payment of the seignorage — 
 and, therefore, must be worth the value of the 
 metal contained in it, plus the seignorage. 
 
 There is no limit to the quantum of seignorage 
 which might be imposed, and become incorporated 
 in the value of the coin within the United Kingdom, 
 — except that it woidd not do to charge seignor- 
 age so high, as to make it the interest of illegal 
 coiners to utter what would be good money. If a 
 seignorage of 20 or of 10 per cent, were taken on 
 gold coin (100 per cent, is taken upon copper- 
 coin), artificers of Birmingham, for a gain of 20 or 
 of 10 per cent., would soon inundate the country 
 with good money, — regardless of prohibitory penal 
 statutes against illegal coiners. 
 
 T
 
 138 
 
 Good copper-coins are not now imitated and ut- 
 tered to any material extent, if at all, for the sake of 
 the 1 00 per cent, increase of value, which copper 
 acquires by being coined — the bulk andunwieldiness 
 of the metal making it impracticable to carry on 
 illegal coinage of it extensively, in any very private 
 manner. 
 
 A seignorage of five per cent., (including the 
 expenses of the coinage), imposed upon gold-coins, 
 would not tempt, nor would such a seignorage, in- 
 cluding such expenses, yield profit or gain that 
 would compensate imitators and utterers of good 
 gold-coins. 
 
 It has been objected — that if seignorage were 
 charged on the coinage of gold — such seignorage 
 would hold out temptation to a dishonest Govern- 
 ment to force out an excessive quantity of gold- 
 coin — displacing paper-money, which is so much 
 cheaper and more commodious, merely for the sake 
 of the profit of the seignorage. But that, if the 
 seignorage were a fair seignorage, would not 
 be worth while ; and could moreover easily be 
 guarded against; by a law — that gold-coin should 
 be provided and issued in all time to come, no 
 otherwise than as it has been provided and issued 
 in time past — namely, by individuals taking gold 
 bullion to the mint and having it coined, on pay-
 
 139 
 
 merit of a fair and reasonable seignorage, instead 
 of having it coined, as now, for nothing. 
 
 A seignorage of 5 per cent, on gold-coin would 
 save the very great charge to the public for annual 
 expenses of the mint — and, which is of infinitely 
 more importance — would prevent the melting or 
 exportation of the gold-coin, — because such melt- 
 ing or exportation would be then attended with a 
 loss of 5 per cent. — or a twentieth part — of the 
 value ivithin the United Kingdom of the gold-coin 
 melted or exported. 
 
 There is now no scarcity of silver or copper- 
 coin in the United Kingdom — because neither of 
 those coins, by reason of having paid seignorage, 
 can be melted, or be sent forth of the realm for 
 sale in a foreign country, except at a very great loss ; 
 — but gold coin is melted or exported as bullion 
 (i. e. the gold of commerce), is, and in preference. 
 
 A goldsmith or worker in gold, by throwing 
 into his crucible the quantity or weight of the 
 existing gold-coin necessary to compose the fabric 
 which he desires to produce— is saved the trouble 
 of going to market for, and of weighing and assay- 
 ing bullion. But a loss of five per cent, in the 
 melting-pot would save the coin from the process 
 of reduction to bullion — and would cause the 
 artizan to go to market for his metal ; where his 
 coin, which had paid seignorage of 5 per cent.
 
 140 
 
 would exchange for its weight in uncoined metal, 
 plus the 5 per cent, of seignorage which was paid 
 for the ascertainment of its weight and fineness. 
 
 In like manner gold- coins, which have paid no 
 seignorage, are exported, when there is a demand, 
 (especially when there is a sudden demand) for 
 gold for exportation, in preference to gold bullion — 
 because the coins can be commanded instanter 
 from a bank or banker in payment of his promis- 
 sory notes, payable to bearer in coin on demand — 
 and the exporter, by exporting coins, is saved the 
 trouble and expense of going to market for gold 
 bullion, and also of the weighing and assaying 
 thereof. 
 
 As a seignorage, e. g. of five per cent, upon gold 
 coin (or such a seignorage as would only defray 
 the sum of all the great annual charges on the public 
 for the expenses of the mint), would prevent the 
 melting or exportation of gold-coin — in the same 
 manner as the seignorage charged on the silver 
 and copper-coins of the realm now prevents the 
 melting or exportation of those coins — The effect 
 would be — that all coins of gold, after they had 
 once been issued from the mint would remain and 
 be confined within the realm — as the existing 
 silver and copper coins now are — doing their 
 office, till, in consequence of wear or abrasion, they 
 required to be recoined.
 
 141 
 
 Any demand for increase of the quantity of coin 
 circulating with the velocity which it had ac- 
 quired, arising from an increase of commodities 
 and paper -money, to be circulated by it — or any 
 demand for increase of quantity of coin caused 
 by diminished velocity of its circulation within the 
 realm — would be immediately supplied by bullion 
 being taken to the mint, and there coined to 
 supply such demand. And, e converso, if the quan- 
 tity of coin should acquire an increased velocity 
 of circulation cccteris paribus — or if there should 
 be a decrease of commodities and paper-money to 
 be circulated by the quantity in existence circu- 
 lating with the velocity which it had acquired at 
 any given time— the surplus quantity of coin would 
 be ejected from the circulating medium, and be 
 rendered again into bullion (the gold of commerce) 
 at the loss of the seignorage.* 
 
 It is manifest under such circumstances, or in 
 
 * Silver-coin, which had been actually ejected as a redun- 
 dant quantity from the circulating medium, to the amount of 
 600 thousand pounds, had accumulated in the bank of England 
 in the year 1831 — which quantity Was in that year melted into 
 ingots — and the loss by that operation amounting to £38,289, 
 was afterwards made good by the public to the bank — as appears 
 by copies of Treasury minutes of 31st March and 22nd April 
 1831, and 21st October 1834, and the estimates of miscellaneous 
 services for the year 1837, ordered by the House of Commons 
 to be printed 3rd and 12th August 1836.
 
 142 
 
 such a state of the circulating medium, as far as 
 composed of coins — that whatever might be the 
 state of the balances of trade among the nations 
 of the world — or the state of foreign exchanges — 
 no exportation from the United Kingdom, of the 
 coins of the realm, would ever take place — whatever 
 might be the exports, (or imports), of the gold of 
 commerce — by which alone, under such a state of 
 the circulating medium, foreign exchanges could 
 be regulated, or actual balances of trade be paid 
 or received, if paid or received in gold. 
 
 That proposition, upon the data assumed, is 
 incontrovertible ; from which it follows, that — if a 
 seignorage were imposed on gold-coin, as well as 
 upon silver and copper coins — all discussions about 
 the state of foreign exchanges causing coin to 
 become scarce — introduced into inquiries touching 
 a circulating medium, which could never leave the 
 realm — and which, therefore, could never be in 
 any manner or way affected by such exchanges,* 
 
 * The directors of the bank, in their evidence before com- 
 mittees of the Lords and Commons, labour very much to prove 
 that, in the existing state of the circulating medium, they regulate, 
 i. e. expand or contract, the issues of their paper-money by 
 reference to the state of foreign exchanges, over which they 
 affect to have control. Among that evidence, the following 
 may nevertheless be found, in the minutes of evidence annexed 
 to the Report of the Committee of Secrecy of the House of 
 Commons on the Bank of England Charter, ordered to be printed
 
 143 
 
 would be as superfluous and irrelevant as the many 
 inquiries de omnibus rebus, made by committees of 
 both Houses of Parliament, on the subject of the 
 paper -money of the bank of England ; and of the 
 coin of the realm ; such as — loans and subsidies to 
 foreign powers — the prices of grain ; of coffee ; of 
 wine; of whale oil; of iron; of leather; — the num- 
 ber of Inclosure-bills passed in Parliament — the 
 price of provisions for a century back — foreign 
 property in the British funds, — the number of com- 
 missions of bankruptcy issued, &c. — which have 
 been drawn into such inquiries, with no other 
 effect than to confound them ; and to hide or bury 
 the material facts and the truth, under a heap of 
 statistical and other rubbish. 
 
 By the law fixing the minimum sum of paper- 
 money in England and Wales at £5 — it is secured, 
 as has been already observed, that all payments in 
 those countries of and under £2. 10s. shall and 
 must be made in coin. 
 
 11th Aug. 1832. — Evidence of J. Horsley Palmer, Governor of 
 the Bank. 
 
 " Question 226. Is it your opinion that by the operations of any 
 individual, or any combination of individuals, the foreign ex- 
 changes can be controled for any length of time? 
 
 " Answer. I should say cei'tainly not." 
 
 To Question 4812, Mr. J. N. Rothschild answers, that the 
 foreign exchanges cannot be controled by any body.
 
 144 
 
 Coin is now in abundance to make all such pay- 
 ments, and to circulate all commodities and all the 
 paper-money within the realm, and will so con- 
 tinue, unless the absurdity of coining gold, i. e. of 
 ascertaining and certifying, by Royal and legisla- 
 tive authority, the weight and fineness of gold coins 
 for nothing, — and thereby giving a bounty on the 
 melting and exportation of gold in coin, be con- 
 tinued.
 
 CHAPTER IX. 
 
 Of Issues of paper-money ; and Of the different 
 qualities or properties of accumulated capital 
 and of circulating medium or currency. 
 
 Paper-money convertible into coin at the pleasure 
 of the holder can never become depreciated — or, 
 in other words, can never, as a substitute for coin, 
 be in excess. 
 
 Any quantity of circulating medium, whether of 
 coin or of paper-money, beyond the quantity 
 requisite at any time, for the circulation of all other 
 commodities within the realm — would necessa- 
 rily be lying idle in some hand or other. 
 
 Nobody but the miser hoards money, merely for 
 the pleasure of eyeing it — and a hoard of money, 
 kept out of circulation merely for the indulgence 
 of the fancy of looking at it — would be as effectu- 
 ally withdrawn from the circulating medium, as if 
 it did not exist. 
 
 As money possessed by any individual lies idle 
 in his hands, at the loss of the interest which 
 might be made of it — every body is continually 
 
 u
 
 146 
 
 pressing into circulation all the money in his pos- 
 session not wanted for immediate use — and every 
 body is so continually giving impulse to the velo- 
 city of the circulation of money. 
 
 Banks of issue, and all issuers of paper-money 
 payable in coin to bearer on demand, must have 
 always in reserve a stock of coin sufficient to meet 
 any demand which may be made upon such bank 
 or issuer of such paper-money for payment thereof. 
 
 The profit arising from the issue of paper-money 
 is, therefore — the difference between the interest 
 made on the quantity of paper-money issued — minus 
 the interest on the dead-stock of coin kept to answer 
 all demands for payment of such paper-money — the 
 cost of the paper with the stamp duty thereon paid 
 to the public revenue* — and the expenses of the 
 bank or establishment for the management of the 
 issue and circulation of such paper-money. 
 
 It is the interest of banks or bankers of issue, to 
 have out and keep out as much paper -money as 
 they safely can — regard being had to their liability 
 
 * The duty on the bills or notes of the bank of England and 
 of country bankers in the year ending oth Jan. 1843, was — 
 For Great Britain .... 97,894 13 6 
 Ireland ..... 8,028 3 
 
 £105,922 16 6
 
 147 
 
 to pay it in coin instanter on demand. But it is 
 the interest of the customers of such banks or 
 bankers to return such paper-money into the bank 
 — because their customers pay interest for the use 
 of it — and it is needless to observe, if a note for £5 
 would pass only for £4. 19s. llfd. in coin — that it 
 would be immediately sent into the bank for pay- 
 ment of the £5 in coin — and, therefore, that it 
 could never, while payable to bearer in coin on 
 demand, become depreciated. 
 
 The paper-money of banks or bankers of issue 
 circulates only within a certain limited district or 
 sphere — out of which, though it may occasionally 
 be used, it is not current. A note of a banker of 
 Exeter is not current at York ; nor of a banker 
 of York at Exeter. 
 
 The circulation of the paper-money of banks of 
 issue is local — and such paper-money is kept out, 
 only by the dissemination of it by the customers 
 of the bank, whose connexion with the bank is 
 personal. 
 
 If any bank or banker of issue were to attempt 
 to force out paper -money beyond the demand for 
 it within the sphere or district of the bank, it 
 would be immediately returned or sent in for pay- 
 ment. 
 
 An erroneous notion or delusion prevails — that
 
 148 
 
 banks and bankers of issue not only possess, but 
 also that they exercise, the power of forcing out 
 paper-money in excess — but by what means that 
 can be effected is not, because it cannot be, stated. 
 
 That erroneous notion or delusion is founded on 
 the mistake of assuming that the loans or advances 
 made by bankers or banks to their customers are 
 merely sums of circulating medium — instead of 
 being, as they really are, sums of accumulated 
 capital — either the actual personal property of 
 the banker, or of the partners in banks — or sums 
 of accumulated capital — deposited in banks, by 
 one set of customers who have a surplus of capital 
 — which it is part of the profit of the trade of a 
 bank or banker to lend upon security to another 
 set of customers who are in want of capital. 
 
 The circulating medium of coins and paper- 
 money never rests with any body — but is always 
 out performing, in incessant whirl, its office in the 
 service of the public. 
 
 The accumulated capital of the 70 bankers in 
 London, and 1638 other bankers or banks (includ- 
 ing in that number their branches), mentioned in 
 the fifth preceding chapter (page 77) and seventh 
 preceding chapter (page 126-7), which is out on 
 continual loan or advance to their customers, pro- 
 bably amounts to many hundred millions — and for
 
 149 
 
 the paper-monetj issued by such banks or bankers 
 every individual member of each several bank is 
 liable with the whole of his fortune . 
 
