its action to some certain law-thus fitting it to become the regulator of that of others. Hence it is that we have now the Bank Restriction Act of Sir Robert Peel, whose name is thus associated with two of the most remarkable acts in the history of the British monetary system, neither of which, however, can be regarded as affording any indication that he had given to the subject the attention demanded by its great importance.

The

Less than three years later, the scenes of 1825 were again exhibited a spirit of the wildest speculation, promoted by the bank, having yielded to one of universal panic. Consols then fell to 80, while railroad stocks declined to half their previous value. rate of interest rose to ten per cent.- the government itself being forced to borrow at five for the supply of its daily wants. Dealers in corn, cotton, and bullion were again proscribed; and thus were repeated once again the phenomena of 1816, '25, and '37. Deputations from the various cities claimed of the Minister a suspension of his law-assuring him that large orders remained unfilled for want of the means required for their execution; while operatives, by thousands, were standing idle, because of inability to sell their labor. The bank itself, with bankruptcy staring it in the face, was compelled to enlarge its loans when it desired to contract them there being thus exhibited, and for the third time in a single decade, the spectacle of a great institution aspiring to regulate the trade of the world, yet totally unable to manage itself. An order of council finally repealed the law for the time being thus furnishing conclusive evidence of the want of knowledge of the persons to whose influence the new system had been due.

Such is the condition of the people of England under the control of its great monopoly institution. They are dependent upon the chance measures of a body of gentlemen, no one of whom has ever yet been able to explain the principles by which he is governed in the administration of the powerful instrument in the management of which he is placed. All of them, in their capacity of stockholders and directors, have a direct interest in producing changes in the currency, because, by so doing, they lessen the public confidence, and thus increase the necessity for looking to their own vaults as the only place of secure deposit.

§ 8. The new system had failed to produce the effect desired having given no steadiness in the supply of money, nor in its value. By some, the fault was found in the law itself; but its author, of course, asserted, that if the bank had acted "in the spirit of the law of 1844," such difficulties could never have occurred. Ready to find the cause of difficulty in "the extraordinary spirit of speculation," he was well disposed to close his eyes to the real cause the radical defect of his own measure, which professed to regulate the action of the great machine, but failed to do so. Had it so done, the directors would have found themselves compelled to act in accordance with both its letter and its spirit; and there could then have been no such speculation as that which had just been witnessed. Had it so done, the difficulties naturally attendant upon short crops would not have been aggravated, as they were, by the total prostration of trade, the discharge of workmen, and the impossibility of obtaining wages to be used in the purchase, at any price, of the necessaries of life. The trade in money requires no more law than that in shoes. It demands, on the contrary, perfect freedom being so vastly greater in amount, that interference to the extent of half of one per cent., is productive of more injury than would result from an interference that should affect the price of shoes to the extent of a hundred per cent.*

Nevertheless, such are the penalties, prohibitions, and liabilities. imposed upon all who desire to associate for the purpose of utilizing the precious metals, and so numerous are the monopolies invested with the control of the money trade, that of all commodities theirs is most subject to sudden alteration in its value. The regulation of the currency is held to be one of the functions of the government; and, as has before been shown, for the reason, that it has at all times afforded to those in power a mode of taxation of all others the most simple and convenient. That of Great Britain has transferred it to the bank an institution by which the duty is so performed, that at one time money is cheapened, and the state is enabled to reduce the rate of interest on its debts; while at another it becomes dear, and those who have accepted

*Every contract for the purchase or sale of any commodity, or property, involves a contract for the delivery of a quantity of money equivalent to the price. The trade in money is therefore equal in amount to the sum of the prices of all commodities, and properties, and labor, sold.

new stock in exchange for old, find that they have parted with a considerable portion of their property receiving nothing in exchange. Lose, however, who may, the stockholders of the bank are always secure of receiving large dividends, while its directors are ever ready to furnish what they think should be received as good and sufficient reasons for such destructive changes. At one time, it is an enormous import of stocks from the Continent; at another, the influx of South American shares and stocks; at a third, vast loans to the United States; and, at a fourth, a deficiency of crops; but stocks would not come if the bank did not paralyze the action of the private capitalist by lending out his money and raising prices, and corn might be deficient without producing any material change in the value of money, except in relation to corn itself. The supply of sugar being small, the price of sugar itself would rise, and there would be somewhat less money to be exchanged against cloth, the price of which would slightly fall; and so, the supply of grain being short, there would be less money to be exchanged against sugar; but in no case would a deficiency in one commodity materially affect the prices of any other, were the currency not tampered with.

