938 T2\m A- — d A^ C/5 — n: = == 33 0^ ^= CD 5 = — — O 6^ ^^^ 1 — 8 THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES MONEY SHOULD BE THE SERVANT OF THE PEOPLE NOT THEIR MASTER. A LETTER TO WILLIAM LEATHAM, ESQ. BANKER, WAKEFIELD. BY JAMES TAYLOR, OF BAKEWELL. '■ That your Petitioners have reason to apprehend that measures are in con- templation, with reference to cash payments by the Bank of England, which, in the opinion of your petitioners, will, as they humbly submit to your lordships, tend to a forced, precipitate, and highly injurious contraction of the circulatuig medium of the country. " That the consequences of such contraction will, as your petitioners humbly conceive, be to add to the burthen of the public debt ; greatly to increase the pressure of the taxes ; to lower the value of all landed and commercial property ; seriously to affect both public and private credit ; to embarrass and reduce all the operations of agriculture, manufactures, and commerce, and to throw out of employment a great proportion of the industrious and labouring classes of the community." — The [Prophetic] Petition of the Merchants, Bankers, und Traders, of London, to the House of Lords, May 21s<, 1819. LONDON : PRINTED FOR PELHAM RICHARDSON, CORNHILL, AND JAMES RIDGWAY, PICCADILLY. 1842. Price One Shilling. LONDON: FKINTED BY JOHN WEKTHEIMEK ANll CO. CIRCUS PiAcn, PI^sBrK\■ cikcu*. CONTENTS. \ X 1 Yr, PAGE Possibility of interested parties obstructing the Bank of England from getting a regular supply of Gold at those times when she most needs it ... 1 Balance of Trade, and course of Exchange naturally in favor of Britain, but liable to be rmnaturally obstructed, not only by defective harvests, and a few large Capitahsts, but by the cunning policy of a Foreign otate ■ • « . • • . • • ^ Premium paid to Mr. Rothschild in 1 825 for the Gold he supplied to the Bank. Monopoly of the Spamsh Quicksilver Mines ...... 5 " Mystery of Money," the importance of its being under- stood by Statesmen ...... 6 Prophetic Warning of the Court of Bank Directors in 1 81 9 7 Difference of opinion on the effect of the Law of 1819, between the late and the present Sir Robert Peel. Erroneous notion of the latter, as to the cause of the People's present distress . . . . .8 A Circulating Medium adequate to the Domestic Taxes and Customs of every nation, is a matter of the Jirst importance to its welfare. Convertibility of the Home Money into Foreign Money of second importance . 10 Gold and Silver should be made subservient to the Peo- ple's use ; and the people's comfort not made to depend upon a supply of Gold and Silver . .11 Instance of the Money Transactions of a great Nation being carried on almost without the use of Gold and Silver in its Domestic Circulation . . . .11 The advice of the Bank Directors in 1819 rejected, the Ministers of the Crown determining to submit the amount of our Domestic Circulation to be controlled by the Foreign value of Gold . . . .14 The precious metals tincoined have their value determined between different Nations on the principle of Barter ; in coin by the authority of the Law in each Nation . 15 No permanent benefit to be derived by any Nation from deteriorating its Coined Money ; but great benefit to be had from t\iQ judicious use of Paper Money . 16 Prussian Currency System . . . . . .19 9 U CONTENTS. PAGE The Court of Bank Directors in 1827, and subsequently, essentially altered fi'oin what it was in 1819 . . 21 The Bank of England, by the useless efforts of its Direc- tors to bolster up an impracticable System, reduced to a state of dependance upon the Bank of France . 23 America affords an instance of a prosperous people without any National Debt, being rapidly reduced to a state of extreme distress through erroneous monetary Le- gislation. Her experience illustrative of the possi- biUty of a Nation " buying Gold too dear " . .24 The United States Bank made the "Scape Goat" for President Jackson's folly . . . . .25 No natural affinity between Paper Money and the Pre- ciotts Metals : — their relative value Arbitrary . . 26 The error of those Writers, who, to avoid fluctuations in the value of Paper Money, would exclude Local Bankers from the free use of their own credit , . 27 Various plans for avoiding any obstruction to our Domestic Circulation, at those times when the Mercantile v^Ane of Gold maybe temporarily enhanced above our leyal value for it ....... 29 Mr. Baring's declaration in 1828 f nine years after the miscalled "settlement of the Currency Question ") that Parliament had still its Lesson to learn on Cur- rency and Banking ...... 32 The present Currency Law leaves the Directors of the Bank a discretionary power to do mischief, but de- prives them of all power to avert it when done bv others ......... 33 Fluctuations in the price of Gold towards the close of the last French War erroneously attributed to excessive issues of Bank Notes ...... 34 Repetition of the Writer's main object. Relief to our National difficulties alleged to be easily attainable under a Statesman possessed of the commercial Genius of the late Mr. Pitt. Reasons for appre- hending a less favorable result from the ministry of Sir Robert Peel . . . . . . .36 Postscript . ........ 42 Petition alluded to in the Letter, page 18 . . .45 The late Sir R. Peel's Speech in 1819, against his Son's Bill 53 A LETTER. Bakewell, March 14th, 1842. Dear Sir, — I have been much gratified to find, on perusal of the pamphlets which you have kindly sent me, that your view of the evils which beset our credit circulation, is very similar to that which I have also entertained for several years past. In addition to the natural diffi- culties to which our credit circulation is exposed, and which are so forcibly portrayed in your writings, there are some artijicml dangers which are not generally noticed. Mr. Alexander Baring, (now Lord Ashburton,) in his evidence before the Committee on Coin, which sat at the Board of Trade in 1828, alluding to the diffi- culties which the Bank of England encountered in 1825, from the want of an adequate supply of the precious metals, said, " The wants of the bank, when they occur, interest speculators and jobbers of every description, and, independently of operations to derive a profit from the price of gold, there will be persons interested in thwart- ing the bank, and preventing its supply. A large capitalist might do this with effect — a £ combination of three or four might do it ahiiost with certainty." I am aware that when the late Mr. Rothschild was questioned upon this point four years afterwards by the Bank Charter Committee, he wished the committee to believe the thing impossible to be done : but a chain of circumstances may be adduced, commencing with the early part of 1824, and ending with the panic of 1825, evincing a strong probability, not merely that such a speculation w^as possible, but that it was then made effective. Again, in the natural course of commerce, there can be no doubt that the balance of trade between Britain and the rest of the world must be in favour of this country. ** You import £1000 worth of iron from Sweden," said Mr. Rothschild to tiie Bank Charter Committee ,> '*when it is manufactured it is worth £10,000, and it is then sent to all the world. You get cotton from America : the cotton costs there dd. or Qd. per pound, but when it is manufactured, that pound of cotton is worth four times as much. In the regular course of things, the exchange with every country must be in favour of England." And, he added, " If we had not sometimes importations of corn, and sometimes foreign loans, he knew not how the people on the Continent could live." However true Mr. Rothschild's illustration may be, in the regular course of things, your pamphlets show that this just and natural effect of British skill and indus- try, may, for a time, be fearfully disturbed by defective harvests ; and though the specie may ultimately find its way back to this country, as it is now doing, yet in the mean time the working population may be starved, and their employers ruined. Another way in which the natural course of commerce may be deranged, and to which I am desirous of drawing attention, is the manner in which our money may be borrowed from us by foreign states, and, wuler the existing law, used to our national inj ury . To illustrate my meaning : suppose a foreign state in good credit. Russia for instance, wants to borrow £10,000,000 to clothe and equip her army, and to store her military chest. England is the market for nego- tiating the loan, and all the energies of some of the principal loan contractors are applied, for the time, to make money easy and cheap with us. Through the medium of these contractors, Russia obtains her loan upon favourable terms. It may be that a large portion of the loan is for the purchase of British commodities, and not more than two or three millions required in specie ; but, instead of taking the commodities from us in the first instance, it is obviously her policy to draw from the Bank of England in the first place, whatever gold she may want. The Bank, finding two or three millions of gold withdrawn from her coffers takes the alarm ; and the usual discounting of bills of exchange is obstructed. The more needy of the manu- facturers, who are oftentimes the most enter- prizing, are compelled to make forced sales of their commodities. Prices are reduced. The richer manufacturers and their workmen are obliged to submit to a reduced market price ; and Russia may then purchase or contract for all her supplies upon terms far more beneficial to herself, even if she paid a premium of five per cent, for the gold, than if she had bought her stores in the first instance. Suppose, on the other hand, that the Bank of England, in order to prevent this unnaiural export of gold, offers a premium in addition to the Mint value for it, the direct consequence is, that the gold which the laws of commerce compel her to buy as an article o/" MERCHANDIZE at £4 or 4 guineas per ounce^ the present law of England compels her to part with, as an article of money, at £3. 