 Any addition to that mass of accumulated capi- 
 tal out and advanced on loan to customers — which 
 could be made by forced issues of paper-money — 
 would, if such forced issues were practicable, be 
 utterly insignificant— the whole issue of paper - 
 money by all those banks collectively being only 
 seven or eight millions in the whole (£8,057,674 
 in January 1844, see note, page 53 ante), which 
 is a mere trifle comparatively with the mass of 
 accumulated capital of such banks. 
 
 The loans, or advances to their customers ; and 
 the issues of paper-money convertible into coin 
 at the pleasure of the holder — made by banks or 
 bankers with such a mass of active actual capital 
 at work — and liable, each partner, with the whole 
 of his fortune, for the dealings and paper-money of 
 the several banks, have substance in them — and 
 form collectively a strong contrast with the single 
 corporation of the bank of England, which, having 
 deposited the whole of its capital with the public, 
 has literally no actual disposable capital to lend 
 to any customer, or to any body. 
 
 Advances of its paper-money, issued by the bank 
 of England, are the only advances which that corpo-
 
 150 
 
 ration can make to its customers — for which paper- 
 money (out to double the amount of the deposited 
 capital of the bank) there is no security but the 
 prudence and the discretion of the directors of the 
 bank — the proprietors of the bank not being liable 
 with all or any part of their fortunes, as other 
 bankers are, for payment of their paper-money ■, or 
 for any of the dealings and transactions of the bank, 
 beyond each his share of the joint-stock. 
 
 Paper-money being limited in England and 
 Wales to a minimum sum of five pounds — that is, a 
 sum which nobody takes from another without 
 being satisfied of the goodness of the note promis- 
 sory to pay it — and five pounds is a sum which 
 passes seldom, or very transitorily, among the 
 labouring classes of the community. 
 
 The paper-money of the banks or bankers of 
 issue in the United Kingdom, circulates only, as 
 has just been noticed, in particular limited dis- 
 tricts or spheres. Issues of such paper-money, cir- 
 culating in many districts or spheres, isolated from 
 and independent of one another, w T ould surely be 
 safer sources or fountains of the issue of paper - 
 money than one bank of issue for the whole realm — 
 the directors or managers of which, upon false 
 principles — upon false theories — from political bias, 
 especially if placed under the influence or control of
 
 151 
 
 the government* — for lucre — or from baser motive, 
 if there be a baser motive — might, without stopping 
 payment — by suddenly contracting the circulating 
 medium of the whole realm, cause and spread con- 
 fusion and ruin, — worse even than that which the 
 corporation of the bank of England caused and 
 spread during its stoppage of payment for a quarter 
 of a century from 1797 to 1822. 
 
 All banks are creatures of credit. Any and 
 every bank — even a mere bank of deposit — must 
 stop payment if a run were suddenly made upon it 
 by the greater part of its customers — but no bank 
 cam fail which has invested the deposits made with 
 it, and issued its paper-money upon good se- 
 curities — nor need stop payment for longer time, 
 than till such securities can be realized. 
 
 That some or that many banks of issue of paper- 
 money have failed, is no better reason for esta- 
 
 * To the question No. 2073, in the minutes of evidence 
 annexed to the report of the Secret Committee of the House of 
 Commons, on the expediency of the bank of England resuming 
 cash payments, ordered to be printed 5th April and 6th May 
 1819, — Mr. Ward, a director of the bank, said in his answer: — 
 " When His Majesty thought fit to send for the Duke of 
 " Wellington, portions of the public chose to come to the bank 
 " and to take coin for their notes — there has been a demand of 
 " nearly two millions in consequence of that — and I do not 
 " hesitate to say the public is suffering very considerable incon- 
 " vcnience from the circumstance."
 
 152 
 
 blishing a monopoly of the issue of paper-money in 
 one bank for the whole realm — than it would be — 
 because some or many tea-dealers have"failed, to 
 restore again to the East India company the mo- 
 nopoly of the sale of tea, — or because some iron- 
 miners have failed, to establish a monopoly of 
 iron -miners for the whole realm. 
 
 The directors or managers of a single bank of 
 issue for the whole realm, composed of a small 
 number of merchants, such as the directors of the 
 bank of England — would form a little oligarchy of 
 metropolitan traders, with the power of prying into 
 the affairs of all other metropolitan traders — and of 
 turning their knowledge to their own profit, and 
 to the prejudice of their competitors in the same 
 branch of trade, or of their rivals engaged in 
 similar speculations as themselves — by withholding 
 from them the accommodation of a single bank of 
 issue under such management and control.* 
 
 * In the minutes of evidence annexed to report of the Com- 
 mittee of the House of Lords on the resumption of cash-payments 
 by the bank, ordered by the House of Commons to be printed 
 12th May 1819, the following evidence is given by Mr. Dorrien, 
 the governor of the bank. 
 
 " Question 27. Do you mean to say that the bank do not now 
 " regulate their discounts by reference to the goodness of mer- 
 " can tile bills presented to them? 
 
 " Answer. Not entirely by reference to the goodness of the 
 " bills, but frequently with reference to their origin.
 
 153 
 
 By imposing a seignorage on the gold-coins of the 
 realm (which, to the extent of the cost of the 
 coinage, is a measure only of justice and common- 
 sense) as suggested in the last preceding chapter, — 
 the abundance of coin now actually existing in 
 the realm may be secured in continuance, i. e. be 
 domiciled (by the melting or exportation of it being 
 made practicable only at a loss) for all payments in 
 England and Wales, of and under £2. 10s. — and 
 the issue of paper-money of £5 and upwards very 
 safely be left free, as it ought to be left free — to the 
 enterprise of such individuals or ordinary co-part 
 neries as shall choose to embark in the trade of 
 banking ; and to deprive them, in such a state of 
 things, of such liberty, would be as unjust and 
 impolitic as to deprive them of the liberty of fol- 
 
 " Q. 29. Of what nature are objections to the origin of bills, 
 " which makes the bank refuse to discount them although they 
 " are good? 
 
 " A. The monopoly of any particular article — speculations in 
 " corn — foreign loans — and bills of that description — that is, 
 " bills drawn or accepted by persons who the bank suspects are 
 " engaged in such speculations." 
 
 It is to be regretted that the Committee did not ask the 
 witness what article of commerce the bank thinks it is in the 
 power of drawers or acceptors of bills to monopolize ? Also 
 whether any of the directors of the bank, being all or most of 
 them merchants, ever engage in speculations in corn, or foreign 
 loans, or affairs of that description ? 
 
 X
 
 154 
 
 lowing any other trade, adapted to the enterprise 
 of individuals or ordinary co-partneries. 
 
 On the policy of depriving the people of such 
 liberty, in order to give a monopoly or exclusive 
 privileges in the trade of banking, to any body 
 politic, or corporate, or person whatsoever — remark 
 has been already hereinbefore made — which may 
 be enforced by the following short account of the 
 bank of England, and of the use which has been 
 made of the monopoly and exclusive privileges 
 which have been granted to that corporation.
 
 PART II. 
 
 AN EPITOME OF THE HISTORY 
 
 OF 
 
 THE BANK OF ENGLAND.
 
 Preliminary Observations . 
 
 Whoever shall read the following pages, can 
 hardly fail of being convinced ; that with its charter 
 and in possession of the exclusive privileges which 
 have been granted to that corporation, — the Bank 
 of England has long been a great and pernicious 
 imposition upon the public. 
 
 That power so extensive and uncontroled as 
 that, by law in 1 797, committed to the directors of 
 the bank ; who are sworn to exercise that power 
 for the support, i. e., the profit, of themselves and 
 their co-partners, — should not be much abused, is 
 more than can be expected from the frailty of 
 human nature. 
 
 That from thirst of undue gain, the directors 
 of the Bank so conducted the trade of the cor- 
 poration, as to produce, by the working of its 
 exclusive privileges, effects ruinous to the commu- 
 nity, — must be manifest to every one, who has 
 attentively considered the consequences of the 
 extension and contraction of the issues of the 
 paper-money of the Bank, from the commencement
 
 158 
 
 to the close of that quarter of a century from 1/97 
 to 1822, during which it was under stoppage of 
 payment. 
 
 At the time of the stoppage of payment in 
 February, 1797, the notes of the bank out, payable 
 in coin on demand at the pleasure of the holder, 
 amounted to 8 J millions (£8,640,250). 
 
 But after the stoppage of payment in February 
 1797 — from which time the bank was excused 
 by law from the payment of all its notes 
 until the end of the war, or for an indefinite period 
 — and its notes were converted into a state-paper 
 money, with power to the corporation of issuing 
 that paper-money, ad libitum, during the war, for 
 its own profit, — the issue was forced — with a de- 
 preciation of the paper amounting to more than 
 26^ per cent.* — to the extent of 29? millions. \ 
 
 On the resumption of payment of the notes in 
 coin on demand at the pleasure of the holder, in 
 the year 1822, the issue was reduced to 17 
 millions. % 
 
 In a well-governed state, to commit the whole 
 power over a state-paper money to any body of men, 
 
 * See page 102, ante. 
 
 I £29,504,080 out, on the average of the quarter ending 30th 
 September 1817. 
 
 \ £17,165,940 out, on the average of the quarter ending 
 31st December 1822.
 
 159 
 
 how disinterested soever personally in its issue, 
 would surely be very unwise and impolitic. But to 
 commit such power to a joint- stock company of 
 traders, interested in working it only for their own 
 profit, would seem to be little short of legislative 
 insanity. 
 
 It will be very becoming of the members of par- 
 liament, who are partners in the bank — and who 
 have, therefore, a direct interest in pounds, shillings 
 and pence, in any proposed contract between the 
 Government and the corporation — if they withdraw 
 from the House upon any divisions which may 
 take place upon questions touching such contract. 
 
 It appears, by a Return of the bank to the House 
 of Commons, No. 95 of the present session — that 
 the whole assets of the corporation, exclusive of its 
 undivided capital, amounted on 24th February 
 
 1844, to £37,349,000 
 
 and their notes out, and debts due, to 34,109,000 
 
 Surplus, called the Rest. . £3,240,000 
 
 and the undivided capital of the Bank is 
 £14,553,000. 
 
 If parliament were to determine to decline to 
 renew the charter ; and the public were conse- 
 quently to pay back the deposited capital of 
 £11,015,100, and the corporation were dissolved — 
 and supposing all assets of the bank to be realized
 
 160 
 
 without any loss — the proprietors of the bank 
 would have to divide among themselves — their 
 undivided capital of £14,553,000, and the surplus 
 or rest of £3,240,000, making together the sum of 
 £17,793,000 — which would give each proprietor, 
 for every £100 of his bank-stock, £122. 5s. 3d. in 
 money, and no more. And yet, every £100 of 
 that stock is now saleable in the market at about 
 200 per cent. — upon the credit, of course, of the 
 talent of the directors of the corporation, for out- 
 witting and over-reaching the government in the 
 treaty on foot for a new bargain. 
 
 The value of that speculation appears, therefore, 
 to be estimated on the Stock Exchange at the 
 difference between £122. 5s. 3d. and £200, or at 
 about 78 per cent. 
 
 It remains to be seen ; if the charter be renewed 
 on the terms now proposed to the House of Com- 
 mons, whether bank-stock will rise or fall. But 
 whatever may be the future price of bank- stock in 
 the market — it is evident, that the directors and 
 partners in the bank speculate on obtaining an 
 enormous profit and advantage beyond the £122 
 5s. 3d. per cent., (which is the utmost present 
 intrinsic value of their stock), as the fruit of the 
 measures for the renewal of their charter now 
 under consideration of the House of Commons.
 
 CHAPTER I. 
 
 Of the Origin and Constitution of the Bank of 
 England. 
 
 The following succinct account of the rise and 
 progress, and of the laws for the government and 
 control of the Bank of England, is extracted from 
 the addresses to the proprietors published in 1798 
 and 1801, by Mr. Allardyce, with the view of 
 enforcing a division of a mass of surplus profits 
 amounting to nearly four millions (3,826,890), 
 which were discovered in 1797 to have been ille- 
 gally accumulated by the directors ; in violation of 
 the statutes, for the regulation and control of the 
 corporation, which commanded that the wholeofthe 
 profits should be divided half-yearly among the 
 proprietors of the bank for the time being : — 
 
 " The Bank of England was established in the 
 " year 1694. The Charter is dated 27th day of 
 "July 1694. 
 
 "William Patterson was the projector of the 
 " Bank of England. He imparted his scheme to 
 " Michael Godfrey, a gentleman of great consider-
 
 162 
 
 " ation in the city, and it was often the subject of 
 " discussion at a club which they frequented in 
 " Friday-street. It met with much opposition. 
 " Some thought it might be converted into a job 
 " or bubble, as many other projects had been in 
 " those days ; others, that it might be made an 
 " instrument in the hands of designing men to 
 " overturn the Government, then but recently 
 " established ; and some thought, that, by the influ- 
 " ence which Government might acquire over the 
 " Bank, it might be made an engine for subverting 
 " the liberties of the people. 
 
 " Many obstacles presented themselves against 
 " the scheme, to some of which the projectors 
 " were obliged to yield, and others they sur- 
 " mounted. 
 
 " That the public might not suffer by its being 
 " made a job, it was agreed, that the capital sub- 
 scribed of £1,200,000 should be paid into the 
 " Exchequer, and that the bank should be re- 
 " stricted from contracting debts to a larger 
 " amount than that sum. On this capital govern- 
 " ment agreed to allow an interest at the rate of 
 " eight per cent, per annum, with the sum of 
 " £4,000, in name of house-expenses, making 
 " together an annual sum of £100,000. 
 