The true cause of difficulty is to be found in the fact, that the task of regulation is committed to one great institution, whose movements are wholly unregulated. Monopolizing securities at one time, it produces an apparent excess, and consequent cheapness, of money with rise of prices. Forcing them, next, back upon the market when much of this apparent excess has found employment in new enterprises, the scarcity then becomes as great as the previous abundance had been. It is a great flywheel in the midst of an infinite number of little wheels, all of which are compelled to go fast or slow as the great one may propel. These latter are the bankers, merchants, and manufacturers of Great Britain, all of whom have, more or less, been, for half a century past, engaged in studying the law which governs the motion of the master wheel, but as yet with such indifferent success, that we hazard little in asserting that there is no man in England, in or out of the bank, who would commit that law to writing, and stake his fortune on proving that it had been operative during any single year in the last half century. In despair of arriving at any comprehension of the laws of its action, all resign VOL. II. - 25

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themselves blindly to its influence-joint-stock and private banks expanding when it expands, and contracting as it contracts, an error of a single million in Threadneedle street thus producing error to the extent of hundreds of millions in the money transactions of the kingdom. Hence the necessity for subjecting it to fixed and positive rules.

The currency needs no such regulator, but if there must be such an one, its action should be rendered perfectly automatic — leaving it then to the proprietors of the little wheels, to use the gearing needed for enabling them to attain as much or as little speed as they might require. It should be acted upon by the community, instead of acting itself upon them, and then it might be consulted with the same confidence as the thermometer. The law that would produce this effect would not be that of 1844, which, with its cumbrous-and really ridiculous-machinery of banking department, and department of issue, was totally unfitted to answer the end proposed. It was framed with a view to changes in the amount of currency in use, which are ever slow, and small in quantity; while it contained no reference to changes in the currency seeking employment, always rapid, and great in amount.*

*It is curious to see in the evidence of eminent bankers the reasons adduced for thinking that deposits-convertible on the instant into notes or gold-are not as much currency as notes themselves. One among the most distinguished of the bank directors thought that they could not be so considered, for the owner "could not pay his laborers with them," nor could he do with them "whatever he could do with sovereigns and shillings." He thought, however, that they possessed "the essential qualities of money in a very low degree." The "essential quality of money" is that of facilitating the transfer of property, and that is possessed in a higher degree by the bank-note than by gold and silver; and in a still higher degree by the check than by the note-the owner of money on deposit drawing for the precise number of pounds, shillings, and pence required, and transferring them, without the trouble of handling or counting even a single penny.—It is curious, too, to remark the strong tendency existing in the minds of many of the witnesses, distinguished in the monetary circles of London, to confound notes of hand, and bills, with currency. A note is a contract for the delivery, at some future day, of a given quantity of money, or currency. Its value, in money, depending on the proportion between the money and bills in market, is just as much liable to variation as is that of sugar or coffee. If money is plentiful, and bills, coffee, or sugar scarce, the price of the article in which the deficiency of supply exists will be high; but if sugar, coffee, or bills be abundant, and money scarce, the price of the superabundant commodity will be low. Notes may be bartered for merchandise, as is done in England to a great extent; but an increase in the supply of notes in the market

although it may materially affect the credit price of commodities, or the price in barter for promises to deliver money at some future day-will make no change in their money prices, unless the notes can readily be converted

The one is in constant use among the great body of the people, and cannot be materially increased or decreased without a great change in the state of trade, or in the feelings of the community. The other represents unemployed capital, the property of the few. liable to increase or decrease with every change of weather, anɑ with every speck that appears in the political or commercial horizon.

§ 9. By the last charter, a sovereign, or, to a certain extent, its equivalent in silver, is required to lie in the vaults of the bank for every pound of its notes in the hands of the public, beyond £14,000,000. The circulation being an almost constant quantity -amounting to £20,000,000-£6,000,000 of bullion must, therefore, remain in the bank, not to be used under any circumstances whatsoever; and as valueless to the community, while so remaining, as would be an equal weight of pebble-stones. How far the circulation can, as a rule, claim to be treated as a constant quan

into money. In time of severe pressure, there is great facility in bartering merchandise for notes; but want of confidence induces the holders of the former to fix the prices very high, with a view to cover the cost and risk attendant upon the conversion of notes into the commodity that is needed, which is money, or currency-the thing with which they must redeem their own obligations. The term currency means money on the spot, and in England, with the exception of the silver coinage for small payments, nothing is recognised as such but gold, which passes from hand to hand, either by actual delivery of the coin, or by the transfer of the property in a certain portion of that which exists in the vaults of banks and bankers by means of private drafts, or checks; or by that of obligations of the bank itself, called bank-notes. A contract for the delivery of flour at a future day might, with the same propriety, be called flour, as a contract for the delivery, at a future day, of a certain quantity of the commodity which is current for the payment of debts, and which we call money, can be called money, or currency, itself.

The difficulties of the bank result from the fact, that, whenever speculation is rife, and men are anxious to make contracts for the future delivery of money, it facilitates their operations by taking their notes freely, and becoming responsible for the delivery of the money on demand; by which means its own debts, called deposits, are largely increased. If it has the money, all is well; but if it has not, it thus swells the imaginary amount of the currency, and prices rise. When the time arrives for payment, it commonly proves that both parties have been trading on their credit. The bank must be paid, or it cannot pay, and must become bankrupt. Having seduced the poor debtor to over-trade, by assuming to do that which it could not have done if called upon, it now ruins him for having yielded to its solicitations. Escaping by lucky accident, it speedily re-exhibits what is called "an increased liberality" in its accommodations-running again largely in debt for the purchase of securities.