Blackwood's Edinburgh Magazine, Volume LXII., No. 381, July, 1847

by Various

Now whatever we may think of the extreme candour of the Right Honourable Baronet, it is perhaps rather too much to expect from human nature that an individual who has been the cause of all this monstrous mischief, should stand forward at once, and manfully plead guilty to the charge. Sir Robert Peel has not yet played out his full hand of political cards; and he is perfectly well aware that after such an admission, very few persons indeed would be inclined to cut in with him for a partner. In short, were he now to acknowledge himself in the wrong, it would be at the sacrifice of his sole remaining qualification as a statesman—the prestige of his financial sagacity. If he loses this, faint though the recommendation be compared with the far higher qualities of consistency and open dealing, he is indeed a bankrupt in his fame! Need we wonder then that he clings to his darling measure, with a tenacity absolutely startling when we reflect on his former degrading versatility? Need we wonder that he eagerly attempts to fasten the blame of the monetary pressure upon the railroad speculators, the Bank Directors, or any other body of men who can at all be brought into question? As to the Bank Directors, we quite agree with Lord Ashburton that it is most unfair to make them the scape-goats in this matter. Had they not been bound down by stringent statutory fetters—had they been allowed to use the common caution of every commercial dealer by measuring the amount of their accommodation by the known responsibility of their customers, there would have been no financial crisis. But Sir Robert, in his infinite wisdom, would not suffer them to retain the prerogative of thinking and rational beings. He made them mere machines for contracting the circulation, and prohibited them from supporting credit: and surely they are not blameable if they shaped their conduct according to the clear letter and distinct direction of the law. In dealing with the railway shareholders Sir Robert Peel cuts even a sorrier figure. He talks about absorption of capital and over-trading, as if these things had in reality any thing to do with an arbitrary restriction of the currency. Now we do not require to be told that there is a certain limit at which accommodation must stop; but we maintain that it is the function of the banker to decide when that limit has arrived in the case of each particular customer. If a man has embarked the whole of his available capital in undertakings which are not yet profitable, or which do not speedily promise to become so, it is unquestionably in the option of the banker at his own risk to refuse or to increase his credit. But, as matters presently stand, not only has the banker no such option, but he cannot afford the required accommodation even to parties whose capital and property are undoubted, for the very simple reason that the law, as amended by Peel, deprives him of the means of doing so. If gold goes out of the country, from whatever cause, the issues must be correspondingly contracted. And is it expected that the whole ordinary business of the country can be conducted with something like one half of its usual amount of circulation? It will not, we presume, be denied by Sir Robert Peel and his Whig financial adherents that the increase of internal railway enterprise, and the vast additional labour which it may be said to have created, require a larger amount of ordinary circulation than in the year when the Bank Restriction Act was passed. And yet, not only have no means been taken to provide for such an expansion, but when the scarcity and drain arise, and the issues are arbitrarily contracted, our candid economists, instead of acknowledging their own normal error, have the coolness to attribute the pressure to the employment of labour at home! Had it not been for that labour and the expenditure of capital among ourselves, the situation of the working classes during the past winter, when the prices of provisions were so high, would have been lamentable indeed.

However, since the currency debate in the House of Commons, Sir Robert Peel seems to have changed his ground a little. It is curious to remark that, in all these financial discussions, the members of the present administration appear as absolute ciphers. They hardly profess to understand the question, but give their absolute faith to the doctrines of Sir Robert, who, with some two or three of his remaining adherents, is put forward to do battle, with the Protectionists and the mercantile party. The member for Tamworth is now desirous of falling back upon his old bullionist theories; and, with the utmost gravity, has invited a serious discussion upon the following subject of debate, “What is a pound?”