 " The charter recites, that, for securing certain
 
 163 
 
 " advantages and recompenses mentioned in the 
 " act of 5th William and Mary, chap. 20, to such 
 " persons as should voluntarily advance a certain 
 " sum for carrying on the war against France, — 
 " the Royal power (William and Mary) would, as 
 " soon as the sum of £1,200,000 should be sub- 
 " scribed, as aforesaid, grant and make forth their 
 " Royal charter, under the great seal of England, 
 " and thereby incorporate all and every such sub- 
 " scribers to be one body corporate and politic, by 
 " the name of the Governor and Company of the 
 " Bank of England, with such powers, capacities, 
 " &c. and subject to such rules, restrictions, &c. as 
 " therein mentioned. 
 
 u And, in order that the bank should be as little 
 " connected with, and under the influence of, 
 " government as possible, it is enacted by the 5th 
 " of William and Mary, chap. 20, that they shall 
 " not purchase any land or revenue belonging to 
 " the crown, or advance or lend to their Majesties, 
 " their heirs or successors, any sum or sums of 
 " money, by way of loan or subscription, on any 
 " part of the revenue, other than any part on which 
 " a credit of loan is or shall be granted by Par- 
 " liament. 
 
 " And, in order that the company might not 
 " accumulate funds which might be employed to
 
 164 
 
 " bad purposes, the Act of the 7th year of Queen 
 " Anne, chap. 7, section 63, directs, that all the 
 " profits, benefits, and advantages, arising out of 
 " the management of the bank of England, shall 
 " (the charges of management only deducted) be 
 " divided from time to time among the pro- 
 " prietors for the time being, according to their 
 " respective shares of stock. And this was a wise 
 " provision ; for, if the sum of £50,000 (a sum 
 " comparatively small to the profits of the com- 
 " pany) had been set aside, each year, for the first 
 " fifty-three years, from the first establishment of 
 " the bank, and the sum of £100.000 a-year, for 
 " the next fifty years, to the present time, and had 
 " been allowed to accumulate at legal compound 
 " interest, they would have amounted at this time 
 " to a sum much beyond one hundred millions. 
 
 " The Legislature has prohibited the bank from 
 " making any accumulations in that way ; but, 
 " when an increase of capital at any time seemed 
 " necessary, it never prevented them from in- 
 " creasing their capital by subscription ; taking 
 " care, however, that such additional capital 
 " should be pledged in the hands of Goverrwient : 
 " and this capital has from time to time been 
 "increased, till it now, in 1798, amounts to 
 " £11,642,400 on which a dividend is now paid
 
 165 
 
 u half-yearly, to the proprietors, at the rate of 
 " seven per cent, per annum, which amounts to 
 " 814,968 per annum, and the Government's per- 
 " manent debt is now increased to £11,686,800, 
 " being £44,400 more than the capital on which 
 " the bank divides ; and the interest from Govern- 
 " ment, having been reduced from eight per cent. 
 " which it was originally, to three per cent, per 
 " annum, is now £350,604. 
 
 ■' The bank of England has, in former times, 
 " been in danger ; but the directors had always 
 " been successful in their precautions to avert it. 
 " In the rebellion, in the year 1745, the sudden 
 " irruption of a small corps of half-clothed, half- 
 " armed, and undisciplined highlanders, had struck 
 " a panic into the country. They had penetrated 
 " as far as Derby, within 126 miles of the capital. 
 " This produced a run upon the bank for specie ; 
 " and it was reduced to the expedient of making 
 " its payments in silver, chiefly in shillings and 
 " sixpences, with which the directors were pro- 
 " vided, in order to gain time, till they were pre- 
 " pared to set on foot an association, for the 
 " support of the bank, which was entered into, 
 "at a meeting held at Garraway's coffee-house, 
 " by the most eminent merchants, considerable 
 " traders, and proprietors of the public funds, on
 
 166 
 
 " Thursday, 26 September 1745, to the following 
 " tenor : c We, the undersigned, merchants, and 
 " others, being sensible how necessary the preserva- 
 " tion of public credit is at this time, do hereby 
 " declare, that we will not refuse to receive bank- 
 " notes in payment of any sum of money to be 
 " paid to us ; and we will use our utmost endea- 
 " vours to make all our payments in the same 
 rt manner.' 
 
 " By four o'clock in the afternoon, 1,140 had 
 " signed it. 
 
 " This measure gave immediate relief to the 
 " bank. At that time, the dividend was 51 per 
 " cent.; bank-stock sold at 141 per cent.; 3 per 
 " cents, at 85. 
 
 " A resolution of the same kind, and expressed 
 " exactly in the same words, was entered into, by 
 " the merchants and bankers of London, on 27 
 " February 1797 3 after the bank had suspended 
 " its payments in cash. It was signed by above 
 " 2000 respectable names. 
 
 " On the 27th day of February 1797, a new era 
 " commenced in the history of the bank of Eng- 
 " land, and an act of parliament was passed in 
 " that year, restricting the bank from making pay- 
 " ments in specie till one month after the signing 
 " of a definitive treaty of peace."
 
 CHAPTER II. 
 
 Of the bank of England as a national institution. 
 
 There is, perhaps, no subject on which so much 
 delusion has pervaded the public mind, as on the 
 fancied importance of the corporation of the Bank. 
 "As good as the Bank" has long been a proverbial 
 expression ; and yet the Bank stopped payment in 
 the year 1797, and did not resume its payments 
 for twenty-five years, viz., until the year 1822. 
 
 In that interval the bank, among other ma- 
 noeuvres for the undue increase of its profits, 
 resorted to the issue of notes for small sums — from 
 Jive shillings and sixpence, down to eighteen pence, 
 stamped, upon pieces of silver of inferior value, 
 but which, as far as the public was concerned, 
 might as well have been stamped upon copper, or 
 upon the still cheaper commodity, paper.* 
 
 * Those silver-notes, called by the bank " tokens," — im- 
 pressed by the corporation with the Royal image and super- 
 scription, were issued from the mint in Threadneedle-street, in 
 exchange for the promissory notes of the bank payable at the end 
 of the war. By the quantity of silver contained in those tokens, 
 a bank of England note for one pound was declared by the cor- 
 poration itself to be debased to fifteen shillings and ninepence. 
 See p. 39 et seq. — p. 45, — and note, p. 118, ante.
 
 168 
 
 The corporation of the bank, during that long 
 period, had recourse to various other gainful ex- 
 pedients, which the nation, in the intense and 
 breathless anxiety of the last war, heedlessly and 
 ignorantly disregarded. 
 
 The minister of the day would even sometimes 
 declare in his place in parliament, that the bank 
 had been the prop and support of the nation! 
 Now, what was that prop ? — a corporation of some 
 2500 or 3000 individuals, who, in the year 1797, 
 were collectively worth the sum of llJ, millions 
 (£11,686,800), and no more; for, had each indivi- 
 dual proprietor been worth that sum, the corpora- 
 tion collectively was worth no more — inasmuch as 
 no proprietor was liable for the dealings of the 
 bank beyond each his share of the joint-stock. 
 
 When the bank stopped payment in 1797, its 
 promissory notes out amounted to 8^ millions 
 (£8,640,250), and the cash and bullion in its coffers 
 to the sum of one million (£1,086,170), and no 
 more. 
 
 The order in council, prohibiting the bank from 
 making further payments in coin, was published 
 on the 27th of February 1797; and the reason 
 assigned in the order for that measure was, " the 
 apprehension of a want of a sufficient supply of 
 cash to answer the exigencies of the public service."
 
 169 
 
 But during the 25 years which elapsed between 
 the years 1797 and 1822, while the stoppage of 
 payment by the bank continued — the public ex- 
 pended, upon the average, very nearly seventy 
 millions a-year;* and in the years 1813 and 1814, 
 of the late war, more than one hundred and jive 
 millions in each of those single years;* amount- 
 ing, in the whole, to more than seventeen hundred 
 millions!* and all without the aid of that one 
 million of cash, which, during all that time, re- 
 mained locked up in the coffers of the bank, and 
 which, had it been resorted to, would not have 
 defrayed the public expenditure in the tivo last 
 mentioned years of the war for four days! ! ! The 
 whole capital of the bank would not indeed have 
 defrayed that expenditure in those two years of that 
 war for six weeks — and yet it was asserted, and 
 by ministers of finance, risum teneatis, that without 
 the aid of the corporation, the state (of which it 
 was the creature) could not have been supported ! ! 
 
 The reason assigned by the order in council, 
 was, then — either a mere pretext for stopping the 
 payments of the bank — or was founded upon the 
 grossest ignorance of the principles of the "bank- 
 
 * See Appendix No 13 to the report of the Select Committee 
 on the public Income and Expenditure, ordered by the House of 
 Commons to be printed 26th June 1828.
 
 170 
 
 ing system," and of the properties and powers of 
 the " circulating medium or currency." 
 
 The profits which the bank accumulated, in 
 consequence of stopping payment, are almost in- 
 credible ; for the public continued to deal with 
 the corporation, after it had stopped payment, 
 just as if its promissory notes, payable at the end 
 of the war, had been equivalent in value to the 
 quantity of coin, i. e. of gold, falsely, thereby 
 purported to be payable to bearer on demand: 
 and to deal with it, moreover, in a manner so 
 reckless and so improvident, as to rival, in ex- 
 travagance and waste, the transactions between the 
 spendthrift and the usurer. 
 
 If proof of the truth of so unqualified an asser- 
 tion be demanded, the following is selected from a 
 mass of other evidence which might be offered. 
 
 To control the practice, which had obtained in 
 some of the public offices, of applying, and some- 
 times fraudulently, the public money to the use or 
 profit of the accountants — an act of parliament 
 was passed, that they should all pay their balances 
 into the bank. 
 
 In consequence of that statute, and from other 
 sources, the bank had, on an average of ten years 
 ending in 1816, balances of public money always 
 in hand, exceeding, in the aggregate, upon the
 
 1/1 
 
 average, the sum of eleven millions* (£11,313,1 40) ; 
 but as the statute, which was made for control of 
 the public accountants (by withdrawing from them 
 the balances of public money, and ordering them 
 to be paid into the bank), omitted to provide that 
 the Treasury might avail itself of the aggregate 
 of those balances for the public service — that 
 statute had only the effect of transferring the 
 profits, theretofore made by the public accountants 
 — whether duly or unduly made by them — to the 
 corporation of the bank; because, when one de- 
 partment was out of cash, and another department 
 had a full account at the bank — official forms, not 
 guarded against by the statute, prevented any one 
 department from relieving the wants of any other. 
 In the year 1808 it was, indeed, proposed to 
 the bank by the then minister of the day, in con- 
 sideration of the advantages derived by the bank 
 from the deposit of those balances — that the cor- 
 poration should advance to the public three mil- 
 lions of promissory notes — not payable until the end 
 of the war, without interest, during the war — to be 
 repaid by the public to the bank twelve months 
 after the ratification of a definitive treaty of peace. 
 
 * See Appendix No. 24 to the report of the Committee of 
 Secrecy on the Bank of England Charter, ordered by the House 
 of Commons to be printed 11th August 1832.
 
 172 
 
 The answer given by the directors of the bank 
 to that proposal, is so illustrative of the truth of 
 the assertion which has just been made respecting 
 the character of the dealings between the public 
 and that corporation, that it is here given ver- 
 batim. It was in the following words : — " Re- 
 " solved, that the court of directors do accede to 
 " the proposal of the Chancellor of the Exchequer, 
 " to lend for the use of Government £3,000,000 on 
 " Exchequer-bills, without interest, during the 
 " war ; provided it is stipulated to be returned 
 " within six months after the ratification of a 
 " treaty of peace ; and under the complete under- 
 " standing that all transactions between the public 
 " and the bank shall be continued in the ac- 
 " customed manner, though the amount of the 
 "public balances should exceed ten millions! ! ! 
 
 That is to say — The bank would consent to lend 
 to the public three millions of its promissory-notes, 
 without charge for interest — provided the public 
 would engage to leave always in the hands of the 
 bank ten millions of such notes ivithout charge for 
 interest! !! 
 
 The corporation afterwards — in pursuance of 
 48 Geo. III. cap. 3, which became law on the 27th 
 of Feburary 1808 — did, in pursuance of that pro- 
 posal, resolution, and statute — advance and lend
 
 173 
 
 to the public three millions of its promissory-notes, 
 not payable until the end of the war, without 
 interest during the war. 
 
 But the directors of the bank, in order to make 
 that advance or loan, without diminishing the 
 number of the promissory-notes of the bank which 
 were then out for the profit of the corporation — 
 just added that number of notes, with about four 
 and a-half millions in addition, for its own further 
 profit, to the amount then out — for, 
 
 The promissory notes of the bank out in the 
 
 quarter ending on 30th September 1810, were £24,170,270 
 
 And in the quarter ending on 31st March 1808, 
 
 were 16,645,860 
 
 Increase in two years and a half . . . £7,524,410* 
 
 The average aggregate amount of public balances 
 by that advance of three millions of notes belonging 
 to the public, and deposited in the bank for 
 safe custody, was reduced from eleven to eight 
 millions. 
 
 But during all those years, while the public had 
 always more than eleven millions (reduced in the 
 
 * See Appendix No. 82 to the report of the Committee of 
 Secrecy on the Bank of England Charter, ordered by the House 
 of Commons to be printed 1 1th August 1832.
 
 174 
 
 year 1 808 to eight millions) lying idle in the bank — 
 advances of promissory notes were made by the 
 bank to the public {which had guaranteed all 
 those very notes) on the credit of the land and malt 
 taxes and other revenues — amounting, often, to 
 very large sums — for which advances the public 
 paid interest to the bank. 
 
 It was suggested to a certain minister of the 
 day — that an officer or clerk should be appointed, 
 whose duty it should be to take a daily account of 
 the aggregate of all the public balances in the 
 bank, — and that the public accountants of the 
 different departments should be permitted to draw 
 on the bank, notwithstanding their particular 
 accounts might not be in cash — as long as the 
 bank held monies of the public, upon the aggregate 
 of all its balances in the bank — with this proviso, 
 that when it became necessary for any accountant 
 to overdraw, his cheque should be countersigned 
 at the Treasury. And it was further suggested, 
 upon that occasion — that when the aggregate 
 amount of the public balances in the bank should 
 exceed the sum of £ , the surplus should 
 
 be invested in Exchequer-bills — which at the time 
 in question, carried interest at Jive, and sometimes 
 higher interest than Jive per cent, per annum.
 