17. lOJ. per ounce ; and, possibly, the same parties, through some secret link, may sell to the bank one day that gold which they take from her on the nei't. In the evidence taken before the Bank Charter Committee in 1832, it appears, that during the pressure on the bank in 1825, Mr. Rothschild received from that establishment about £100,000 in addition to the Mint value, for the gold which he then supplied to her. A recent number of the " Circular to Bankers " states that the same gentleman*s family are now deriving an enormous profit from the monopoly of the Quicksilver Mines in Spain — that the effect has been to withhold many millions of silver from being supplied by the mines of South America to the commercial world ; and that thus all merchants, bankers, &c., engaged in large credit transactions, the success of which depends upon the regular supply of the precious metals, are liable to have their best calculations falsified, by the secret machinery which a few individuals may set in motion. Our dealings with America, during the last eight years, afford another proof of the possi- bility of the hasis of our currency being drawn from us, to our extreme injury, by a nation, from which, in the natural course of trade, there ought to have been an uniform flow in the con- trary direction. In fact, the whole history of the monetary affairs of the world, so far as I am acquainted with it, constitutes one continuous illustration of the justness of the following- remark, made by a writer more than two cen- turies ago, and which I have often had occasion to borrow: "Unless those advantages, which 6 one country may make upon another in the mystery of exchanges, be thoroughly discovered and prevented by such as sit at the helm of the state, it may fare with us, notwithstanding all our commerce, as with some bodies after much food, that, instead of growing full and fat, we may pine away and fall into irrecoverable con- sumption*'' The extensive use of credit money which now prevails, adds greatly to the force of the above remarks, when applied to our own day. It is notorious, that, with us, every bale of goods may constitute the real basis of a bill of exchange. There is indeed no article of com- merce which may not be thus represented by the pou/ids, shillings, and pence, expressed in such an instrument of exchange ; and thus, our credit or bill currency may be co-extensive with the gross nominal value of all the commodities which are daily passing from hand to hand. In your tables and pamphlets you have forcibly drawn attention to the startling disproportion that exists between these liabilities, and the legal means there are of liquidating them. Unless we can bring ourselves to believe the absurd proposition that " a part may be equal to the whole,"" it seems impossible that our credit currency, representing (as it does) every other kind of property as well as the precious metals, should at all times, and under all circumstances of peace, war, famine. or artful speculation, be absolutely redeemable in pieces of gold of a specific weight and fineness. I was no sooner acquainted with the provi- sions of the law of 1819, than I became con- vinced that a fearful shock awaited us, whenever the market price of gold should be enhanced above the mint price ; and, persuaded that pri- vate speculation, as well as many natural causes, might operate so to enhance the mercan- tile value of gold, I submitted a paper on the subject to a public meeting which was held here for the purpose in March 1823. To the argu- ment in that paper I obtained the assent of all the gentlemen who attended the meeting. I was further confirmed in my apprehensions when I afterwards found that my fears were very much in unison with those which the Court of Bank Directors had stated to His Majesty's ministers in 1819, whilst "Peel's Bill" was pending. The experienced men who then managed the bank forewarned the government that the proposed system of cash payments would, if passed into a law, probably "com- promise the universal interests of the empire in all the relations of agriculture, manufactures, com- merce, and revenue,''^ a prediction which is every day becoming more perfectly and more fear- fully fulfilled. 8 There are few things with which men in a state of civilized society are more familiar than "money;" yet few things, the real nature of which has been less understood by them. Ac- customed to the use of it from their childhood, almost every one assumes that he has a thorough knowledge of its nature and properties ; and yet, when even learned and scientific men have attempted to define accurately what they mean by "money," — what constitutes its exchange- able value, — what rules govern and regulate its circulation, — they have been far more puzzled to do it than to describe the essential properties and working rules of the most intricate piece of machinery ever invented. One class of political economists thinks that the precious metals have the character of money essentially in themselves. Another class regards them as commodities which derive their monetary character wholly from the authority of the state, or some conventional agree- ment among men ; — whilst the great majority of the people, however well they may avail themselves of the power of money to command the necessaries of life, and to enrich themselves, are, in reality, as little acquainted with its essen- tial character, as they are with the natural prin- ciples which govern the circulation in their own veins. Sir Robert Peel appears to belong to \\iejirst denomination of persons : his father was 9 probably one of the second, which may account for the very opposite opinions they entertained of the effect to result from the Bill of 1819. The present Sir Robert Peel anticipated national prosperity from that measure — his father /ore^o/^ national ruin : bitter experience has shown the father to be the wiser statesman of the two ; and now, when the troubles are come upon us, which the late Sir Robert Peel and the Bank Directors of 1819 predicted as the probable consequence of "Peel's Bill;" our manufac- tures, commerce, and revenue compromised ; our agricultural interests placed in great jeo- pardy ; we are required to believe, not that bad legislation, but that the excessive skill and industry of the people have produced the mischief: and we are told by the present Sir Robert Peel, on behalf of the Tories, and by Lord Melbourne on behalf of the Whigs, that legislation can do little or nothing towards our relief. If it had been alleged that the distress of the people was the consequence of idleness and improvidence, Sir Robert might justly have said that legisla- tion could not cure it; but when he accuses our manufacturing population of extravagant indus- try, and when he well knows that our Savings' Banks show the English to be habitually a provident people ; then, to tell them in their long-protracted distress, that legislation cannot 10 eftectually relieve them, is surely as monstrous as it would have been for the Egyptian monarch, after depriving the industrious Israelites of " straw for their bricks," and requiring an equal *• tale " at their hands, to have told those indus- trious and afflicted people, that their distress was beyond the reach of legislative remedy. As I believe all Scripture to be given for our instruc- tion, so I take it to be one of the Jirst duties of every government, to secure for the people '* strmviov their bricks" — the means of fulfilling their tasks — or in other words, a circulating mediwn adequate in amount to the payment of their labour, and to the free exchange of all the products of labour and of art throughout the nation, on such terms, and at such rates, as shall be fully equal to the money charges which the ta.ves of the state or the customs of the nation impose upon the people ; and that, as all addi- tional wealth in the nation must be produced by the skill and labour of the working part of the community, it is especially the duty of the execu- tive to see that this portion of the people should never be forced into idleness for want of a regular and sufficient ??iedium, by which their labour, or the produce of their labour, may be exchanged or accumulated. The ne.rt great duty of the state in regard to its money, is to devise means whereby the circulating medium at home may be 11 equitably and freely converted into the money or circulating medium of any foreig/i nation. But this foreign object, though an important feature in a perfect money system, is of second- ary importance to the home circulation. However much the customs of the world may have used the precious metals for money, it is essential to the happiness of the people in every nation, that the rulers of nations should take especial care that the precious metals be made subservient to the comfortable enrploymeiit of the people, and not that the people's comfort should be made subservient to ox dependent upon a supply of the precious metals : for otherwise, as we have seen, a foreign state, or a combination of th7xe or four capitalists, who can for a short time withhold the regular supply of the precious metals from an otherwise opulent nation, may control the money value of the people's labour, and throw all the important interests of that nation into the greatest confusion and distress. That the internal monetary transactions of a great nation may be carried on for many years, almost without the use of the precious metals, is evident from the experience of this country within the last 45 years. Necessity, the pro- lific parent of almost every useful invention, did, during the late war, force us upon a system, endowed in an extraordinary degree with the 12 attributes needful for the home circulation ; a system so adequate to our domestic wants, as to enable Britain to surmount difficulties greater, I believe, than had ever before been surmounted by any nation. Under this system, the Bank of England note became the practical represen- tative of the pound sterling, and of the pound in account throughout this kingdom, and, I might add, in many other parts of the