' rate of interest upon his unfunded debt, instead of charging an increased rate of discount upon commercial bills.'

It is certainly true, as Mr Palmer has remarked, that from September to the present time (30th March) no bullion, or next to none, has been demanded from the Bank for foreign remittance; but this, though an extenuation, does not seem to be any good justification of the refusal of the Bank to raise the interest. The deficiency of her treasure made it the bounden duty of the directors to persist, as far as possible, in a systematical, undeviating course of contraction, till bullion had begun to flow in a full continuous stream into their coffers. Had they been in possession of eight or ten millions of bullion, there would have been nothing to censure in their keeping interest at 5 per cent.

After all, however, it is most probable that the exchange will speedily become favourable; and that the Bank will be able to accumulate a sufficient stock of bullion without farther reducing her issues or raising interest. The fall that has taken place in the price of most articles since the first rise in the rate of interest, must, by fitting them the better for the foreign market, tend to bring about this result; which will be still further promoted by the shock given to credit, and the check to importation from abroad. These, no doubt, are merely probable events; and many things may occur to hinder them from being realized. We do not, therefore, think that this is a case in which success should atone for the omission of any thing that might have been done to render it more secure. We grant that the Bank could not help coming forward to the assistance of the American houses; but we think she should have counteracted whatever tendency to increase this might occasion by a corresponding action on the other side; that is, by raising the rate of discount and making money dearer.

4

On the whole, therefore, looking at the conduct of the Bank of England and the provincial banks, from the 1st of January, 1836, it appears to be sufficiently established

First, That the excessive and unprecedented multiplication of joint-stock banks in the early part of last year, their competition with each other and with the previously existing banks, and the addition they made to the existing mass of money and of the substitutes for money, was the sole cause of the unfavourable exchange and of the heavy drain for bullion that began to operate upon the Bank of England in April, 1836

Second, That though the Bank of England erred in not taking measures in anticipation of the drain, her measures to stop it after it did set in were judiciously contrived, and occasioned its cessation by the 1st September

Third, That the Bank of England is not to be blamed for not reducing her issues in consequence of the discredit in Ireland in November, and the consequent drain of bullion to that part of the empire; and

Fourth, That the conduct of the Bank since October or November seems, except in the case of the American houses, to have been determined too much by a regard to the supposed exigencies of commerce; and that there has not been that steady effort to contract her issues in order to occasion an influx of bullion, which the inadequate supply of treasure in her coffers rendered imperatively necessary.

If we be right in the above conclusions, it follows that we have no security, unless some radical change be made in the law relating to joint-stock and private banks, against the recurrence of a state of things similar to that we have just witnessed; or it may be one much worse. We have already seen that during the whole period from April to September, when the exchange was notoriously against the country, and the exportation of bullion was discussed in every newspaper, the joint-stock banks went on increasing their issues at a rate that would have been most unwise even had the exchange been greatly in our favour. Mr Loyd seems to think that some excuse may be found for this conduct in the defective returns laid before the public by the Bank of England. But these returns, how defective soever in other respects, proved distinctly, that the stock of bullion in the coffers of the Bank was progressively diminishing; and though the managers of the joint-stock banks might not be aware of the extent to which the town issues of the Bank were reduced, the rise in the rate of discount from 4 to 4, and then to 5 per cent, must have satisfied them that the Bank was alive to the danger, and was endeavouring to obviate it. The more, indeed, that the subject is enquired into, the more idle will be found the attempt to establish the paper currency of the country on sound principles, unless the power to supply it be confined to one issuer. Suppose that, owing to any circumstances, the currency becomes abundant, and that the Bank of England is obliged to contract her issues: in such a case, the country bankers see, speaking generally, that they ought also to contract; but being a very numerous body, comprising several hundred establishments, scattered over all parts of the country, each is impressed with the well-founded conviction that all that he could do in the way of contraction would be next to imperceptible, and no one ever thinks of attempting it so long as he feels satisfied of the stability of those with whom he deals. On the contrary,

every banker knows, were he to withdraw a portion of his notes, that some of his competitors would most likely embrace the opportunity of filling up the vacuum so created; and that, consequently, he should lose a portion of his business without in any degree lessening the amount of paper afloat. Hence, in nineteen out of twenty cases, the country banks go on increasing their aggregate issues long after the exchange has been notoriously against the country; and when at length they are compelled, because of the altered state of things in the metropolis, to pull up, the chances are ten to one that the contraction is carried to an improper extent. A revulsion of this sort seldom occurs without destroying some of the provincial banks. We have already seen that the recoil in November destroyed the Agricultural Bank of Ireland, and the fall of the Northern and Central Bank might, but for the interference of the Bank of England, have proved fatal to sundry other establishments. We have had, and we may depend upon it we shall continue to have, if the present system be maintained, a constant alternation of glut and deficiency. At one time money is sure to be in excess, confidence blind and indiscriminating, and prices high; and at another time money is as sure to be deficient, distrust universal, and prices low. It is not easy to exaggerate the evils inseparable from such alternations; they go far to convert industrious undertakings into mere gambling speculations; and render it impossible, even for the most prudent individuals engaged in business, to form at any time any distinct notion of what may be their state twelve months hence. history of the country from 1790 down to the present day teems with examples of what has now been stated. It is, however, difficult for those not familiar with the circumstances, to form any adequate notion of the sudden and powerful operation of fluctuations, even in districts not peculiarly within the sphere of their operation. The following memorial may be referred to in proof of this,-Birmingham not being affected by any particular discredit. It was presented to Lord Melbourne in March last, and was signed by all the principal merchants, manufacturers, and traders of the town. The facts it communicates are in no degree exaggerated, and are equally striking and instructive:

very

The

My Lord,-We the undersigned merchants, manufacturers, and other inhabitants of the town of Birmingham, beg leave respectfully to represent to your Lordship the following facts :