 175 
 
 The suggestion was not adopted, although it 
 was and is clear to demonstration—however in- 
 credible it may seem at first sight — that the ap- 
 pointment of a single clerk, for the purpose above- 
 mentioned, would have saved the nation more than 
 £400,000 a-year, that is to say — interest on more 
 than eight millions, which, at five per cent, (the 
 then rate of interest in the market) amounts to 
 more than £400,000,— which was thus annually 
 lost to the public, and made by the corporation of 
 the bank after it had stopped payment, — upon its 
 promissory notes, payable at the end of the tlien 
 war, — deposited by the public in the coffers of the 
 bank for safe custody,— but re-issued by the cor- 
 poration, upon interest, for its own profit — the 
 greater part of those notes (which cost the bank 
 nothing but the expense of the paper and printing) 
 being in fact re-issued* upon interest to the Trea- 
 sury itself, which was the depositor of them ! ! ! 
 
 * The directors of the bank affect that they never ?'e-issne a 
 note of the corporation — which only means — that they do not 
 re-issue any such note on the same piece of paper. If there lay 
 in the coffers of the bank eight millions of notes deposited by the 
 public locked up for safe custody, — it surely makes no differ- 
 ence in substance, whether the directors of the bank took and 
 re-issued those identical notes, — or took and destroyed them, 
 and issued the same amount of notes on new pieces of paper in 
 their stead.
 
 176 
 
 The same system of leaving a mass of deposits 
 of public money in the bank, forming a large 
 aggregate sum, while interest is continually paid 
 to the bank for loans of money to the Treasury, it 
 is understood, still prevails.
 
 CHAPTER III. 
 
 On the Renewal of the Charter of the Bank in the 
 year 1800. 
 
 The charter of the bank was first granted in the 
 reign of William and Mary, in the year 1 694 ; 
 since which time it has been eight times extended 
 or renewed. The only consideration which the 
 corporation ever gave to the public in return for, 
 or as the price of, the monopoly and exclusive 
 privileges granted to it — which may but too truly 
 be said to have been, as they now are, most 
 enormous — was an undertaking to be, during the 
 continuance of those exclusive privileges, the 
 holders of a certain quantity or amount of the 
 public debt at a certain fixed rate of interest, 
 which debt so held by the bank should constitute 
 its capital. 
 
 At first that capital amounted to no more than 
 £1,200,000, which was gradually increased upon 
 successive renewals of the charter ; and in the year 
 1797, when the bank stopped payment, amounted 
 to the sum of £11,686,800, carrying interest at 
 
 A A
 
 178 
 
 three per cent., at which amount the capital was 
 fixed in 1781, when, by the 21st Geo. III. cap. 60, 
 the charter was renewed for 31 years, ending in 
 1812. 
 
 In 1816, by the 56th Geo. III. cap. 96, three 
 millions of profit which had been foraged from the 
 public by the bank during its stoppage of 'pay- 
 ment, were allowed to be added to the capital, 
 which was thereby increased to the sum of 
 £14,686,800, carrying interest at three per cent. 
 
 The public debt amounts to 800 millions, 500 
 millions of which consist of 3 per cent, stock. 
 What merit, it may be asked, had the little knot of 
 individuals, composing the corporation of the bank, 
 in agreeing to be always the holder of 1 1 J millions 
 of 3 per cent, stock, more than any and every other 
 knot of individuals, of greater or less number, 
 which happened to hold at any time 1 ] k millions 
 of the same stock, — that such enormous exclusive 
 privileges should have been granted to the corpo- 
 ration for such a consideration ? 
 
 It is true, indeed, that during the last long war, 
 the rate of interest in the market was very seldom 
 lower, but for the greater part of that time was 
 higher than the legal maximum rate of Jive per 
 cent. Taking the average rate of interest at five 
 per cent., the public, during the war, had an
 
 179 
 
 advantage of two per cent, per annum on the capital 
 of the bank, which, on £11,686,800, amounted to 
 £233,736 per annum. 
 
 But the monopoly and exclusive privileges 
 granted to the corporation were of a value so pre- 
 posterously disproportioned to that advantage 
 (which was, indeed, not foreseen when the charter 
 was renewed in 1781), that while the 488i millions 
 of 3 per cent, stock (taking the whole at 500 
 millions) belonging to other individuals fell in 
 value during the late war, so as to be worth in the 
 market only 47 per cent., and never rose during 
 that period on the average of any year to 72i per 
 cent., — the 1 1^ millions of such stock belonging to 
 the individuals composing the corporation of the 
 bank, never fell lower than 115^ per cent., and 
 rose (in the year 1809) to no less than 288 per 
 cent.* 
 
 The difference of the values of £100 of the 1 1^ 
 millions of the 3 per cent, stock belonging to the 
 corporation of the bank, — and of £100 of the 488£ 
 millions of 3 per cent, stock, belonging to other 
 individuals of the public, shews, to a certain extent, 
 the value of the monopoly and exclusive privileges 
 sold to the corporation by the state. 
 
 * See page 101 ante.
 
 180 
 
 But there is this essential difference between the 
 3 per cent, stock held by the corporation of the 
 bank, and the 3 per cent, stock held by other indi- 
 viduals, — viz. that the latter have no demand for their 
 principal monies lent — while the principal of the 
 3 per cent, stock due by the public to the corpora- 
 tion, is payable at a day certain ; whereby their 
 Hi millions (afterwards Hi millions) of stock, 
 were and are secured from depreciation below cent, 
 per cent, at that day — whatever may then be the 
 price or value of the 4 88 J> millions of stock due to 
 the individuals w 7 ho may happen to be the holders 
 of the latter sum or mass of the public debt. 
 
 If the rate of interest in the market had fallen 
 below three per cent. — the bank during the con- 
 tinuance of such rate of interest and of the charter, 
 would have been receiving the difference from the 
 public Jt /br having accepted the charter, instead of 
 paying any thing for it ; and, in point of fact, the 
 public paid for many years to the bank of Ireland, 
 on its capital of 2J> millions, interest on one million 
 at Jive per cent., and on a million and a half' at 
 four per cent. ; which the public could have raised 
 by creation of stock at three and a half, or on 
 exchequer bills at less than three per cent. ! ! 
 
 That was a practical illustration of the improvi- 
 dence of the bargain made with the bank of
 
 181 
 
 England ; for it is clear to demonstration — if the 
 rate of interest in the market had fallen under three 
 per cent. — that the corporation would have been 
 receiving a bonus for the acceptance of its charter, 
 (as the bank of Ireland, in point of fact, did); and 
 even if the rate of interest in the market had been 
 three per cent., it is equally clear, that while that 
 rate continued at three per cent., the bank would 
 not be paying nor the public receiving, any con- 
 sideration whatsoever for the monopoly and enor- 
 mous exclusive privileges affected to be sold to the 
 corporation. 
 
 It may, perhaps, be truly said, that on each suc- 
 cessive renewal of the charter of the bank, the 
 minister of the day made a worse bargain for the 
 public ; and the corporation a better bargain for 
 itself ; from the time of its first institution in the 
 year 1694. 
 
 But the bargain made with the corporation on 
 the renewal of its charter in the year 1800, was of 
 a character so incredibly singular, that it but too 
 well deserves to be particularly noticed. 
 
 The bank having stopped payment in the year 
 1/97, with 8i millions of promissory notes out, 
 and about a million of treasure in its coffers, — the 
 public, the holder of all the notes of the bank, not 
 only excused the corporation from the payment of
 
 182 
 
 all those notes then out, until the end of the then 
 war, but permitted the further issue of similar 
 notes during the war, by the same corporation, ad 
 libitum, for its own profit, after it had stopped 
 payment; making all such notes, moreover, lawful 
 tender, in payment of all debts due from indivi- 
 duals to one another — in payment of rents — and in 
 payment of all the public revenue; which last provi- 
 sion by law converted such notes into state-paper 
 money to all intents and purposes. 
 
 The issue was, consequently, increased from 8^ 
 millions of such notes out, at the time of the stop- 
 page of payment in 1797, to more than 29\ millions 
 out* in 1817 H the value of the notes, by such 
 over issue, being depreciated by more than 26i per 
 cent.: viz., in the year 1813, when the price of 
 standard gold, in exchange against the notes of the 
 bank, had risen to £5. 6s. \\d. per ounce, or 
 to £1. 8*. 3d. per ounce above the mint price. In 
 other words, when, for notes of the bank, promis- 
 sory to pay an ounce, a pound, or any other quan- 
 tity of standard gold at the end of the war, not 
 three-fourths (but only .736) of the promised 
 quantity of such gold, ready iveight, could be 
 purchased in the market ! ! 
 
 * See Appendix to report referred to in note, p. 31.
 
 183 
 
 The public even paid interest to the bank, 
 during the ivar, for the loan of vast sums of its 
 promissory-notes, after the same public had con- 
 verted all the notes of the bank into state-paper 
 money, and had excused the bank from the pay- 
 ment of them until the end of the ivar, and one 
 month thereafter. 
 
 The renewal of the charter of the bank was con- 
 firmed by law on the 28th March 1800, by the 39 
 and 40 Geo. III. cap. 28. The consideration giv en 
 and accepted for that renewal for 33 years, ending 
 in the year 1833, was an advance from the bank 
 to the public of three millions of its promissory- 
 notes, for six years, without interest. The amount 
 of bank notes out, 
 
 In the quarter ending with December 1802, was £17,379,760 
 In the quarter ending with December 1799, was 13,776,160 
 
 Increase . . £3,603,600 
 
 Whence it appears that in three years from the 
 end of the quarter preceding the completion of the 
 bargain — the bank increased the number of its 
 notes out, and not payable until the end of the war, 
 by more than 3? millions (£3,603,600), and, there- 
 fore, as the three millions of those promissory- 
 notes, which were advanced by the bank, as the 
 price of the renewal of the charter, were a mere
 
 184 
 
 addition to the notes of the bank, issued and out, 
 and not payable until the end of the war — it is 
 quite clear — that they cost the bank nothing but 
 the expense of the paper and printing! ! ! 
 
 What beggar, it may be asked, could not have 
 purchased such a charter, if the price to be paid 
 for it were nothing but a loan of three millions (or 
 any other sum) of his promissory-notes for six 
 years, he being excused by the borrower, and pro- 
 hibited by law, from paying them during the whole 
 of that time ? 
 
 But the most truly astonishing part of this 
 singular transaction between the minister of the 
 day and the bank remains to be told, and would 
 be incredible were it not a matter of incontro- 
 vertible evidence upon record. 
 
 The six years, — during which the advance of 
 those three millions of promissory-notes carried 
 no interest — having expired in the year 1806 — it 
 was proposed to the bank by the minister of the 
 day, that, instead of the notes being then repaid 
 or returned to the bank — the advance of them 
 should be continued by the bank to the public until 
 the end of the war ; the public — which had con- 
 verted all the notes of the bank into state-paper 
 money, and had excused and prohibited the bank
 
 185 
 
 from the payment of them, until the end of the 
 war — paying interest to the bank for the same, 
 during the war, at three per cent, or at the rate 
 of £90,000 per annum. 
 
 It is needless, of course, to say that the bank 
 agreed to the proposal (although the directors had 
 the modesty to qualify their consent to it with 
 conditions); — for it is manifest that the effect of 
 the arrangement was — that from the year 1806, 
 until the end of the late war, and thereafter, 
 until the resumption of its payments by the bank 
 in the year 1822, a period of sixteen years, — 
 the corporation received back annually, under 
 the name of interest, £90,000 a-year of those 
 three millions of notes — from the payment of 
 which they were excused by the public, — to be 
 cancelled. 
 
 And thus, instead of paying any thing for the 
 renewal of the charter in 1800 for 33 years — the 
 bank actually received, at the public expense, no 
 less than £90,000 a-year, from 1806 to 1822, for 
 having accepted it! 7 7 
 
 If any beggar could have purchased a charter 
 for the loan of three millions of his promissory 
 notes, which he was excused, and even prohibited 
 from paying, by the borrower, — how would that 
 beggar be enriched ; if for the continuance of such 
 
 B B
 
 186 
 
 a loan he were, for sixteen years, to receive back 
 annually, under the name of interest, £90,000 of 
 his notes to be cancelled — and payment in full of 
 the three millions, over and above, in coin or 
 money of the realm, at the end of that period ? 
 
 Yet such, and no other, was the bargain which 
 the corporation of the bank had the dexterity to 
 drive — the minister of the day the folly to consent 
 to — and Parliament the want of sagacity to con- 
 firm — on the renewal of the charter of the bank in 
 the year 1800.* 
 
 £90,000 a-year accumulated, at compound in- 
 terest of 5 per cent., — which rate of interest could 
 be obtained during all the period from 1806 to 
 1822, — amounts to more than two millions ; that is 
 
 * Nothing can be further from the intention of the writer 
 than to speak disrespectfully of Parliament, or of the Govern- 
 ment of the country. But when it is recollected that, in the 
 month of May 1811, the House of Commons passed a resolution 
 " that the promissory notes of the bank of England had there- 
 " tofore been, and were at that time, equivalent to the legal coin 
 " of the realm," — its notes being, at that very time, proclaimed 
 and fixed by the bank itself to be of the value of fifteen shillings 
 and ninepence in the pound— (see page 45 ante), — it is difficult in 
 a free — though, as it is hoped, and certainly as it is intended, a 
 candid and temperate inquiry into the subject, — to find terms, 
 in which to speak becomingly of proceedings, such as those re- 
 ferred to in this note and in the text.
 