world also. The bank itself was the wholesale dealer in this medium of exchange ; and country bankers, in a smaller way, supplied the local wants of their immediate neighbourhoods. This system, which the necessity of the times, and the conveniency of the people, brought into active operation in almost every town throughout the kingdom, furnished the means whereby labour was freely purchased. Labour employed, increased the pro- ductiveness of the soil in agricultural districts, and i\\Q productions oi i\\Q people in manufacturing districts : rents were increased, not by forcing the people to buy homegrown corn, but by the increased means which the people had of paying for and consuming that which was grown by their own neighbours; and the re-expenditure of those increased rents, with the expenditure of all other accumulations of capital, was visible in new and improved houses, new public roads, canals, bridges, docks, drainages, enclosures, 13 and an almost infinite variety of profitable public works, which, whilst they ennobled and beauti- fied the country, provided new and beneficial employment for those whose former occupations might perchance have been superseded by machi- nery. It could scarcely be expected that a system pregnant with such important and beneficial effects would be entirely free from imperfection. The good faith which generally distinguished those whose credit supplied the medium through which much of this good was produced and dif- fused, was occasionally tarnished by the unwor- thiness of some parties, and by the indiscretion of others ; but these imperfections were every day working their own cure far better than any direct interference of the legislature could do it ; and whatever the people can do for themselves, is almost sure to be done better than by any legislative enactment. Admirably as this sys- tem had supplied all our pecuniary wants at home, enabling us throughout the war to do either with or ivithout the precious metals ; it became necessary, on the return of peace, to reconsider the act of 1797, under which our home currency had been fostered, and as you. Sir, are well aware, to adopt such a system of cash payments, as, in the event of any future war, should preserve us from a repetition of the catastrophe of 1797, and provide means for our 14 home money being at all times equitably con- vertible into the money of any foreigyi country. I cannot entertain a doubt that these import- ant objects would have been satisfactorily attained, had our rulers duly profited by the counsels of the Bank Directors in 1819. The plan they suggested would, with very little modification, not only have accomplished these objects for ourselves, but would, I believe, have averted many of those calamities which have since befallen the commercial and banking inte- rests of many other countries also. Unfortu- nately Lords Liverpool and Grenville, and other noblemen, who, as ministers of the crown, had gladly availed themselves of the services of the bank directors during the war, thought they could do without that assistance in 1819, and thus the counsel of those directors was not only disregarded, but — if we may believe the reports of the day — was rejected very uncourteously. Those noblemen, as well as Messrs. Huskisson, Canning, Peel, and many other influential per- sons, became converts to the new and fashionable opinion, that the amount of the ci^edit circulation of Great Britain should no longer be regulated according to her internal taxes, rents, and other credit engagements, but by the state of the foreign exchanges ; or in other words, by that estimate of the value of the precious metals, lo which was to be found in the average rate at which gold and silver could buy the cheap labour of the poorer nations of the world. A doctrine in reality not more reasonable than that a full- grown athletic man, such as Jolni Bull was once represented to be, should be required to have his circulation regulated, not by the natural wants of his own system, but by the average wants of all the needy bodies around him ; and that they should be allowed, like so many leeches^ to borrow his life's blood from him, until they could pull down his strength, and raise their own to an equality, leaving poor John to bear all the costly honours of his own cumbrous body, with only halfh\s proper circulation. 1 fully admit that between one independent nation and another, the precious metals, in an uncoined state, must have their exchangeable value solely determined by weight and purity, upon the same system of barter as that upon which all other foreign transactions are generally conducted : but hence it follows, that whatever nation, after well supplying the wants of her own people, has the most surplus produce, or manufactured commodities to part with, such na- tion can afford to give the most goods in exchange for gold and silver abroad, and must consequent- ly, in the natural course of tilings, command the largest quantity of those metals. If the rulers 16 of such a nation understand the mystery of money, I have not a doubt that they may deter- mine the mode and the terms by which this superfluity of the precious metals shall be parted with to other and more needy nations, agreeably to the opinions implied in the evidence of the late Mr. Rothschild as quoted in the second page of this letter. These remarks apply to the principle which governs the exchange of the precious metals betiveen different nations. In the home dealings of any given country, gold and silver are governed by another princi- ple. The authority of the state, in this case, determines the relative value which specific pieces of those metals in coin shall possess in the legal discharge of all taxes, debts, and credit engagements within the realm ; but the expe- rience of every nation shows, that, as the legal or coined value of the precious metals is enhanced, so the mercantile price of them in the same coun- try has always had a tendency to advance also ; and just at those times when the country could least bear it, then the mercantile value has gene- rally been found to exceed the coined value, however much the latter may have been pre- viously enhanced. Hence, a needy state has never derived permanent relief, by diminishing the specific weight, or deteriorating the quality of its coined money. 17 The issuing' however of a paper or credit cur- rencij, under certain limits, has a very different effect. Judiciously used by the government of an industrious nation in good credit, it may be made the means of controlling; the mercnjitile value of the precious metals, and thereby of sustainino; the intrinsic character of the coin both in weight and purity. As an illustration, take a supposed case from our own country. Her government is entitled by the consent of parlia- ment to receive from the people taxes and revenue, amounting, say, to £40,000,000 an- nually. She does not receive this money to hoard and accumulate^ but to pay back to the people for dividends, stores, services, &;c. &;c. Let then the government ordain that this £40,000,000 of taxes shall be paid, in whole or in part, as may be most convenient to the people, after the following manner: either in gold, after the rate of £4 per ounce ; in silver, after the rate of 5s. per ounce ; or in exchequer notes, each £5 note being deemed the equivalent for 1^ oz. gold, or 20 oz. of silver. This being then the lescil relative value of gold and silver to such exchequer notes, there can be little doubt that, whilst the amount of them was kept within the average demand required for our current taxes, those notes, in all domestic transac- tions would be quite as valuable, though stamped 18 and signed on paper only, as if they were stamped pieces of gold weighing \\ oz. each ; and more valuable in one sense than our present gold coinage, which, it now appears, may be robbed of its intrinsic value to the extent of 15 or 20 per cent, without the public knowing how to detect the fraud. This explanation may serve to illustrate the opinion 1 entertain of the nature and value of credit or paper money ; but as one mode of practicalli/ applying these opinions to the gene- ral use of this country, I beg to refer you to the accompanying petition which, in 1830, I placed in the hands of Mr. now Lord Denman, and Sir James Graham, for presentation. I saw these gentlemen upon the subject, a few days before the Duke of Wellington made those celebrated remarks in the House of Lords, which, acting upon the groiuing distress of the people, threw the whole nation into its Reform fever. There seemed then so little chance of obtaining any attention in Parliament to the dry subject of the currency, that the petition was not pre- sented, but I printed and circulated it amongst my friends in the enclosed form ; and it was republished in some of the newspapers of the day. I purpose also sending you two or three pamphlets, reiterating, with different arguments, the same sentiments which were first addressed to the Bakewell meetinsr in March 1823. 