The object of this question is sufficiently clear. The astute ex-minister, finding himself so vigorously assailed on all quarters, for the absolute failure of his model banking act, and being unable to defend it upon any intelligible principles, would fain rake up a point upon which the opinions of his opponents differ, and so escape from the dilemma under a cloud of contradictory theories. It is an old device, and not a very creditable one; but we trust that, on the present occasion, it may prove utterly unavailing. The question is not now of the convertibility or inconvertibility of paper; for, if it were absolutely this, there are materials enough in Sir Robert Peel’s own banking measures to refute the notions which he professes to maintain as a principle. His own currency is not altogether based upon gold. Fourteen millions of the Bank of England’s paper is unrepresented by the precious metals; and yet every one of these notes is an actual engagement to pay the bearer of it in gold! Notwithstanding all the arguments of the bullionists, the plain matter of fact is just this, that the Bank of England, like every other institution of the country, is substantially based upon credit, and that it never had, at any one time, the means of liquidating its engagements by payments in specie. The issue, therefore, of paper, as it cannot be made to depend entirely upon the amount of hoarded gold, ought to have reference simply to the absolute wants of the community—wants which are, as all experience has shown, remarkably but inevitably variable, and which must be supplied in order that trade, and manufactures, and agriculture may go on, and that our internal products may adapt themselves, with out any difficulty, to the demand.

The question as to the real nature of a pound is useless at the present time. We are not now discussing the older banking acts, but the wretched abortion of 1844, which has led to this unnatural crisis. It is, in fact, a question which ought not to be mixed up with the others, because if, as Sir Robert Peel maintains, a pound is neither more nor less than a piece of metal of a certain weight and fineness, to which he, in opposition to the practice and experience of the whole world beside, has attempted to give a fixed unvarying price. He should in the first instance be prepared to defend it as the sole basis for every kind of representative circulation. In short, if his theory be correct, no banker should be permitted to issue a note, unless he has within his coffers a “pound,”—that is, a sovereign, to redeem it. Were the bullionists consistent, such indeed would be the proper result of their arguments, and the consequence would be, that at the present moment the legal circulation of England would have been something under ten millions. We shall not pause to demonstrate the absurdity of such a position, because it carries distinctly upon its face its own triumphant refutation. It follows therefore, and is admitted, that the basis of our circulation is mixed—part of it, which fluctuates, being the representative of these precious “pounds,” and the larger portion being based on credit, or inconvertible government securities.

What is the use then of arguing about a “pound,” when our paper, if called in, could not by any possibility realise it? We do not in the slightest degree deprecate the discussion at a future time; on the contrary, we most earnestly hope that the whole subject may engage the early attention of the next Parliament, for we are thoroughly convinced that the more it is sifted, the more clear and palpable will become the fallacies of our financial empiric. But we frankly avow our anxiety that he may not be permitted through such a begging of the question, to escape from his present difficulties. Let him show, if he can, that his Act of 1844 was the natural and inevitable result of his previous measures, and then we may be in a situation to condemn the whole of them together. But if it is not so, but a mere device of his own to show his admirable mechanical skill, let him defend it on its own merits. That it has acted banefully on the currency, no man can deny. It is quite clear that it has led to an enormous depreciation of property; and the very fact, that, notwithstanding the unprecedented pressure, the general credit has been maintained, is above all others the strongest proof that the pressure was utterly uncalled for. The point for immediate consideration simply resolves itself into this: are we to leave untouched upon the statute-book, a law which can at any time expose us to the inevitable hardship of a monetary crisis like the present?—Are we to continue and approve of an Act, the operation of which is, in certain circumstances, to drain dry the fountain of our currency, and that at the very time when an expansion of the currency is required? We do not want to hear from Sir Robert Peel, any more than from an itinerant lecturer, his definition of the nature of a “pound.” What we want is a fair current representative for our property, without an adequate supply of which, that property becomes stationary and is depreciated. The depreciation of the last few months has, upon the most moderate calculation, swallowed up at least two years of the surplus capital of the country, and yet we are told that such a state of things is not only necessary but wholesome! We are quite aware that it is in vain to look for any remedy at the hands of the Whigs. They are at present in a state of most hopeless bewilderment on the subject; trusting in the first instance to Sir Robert Peel, and in the next to the chapter of accidents. A good harvest they think will be sufficient to remove all immediate difficulty; prices will again revive, and the monetary distress be forgotten. We pray most earnestly that the first part of their anticipations may prove correct, but we shall not on that account relax in our exertions to overturn a system which may at any moment expose us to the recurrence of a similar calamity.