 187 
 
 the sum, therefore, which the bank took by the 
 bargain of the year 1800 for the renewal of its 
 charter, in addition to all the other enormous 
 advantages and exclusive privileges thereby se- 
 cured to it.
 
 CHAPTER IV. 
 
 Of the last renewal of the charter of the bank in 
 the year 1833. 
 
 The only material further, or new advantages which 
 the directors of the bank contrived to extract from 
 the Government of the day and the legislature upon 
 the last renewal of the charter of the corporation, 
 which became law on 29th August 1833, by the 
 3rd and 4th Wm. IV, cap. 98 — were two, namely, 
 First, a provision by that statute for the repayment 
 by the public to the bank of the sum of £3,638,250, 
 as and for one fourth of the sum of £14,686,800, 
 stated to be the capital of the bank — and, 
 
 Secondly, a provision by the same statute, 
 that, after 1st August 1834, " a tender of the 
 " notes of the bank of England, payable to 
 " bearer on demand, shall be taken to be valid as 
 " a tender for all sums above five pounds, on all 
 " occasions in which any tender of money may 
 " be legally made, so long as the bank of England 
 " shall continue to pay on demand their said notes 
 " in legal coin." — Such last mentioned provision 
 extending, as it does, to make the notes of the
 
 189 
 
 bank of England legal tender in payment of all 
 the public revenue, had the manifest and palpable 
 effect of converting such notes into state-paper 
 money, to all intents and purposes. 
 
 Such last mentioned provision would seem to 
 have been a reasonable ground for demanding from 
 the bank the deposit of an increased capital — of a 
 capital at least not less than the amount of notes 
 guaranteed by the public to be at any time issued 
 by the bank — the deposited capital of the bank 
 being much less than its notes out at the time of 
 the passing of the act. 
 
 The provision for the reduction of the capital of 
 the bank in the same breath by which the public 
 guaranteed all the paper-money of the corporation 
 — with power to the directors of the bank to issue 
 it ad libitum for the profit of themselves and their 
 partners — (by which a partnership in responsibility, 
 without participation of profits was established 
 between the public and the bank in respect of all 
 paper-money issued and to be issued by the bank) — 
 seems, on the contrary, to be at least a very absurd, 
 not to say foolish, provision. 
 
 It may be at least doubted — on consideration of 
 the 10th sect, of the act — whether the quarter of 
 the capital (stated to be the sum of £3,638,250) 
 were to be repaid to the bank — if the proprietors 
 did not, — at a general court to be held at some time
 
 190 
 
 between the passing of the act and the 5th day of 
 October 1834, — determine to divide mid appro- 
 priate the said sum of £3,638,250 among the 
 parties or persons who should be proprietors of 
 the capital stock of the hank on 5th October 1834. 
 
 It does not appear whether, in point of fact, any 
 general court — for the purpose of determining 
 whether such division and appropriation should be 
 made — was held or not. 
 
 But it does appear by the 4 and 5 Wm. IV, cap. 
 80, which became law on 14th August 1834 — that 
 the bank agreed to accept, and the government to 
 give, £4,080,000, 3 per cents, reduced — in lieu or 
 by way of payment of the sum of £3,671,700, 
 stated to be the quarter of the capital due from 
 the public to the bank — and the said sum of 
 £4,080,000 3 per cents, reduced, was accordingly 
 written into the books of the bank, to the credit of 
 the governor and company of the corporation. 
 
 By the said last-mentioned act it is provided 
 that interest on the sum of £3,671,700 should be 
 paid by the Treasury to the bank up to the day 
 upon which the said sum of £4,080,000 3 per cents, 
 red. should be written into the books of the said go- 
 vernor and company, — and that the first half-yearly 
 dividend on the said sum of £4,080,000 3 per cents, 
 red. should be made to the bank on the 10th Oc- 
 tober 1834.
 
 191 
 
 It does not appear on what day the said sum of 
 £4,080,000 3 per cents, red. was written into the 
 said books — but that must have been on some 
 day subsequent to the 14th August 1834, until 
 which day the act did not become law. If the 
 writing into the said books were deferred till 
 10th October 1834, — it is manifest, that in that 
 case, the bank got two interests, or double interest 
 on that quarter of its capital for that half-year — 
 viz. a half-year's interest at 3 per cent, per annum 
 on £3,6/1,700 from the Treasury — and a half- 
 year's dividend on £4,080,000 3 per cents, red. from 
 themselves as managers of the public debt — with 
 £612 more (the half of £300 million per ann.) for 
 the trouble of paying themselves that half-year's 
 interest. 
 
 This repaid quarter of their capital stock having 
 never been divided among themselves by the pro- 
 prietors of the bank — it may therefore reasonably 
 be asked (whether the repayment were in strict 
 conformity with law or not) — why a debt from the 
 public to the bank of £3,671,700, carrying interest 
 at three per cent, was converted into a debt of 
 £4,080,000, carrying interest at three per cent.? 
 
 The consequences of that transaction have been 
 and are — that the public loses and the bank gains 
 (3 per cents, red. being at 100) — a capital sum of 
 £408,300 (£4,080,000— £3,671,700) with interest
 
 192 
 
 thereon at 3 per cent., amounting to £12,249 per 
 ami. — to which is to be added the sum of £1,224 
 per ann. allowed to the bank (at £300 per million) 
 for management of the said sum of £4,080,000 3 per 
 cents, red. — (that is to say — for retaining to them- 
 selves out of the 'public money in their hands the 
 dividends on that sum of stock) — making with the 
 said sum of £12,249, the sum of £13,473 per ann. 
 
 For this loss of £408,300 of capital, attended 
 with an annual charge of £13,473 per ann. thereon 
 for interest and management, until paid in money — 
 no reason upon earth is discernible — that is to say 
 discernible by any common understanding — what- 
 ever reason may have existed in the minds of the 
 transcendental speculatists, who arranged the 
 transaction with the practical directors of the 
 bank. 
 
 The effect of the manoeuvre has been to secure 
 to the bank not only a clear gain of the said capital 
 sum of £408,300, at the loss of the public, — but 
 also interest at rather more than £3. 6s. 8d. per 
 cent, per ann. on one-fourth of its undivided ca- 
 pital — in lieu of the interest at three per cent., 
 which was formerly paid thereon by the public — 
 the said sum of £13,473 per ann. now paid to the 
 bank for interest on the £3,671,700,— the quarter 
 of the capital paid off as aforesaid — being rather 
 more than £3. 6s. 8d. per cent, per annum.
 
 193 
 
 To keep out of sight, as far as practicable, the 
 result of this manoeuvre — in which the directors of 
 the bank outwitted the government — the dividends 
 to the proprietors of the bank have all along been, 
 and are now continued to be, declared and made — 
 on an undivided capital of £14,553,000, just as if 
 the quarter- of that capital had not been repaid — 
 instead of being made on the deposited capital 
 which is £11,015,100— by which means the extra- 
 interest of £3. 6s. 8d. — obtained from the public 
 by the manoeuvre aforesaid on a quarter of the 
 undivided capital — merges in the general profits of 
 the bank. 
 
 That the bargain which the directors of the 
 bank made with the government of the day in 
 1833, for the purchase of their monopoly and exclu- 
 sive privileges, was very gainful to the bank, and to 
 the disadvantage of its sleeping partner, the 
 public, — is very plainly to be seen — because the 
 
 Rest, or surplus profits of the bank, ultra the dividends of 
 profits which they have made half-yearly among themselves, 
 appears, by the return to parliament of 24th February 184-1, 
 to have been £3,240,000 
 
 While on the 3rd September 1833 (the date of the 
 first return after the passing of the act for the 
 renewal of the charter), the Rest was . . 2, 1 48,000 
 
 The difference . . £1,092,000 
 
 being gain ultra the said half-yearly dividends of 
 
 c c
 
 194 
 
 profits in less than 10^ years — to which sum of 
 £ 1 ,092,000— the gain of £408,300 (by themanceuvre, 
 about the fourth of the capital), being added — the 
 gains of the proprietors of the bank, ultra the divi- 
 dends of profit made half-yearly among them- 
 selves, in less than 10| years, appear to be a 
 million and a half (£ 1 ,500,300) — which would have 
 enabled them to increase their dividends by one per 
 cent, per annum during those 10^ years more than 
 they have thought fit to divide among themselves. 
 As upon the security of a deposited capital of 
 11 millions (£11,015,100), the bank have had 
 out since 1831 state-paper money which has in 
 that interval exceeded 22 millions, with power 
 always in the directors of the bank to extend that 
 issue ad libitum, for the profit of themselves and 
 their partners in the corporation — it maybe asked, 
 whether it would be very unreasonable on the part 
 of the public — the sleeping partner of the bank, 
 whose security or guarantee was given to the 
 holders of all the paper-money of the bank, by the 
 issue whereof, that mass of accumulated undivided 
 profit was made — to lay claim, in justice and equity, to 
 a share of, if not to the whole of those accumidated 
 undivided profits made in the last 10^ years — con- 
 sidering the large half-yearly dividends of profits — 
 made by the issue of the same paper-money — 
 which the proprietors of the bank have pocketed ?
 
 CHAPTER V. 
 
 Of the capital of the bank. 
 
 The present deposited capital of the bank is eleven 
 millions (£11,015,100) which is, as has been 
 observed, about half the amount of its paper - 
 money out — the whole of which paper-money (by 
 being made lawful tender in payment of all the 
 public revenue of 52 millions a-year) is converted 
 into a state-paper -money — with power to the 
 directors of the bank to issue it, ad libitum, for 
 the profit of themselves and their partners in the 
 corporation. 
 
 If the deposited capital be intended as a security 
 to the public — it seems somewhat fanciful to take 
 it, for only ten shillings in the pound on that por- 
 tion of the debts of the bank which consists of its 
 paper-money guaranteed by the public. 
 
 The debts of the bank on the 24th February 
 last (1844), were 34 millions (£34,109,000), in 
 two grand divisions — viz. 25| millions of notes 
 and deposits due to the public — and 8j millions of 
 deposits due to private individuals or parties.
 
 196 
 
 The deposited capital is not by law appropriated 
 as security for either of those two grand divisions 
 of the debts of the bank, specially — but in the 
 event of the failure of the bank (against the risk of 
 which the security is of course taken), inasmuch 
 as the public holds the security — it would probably 
 go all to the relief of the public — leaving the pri- 
 vate individuals, or parties who might be creditors 
 of the bank, without any benefit whatever from it. 
 
 In the early statutes, (stated in the preceding 
 first chapter) confirming the charter, the bank was 
 prohibited from contracting debts beyond the 
 amount of its deposited capital — which, under 
 that limitation, was a security to all the creditors 
 of the corporation. 
 
 It is at least a singularity — that it should be 
 thought an essential requisite in the constitution 
 of what has been called the National-bank — that 
 it should have no disposable capital. The whole 
 capital of the bank of England being deposited 
 with the public at interest of 3 per cent, per 
 ann., and the members of the corporation being 
 excused from any liability beyond each his share 
 of the joint-stock — and having made no con- 
 tribution of any other capital than the deposited 
 capital— it is manifest that the National-bank has 
 literally nothing to lend or advance to any body —
 
 197 
 
 except the half yearly interest of the deposited 
 capital, and that they have always divided among 
 themselves. 
 
 The private and joint-stock banks have, col- 
 lectively, an immense actual paid up capital to 
 lend to their customers, and to aid in meeting the 
 payment of the paper-money issued by them — 
 ■ultra the securities taken for that paper-money 
 upon the issue of it ; and the partners are liable for 
 all the dealings of the several banks of which they 
 are partners, with the whole of their fortunes. — 
 The actual paid up capital and the whole fortunes 
 of the partners of such banks are, therefore, secu- 
 rity to their customers — and for their paper- 
 money. 
 
 But the bank of England has literally no dis- 
 posable capital to lend to its customers ; or to aid 
 in meeting the payment of the paper-money issued 
 by the directors ; beyond the bare securities taken 
 for that paper-money upon the issue of it. In the 
 event of any such securities proving bad, the bank 
 becomes, therefore, immediately insolvent to the 
 amount of such bad securities — leaving out of con- 
 sideration its inaccessible deposited capital — to 
 which resort cannot be had,— to fill up the gap in 
 its assets, caused by any securities taken by the 
 directors having become bad.
 
 198 
 
 If it be politic and expedient, on the sale of its 
 monopoly and exclusive privileges to the bank of 
 England, to take effectual security by a deposit of 
 capital, against the abuse of such monopoly and 
 exclusive privileges — it would seem proper, that the 
 provision of the early statutes (which, by the way, 
 are understood to be unrepealed), viz., that the 
 bank should not contract debts beyond the amount 
 of its deposited capital — should be enforced — or 
 otherwise, that the proprietors should by law be 
 required to have — ultra their deposited capital — a 
 certain amount of paid-up capital, wherewith to 
 carry on their trade of bankers ; and that they 
 should not be left to carry on such trade merely 
 by means of 'issues of paper-money, for which there is 
 no security beyond what is taken in exchange for 
 it when issued — the goodness of which depends 
 entirely upon the judgment, prudence, and discre- 
 tion of the directors of the bank. 
 
 The bank now, indeed, possesses two disposable 
 funds, in aid of its deposited capital. But those 
 two funds form little, or no security to the public ; 
 because they are divisible among the proprietors of 
 the bank at their pleasure ; and are in no manner 
 of the nature of paid-up capital, conditioned to be 
 Itept and continued paid-up as trading capital of 
 the bank. On the contrary, it is believed that one of
 
 199 
 
 those funds was illegally accumulated, and now re- 
 mains illegally undivided among the proprietors of 
 the bank — and that it is doubtful whether the other 
 of those funds is not also illegally undivided. 
 