19 111 the year 1829 I was discussing this subject in London in the presence of a Prussian gentle- man, who remarked that he thought the views I entertained on currency were not very dis- similar to those which were acted upon in his own country ; and, the next day, he sent me a note, of which the following is a copy. *' It quite escaped my recollection when we conversed on the subject of Prussian currency, that I could give you some information that probably might interest you. » " The Prussian government issues its gold coin called Friedrich d'or, at five dollars, and com- pels the people to pay their duties as follows — *' One third in the above coin at the price at which it is issued. ** One third in ' treasure notes,' which circu- late like Bank of England notes — and " The remainder in silver. " If a person cannot pay the amount required in gold, he is charged the agio, or the market price in addition, so that if the Friedrich d'or is worth five dollars and a half in the market, he must pay the half dollar in addition." It will be seen by this sketch of the monetary system of Prussia, that provision is made for the possi- bility of her " treasure notes " being at a discount in the market. By providing a remedy for such c 2 20 a contingency, I believe it will be found, that so far from these '' treasure notes '' being at a dis- count, tliey generally bear q. premiimi throughout Germany, as being so much more convenient and safe for transfer than gold and silver. Per- ceiving that this plan must obtain for Prussia that security for her credit circulation, which, through the agency of the Bank of England, I was seeking for ours, I named the subject to the Duke of Wellington, in a letter which about that time I had His Grace's permission to address to him. I also spoke of it to an influ- ential London merchant, with whom I had corresponded upon the currency question ; but, at that time, though England had sufl'ered much, it appeared we had not suffered enough to humble our pride. The latter gentleman thought it an absurd thing to suppose that England could possibli) derive any useful lesson upon money and currency from Prussia, which he then regarded as an insignificant State. In the few years which have since elapsed, the rapid progress which Prussia has made in the scale of nations, furnishes a remarkable instance of the benefit to be derived through a monarch, who, having learnt wisdom in the school of adversity, knew how to make money the servant of his people, and not their master. The com- 21 mercial code of Prussia, without her judicious monetary system, would, in my opinion, have done comparatively nothhig for her. I regret to see, in your valuable pamphlets, much evidence that the bank directors of late year's have not manifested that commercial wis- dom and practical banking knowledge which distinguished their predecessors in 1819 It would seem, from the evidence of Mr. William Ward before the Bank Charter Committee in J 832, that between the years 1819 and 1827 a great change had taken place in the counsels which governed the bank. Mr. Ward informed the Committee, that in 1819 he was the youngest, and the only member of the court who had adopted the then new opinion, that the amount of the credit circulation of Great Britain ought not to be regulated by the internal wants of the kingdom, but by the state of the foreign exchanges : but in the year 1827, the members of the court had become so changed, that it appears he had now the gratification of finding a majority favorable to his views. Contempo- raneously with this change in the directors, the resolution appears to have been formed, that the bank should always retain in her coffers specie equal to one third of her liabilities : a resolution which experience has since convinced them they had not power to execute. It is fair to believe 22 from the opinions expressed in the memorial of the directors in 1819, that those gentlemen would h^ve foreseen that the resolution in question could not be kept under all circumstances, without ruining first their customers, and afterwards themselves, so long as the credit circulation of the kingdom remained under the government of " Peel's Bill." The same wisdom which dic- tated the memorial of 1819, would probably, after the panic of 1825, have prompted them to say to the ministers of the crown, *' We have done all in our power to support your new mo- netary system. We have brought this great national establishment into such jeopardy by our efforts to support your views, that we are indebted to the help of one man for its preserva- tion. When the bank was in its extremities, we were advised by an influential minister of the crown, (Mr. Huskisson,) himself a distin- guished supporter, if not the real author of * Peel's Bill,' to close our doors to the public. We are convinced that the minister who could give such advice is totally ignorant of the nature and value of English credit ; and, unless you so alter the monetary laws, as that, for the future, we can protect this establishment, without ruin- ing the mercantile and banking interests of the nation, we must resign the trust imposed in us." But instead of addressing such plain truths as 26 these to the ministers of the crown, tne directors of 1827, and their successors, appear to have com- bined with those ministers to obtain a selfish monopoly of the whole credit currency of the kingdom ; and by their unsuccessful efforts to bolster up an impracticable system, reckless of the ruin of the manufacturing and commercial interests of the nation, have brought great and bitter complaints against themselves — in- volved the credit engagements of the country in repeated difficulties — and, upon one occasion, made the continued existence <jf their establish- ment dependant upon the friendly assistance of a foreign bank. How would Napoleon have exulted, even in his exile, could he have beheld the Bank of Ens^land — lately the Bank of the World — reduced to the mortifying necessity of depending for her existence upon the Bank of France ! How would Mr. Pitt have mourned, could he have thought it possible, that statesmen professing themselves his disciples, should ever allow the National Bank and national credit of England to be thus humbled ! It is more than probable that such repeated exposures of our monetary weakness under the baneful influence of " Peel's Bill," may have encouraged in the more restless part of our French neighbours the wish they have lately so often manifested, to involve us in another Continental war. 24 Tlie folly by which the credit ssystem of Eng- land has been governed since 1811), great as it is, is not without its parallel even in later times. America has shown us that the gratui- tous evils we have inflicted upon ourselves in addition to our national debt, she could inflict upon her people, aftlr they had cleared off the national debt. General Jackson seems to have had no more aflection for the Bank of the United States in 1834, than some of our statesmen manifested for the Bank of England in 1819. Regardless of the valuable services which the United States Bank had rendered to America in equalizing and facilitating the exchange of money throughout all her States — in raising the intrinsic character of her money from the impo- verished condition it was in when that bank was established, — and finally in enabling the govern- ment honorably to discharge the national debt ; President Jackson appears to have formed the resolution to annihilate that establishment, not- withstanding the deserved esteem in which it had been long held throughout the world. Under the same popular plea which gilded the poisonous pill for us in 1 8 19, of giving the people a golden currency, the President was enabled to carry his object by the popular voice in opposi- tion to the wise counsels of more experienced men. To fulfil his promise of getting gold for 25 the people, he appeared to lose sight of the old caution, " not to buy it too dear," for he en- hanced its value about 6 per cent in relation to silver, and consequently to all the internal credit engagements of America. This advance in the legal value of gold in America, added to the high rate of interest offered to all who could bor- row money in England — ^just at the time when, to assist our government and Mr. Rothschild in negotiating the West Indian loan, our bank directors were making money cheap here — effec- tually drained the gold from our circulation to Jill that of America A temporary success thus attended his measures, which carried him over his first difficulties, and produced a gleam of delusive prosperity ; but experience soon con- vinced the Americans that instead of " growino- full and fat" upon their golden dreams, those bright visions were but the prelude to an almost universal bankruptcy. Mr. Biddle and others, creditably to their patriotism, but unfortunately for their pecuniary reputation, endeavoured to uphold the United States Bank, and the national credit, until the error of General Jackson's policy should be discovered, and the mischief repaired. Herein, like the modern directors of the Bank of England, the managers of the American Bank nnscalculated their power, and, whilst they have thus made themselves the " scape-goat " for 26 jreneral Jackson's folly, America, notwithstanu ing her wonderful natural resources, affords an unhappy illustration of the mischief which may be inflicted upon an industrious people by the injudicious monetary measures of their rulers; exhibiting, in her present condition, a striking contrast to the increased domestic comfort, and foreign influence, which wiser counsels have, in the same time, conferred upon the people of Prussia. Whatever proportion the relative quantities of gold and silver in the world may bear to the relative values attached to them by the mone- tary laws of this or any other nation, there can be no natural affinity discovered between those fnetals and paper money. Some reason may doubtless be given why an ounce of gold should be thought of equal value with fifteen or sixteen ounces of silver, but to declare that £3. 