With very few exceptions the whole of the public press is with us, and we can hardly believe that the intelligence of the nation is not adequate to work out its own relief. In fact, out of the House of Commons there is hardly a single man who does not reprobate the continual tampering with the currency, which, next to his marvellous power of tergiversation, is the leading characteristic of Peel: nor would his measure of 1844 have been carried but for his confident puffing of the merits of his own machinery, and the almost universal belief in his talents as a financial minister. The bankers, and all those—who were familiar with monetary matters, and who, from long experience, were gifted with foresight and sagacity, not only entertained but expressed the most serious doubts as to the permanent working of the act. But all warning was rejected with scorn by our political dictator, who was resolved to have his own way; and at the present moment we are reaping the delectable harvest of our confidence.

We have already spoken, quite fully enough, of the manner in which the unanimous remonstrance of the Scottish bankers was received. The fact that their representation was backed by the unanimous voice of the public, beseeching that they might be left alone without any legislative interference, went for nothing in the eyes of Sir Robert. He had, to say the truth, too much power, and he never was chary in abusing it. He dealt with Scotland as if she were an insignificant colony, too ignorant to regulate her own monetary affairs, and too weak to resist any show of forcible aggression. In the plenitude of his rashness, however, he displayed the same disregard to public opinion in regulating the currency of England; and we shall now proceed to detail a very few of the several warnings which he has received.

In 1844 the following document was laid before him; and we surely do not exaggerate its importance when we say, that it proceeded from a body of men whose opinions, upon monetary subjects, were entitled to be listened to with the utmost respect and deference:—“We, the undersigned bankers of London, are induced, by the importance of the measure and our interest in its success, to address you upon the subject of the Bank Charter Bill, now before parliament. We were led to believe, when the measure was first brought forward, and we feel confident it was generally understood throughout the country, that although it was the intention of her Majesty’s government that the paper Circulation of the Bank of England, in their issue department, should be limited to an amount not exceeding £14,000,000, upon securities, yet, that in the event of any particular crisis arising, a power was to be reserved by the bill enabling the Bank of England, with the consent of the first Lord of the Treasury, the Chancellor of the Exchequer, and the Master of the Mint, to extend their issue upon securities beyond that amount. It is with considerable surprise that we find that the bill now before the House of Commons does not contain any provision for an extension of the issue beyond £14,000,000, upon securities, excepting under the special circumstances named in the fifth clause of the bill now before parliament. We are apprehensive that the absolute limitation of the issue to £14,000,000, without any power of expansion reserved, whether that amount be in itself a proper amount or not, will create a general feeling of uneasiness throughout the country, and, by preventing the satisfactory reception of the measure, will deprive the scheme of many of the advantages it possesses, and interfere with its success. We respectfully submit that the effect of such an absolute limitation will be to restrict the business of the country by leading to a general withdrawal of legitimate accommodation, unless some power be reserved by the bill for extending the issue with the sanction of the authorities above alluded to in cases of emergency, to be made apparent to such authorities.”

This memorial, to which were adhibited the signatures of every eminent banking firm in London, was treated by Sir Robert Peel with the most calm and imperturbable indifference. The warning and the danger so distinctly described and foretold had no effect in altering the resolution of the intrepid baronet. He had made up his mind to place the country permanently in commercial fetters, and no representation of the consequences would cause him to swerve from his purpose. It would have been well if at that time he had reflected with a little respect upon the opinions entertained and expressed by his own venerated father—a man of that sound sagacity and peculiar clearness of conception which are incomparably more valuable than talents of an adroit and plausible description. We wish that those few of his old supporters and adherents who are in the daily habit of diluting the monetary notions of their idol, would refer to the views which were enunciated by the elder Peel in his remarkable letter of 1826, addressed to the members of both houses of parliament. It is surely not unfair to recall the words of the father as powerful evidence against the destructive theories of the son.

Sir Robert Peel, senior, writes thus:—"In the enlarged scale of business carried on by this country, embracing a great variety of pursuits, a reliance on a metallic circulation alone ever did, and ever will fail us. Gold, though in itself massy, often disappears in consequence of war or speculation—nay, the breath of rumour itself is sufficient to disperse it. Our domestic concerns are interrupted, and confidence lost, for want of an ample and approved medium of traffic.