 The first of those two sums being, what is called 
 the Rest, amounted on the 24th February last 
 (1844), to more than 3 millions (£3,240,000), and is 
 composed of an accumulation of profits, ultra the 
 half-yearly dividends of profits, which the pro- 
 prietors of the bank have thought to make among 
 themselves. 
 
 As it is peremptorily enjoined by the early 
 statutes constituting the bank (which are under- 
 stood to be unrepealed) that the whole of the 
 profits be divided every year among the proprietors 
 of the corporation for the time being (see page 164 
 ante), it is manifest that that accumulation was 
 and is illegal. 
 
 Accounts shewing the state of affairs of the 
 bank — were never, as enjoined by the same sta- 
 tutes, laid before the proprietors, or made public — 
 till the year 1797 — when, in consequence of its 
 stoppage of payment, the state of the affairs of the 
 corporation (which by the directors and the propri- 
 etors had always theretofore been studiously kept 
 secret and concealed) was exposed, by the mandate 
 of Parliament — and on that occasion the Rest or
 
 200 
 
 mass of illegally accumulated profits came to 
 light — and in February 1797 amounted to nearly 
 4 millions (£3,826,896) — the non-division of which 
 during the period of the accumulation of it, from 
 year to year, prior to 1797, among the proprietors of 
 the bankybr the time being, (if they were ignorant 
 of the existence of such accumulated profits) was a 
 manifest fraud upon them, for the benefit of future 
 proprietors their successors. 
 
 As the accounts of the bank have from time to 
 time since 1797, been regularly published, pursuant 
 to statutes in that behalf, — the non-division of 
 that accumulation of profits — though illegally un- 
 divided — cannot be said to be a fraud upon the 
 proprietors, because they know of and acquiesce in 
 that non-division, — and sell and buy their shares in 
 the joint-stock with full knowledge of the Rest as 
 part of the assets of the bank. 
 
 The other of those two funds consists of the 
 4 millions (£4,080,000) of 3 per cent, reduced 
 stock, which was written into the name of the 
 governor and company of the bank— in lieu of 
 repayment of the sum of £3,671,700, (the fourth 
 part of the deposited capital of the corporation) 
 upon the last renewal of the charter — by which 
 repayment the deposited capital of the bank 
 became reduced to its present amount of 1 1 millions
 
 201 
 
 (£1 1,015,100). On this other of those two funds, 
 it is needless to add to what was said in the last 
 preceding chapter on the last renewed of the charter 
 of the bank. 
 
 Upon this statement of facts — touching the de- 
 posited capital of the bank, considered as a secu- 
 rity to the public — the working of the trade of the 
 bank without any disposable capital — the undi- 
 vided 3 millions of accumulated profits, called the 
 Rest, — and the undivided 4 millions of 3 per cent, 
 red. stock given to the bank in 1834, in lieu of re- 
 payment of the fourth part of the then deposited 
 capital — and touching the comparative security to 
 the public — of paper-money issued by private and 
 joint-stock banks — and paper money issued by the 
 bank of England (leaving out of consideration the 
 fact of the latter being for the present a state 
 paper money) reflections will occur to every reader, 
 so numerous and so obvious, that it would be idle 
 here to offer any upon those subjects. 
 
 D D
 
 CHAPTER VI. 
 
 Of the issue of paper-money by the hank of 
 England. 
 
 The theorists, who advocate the establishment of 
 a single bank of issue of paper-money for the 
 whole realm, allege — that private and joint-stock 
 banks force out paper-money in excess, and with 
 great insecurity to the public — but no proof is, 
 because no proof can be, given of such issues in 
 excess. 
 
 Paper-money payable to bearer in coin on de- 
 mand — although it cannot be issued and kept out in 
 excess, may be issued with indiscretion — namely, 
 upon doubtful or bad securities— or upon securities, 
 which, (though they may ultimately be good) are 
 payable at some indefinite remote period, and not 
 convertible into money in the market to meet a 
 run (arising from panic or other cause) upon a 
 bank, for coin for its paper-money payable to 
 bearer on demand. 
 
 Private and joint -stock banks — with paid-up dis- 
 posable capital, in aid of the securities taken for
 
 203 
 
 their paper-money when issued — and the whole 
 fortune of every partner in the bank being liable 
 for the payment of it — must be better able to meet 
 a run — than the bank of England, which has no 
 paid-up disposable capital to resort to, in aid of 
 the securities taken for the paper-money of the cor- 
 poration when issued — to meet a run upon it; 
 and the partners in the bank not being liable for 
 the payment of its paper-money beyond each his 
 share of the joint-stock. 
 
 The stoppage of payment of the bank, in the 
 year 1/97, was caused solely and entirely by indis- 
 creet issues of its paper-money by the directors of 
 the corporation. 
 
 By the state of affairs of the bank, laid before 
 Parliament at that time, it appeared — that the 
 notes of the bank then out amounted to 8\ millions 
 (£8,640,250) — and that the whole of such notes 
 had been issued to the government — on security of 
 the land and malt taxes ; exchequer-bills and trea- 
 sury-bills — which the government being unable 
 instanter to repay, — the bank, when the run was 
 then made upon it, necessarily stopped payment. 
 
 The debt then due from the government to the 
 bank, upon indiscreet issues or loans of the 
 paper-money of the corporation, was lOi millions 
 (£10,672,490) — exceeding by two millions the whole
 
 204 
 
 amount of its notes out — the advance of two millions, 
 ultra the whole amount of its notes out, having been 
 made out of the illegally accumulated profits called 
 the Rest — which then amounted to nearly 4 millions 
 (£3,826,890*). 
 
 The following table shows — the amount of the 
 issues of its notes by the bank — the amount of the 
 same notes deposited by the public with the bank 
 for safe custody — the amount of the public secu- 
 rities held by the bank — and the amount of the 
 commercial-paper discounted by the bank— during 
 the stoppage of payment of the corporation for the 
 quarter of a century from 1797 to 1822.f 
 
 * In the minutes of evidence annexed to the report of the 
 select committee of the House of Commons on the expediency 
 of the Bank resuming cash payments, ordered to be printed 
 5th April and 6th May, 1819, may be seen at page 262, the 
 copy of a resolution of a court of directors of the Bank, held 
 25th March 1819, which begins with the words following: 
 " Resolved, That the restriction on cash payments was altogether 
 " a measure of State necessity.'''' Query : Are the directors 
 of the bank the creatures of the State, i. e. of the Government 
 of the day, — to do its bidding at the peril of the bank, and of 
 the public? Can the Government of the day command the 
 directors of the bank as to the issues of the paper-money of the 
 corporation ? Should the Government of the day be head part- 
 ners of the firm ? or have any voice as to such issues P But see 
 note p. 110. 
 
 f The figures in the table are taken — as to the bank 
 notes out — from the Appendix No. 82 to the report of the
 
 £. 
 
 £. 
 
 £. 
 
 
 10,238,000 
 
 5,350,000 
 
 
 11,783,000 
 
 5,432,000 
 
 
 13,061,000 
 
 8,725,000 
 
 
 14,494,000 
 
 11,243,000 
 
 11,834,215 
 
 14,333,000 
 
 13,970,000 
 
 10,844,000 
 
 18,983,000 
 
 16,239,000 
 
 11,430,000 
 
 26,825,000 
 
 13,521,000 
 
 10,808,000 
 
 22,762,000 
 
 11,416,400 
 
 7,883,000 
 
 26,702,000 
 
 4,143,000 
 
 4,538,000 
 
 23,887,000 
 
 6,515,000 
 
 3,713,000 
 
 20,445,000 
 
 3,883,000 
 
 3,920,000 
 
 15,882,000 
 
 2,676,700 
 
 4,108,000 
 
 13,073,000 
 
 3,366,700 
 
 205 
 
 Public Public secu- Commercial pa- 
 
 deposits held ri ties held by per discounted 
 Bank notes out. by the bauk. the bank. by the bank. 
 
 War. £. 
 
 In the year . . 1797 10,990,000 
 
 In 3 years ending with 1800 13,731,000 
 In 3 years ending with 1803 16,325,000 
 In 3 years ending with 1806 17,029,000 
 In 3 years ending with 1809 17,576,000 
 In 3 years ending with 1812 23,027,000 
 In 3 years ending with 1815 25,940,000 
 
 Peace. 
 
 In the year . 1816 26,575,000 
 
 In 2 years ending with 1818 27,738,000 
 
 In the year . 1819 25,145,000 
 
 In the year . 1820 23,910,000 
 
 In the year . 182121,576,000 
 
 In the year . 1822 17,863,000 
 
 The 1st column of the foregoing table shows 
 at a glance — the extension of the issues of 
 the paper-money of the bank during the time 
 while the directors had power to issue it, ad 
 libitum— for the profit of themselves and their 
 partners in the corporation^ exempt from the 
 liability of paying any of such paper-money — viz. 
 from 1/97 to 1819 — and the contraction of the 
 
 Committee of Secrecy of the House of Commons, ordered to be 
 printed 11th August 1832 — as to the public deposits held by the 
 bank — from the Appendix No. 24 to the same report — in a note, 
 at the foot of which appendix, it is stated, " that the bank is 
 " unable to furnish correctly the aggregate amount of public de- 
 " posits previous to the year 1807" — as to the public securities 
 held by the bank — from the Appendix No. 5 to the same report — 
 and as to the commercial paper under discount by the bank — from 
 the Appendix No. 59 to the same report.
 
 206 
 
 issues of that paper-money after the year 1819, 
 when the law for the resumption of cash pay- 
 ments was passed^ down to the year 1822, when 
 cash payments were actually resumed. 
 
 The 2nd column shows the average aggregate 
 amount of the deposits of the notes of the bank 
 made by the public for safe custody in the coffers 
 of the bank — but which were all re-issued by the 
 directors of the bank for the profit of themselves 
 and their partners in the corporation — which 
 re-issue becomes manifest on comparison of the 
 sums (added horizontally) of the items of the 3d 
 and 4th columns (which disclose the amount 
 of its notes issued by the hank) with the corres- 
 ponding items of the 1st column — which shows 
 the amount of the notes stated to be actually out ; 
 wherefrom it appears clear to demonstration — that 
 the issue of notes of the bank, for the sums or 
 amounts in the 3d and 4th columns (added hori- 
 zontally), could not, by possibility, have been made 
 with the amount of the notes stated in the 1st 
 column to be out, nor without the aid and addition 
 (i. e. the re-issue) of the sums of notes mentioned 
 in the 2nd column — being the notes deposited in 
 the bank for safe custody by the public* 
 
 The sums of the items of the 2nd and 3d 
 
 * See note, page 175.
 
 207 
 
 columns (added horizontally) show the amount of 
 public securities and public deposits, of which the 
 bank was making interest by the issue of its notes — 
 deducting the three millions (see page 172 ante), 
 which the bank advanced to the public in the 
 year 1808 (out of the notes belonging to the public 
 itself, deposited for safe custody in the bank) 
 without charge by the bank to the public for 
 interest ! 
 
 The 3rd column shows the amount of the secu- 
 rities of the public held by the bank, consisting 
 almost entirely of Exchequer-bills — of which the di- 
 rectors possessed themselves — during the stoppage 
 of payment of the bank, — by the very simple process 
 of issuing paper-money of the bank, not payable 
 until the end of the war, and purchasing therewith 
 Exchequer-bills, ad libitum. — By which simple 
 legerdemain the directors of the bank converted, 
 ad libitum, the paper-money of the corporation 
 guaranteed by the public, but carrying no in- 
 terest to the public, and which the bank ivas 
 by the public excused from paying until the end 
 of the ivar — into paper-money (i. e. Exchequer- 
 bills) of the public, carrying interest to the 
 bank during the war! 
 
 The great and long-continued depreciation, 
 during the war, of the paper-money of the bank
 
 208 
 
 not payable until the end of the war, arose entirely 
 from the excessive issues of that paper-money, in 
 consequence of the unrestrained rapacity of the 
 directors, in foraging for themselves and their 
 partners in the corporation, by the practice of that 
 legerdemain, the enormous and before-unheard-of 
 profits which will appear in the next chapter. 
 
 The 4th column shows the amount of commer- 
 cial paper discounted by the bank — and a com- 
 parison of the items of that column with the sum 
 of the items of the 2nd and 3rd columns, (added 
 horizontally) shows — how small the issues of the 
 paper-money of the bank devoted to commerce — 
 and how large the issues of that paper-money 
 denoted to the purchase of public securities, — were 
 during the stoppage of payment of the bank. 
 
 On casting the eye over the figures in the 4th 
 column, perpendicularly downwards and upwards 
 — from the year 1816— when, by the establish- 
 ment of peace, the directors of the bank began 
 to foresee, that cash payments must be resumed — 
 and that the issues in excess of their notes must 
 needs be withdrawn, in order to retrieve them 
 from depreciation— it is very striking to observe 
 the sudden contraction of the issues of the paper- 
 money of the bank devoted to commerce — from the 
 amount at which it had ranged for the 13 years
 
 209 
 
 ending with the year 1816 (which was from 1 1 to 16 
 millions), down at once to 4 millions on the average 
 of the years 1817 and 1818 — while the public 
 sectirities held by the bank in the two last-men- 
 tioned years, instead of being contracted, were 
 kept (being then nearly 27 millions) within a trifle 
 of the highest amount of such securities, ever 
 held by the bank — which shows how unscru- 
 pulously the directors sacrificed the commercial 
 interest for the convenience of the corporation, 
 — and shows, moreover, very forcibly, that the 
 monopoly and exclusive privileges sold to the bank- 
 are worked, — not with a view to the benefit of the 
 commercial world — but merely for the profit of the 
 corporation, with some imagined convenience to 
 the first Lord of the Treasury, and Chancellor of 
 the Exchequer for the time being, — who, if they are 
 to be made leading partners in the firm, will always 
 be ready armed with an order in council for the 
 bank to stop payment — ostensibly — because of 
 some alleged or pretended deficiency of cash for 
 the exigencies of the public service (see page 168 
 ante), — but really to cover their own indiscretion 
 in the issues of the paper-money of the corporation. 
 