17s. lO^d. in an English bill of Exchange, or in Bank of England notes, shall at all times, and under all circumstances, be exactly equal to an ounce of gold, must be purely conventional and artificial. Your Tables show that on an average ^m\\ fifteen parts out oi seventeen of our paper money are not at all based upon the precious metals ; and there- fore, as before observed, unless we can believe that the remaining two parts may be equal to the whole seventeen, it is totally impossible that 27 our present absolute and arbitrary arrangement can stand the test of a trial when really put to it. Mr. Baring, in the evidence of 1828, to which I have before referred, says, " Our pe- dantic attachment to the supposed perfection of the standard of a single metul, and the difficul- ties we make about the possible variations between gold and silver of an almost impercep- tible fraction, lead us to overlook the really im- portant variations which occur in the value of money, as composed of its two elements paper and metal.'" Although a seeming uniformity was preserved between bank-notes and sovei^eigns in J 825, yet the premium of £100,000 at that time paid to Mr. Rothschild by the bank directors, shows there was really a very great difference in their value, and Mr. Baring, referring to the same period, says there was an actual fluctua- tion "of 15 or 20 per cent in the value of the pound sterling, and in many cases much more." The expedient suggested by some writers for avoiding a repetition of these fluctuations in the value of the pound sterling, by throwing the whole credit circulation of the kingdom into the hands of the Bank of England, and doing away altogether with the promissory notes of country bankers, could have no other efl'ect than to glut the heart of our political body, and to starve the extremities. Besides, for such a system to be 28 effective, drafts and bills of exchange must also be annihilated ; for it would be preposterous to allow any small manufacturer or shopkeeper to circulate a draft for i.'20 or £30, promising to pay at three fnonths after date, and to deny to some of the richest men in the kingdom the right to pay away, and to the people the right at their own risk to retain in circulation, a £5 promissory note, payable on demand; and if the right to issue a draft or promissory note at three months after date be denied to the manufacturer or shopkeeper, I know not upon what principle it can be conceded to any body else. Ten or twelve years ago it was the boast of Manchester merchants and manufacturers that they managed their monetary transactions without the aid of local credit money, and Mr. S.J. Lloyd seems to have fallen under the same delusion ; but it will be found on further inquiry, that the district of Manchester was really very largely supplied with such local issues, the only difference being that the bankers of that town supplied their customers with drafts, drawn upon themselves or their agents in London, payable two or three months after date, whilst bankers in other parts of the country supplied their customers with promissory notes payable on demand. Such ex- pedients as the foregoing, if acted upon, must aggravate our difficulties, instead of relieving or curing them. 20 To avoid, for the time to come, a repetition of siicli real fluctuations in the value of the pound sterling- as now occur whenever the bank is called u])on for two or three millions of specie — to counteract the artful machinations of selfish speculators - to avert the evils which may arise from the mischievous policy of foreign poten- tates — and, also, to provide for those occasions when it may be needful or profitable to suffer the precious metals to go from us for a season, in extra quantities, to return with advantage afterwards — the mode of determining the rela- tive value of our paper money to the precious metals must be rendered more uniformly prac- tical than it is at present. Means of some kind must be devised by which we may avoid any obstruction in our domestic circulation from the possible contingency of the mercantile value of gold being enhanced above our legal value for it. The Bank Restriction Act accomplished this object ; but being unaccompanied with any obligation to pay in specie, it was therefore defective. The plan proposed in the enclosed petition supplies that defect, and yet provides a remedy for ?i possible fluctuation in the mercan- tile value of gold. The Prussian system attains the same object by other means ; but as the power to increase the " treasure notes " is with the government, and the obligation to provide the 30 specie for them with the people, the system is too limited, and, in the hands of an unscrnfulous ministry, too liable to be abused, to suit the cautious policy of this nation. The object is also to be attained by another plan. Let par- liament sanction the issue of Exchequer notes to a given amount, say half the amount of the annual revenue, but twenty or even fifteen mil- lions would probably be sufficient. Let these Exchequer notes be made a legal tender. Instead of the government paying interest, let the bank be charged a small rate of interest for the use of them. This she could well afford to pay, as such Exchequer notes would be more efficient to the bank than a hoai^d of gold, in stopping any unnatural demand which might be made upon her. The chief objection to such a plan would be, that for these Exchequer notes there could be no parties under an obligation to provide gold in exchange ; they would therefore be lessjixed in their gold value, than bank notes would be under the plan proposed in the enclosed petition. In the latter, the bank being always required to fix a price at which she will give or take gold, the same steadiness of value might be expected to arise from it, as would be conferred upon the Stock Market, if parties sufficiently wealthy and disinterested could be found, to fix every day one price at which they 31 would either buy or sell 3 per cent. Consols : — whereas under the Exchequer note plan, the public would probably have to pay the dealer in them a trifling profit on the exchange. But whatever plan were adopted, it would be wise for the Bank of England to resume her place as a wholesale establishment in the metropolis, and to leave the retail business in the country to those who know the parties of their respective localities much better than directors in London can know them ; and the sooner she can fall back upon the prudential maxims which actu- ated the directors of 1819, the more safe it will be both for herself and the community. By these Remarks, which, pursuant to your kind invitation, I have offered very freely, you will perceive that I fully agree with you, that the most fearful evil with which our currency system has to contend is the enormous disparity which exists between our credit liabilities and our legal means of meeting them ; — that bills of exchange ought to be regarded as constituting by far the most important part of our credit circulation ; and that statesmen, political eco- nomists, and committees of Parliament, by pre- tending to institute an enquiry respecting our systems of currency and banking, and at the same time agreeing to exclude bills of exchange from the question, confirm the truth of an 32 observation made in Parliament by Mr. Baring in 1828 ijiine years after the miscalled " settle- ment" of the currency question), " that there were no great questions on which persons in and out of Parliament were n.ore completely learning their lessons, than the question of the circulation and the banking system." But whilst I thus agree with you as to the main characteristic of the disease which afflicts Britain, you will perceive from the tenor of this letter, that I entertain an opmion different from your own as to the remedy. You would guard us against the evil of a sudden demand for bullion by the accumulation of a large stock of dor- mant bullion in the Bank; I would avoid the same evil by securing a uniform, active, and free supply in the market. In a temporary scarcity of wheat or hay, or any other neces- sary, the way to prevent the natural distress from being aggravated by monopoly, is, if pos- sible, to discover a temporary substitute for the same article. It might be difficult to find an effectual substitute for wheat, hay, and many other things ; but for the precious iuetals, our necessities during the late war did force us upon the discovery of a substitute as effectual as that of steam for physical labour. The system by which this was done is admitted to have been imperfect, inasmuch as the substitute for 33 our home circulation was devoid of the means of a legal convertibility into the currency of other nations, even after the cause of the original scarcity had ceased ; and, to follow out the simile, it resembled the steam-engine with- out its regulator. To secure all the benefits of the new system, and to remedy its defects, should have been the object of the Parlia- mentary Committee of 1819; but, instead of supplying a regulator to the system, agreeably to the wise suggestions of the most experienced credit-engineers — men who by their firmness had preserved the engine when the ministers of the Crown, under the pressure of the late war, would fain have overstrained its proper power — they recommended a law, which, being passed, leaves the Directors of the Bank a dis- cretionary power to do injury, but deprives them of all power to avert it when attempted to be inflicted by others, and has ever since kept our credit machinery vacillating between the opposite extremes of being either perfectly useless^ or poiverful only for mischief ; — while the authors of this ill-judged law have not failed to charge the mischief either upon the original system, or the e.vcessive industry of the people, and not, as they ought to have done, upon their own obstinate and injudicious interference with that credit system, which, under wiser D 34 management, would have become a permanent benefit to the nation. An alleged depreciation of bank notes from excessive issues, and the desire to prevent a re- petition of the evil, was the popular plea for the passing of Peel's Bill. Many of the Political Economists of that day assumed that the Direc- tors of the Bank had been foolishly anxious to FORCE their notes into circulation, and that the high price bullion attained towards the close of the war was to be attributed to their indiscre- tion ; but the ministers of the crown could not be ignorant of the fallacy of the charge — they must have known, from their own correspond- ence with the bank, since published, that the managers of that establishment had been most RELUCTANT to part with their notes even to the government ; and facts on record show that the high price of bulliott towards the close of the war ought to be attributed to the watits of our armi/ abroad, rather than to any e.vcess of bank notes at ho??ie. In the year 1813, such was the demand for specie for the army in Spain and Portugal, that our government was compelled to buy it at almost any cost ; and at one time gold was esti- mated, relatively to the pound sterling, at£5. 