“Then what security is there against an inundation of promissory notes that may never be paid?”
“None whatever, but in the honour of the Directors of the Bank of England. There appears to be good ground for trusting in this honour; but a better security ought, in a matter of such paramount importance, to have been provided long ago.—But we have not spoken yet of the Act of Restriction; only of the Order in Council.—As soon as parliament met, a committee inquired into the affairs of the Bank, and found them in very good condition; and parliament therefore decreed the restriction to remain till six months after the conclusion of peace.”
“But there has been peace since that time.”
“Yes; and there will be another, very likely, before the Bank pays cash again. It is much easier to quit cash payments than to resume them; the temptation to an over-issue is so great when responsibility is destroyed, and especially when moderation at the outset has propitiated public confidence.”
“Then there was moderation at first?”
“For three years after the restriction, the issues were so moderate, that the notes of the Bank of England were esteemed a little more valuable than gold, and actually bore a small premium. Then there was an over-issue, and their value fell; afterwards it rose again; and it has since fluctuated, declining on the whole, till now.”
“And what are Bank of England notes worth now?”
“Less than they have ever been. So long ago as 1810, parliament declared that there had been an over-issue, and recommended a return to cash payments in two years; but four years are gone, and cash payments are not begun, and the depreciation of the Bank notes is greater than ever.”
“That is partly owing, I suppose,” said Fanny, “to the increase of country banks. Melea and I could count several new ones within our recollection.”
“At the time of the restriction, there were fewer than three hundred country banks in existence; there are now more than seven hundred.”