 By the return from the bank to the House of 
 Commons, No. 95 of the present session, it ap- 
 
 E E
 
 210 
 
 pears — that on the 29th February last (1844) the 
 notes of the corporation out, were 21 millions 
 (£21,307,000), and that to meet the payment of 
 them — the bank then held public securities, stated 
 to be of the value of 15 millions (£15,307,000), — 
 discounted bills to the amount of 2 millions 
 (£2,194,000), — and other private securities, stated 
 to be of the value of 4 millions (£3,741,000), — but 
 no account is given of the particulars which com- 
 pose the 1 5 millions, or the 4 millions of securi- 
 ties — and, therefore, no judgment can be formed 
 by parliament or by the public, either of the fair- 
 ness of the estimate of the value of those securities ; 
 or of the discretion of the directors, in issuing for 
 the purchase of them, notes of the bank payable 
 to bearer in coin on demand. 
 
 But it is known, that a very large part of the 
 15 millions — the alleged value of the public secu- 
 rities — is made up of the estimated value in pre- 
 sent money of an annuity of £585,740 for the 
 remainder of a term of 45 years, of which 23, from 
 5th April 1844, are unexpired. 
 
 That annuity was part of a delusive speculation 
 or scheme on a much larger scale, devised by the 
 minister of the day in the year 1822, called the dead- 
 weight annuity (which as nobody but the directors 
 of the bank would enter into it, was, as to all the
 
 211 
 
 rest of it, abandoned as impracticable), and was pur- 
 chased from the public in the year 1823 for a term 
 of 44 years, then unexpired, by the directors of 
 the bank — who paid into the Exchequer for the 
 purchase (pursuant to 4 Geo. IV, cap. 22) notes of 
 the corporation, payable to bearer in coin on de- 
 mand, amounting in the whole to 13 millions 
 (£13,089,419). 
 
 The 1 3 millions of notes for that purchase were 
 paid by instalments, in five years, ending in the 
 year 1828 — and the account between the Ex- 
 chequer and the bank, up to the time of payment 
 of the last of those instalments, is intricate and very 
 obscure. 
 
 But in the fourth year after the payment of the 
 last instalment, it appears by a return of the 
 bank* — that the advance of the corporation in 
 respect of the purchase of that annuity stood in 
 February 1832, at eleven millions (£10,897,880). 
 
 Every shilling of the capital of the bank being 
 deposited and locked up at interest at three per 
 cent, for the purchase of the charter — the issue by 
 the directors — not possessed of one shilling of dis- 
 posable capital — of 1 1 millions of paper-money 
 
 * Appendix No. 13, annexed to the report of the committee 
 on the bank of England Charter, ordered by the House of 
 Commons to be printed 11th August 1832.
 
 212 
 
 payable to bearer in coin on demand — for mi annuity 
 
 of £585,740 for a term of 44 years — would seem 
 to be an act of insanity — being a means — as certain 
 as could well be devised — of insuring the stoppage 
 of payment of the bank, if a run should be made 
 upon it for payment of the 1 1 millions of paper- 
 money payable to bearer in coin on demand, 
 issued for such a purchase — there being literally 
 nothing to meet such a run, except the payments of 
 the annuity from half year to half year — and, accord- 
 ingly, in about three years after the purchase of 
 that annuity, viz. in December 1825, a stoppage 
 of payment of the bank was actually contemplated 
 and suggested by the directors, (see note page 1 10 
 ante) . 
 
 The Government of the day, in 1823, encouraged, 
 if it did not solicit, the directors of the bank to go 
 as a decoy — into the scheme of the dead-weight — 
 and to risk the issue of 13 millions of the "paper- 
 money of the corporation, payable to bearer in 
 coin on demand, for an annuity of £585,740 for 
 44 years ! 
 
 Reasoning from the past to the future — if suc- 
 cessive Governments of the day are to be joined 
 with the directors of the bank as leading partners 
 in the firm— such a conjunction (which is said to 
 be contemplated) is very ominous of stoppages of 
 payment of the concern — as orders in council upon
 
 213 
 
 the pretence of u the apprehension of a want of a 
 " sufficient supply of cash to answer the exigencies 
 "of the public service" — as in the year 1/97 — or 
 on some other pretence — will then be obtainable 
 at a moment's notice, at the will and pleasure of 
 the head of the firm. 
 
 The directors of the bank, on the 17th July, 
 1 839, took biddings for a proposed sale by them of 
 parts or portions of the dead iveight annuity, but 
 effected no sale of any part thereof ; and, in their 
 distress, afterwards pawned it in foreign countries 
 for loans of money to enable them to meet 
 the payment of the paper-money of the corpo- 
 ration, payable to bearer in coin on demand, 
 which was insanely issued for the purchase of that 
 annuity.* 
 
 * la the minutes of evidence annexed to the report of the 
 select committee on Banks of Issue, ordered by the House of 
 Commons to be printed 7th August 1840, in the examination of 
 Mr. G-. W. Norman, a director of the bank, the following 
 occurs, viz. 
 
 " Question 1 897. Will you state generally the further measures 
 " adopted by the bank in the course of the summer? (of 1839) 
 
 " Answer. The bank subsequently raised the rate of discount 
 " to o|, and on the 1st August to 6 per cent. — and having sold 
 " those securities, which the market would readily take, they 
 " attempted to make a sale of portion of the dead-weight — but 
 " for that dead-weight the offers did not reach the price which 
 " the bank thought it fairly worth; and they then fledged a 
 " portion, and obtained credit, in foreign countries upon it, which
 
 214 
 
 The purchase, even if it could have been made 
 with evitable risk of stoppage of payment, would 
 have been a most indiscreet purchase to be made 
 by any hank, even a bank with paid-up disposable 
 capital, — and was a foolish purchase by the direct- 
 ors of the bank, without one shilling of disposable 
 capital to fall bach upon in the event of a loss by 
 the specidation, — regarded merely as to profit to 
 be expected from it. 
 
 The purchase of the annuity, as stated by the last 
 mentioned return to the House of Commons, stood 
 the bank, in February 1832, in the sum of 11 
 millions (£10,897,880), — from which year, down 
 to the present year (1844), the bank has received 
 the annuity of £585,740, in reduction of the prin- 
 cipal and interest of those 1 1 millions. 
 
 To what the capital sum, the sum of 1 1 millions 
 in February 1832, is ?iow in the year 1844 reduced, 
 by the receipt of the annuity, — depends upon 
 the rate of interest cast by the bank on the 11 
 milliotis, credited with the annuity since 1832. 
 
 The unexpired term of the annuity is 23 years 
 from 5th April, 1844, — and the value in present 
 money of an annuity of £585,740 for 23 years 
 
 " they made use of to the extent of about two millions and a 
 " half: they also borrowed £750,000 on Exchequer-bills from 
 " the East India Company on the security of the dead- weight, a 
 " portion of which they made use of.
 
 215 
 
 unexpired, calculating interest at three per cent., is 
 more than 9£ millions (£9,63 1,074); — but calculat- 
 ing interest at jive per cent, that value is not quite 
 8 millions (£7,900,812). 
 
 Calculating interest at three per cent, (which is 
 the rate paid to the bank on its deposited capital), 
 on the 11 millions (£10,897,880) credited with the 
 annuity since 1832, — the bank (9i millions being 
 taken as the value of the annuity in present money), 
 is now gainer of nearly two millions and a half 
 by the speculation. 
 
 But calculating, in like manner, interest at Jive 
 per cent, (which might have been the rate of 
 interest in the market now and since 1832), the 
 bank (8 millions being the value of the annuity in 
 present money) would now have been loser of 
 about two millions and a quarter by the same 
 speculation. 
 
 As the rate of interest in the market is a con- 
 tinually fluctuating quantity ; and in the event of 
 war, would probably rise to five, or a higher rate 
 per cent, instanter ; the purchase of such annuity 
 (apart from any consideration of the risk of stop- 
 ping payment in consequence), regarded merely 
 as a speculative investment of funds of the bank, — 
 was most indiscreet on the part of the directors of 
 the corporation ; and it was w r orse than folly of 
 the government of the day to encourage such an
 
 216 
 
 investment of the paper- money of the bank, pay- 
 able to bearer in coin on demand : the sanction of 
 which by the government implies moreover, that 
 the corporation of the bank, without one shil- 
 ling of disposable capital, — was, in the opinion of 
 that government, better able to bear a deadweight 
 of 13 millions than the nation itself 1 
 
 It is understood also, that part of the sum of 
 
 four millions of private securities, which the bank 
 
 held on 24th February last, 1844, is made up of 
 
 mortgages on lands, &c. which cannot be promptly 
 
 realized in case of a run upon the bank. 
 
 However a private, or joint-stock bank, though it 
 would be judicious in very few cases, might be 
 excusable in particular instances, in lending paid- 
 up capital on such securities, — the directors of the 
 bank of England are guilty of great indiscretion 
 when (having no disposable or paid-up capital to 
 lend) they force out issues of paper-money of the 
 corporation, payable to bearer in coin on demand, 
 upon such securities, — the paper-money forced out 
 upon which would immediately be brought back 
 for payment in coin ; but for the circumstance of its 
 being kept out as a state-paper money for the 
 payment of the public revenue ; and generally as 
 circulating medium, made, by statute, legal tender 
 for all payments above £5, in common with the coin 
 of the realm.
 
 CHAPTER VII. 
 Of the profits of the bank. 
 
 By the statutes confirming the charter (3d William 
 III., cap. 20, and 7 Anne, cap. 7) the bank is 
 enjoined to divide the whole of its profits twice at 
 least in every year among the members of the 
 corporationybr the time being. 
 
 By the 12th bye-law of the bank, in conformity 
 with those statutes, it is ordained, " that twice in 
 every year," viz., in the months of the September 
 and March, "a general court shall be held for 
 " considering the general state and condition of 
 " this corporation, and for the making of dividends 
 "among the proprietors, according to their several 
 " shares and proportions." 
 
 But the directors and proprietors of the bank 
 have always wholly disregarded both the statutes, 
 and their own bye-law, in that behalf made and 
 provided. They did not, and do not divide the 
 whole of the profits among the members for the 
 time being ; but made, and continue to make, re- 
 serves of profits for the benefit of future specu- 
 lators in the joint stock — nor have the directors 
 
 F F
 
 218 
 
 ever laid before the proprietors " the general state 
 " and condition of the corporation," to enable 
 them to judge of the state of their affairs. 
 
 In these commissions and omissions of the di- 
 rectors, the proprietors of the bank, like other 
 illicit traders, have always thought fit to acquiesce ; 
 and to uphold a system of concealment and secrecy, 
 which is essential to the success of illicit trading 
 of every description. * 
 
 From the year 1765 (when the charter was 
 prolonged) until 1781 (when it was again ex- 
 tended), the dividends of profits made by the pro- 
 prietors of the bank among themselves did not 
 exceed 5j per cent, per ann. 
 
 * In the minutes of evidence annexed to the report of the 
 Committee of secrecy on the Bank of England Charter, ordered 
 by the House of Commons to be printed 11th August 1832 — 
 the following appears in the examination of Mr. J. H. Palmer, 
 the governor of the bank. 
 
 " Question 228. Are not all your (the directors') proceedings 
 " subject to the approval of the proprietors? 
 
 " Answer. The accounts never have been laid before the 
 " proprietors: the question has been frequently submitted to the 
 " them, and always left to the proprietors to decide; and they 
 " have conceived it to be their interest not to demand the 
 " accounts. 
 
 " Q. 232. Have not demands occasionally been made? 
 
 " A. Demands have occasionally been made; but they have 
 " been rejected by such immense majorities, that there has been 
 " no possibility of entertaining the question."
 
 219 
 
 In the year 1/81, the dividends were raised to 
 6 per cent, per aim., at which rate they continued 
 to be made till 1788, when they were raised to 7 
 per cent, per ann., and at that rate were continued 
 to be made down to the time of the stoppage of 
 payment in February 1797. 
 
 Estimating the profits of the bank, down to the 
 time of its stoppage of payment, by the rate per 
 per cent, of the dividends made on the joint- 
 stock, — such profits, at their highest rate, would 
 appear not to have exceeded about double the rate 
 of interest in the market. 
 
 But by the " state of affairs of the bank" laid 
 before parliament at the time of the stoppage of 
 payment, in February 1797 ; it came to light, that 
 the corporation had accumulated £3,826,890 of 
 profits, which remained, in violation of justice, and 
 contrary to law, undivided among the proprietors 
 for the time being during the accumulation. 
 
 That sum of nearly four millions —which had 
 acquired the distinctive name or title of The 
 Rest — amounting to more than 32 per cent, on 
 the then capital of the bank (£1 1,680,800)— 
 constituted profits ultra the dividends, which had 
 been distributed half-yearly among the proprietors 
 for the time being. 
 
 From what time the bank first beiran to ac-
 
 220 
 
 cumulate illicit undivided profits does not appear — 
 no state of the affairs of the corporation having 
 ever been made public ; from the time of its first 
 institution in the year 1694, down to the time of 
 its stoppage of payment in 1 797 ; upon which 
 event the state of its affairs could no longer be 
 concealed, being called for by the imperative and 
 irresistible mandate of parliament. 
 
 But the profits of the bank, including the Rest, 
 however excessive before the stoppage of payment 
 in 1797, became so enormous after that event, — in 
 consequence of the insane course of proceeding, by 
 which the paper-money of the bank not payable 
 until the end of the war, was made by law a state- 
 paper-money during the war, with power to the 
 directors to issue it, ad libitum, for the profit of 
 themselves and their partners in the corporation — 
 in consequence of the matchless improvidence with 
 which the Treasury dealt tvith the corporation as 
 the bankers of the state — in consequence of such 
 state-paper money being made by law legal tender 
 inpayment of all debts in the United Kingdom — in 
 consequence of the issue by the bank of small 
 notes, from two pounds, down to eighteen-pence* — 
 and in consequence of other undue advantages of 
 
 * See page 39 et seq. — page 45 — and page 118 ante.
 