12s. per ounce. When our troops began to return home, and our own government ceased to be buyers, the price rapidly declined to £4. 5s. per 35 ounce. No doubt, in the natural course of things, the mercantile value of gold would soon have fallen to our legal value ; for no nation be- sides Britain had aught to give in exchange for it ; but no sooner did Napoleon make his re-ap- pearance in France, than a necessity was again imposed upon our government to become buyers, and the price immediately got up to £5. 6s. per ounce. Alter Napoleon's defeat at Waterloo, the price declined almost as rapidly, until in the month of May following it stood at £4. per ounce, which, allowing for the worn state of the old guineas, was probably as low as the legal value attached to it in our present coinage. No corresponding change in the amount of bank issues can be found to justify this varying price of gold ; and that those sadden variations were totally uninfluenced by the amount of bank issues, is farther evident from the following facts: — Gold is quoted at £5. 10s. per ounce to- wards the close of 1813; and the amount of bank notes in circulation at the same time was only £23,844,050. At the end of 1814, the go- vernment demand for gold having ceased, the price of it had declined to £4. 6s. 6d. per ounce, and yet, in the mean time, the amount of bank notes had increased to £28,232,730. Again, in 1817, when the price of gold had declined nearly to par, bank notes had further increased to the D 2 36 sum of £29,543,780. These facts are so incon- sistent with the assumption that the high price of gold was occasioned by an excessive issue of bank notes, or that the price of gold should be taken as an inde.v of the depreciation of bank notes, that, surely, no impartial person, having access to these facts, can remain under such a delusion. You, Sir, I have no doubt, will well re- member that, during the whole course of that time, when such great fluctuations were con- tinually taking place in the price of gold, our home monetary transactions went on uninter- ruptedly — the bank-note was the uniform repre- sentative of the pound sterling ; and scarcely one person in a thousand, except bullion dealers, knew, or cared to know, how much the market price of gold was constantly varying. This happy ignorance is worthy of the special observation of statesmen : and though I hope similar circum- stances may never again cause the like fluctua- tions ; yet, as you have shown, and this letter is intended to show, that other circumstances may produce great and sudden changes in the value of gold, so every statesman would do well to profit by the e.vpedient which was at that time forced upon us with such beneficial effects. I beg then to repeat, that the main object I have in view, is to obtain, for our domestic use. 37 a CREDIT circulating medium, as free from foreign control as that which existed during the late war, and yet that this medium shall always be equitably convertible into specie, and consequently into the currency of any foreign country. A British credit currency possessed of these properties, and relieved from those sudden and frequent checks to which it must ever be liable under our present impracticable system, would not only be quite as valuable as gold in our home circulation, but would be pos- sessed of an equal value in many cases abroad. For instance, where foreign states have divi- dends to pay for loans contracted in England — where foreigners want to transmit money for purchases made in this country — where Custom House duties have to be paid on foreign merchandize brought into our ports j — in fact, with the balance of trade in our favour to the degree which British skill, capital, and industry ought to make it, and would make it, under a statesman endowed with the genius of com- merce like the late Mr. Pitt, — British notes, no matter whether they were called *' Treasury,'''' ''Exchequer,'' or ''Bank of England"" notes, would constitute a medium of exchange for almost every part of the commercial world, not less valuable, and sometimes more so, than our best gold money. Under this, system it would 38 cease to be in the power of three or four capitalists, for their private gain, to control and derange the bullion market : that control would then be vested in the whole body of British merchants, as the natural consequence of this nation being able to export a larger portion of valuable commodities than any other country. But I fear Sir Robert Peel is not the states- man under whose ministry this great good for Britain can ever be accomplished. To effect the desired object. Sir Robert must admit that he did wrong in not following his father's counsels, and those of the Bank directors, in 1819; and therefore his prejudices are against us. His notions, too, of manufactures and commerce must be radically defective, or he never could have attributed the distress of this nation, in any degree, to an excess of its manu- facturing power. Last year, in his speech on the Sugar Duties, he stated our Exports— For 1839 to have been £97,000,000 in ojficial value, and .£52,700,000 in declaimed \2i\ne. For 1840 to have been £102,000,000 in official value, and £51,000,000 in declared value. Thus showing that in the latter year we had exported about ^ve per cent. 7nore goods and realized three per cent, less money for them : and upon the strength of this statement he is repre- 39 sented as saying, that " he certainly entertained undiminished hopes of the revival of our trade." Neither Sir Robert's father, nor the late Mr. Pitt would have been deluded into such a belief. They would have thought that a nation thus progressing backwards, rather resembled those tradesmen whose case appeared in the papers a few weeks ago. The parties had been three or four years in business, selling goods all the time for 20 or 30 per cent, less than they cost, and, as a natural consequence, finished their commercial career by appearing in the Gazette. In parlia- ment the other evening, Sir Robert, in replying to another member, said he had been thirty years a member of that House, but had never before heard that commerce could be carried on without profit to somebody. If he were a tradesman he would find it difficult to discover how either individuals or states can ever derive profit from a foreign or a home trade, carried on upon such principles as the above. Sir Robert, in his interviews with commercial men, seems more alive to their ignorance of the art of logic and the skilful use of words, than to t\\e\x practical knowledge in matters of business. On the other hand, Mr. Pitt, in similar cases, appears to have been regardless of the imper- fections of the parties, intent only upon extract- ino- from them whatever information their station 40 in life might have titibrded them, probably not expecting any man to know every thing. There is a story toid of Mr. Pitt, in his younger days, that an eminent tea dealer, as one of a de- putation, having had an interview with him, was asked by a friend, what he thought of their young minister. " Thought of him!" said the old tea dealer; "why, if I could get such a young fellow into my counting-house, 1 could afford to give him a thousand a year.'' I ques- tion whether Sir Robert Peel's commercial talents would ever have called forth such a remark. His talents, great os they unques- tionably are, are quite of a different kind. They evidently belong to the bar, rather than to the Exchange or to the merchant's counting-house. In a difficult law case, Sir Robert's services would be pre-eminently valuable ; and, could he have another Pitt at all times for his guide and counsellor, on manufacturing, commercial, and monetary affairs, his talents would be most valuable in the government of a nation ; but without a thorough revolution in his opinions upon those branches of the public service, and espe- cially the hist, I fear, nay, I am fully satisfied, it will never be in his power to extricate this nation from her present difficulties. It is evident that Sir Robert has not faith to believe that legislation can remedy the distress 41 of the people ; and therefore no great good can be expected from his prescriptions, although he has been " feeling the nation's pulse " for seve- ral months, and no doubt deeply investigating his patient's condition. Were his remedies deserving his confidence, he would doubtless have more faith in their virtue than he manifests. The "Great Western " would never have crossed the Atlantic, if the projector of that magnificent steamer, and the captain who commanded her, had not felt perfect confidence in their power to execute their respective tasks. Neither can our vessel of state ever be carried safely through the rocks and breaJiers with which she is at present beset, unless a pilot can be found, who, having caught the mantle of our immortal Pitt, clearly perceives the course he ought to steer, and has faith to believe he can bring her safely into port; but Sir Robert's hopes appear to extend no further than keeping the vessel afloat by increased taxation, trusting to time and acci- dent for the effectual relief and final deliverajice of the people from their distress. Though I believe the counsels of Sir Robert Peel have contributed greatly to bring the nation into its present perils, yet I can assure you, my dear Sir, that there is no one that would rejoice more than myself to behold Mr. Pitt's mantle descend upon Sir Robert Peel, and to see him 42 enjoy the distinguished honour and happiness of extricating the British nation from all those troubles with which she is, and has so long been, needlessly surrounded. I beg to remain, dear Sir, Your faithful and humble servant, James Taylor. POSTSCRIPT. Since writing the above, I have seen Sir Kobert Peel's speech on the introduction of a property or income tax ; and it must be con- fessed, that however inferior to the late Mr. Pitt Sir Robert may be in devising means for the people wherewith to fulfil their tasks, he is quite equal to his great predecessor in his ability to add to their burthens. The public are justly alive to the unfairness of taxing an income of £200 a-year, whether derived from land worth thirty years'* purchase, or from the casual profits of a trade not worth three years' purchase, or of a profession not worth one years purchase, at the same rate; but this inequality is a trifling grievance, when compared with the hateful inquisitorial power which must attach to this tax, if enforced upon professions and trades. And for what is all this additional burthen and cruelty to be inflicted upon the people ? For what, after twenty-seven years of peace. 