"I am no friend to an unrestrained issue of paper money, and saw with concern, in the absence of a due quantity of specie, bills admitted into circulation issued by persons of respectability, possessing property, but evidently unable to meet a sudden and large demand upon them. More than two years ago, I mentioned to a friend, high in his Majesty’s councils, my fears of the mischief likely to ensue if the practice were not discontinued; accompanied with a suggestion to confine future issues of paper money or tokens to the Bank of England and other competent bodies of men, who would give security in land, the public funds, canals, buildings, or other tangible property, amounting at least to one-half of the value of their bills or tokens in circulation. My proposition was not favoured with any notice; yet, had it been adopted, I am of opinion that most of the panic and distress now so severely felt in the nation would have been avoided. If such an improvement in the banking system could be made available, gold would become less requisite, and the country be supplied with a stationary medium of exchange originating with ourselves.
"The present panic and distress in the country have been declared by high authority to proceed from ‘overtrading’ and ‘wild speculation.’ Infant nations and establishments are liable to miscarry from want of experience and solidity. Trading and SPECULATION, being natives of this island, and parents of our wealth and independence, are surely exempt from such an imputation. The same authority has declared, that ‘gold and paper money are incompatible with each other, and cannot exist together.’ The population and trade of the empire having been much increased, a proportionate increase in the medium of circulation is called for; and when gold is found insufficient, recourse must be had to paper, which if improved on the principle already suggested, the two substances would be found in the same pocket without disunion.
“Anxious to see our situation ameliorated, I trust the currency may be mended without changing or impairing the national commercial character—which measure, if resorted to, would resemble the policy of diverting from its course a powerful river that had long given fertility and happiness to a large district, merely because, from excessive rains, it had sometimes exceeded its natural limits, and produced partial injury.”
A sounder and a clearer view of the sole legitimate control which government is entitled, for security of the public, to exercise over the issues of the bankers, cannot be found than this. The elder baronet was fully alive to the gross absurdity of the bullionists who literally make toys of their coin. He recognised to its fullest extent the salutary principle that REAL PROPERTY is, after all, the only proper basis of circulation: and he would have laughed to scorn the idea of an arbitrary restricted issue, as the certain means of inflicting a paralytic stroke upon the energies and the enterprise of the nation. The total neglect of this view is the capital error of the son. He depreciates the value of real property, by depriving its possessor of the power to command at any time its cheap and commodious representative; and he forces us, under the most adverse circumstances to hunt for gold, and not improbably to humiliate ourselves in time of need, by an application to the hoarding Russian.
We entreat the public attention to the fact, that the banking system and mode of circulation suggested by the elder Sir Robert Peel, is in fact precisely that which was followed out by the Scottish banks, without failure, without complaint, and with incalculable advantage to the country, before the late premier commenced his wanton interference with our institutions. Heaven only knows what amount of suffering we must undergo until the public mind is thoroughly roused to the evils which have resulted from a weak and imbecile confidence in the nostrums of a theoretical minister, and until the money trade is freed from its present most odious restrictions. But we cannot, and we think we ought not, to conceal our conviction that the present monetary crisis is directly owing to the Restriction Act, and that the whole empire, and Scotland in particular, has reason to curse the hour when Sir Robert Peel thought fit to embark on his financial crusade.
We are glad to see such men as Mr Baring and Mr Newdegate protesting in the lower House, against the iniquity of the present system, and exposing its operations in detail. It is in vain that the Chancellor of the Exchequer—whose deference to the opinions of Sir Robert Peel is so ludicrously displayed—attempts to raise his voice in defence of restriction, and to attribute to other causes the deficiency which he cannot deny. Even Peel himself, as we have already remarked, is fain to blink the question, and to escape from the attacks of his antagonists, by the stale artifice of confounding and contrasting their opinions. The memorable debate in the House of Commons on the 10th of May, has, if we are not widely mistaken, established a principle which must lead to important party results; and we would earnestly beseech those who have the welfare of their country at heart, to make this matter of the currency a leading consideration in the use of their electoral franchise.
We have already shown the manner in which Sir Robert Peel was pleased to treat the respectful remonstrance of the English bankers, and the total variance of his financial views from those which were entertained by his excellent and honoured parent. We now take leave to draw the attention of our readers to a rather remarkable passage in Mr Alison’s late pamphlet, entitled “England in 1815 and 1845.”
We need hardly state our reasons for declining to criticise that work. We agree entirely with the views entertained by that eminent writer; and we should be happy indeed, could we state our own arguments with a force and a precision at all commensurate with his. Sir Robert Peel, however, in the course of the year 1845, thought proper to make this pamphlet the subject of his remarks, and concluded, more suo, with a sneer at Mr Alison, which, apart from its propriety, does not strike us as particularly clever. The point at issue was rather a trivial one; for Sir Robert, as usual, did not apply himself to the main body of the argument: he neither impeached the facts nor the conclusions of Mr Alison, but fastened upon an incidental point of no great value or importance. The attack, however, had this good effect, that it elicited a reply from Mr Alison, in which he points out so distinctly the results of the restrictive measure, that we cannot do better than transfer an extract from his Postscript to our pages. It is proper to observe, that this Postscript was published two years ago, and we leave the public to judge of the accuracy of M. Alison’s observations:—
“Whoever,” says he, referring to the Banking Act of the preceding year—"whoever considers these provisions with attention, will see that they practically introduce two things: 1st, A limitation of the issue of Bank of England notes to £14,000,000 on securities, with the addition of the specie and bullion transferred to the issue department:—2d, A limitation of any further issue to the amount of such securities, bullion and specie. It is the avowed object of the Act to base the circulation of the bank on these three things. And the opinion of its supporters has been repeatedly expressed that they constitute the only safe foundation of banking operations. If, therefore, the specie is drawn out by the holders of notes who are declared entitled by the Act to have their notes paid at £3, 17s. 10½d. an ounce of gold, it follows, of course, that the notes in circulation must be diminished in the same proportion. They cannot issue notes beyond the £14,000,000, except in exchange for specie or bullion—the most effectual of all ways for limiting the issue to their amount.
"Now, suppose a bad harvest, such as we have narrowly escaped, occurs, when undertakings of a gigantic nature are on foot, and a large quantity of specie is drawn from the bank to purchase foreign grain or other subsistence, what, under the existing law, must be the consequence? Must it not be that the paper circulation of the Bank of England and of course of every other bank, will be simultaneously and rapidly contracted? Their own notes pour in to be exchanged for specie to buy foreign grain, or make the necessary remittances to foreign undertakings. They cannot issue new ones beyond the £14,000,000, except in exchange for specie or bullion, which is the very thing they are every day losing, and which is bought up in all parts of the country for foreign exportation. The result is inevitable, that their notes must be called in as rapidly as the sovereigns go out. The screw must be put on; the circulation must, at all hazards, be contracted. If £10,000,000 of sovereigns are drawn out to buy foreign grain, or to meet a demand for gold in foreign states, £10,000,000 worth of notes must be drawn in to equalise the paper with the stock of gold and silver above the £14,000,000 authorised to be issued on paper securities. The circulation will thus be diminished by £20,000,000, or nearly a third of its amount, and that at the very time when the public interests most loudly call for its extension.