 221 
 
 the corporation in its dealings with the public — 
 that the bare statement of them beggars comment. 
 The following account — of all the distributions 
 made during the time of the stoppage of payment of 
 the bank from 1/97 to 1822, among the pro- 
 prietors of the joint-stock of the corporation — 
 is extracted from the account No. 29 of the 
 appendix to the report of the committee of secrecy 
 on the bank of England charter, ordered by the 
 House of Commons to be printed 11th August 1832. 
 
 In June 1799, 10 per cent, bonus in 5 per cents. 1797, on 
 
 May, 1831, 5 per cent, ditto, Navy 5 per cents. on 
 
 Nov. 1802, 2§ per cent, ditto, ditto on 
 
 Oct. 1804, 5 per cent, ditto, cash on 
 
 Oct. 1805, 5 per cent, ditto, ditto on 
 
 Oct. 1806, 5 per cent, ditto, ditto on 
 
 From April, 1807, \ -,.;,, , ) 
 
 /-. . ^ ,o~ Increase ot dividend, at the rate 
 to October, 1822 )■ „ . t- 
 
 , ,, . , . of 3 per cent, per ann. is 16 years 
 both inclusive.; r r j ) 
 
 In June, 1816, Increase of capital, 25 per cent. on 
 
 From Oct. 1816, ^ 
 
 n iaoo 1 Dividend, at the rate of 10 per cent, per ann. 
 
 to Oct. 1822, 
 both inclusive 
 
 on £2,910,600 increased capital— is 6j years 
 
 £. 
 
 £. 
 
 1,642,400 is 1,164,240 
 
 ditto 
 
 582,120 
 
 ditto 
 
 291,060 
 
 ditto 
 
 582,120 
 
 ditto 
 
 582,120 
 
 ditto 
 
 582,120 
 
 
 5,588,352 
 
 ditto 
 
 2,910,600 
 
 ann. 
 
 1,891,890 
 
 Aggregate amount of the whole . . £14,174,622 
 
 Annual Dividend payable on Bank Stock, in 1797, on a capital of 
 
 £11,642,400, at 7 per cent, per annum £814,968 
 
 Annual Dividend payable after June 1816, on a capital of £14,553,000, 
 
 at 10 per cent, per annum £1,455,300 
 
 The foregoing document shews, that, over and 
 above the regular dividends, of 7 per cent per 
 annum — there were shared and divided among the 
 proprietors of the bank, in the 25 years next after
 
 222 
 
 the stoppage of payment of the corporation ending 
 in the year 1822, extra profits, amounting to no 
 less than fourteen millions (£14,174,622), or to 
 12 If per cent on the whole capital or joint stock of 
 the corporation (£ 1 1 ,686,400), in that short period ! ! 
 
 If a company of trading adventurers, risking 
 the whole of their fortunes, their health and their 
 lives, in some bold and hazardous undertaking, had 
 acquired such profits on capital embarked by them ; 
 it might, probably, be thought that they had not 
 been ill recompensed for the risk, toil, and peril 
 of their enterprise. 
 
 But when it is considered that profits so enormous 
 and before unheard of, were made by a joint-stock 
 company, exempted from all trouble (except the 
 labour so much coveted of their directors) and from 
 all risk beyond each his share of the joint-stock, and 
 after the corporation had stoj>ped payment, — the 
 fact appears incredible — and the question na- 
 turally suggests itself — in what manner or by what 
 means, have such before unheard of profits been 
 so unaccountably acquired, and gotten ? 
 
 If any private or joint-stock-bank, had in 25 
 years accumulated profit of 12 If per cent, on the 
 capital of such bank, ultra profits of 7 per cent, per 
 annum divided by the partners half-yearly among 
 themselves — would any body believe that such
 
 223 
 
 profit had been honestly come by, from the cus- 
 tomers of such bank ? 
 
 Soon after the stoppage of payment of the bank 
 of England, in pursuance of the order in council 
 of the 26th February 1 797 — an act of parliament 
 was passed, continuing the suspension of payment 
 till the 24th June then next ; and another act was 
 afterwards passed, continuing that suspension till 
 one month after the then next session of parlia- 
 ment — in which was passed the memorable and 
 fatal act, suspending the payments of the bank 
 until one month after the conclusion of the then war. 
 
 If the minister of the day, and his majority in 
 parliament, had stopped at that point; and pro- 
 hibited the further issue of notes by the bank, 
 while those then out, continued unpaid in coin on 
 demand — the payment of them in coin on demand 
 would soon have been resumed : for such a re- 
 straint of the issue of the paper-money of the 
 corporation would have so limited their profits, 
 that measures to extricate their affairs from the 
 entanglement in which they were involved — by 
 imprudent advances made by the directors to 
 the Government of the day (which were the sole 
 cause of the stoppage of payment) — would soon 
 have been adopted. 
 
 But instead of that course of proceeding, which 
 common sense seemed to dictate — a course was
 
 224 
 
 pursued so insane, that the best that can be said 
 of it is — that it was the ministerial and legislative 
 madness of the day. 
 
 The bank is a trading corporation. When a 
 trader stops payment, the natural and necessary 
 consequence is, the stoppage of his trade and the 
 profits thereof, till his payments be resumed. 
 
 But when the Bank of England stopped pay- 
 ment, and was no longer able to carry on its trade, — 
 Parliament, upon the suggestion of the minister of 
 the day, — " heaven-born" as he was said to be by 
 the party of which he was the head, — instead of 
 prohibiting the further issue of notes, which the 
 bank coiddnot pay — passed acts not only excusing 
 the corporation from the payment of all such notes 
 then out — until the end of the war, — but autho- 
 rizing the issue, during the war, oft further similar 
 notes not payable until the end of the war, and the 
 issue moreover of such notes under £5 in value, 
 theretofore prohibited by law — which the bank, in 
 a few years, poured out to the amount of more than 
 nine and a half millions* by way of addition to the 
 issue, ad libitum, of its notes of higher denomina- 
 tion, all not payable until the end of the war — and 
 all for the sole profit of the corporation ; and 
 
 * £9, 571,850 on the average of the year ending 30 Sept. 
 1814.
 
 225 
 
 then, by a succession of other statutes, — all the 
 notes of the Bank, not payable until the end of the 
 war, were made legal tender for the payment of all 
 debts — in discharge of rents — and in payment of all 
 the public revenue during the war. By the last of 
 which legislative provisions, the notes of the bank 
 were converted into a state-paper-money, to all in- 
 tents and purposes. 
 
 The corporation of the bank, not being responsible 
 beyond each member his share of the joint- stock — 
 finding itself in possession of the unrestrained and 
 unlimited power of issuing, for its own profit 
 during the war, state-paper-money , not payable 
 until the end of the war — and which, therefore, 
 cost, during the war, nothing but the expense of 
 the paper and printing — exercised that power so 
 unconscionably, that their promissory-notes be- 
 came depreciated in value more than 26J per cent.* 
 
 The irreparable evils entailed on the nation by 
 the ruinous system pursued by the bank, merely 
 for the profit of the corporation — are so great and 
 so deadly, that it is sickening to reflect on them. 
 
 Instead of the bank having been the prop and 
 support of the nation — it would have been a 
 blessing to the nation, if it could thereby have 
 
 * See page 102 ante. 
 
 G G
 
 226 
 
 been saved from the curse of the system pursued 
 by its directors, in conjunction with successive 
 governments of the day, and with the sanction of 
 the legislature — under which system the country 
 was inundated with a depreciated paper-currency — 
 if, in February 1/97, the earth had opened her 
 mouth and swallowed up the fabric in Thread- 
 needle-street, with all its contents. What would 
 have been the consequence ? 
 
 The public was then indebted to the bank the 
 joint-stock capital ..... £11,686,800 
 
 And for advances on the land and malt taxes, 
 
 Exchequer-bills, &c. 10,672,490 
 
 £22,359,290 
 And the bank was indebted to the 
 
 public for promissory notes out . £8,640,250 
 And to individuals on drawing ac- 
 counts and otherwise . . 5,130,140 
 
 13,770,390 
 
 Surplus in the hands of the public after payment 
 
 of all the debts of the bank . . . .£8,588,900 
 
 which would have effected a dividend of fourteen 
 shillings and ninepence in the pound among the 
 proprietors of the bank, after their stoppage of 
 payment, and after the total disappearance of their 
 establishment in Threadneedle-street. 
 
 With respect to the enormous profits, amounting 
 to more than fourteen millions, made by the bank
 
 227 
 
 (luring its stoppage of payment from 1 797 to 1822, 
 over and above the accustomed half yearly dividends 
 of seven per cent, per annum — it may be asked — 
 was not that profit unduly derived from the public 
 itself? — made by the use of a state-paper-money, 
 issued by the bank to the amount of nearly thirty 
 millions * for which the partners of the bank were 
 not responsible, beyond each his or her share of 
 the joint-stock, amounting only to eleven millions 
 and a half (11,686,800)? 
 
 And, surely, it may be further asked — which of 
 the two, in justice and equity, was best entitled to 
 that enormous accumulation of profits made by the 
 bank during its stoppage of payment ? Was it the 
 public, with whose state-paper -money those profits 
 were made ? or was it the bank which so made and 
 accumulated them — by the use of that state-paper- 
 money, from the payment of which it was excused 
 by the public} 
 
 The profits of the bank, since the resumption of 
 its payments in the year 1822, have been of course 
 much curtailed, though they have ever since been 
 excessive. 
 
 In the sixteen years next following that time, 
 
 * £29,504,080 on the average of the quarter ending 30th 
 Sept. 1817.
 
 228 
 
 and ending with the year 1838, the proprietors 
 distributed among themselves half-yearly dividends 
 of profits, on the undivided capital of £ 14,583,000, 
 amounting to eight per cent, per annum. 
 
 And in the five years after 1838, ending with 
 last year (1843), such dividends have been distri- 
 buted at the rate of seven per cent, per annum. 
 
 Such dividends of profits have all along greatly 
 exceeded double the rate of interest in the market. 
 
 But ultra such profits — there have been made and 
 accumulated — since the last renewal of the charter 
 in the year 1833— undivided profits amounting to 
 one million (£1,092,000), being the increase of 
 the Rest within that period of time (see page 
 193 ante)— to which is to be added the £408,300 
 profit on the repayment of the fourth of the de- 
 posited capital in the year 1834 (see page 190 et 
 seq.)— making together the sum of a million and a 
 half (£1,500,300) —to which is to be further added 
 the value in present money of the annuity of 
 £585,740 for 23 years from April ISAA—idtrd the 
 cost or price at which that annuity now stands 
 the bank. (See page 215 ante). 
 
 But such excessive profits — made since the re- 
 sumption of cash-payments in the year 1822 — and 
 even the before unheard of profits — made during 
 the stoppage of payment for the 25 years preceding
 
 229 
 
 that epocha in the history of the bank — however un- 
 due — are a small evil in comparison with the power 
 exercised, under the existing laws, by the directors 
 of the bank, over the quantity of the currency — a 
 very small sudden contraction of which quantity — 
 endued with the inconceivable velocity of its cir- 
 culation in the United Kingdom — must always pro- 
 duce, as by the indiscretion of the directors of the 
 bank, it often has produced, the most disastrous 
 and fatal effects. 
 
 In the exercise of that dangerous power which has 
 been so unwisely entrusted to them, the trading 
 directors of the bank have sometimes assumed 
 importance, which is indeed truly ridiculous- 
 affecting the part of politicians and statesmen — 
 and to have influence — over the resources — and 
 in the exercise of the power — of this mighty nation ; 
 in relation to which, they and their corporation, 
 and a succession of ministers of the day, may not 
 inaptly be compared to a soap-bubble blown by a 
 wondering boy, and wafted into air, where it swells 
 and expands till it bursts. 
 
 For example, — among the copies of papers given 
 in the report of the Lords' committee of secrecy 
 on the order in council of the 26th of February 
 1/97, relating to the bank, the paper No. 8 con- 
 tains the following, viz :
 
 230 
 
 " At an interview with the Chancellor of the 
 -'Exchequer, on the 23d of October 1795, the 
 " governor of the bank mentioned his having 
 " heard that there might be annexed to the ensuing 
 "loan one of £1,400,000 for the emperor of 
 " Germany. The Chancellor of the Exchequer 
 " replied, that he had not, at present, the most 
 " distant idea of it ; though he did not pledge 
 " himself that, on no occasion, such a thing might 
 " happen. The governor thanked him for his 
 " answer, which he told Mr. Pitt, he received 
 " with pleasure, thinking, as he did, that another 
 " loan of that sort would go nigh to ruin the 
 " country" 
 
 The paper No. 21, given in the same report, 
 contains a copy of a memorial of the court of 
 directors of the 28th of July, 1796, in which it is 
 declared, " that the court of directors of the bank 
 " are very willing and desirous to do every thing 
 " in their power to support the national credit 
 " and to enable his Majesty's ministers to carry 
 " on the public service" 
 
 The gross property of the corporation was, at 
 the times in question, eleven and a half millions 
 (£11,686,800), and in less than a year after the 
 last mentioned flourish of its toy-trumpet, the 
 bank stopped payment.
 
 231 
 
 Absurd and ridiculous as such pretensions really 
 were — they were founded upon a power over the 
 quantity of the circulating medium of the king- 
 dom, which ought never to have been committed to 
 a joint stock trading company, to be used merely 
 for its own profit ; nor upon any terms to any 
 person ; body politic or corporate ; power ; or 
 authority whatsoever ; in a well governed state. 
 
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