43 are three or four millions of additional taxes required ? Why, truly, as a further expedient to bolster up Sir Robert Peel's currency blunder of 1819 ;— to patch up a system which requires the people to make " bricks ivithout straw ;" — to give a temporary prop to our 7iatioual revenue, which, as we have seen, Sir Robert was forewarned would probably be ruined hy his oivn injudicious monetary measures The same indiscreet boldness which prompted Sir Robert Peel to legislate upon the Currency Question in 1819, in opposition to the admoni- tions of his own father — of the counsels of many of the oldest and most wealthy bankers and merchants of London — and of the expe- rienced men who at that time governed the bank— appears to have prompted him, upon the present occasion, to set the opinions of the great body of the English people at defiance. He has scarcely announced this most impor- tant tax, before the resolutions founded thereon are to be proposed for adoption. The resolu- tions being adopted, the people are told their petitions against the tax cannot be received. This mode of stifling the voice of the British people is so utterly at variance with the spirit of the British constitution, that if Sir Robert wished to increase the power of the Chartists, he could scarcely have taken a more effectual way of doing it. 44 At the end of this pamphlet will be found the late Sir Robert Peel's speech against his son's '* Bill" in 1819. The son seems fully alive to the weight which ought to attach to his own opinion on matters of finance, in consequence of the eight or ten hours' daily study he has given thereto. By the same rule the counsels of his father, who had spent a long life in the successful prosecution of financial matters, and had been for forty years experienced in parlia- mentary affairs, were doubtlessly entitled to greater deference than they received from thai son, who was, comparatively, beginning his parliamentary career. But let Sir Robert now realize his father's fond hopes — let him return to the ** path of propriety," from which he unhap- pily deviated in 1819, and he will soon find an abundant revenue without any additional taxes. By a judicious currency system, the interest on Exchequer Bills, amounting to about £800,000. annually, might be immediately saved to the Government ; but this would be a trivial gain compared to that which would soon arise from the increased means the people would enjoy of consuming taxed commodities. October, 1830. TO THE HONORABLE THE COMMONS OF THE UNITED KINGDOM OF GREAT BRITAIN AND IRELAND: The Petition of James Taylor, of BakewelU in the County of Derby ; HUMBLY SHEWETH, That it was stated in the last Session of Parliament, by the Lord High Chancellor, that Credit Engagements to the amount of Five Hundred Millions of Pounds Sterling had been liquidated in the course of one year by only four London Bankers, and that the further amount of One Thousand Millions of Pounds Sterling had in the same time been liquidated by twenty others of the London Bankers, making a total of nearly double the gross amount of our National Debt; from which statement some idea may be formed of the very great amount of the money transactions of this country. That these transactions, though by courtesy gene- rally liquidated in Bank Notes, or Balances of Credit, are legally payable in the Gold Coin of the Realm only. That the amount of this Gold Coin in active circu- lation bears so inadequate a proportion to the Credit Engagements which are constantly in course of payment, that a sudden demand in the market for Two or Three Millions, places in jeopardy the credit of many other- wise trustworthy individuals; and experience has re- peatedly shewn, that the Abstraction from Circulation 46 of Six or Eight Millions of this the only legal Money, imposes such a restraint upon the issue of Bank Notes, as to create a general Panic through the country, and a Ruinous Depression in the money-value of every species of property. That, in addition to the natural causes, such as a Failing Harvest, or Foreign Wars, which occasionally produce large demands for Specie, it is apparent to your Petitioner that the same effect may be produced by a few speculative men of large capital, whose object shall be, in the first place, to withdraw capital from the Funds, and for a time to employ that capital in Bank deposits, or in taking up such other securities as shall give to the holders a legal right to make an Absolute Demand for a specific quantity of Specie at their pleasure — then to apply the power thus obtained in giving a check to Credit; and when, by this course, they have restrained the cir- culation, and, as a consequence, greatly depressed the value of Government Securities, then to re-invest the capital in them. Supposing an operation of this kind to have preceded the panic of 1825, a reference to the prices of Government Securities at that time will shew, that the Speculators would, in the course of a few months, have added Twenty per Cent, to their Annual Income. That there are times when it is in the power of a few individuals to monopolize Specie, and to produce the effects here described, is further confirmed by the Evi- dence of Mr. Baring, before the Committee for Coin at the Board of Trade, 26th of April, 1828, who having stated, that there are persons interested in thwarting the Bank, and preventing its supply of Gold, says : — " A large Capitalist might do this with effect ; a Combi- " nation of three or four might do it almost with cer-^ 47 ** tainty ; and it should be here stated that the Banks of " France and Amsterdam both make advances at a very " low rate of interest, on the deposit of Gold: I believe, " they advance the value less 10 per Cent. By this " means ;£ 100,000 would lock up a Million, and One " Million would lock up Ten." Mr. Baring adds — " It will easily be seen what advantage this circumstance " affords for the Combination I have mentioned." That, under these cii'cumstances, and with recent facts before them, it is to be expected that Bankers generally, and such Capitalists as are averse to specu- lation, should feel it needful constantly to keep a large Balance of Credit in the Bank of England ; and that the Bank of England, for its security against these demands, should likewise feel it needful to keep constantly in store a large quantity of Specie ; and that thus, whilst Dormant Money abounds, the Circulation should languish, and the able-bodied labourer and ingenious artisan be left to pine away for want of employment. Your Petitioner therefore humbly prays, that your Honourable House would be pleased to take this subject into your serious consider- ation, with a view to devise some means by which the continuance of Cash Payments may be secured, and yet the nation be relieved from that unfair and unnatural control to which its Credit Engagements are now liable. And as one mode of attain- ing so desirable an end. Your Petitioner respectfully submits the following Plan to the consideration of Parliament, 48 THE PLAN. First, That Bank of England Notes be made a legal tender for all payments of the value of one pound and up- wards. Secondly, That the Bank Directors be required to pay their notes, on demand, in Gold, at the market price. And in order to ascertain and publish the market price — Thirdly, That the Directors be required to give periodical notice of the price at which they will exchange their Notes for Gold ; and whatever price they fix, at the same price they be required to give Gold for their notes, or receive Gold in payment for the varioug debts owing to them. Such notice to continue in force till the stated period for its renewal. Fourthly, That the Public be always entitled to take Gold to the Mint, there to be coined for them, agreeably to the present standard, and that a Sovereign of due weight be always deemed a legal tender for an en- gagement of one pound sterling ; so that Foreigners, as well as Englishmen, may at all times calculate upon Gold brought to England being at least ade- quate to the payment of credit engagements after that rate. Fifthly, That in order to save a needless waste of the labour of coinage. Bars of Gold, duly assayed and 49 stamped at the Mint, be allowed to constitute the medium of cash payments for all sums above one, two, or three hundred pounds, as may be agreed upon ; and that such Bar Gold be estimated at such a given rate per ounce less than coined Gold, as may be equivalent to the cost of coinage. For example, if coined Gold were SI. 17 s. lOld. per ounce, let Bar Gold be 3/. 17s. 6d. per ounce. Sixthly, That the same regulation be applied to large pay- ments of Silver, supposing it should, on inquiry, be deemed expedient to adopt the use of Silver as well as of Gold in large payments. Seventhly, That Country Bankers, &c. be always required to meet their issues and other engagements, either in coined Money or Bank of England Notes. Your Petitioner, conceiving that the foregoing Plan, or such other plan as the wisdom of Parliament may devise, having for its basis the establishment of an Agio, for the perpetual ad- justment of our Credit Money with Specie, would essentially conduce to the permanent welfare of this country, implores the attention of your Honourable House to the subject : and your Petitioner, as in duty bound, will ever pray, &c. [This Petition, with the following "Observations" upon it, was published in the Manchester Courier of Novem- ber 27, 1 830, and in several other Papers about the same time.] E 50 OBSERVATIONS. The success of the proposed Plan rests on the assump- tion, that SELF-INTEREST is the primum mobile of human action. The argument against the existing system is, that it offers a temptation to the individual to seek his private profit by measures eminently injurious to the community ; whilst the argument in support of the proposed plan is, that the individual pursuing his own interests would simul- taneously promote and secure the public good. The chief Objections to be anticipated against the plan are, that it would give to the Bank — 1st. Too great a control over the circulating medium; and 2ndly. A power of depreciating the value of their own Notes. To the first Objection it may be replied, that the Bank already possesses sufficient power over the circvdation to do mischief, if such were the object of the Directors; but not sufficient power to avert it, if attempted to be done by others. The same effect which it has been shewn might be produced upon the money value of Government Secu- rities, &c. by a few speculative capitalists, might even noio be much more easily produced by the Bank ; but the Directors, being responsible to the country for the fair exercise of their power, and, moreover, the majority of them being, in their private capacity as citizens, more interested in the general good than in the private profits of the Bank, it would be unreasonable to fear such a wilful 51 abuse of their power. The case is quite ditfereut with private speculators, citizens of any country to which they may choose to transport their gold. Comparatively un- known, and too often insensible to public censure, where the acquirement of great wealth is concerned, they may attain their end in defiance of the Bank ; and yet through its instrumentality. It is true, the Directors have the power of averting ruin from their own Establishment; not, however, by causing it to recoil upon the speculators, but by throwing it upon the community ; and thus the public are made to bear the loss, whilst the Bank bears the odium, and the speculators carry off the profit. By the proposed plan the Bank would have the power of thwarting the speculators, and thus of protecting itself and the public at the same time ; so that, if the plan gives any increase of power to the Bank, it is merely power to do good in addition to the power it already possesses of doing evil. The control of the Bank over the circulating medium would however be always subject to the influence of Merchants importing the precious metals, getting them coined at the Mint, and paying them away as money — an influence sufficient to make it the interest of the Bank to withdraw its notes, and to use gold whenever the precious metals should flow in too abundantly ; or otherwise to accumulate the gold in their coffers until it were wanted : and when any extraordinary export of specie should take place, whether for warlike purposes or for corn, then to supply the chasm with Bank Notes until the natural course of Trade should bring the gold back again, so as at all times to keep the circulating medium as steady and uniform as possible. The second Objection is founded upon a mistaken view of the interests of the Bank — a mistake sanctioned by the authority of Mr. Ricardo. The Bank Directors, under the 52 proposed plan, would undoubtedly have the poicer of de- preciating the value of their own notes, but would they have the inclination ? Certainly not. For to depreciate the value of Bank notes, would be to depreciate the value of the Bank Capital, inasmuch as the engagements due to the Bank exceed those due from it ; so that it would be as rational to suspect the manufacturer of a design to diminish the value of his own productions, as to suspect the Bank Directors of a wish to diminish the value of Bank notes. Circumstances like those which occurred during the late war, might, contrary to the interests of the Bank, compel a diminution in the metallic value of the note, or in other words, a rise in the value of Gold relativelv to Bank notes ; but this, supposing it to be the case, would be infinitely better than a Bank restriction ; and every one, at all conversant with the money question, knows that this must be the alternative to the present system^ if a war were to break out before an alteration were effected. To permit a possible rise of the price of gold in Bank notes, would secure the country against an inconvenient efflux of the precious metals, and encourage, in lieu thereof, an exportation of the products of British Industry. 53 The LATE Sir Robert Peel's Speech on pre- senting the petition of the Merchants^ Bankers, and Traders of London to the House of Com- mons, May 19th, 1819, against his Son's '"'Bill.'' " Sir Robert Peel said, that he now stood in a situation which he had never experienced before, although he had sat in that House forty years. The petition which he was about to submit to the House was from a body of men entitled to the very first consideration — a body of men who, in the time of public distress and pecuniary want, were the very first to come forwax'd and relieve the government. He should wish to call to the recollection of some members, who he believed now heard him, whether they did not re- member a meeting of the merchants and bankers called in 1797 ? At that time the Bank Restriction Act was pro- jected, and could not have passed if that very meeting of the merchants, manufacturers, &c. had not expressed them- selves strongly in its favour. He begged the House would pay particular attention to the petition which he now held in his hand. It was one of no common character, but that of a great and important body, all of the first respectability, praying that those resolutions which were intended to be submitted to the House might not be carried into effect. He begged leave to state his opinion, that the petitioners were the best judges of such a measure. He would add also, that although they were intimately connected with 54 all that concerned the welfare of the country, the most experienced men, and the best qualified, from their con- nection with our manufactures and commerce, yet they had not been examined by the committee ; he hoped, therefore, that before a measure so destructive of the com- mercial interests of the country was passed (and when he said that, hon. members would conclude every other interest to be combined with those, and to go along with them), the House would pause awhile, in order to collect that information which they so particularly wanted. In looking at the reports which had been published on the subject, he must say, that the witnesses were not men likely to give any information to government, not men acquainted with the state of the country ; the last men who should have been questioned if government wanted to arrive at the merits of the case. In attending lately a meeting in London, he begged it might be understood that that was the only one he was ever interested in, except the meeting of 1797, and the latter one was considered of con- sequence enough to have saved the country. If, then, that was a meeting which deserved the attention of the House, he hoped the present one, which originated this petition, would be considered as equally entitled to it. He hap- pened on that occasion, however, to be in company with some whom he could not deem the best friends of their country ; but he should not do justice to two persons who attended there, Messrs. Wooller and Hunt, if he did not say that they behaved in a manner the least disorderly in the world, which he attributed to their new and singular alliance with His Majesty's ministers, for they supported the measure in question : they inveighed against any attempt at deferring the period of resuming cash pay- ments. He must confess that the circumstance, so new, of 65 tliese men being supporters of the administration, consti- tuted the outline of a very good caricature. To see the noble lord and his hon. friends on the one hand, and Messrs. Hunt and Wooller on the other, united in their attempt to pull down the mighty fabric erected by the immortal Pitt, was at once ludicrous and painful. He would implore the House to pause before any rash step was taken which might forward such an attempt. He really thought the resolutions were of a very extraordinary character. It was true that he should have to oppose a very near and dear relation. But while it was his own sentiment that he had a duty to perform, he respected those who did their's, and who considered them to be para- mount. The gentlemen who opposed him at the meeting of which he had spoken, were rather indignant at his men- tioning the name of Mr. Pitt. His own impression was certainly a strong one in his favour ; he always thought him the first man in the country. All of us had some bias, and he should not quarrel with those who preferred some other name. He well remembered, when that near and dear relation was only a child, he observed to some friends who were standing near him, that the man who discharged his duty to his country in the manner in which Mr. Pitt had, did most to be admired and was most to be imitated : and he thought at that moment, if his own life and that of his dear relation should be spared, he would one day present him to his country to follow in the same path. It was very natural that such should be his wishes, although those who did their duty might at once be contented with their con- duct. He was well satisfied that the head and heart of that relation were in their right place ; and that though he had deviated a little from the path of propriety in this instance, he would soon be restored to it. He had entered 56 more largely into the subject than he had intended; any other observations he should reserve to a future oppor- tunity, and conclude by moving that the petition be brought up." [The two clauses which are given in the title page of this pamphlet contain the essence of the petition.] Prinffd by J. Werllieimer nnd Co., Circus Tlace, Finsburj Circus. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. Form L9-32m-8,'58(5876s4)444 UC SOUTHl-KN Rl GlONAl LIBRARY fACILITY AA 000 568 163 o HG 938 T21m