66

1. During the last two or three years a very great improvement has taken place in the trade and commerce of the town and neighbourhood. The workmen have generally been placed in a condition of full employment and good wages, producing a general state of satisfaction and contentment among them. Their employers also have enjoyed a condition

VOL. LXV. NO. CXXXI.

F

of ease and security which might be called affluence when compared with the losses, difficulties, and anxieties, which they endured for several years before. No stock of goods was accumulated-no over-trading of any kind existed; the products of one man's industry were readily exchanged for those of another, and all the products of industry in every trade were carried off into the absolute consumption of the people quite as fast as they could be produced.

"2. Suddenly, within the last three months, with all the clements of general prosperity remaining unimpaired, this gratifying state of things has disappeared, and has been succeeded by a general state of difficulty and embarrassment, threatening the most alarming consequences to all classes of the community. Orders for goods are countermanded and discontinued both for the foreign and home trade.

"The prices of goods are falling, so as in many cases to occasion a loss instead of a profit on their production. The process of production is thus obstructed; the workmen are beginning to be discharged, or to be placed upon short employment; and we are confident, that unless remedial measures be immediately applied, a large proportion of our population will shortly be thrown entirely out of employment.

"3. We earnestly solicit the serious and immediate attention of His Majesty's Government to this alarming state of things, confidently hoping that they will forthwith adopt decisive and effectual measures for its relief."

We do not know that any measures can be taken for the relief of the actual misery resulting from such a state of things; but certainly the legislature will most strangely neglect its duties, if it allow a system productive of such consequences to continue to spread its roots and scatter its seeds on all sides. So long as any individual or set of individuals, how bankrupt soever in fortune or character, may usurp the royal prerogative, and issue money without let or hindrance, so long will it be issued in excess, in periods when prices are rising and confidence high; and be suddenly and improperly withdrawn when prices are falling and confidence shaken. All the causes of fluctuation inherent in the nature of industry are aggravated a thousandfold by this vicious system, at the same time that it brings many new ones into existence. There is not, in fact, any reason for supposing, had our currency been either metallic, or made to fluctuate exactly as it would have done had it been metallic, that the difficulties in which we have been, and still continue to be involved, would ever have been heard of. The inordinate increase of banks, of money, and of the facilities for obtaining money in the spring of the last year, led to that increase of prices, to that multiplication of wild and absurd projects, and to that excess of confidence which distinguished that period; at the same time that, by bringing on a fall of the exchange and a drain for bullion, they insured that revulsion of which we are now feeling the ef

fects. If it be wished that the country should be kept for ever under an intermittent fever-now suffering from a hot and then from a cold fit, now in an unnatural state of excitement, leading to, and necessarily ending in an unnatural state of depression-the present money system is the best possible. But our readers, we are quite sure, will agree with us in thinking, that a fever of this sort is not more injurious to the animal than to the political body. So dangerous a disorder is not to be trifled or tampered with. This is not a case in which palliatives and anodynes can be of any real service. If a radical cure be not effected it will paralyse and destroy the patient.

Now, to accomplish this radical cure, that is, to make sure that the fluctuations of the currency shall not in future exceed those that would occur were it wholly metallic, it is indispensable that all local notes be suppressed, and the issue of paper confined entirely to one body. Nothing short of this can be of any material service. The exacting of security, previously to the issue of notes, would not hinder that competition among the issuers that is the bane of the present system; nor prevent their being at one time in excess, and at another time deficient. If we would provide for that unity of action, and that equality of value that is so indispensable, we must make an end of a plurality of issuers. If one body only were intrusted with the issue of notes, it might immediately narrow the currency when bullion began to be exported, and expand it when it began to be imported; and the legislature might enforce its observance of such regulations as would effectually prevent the fluctuations in the quantity and value of money ever exceeding those that would take place did it consist wholly of the precious metals. But nothing of the sort can be attempted so long as it is supplied by more than one source. Every thing must then be left to the discretion of the parties. And it will certainly happen in time to come, as it has invariably happened in time past, that some of them will be increasing their issues when they ought to be diminished, and diminishing them when they ought to be increased.

r

Mr Loyd, whose authority on all questions of this sort is so deservedly high, states distinctly that an adherence to sound ' principle would certainly lead to the conclusion, that the issues of paper money should be confined to one body, intrusted with 'full power and control over the issues, and made exclusively re⚫sponsible for the due regulation of their amount.'-(P. 52.) He is, however, disposed to think that the practice in this country of individuals and associations issuing notes has been so long established, and become so intimately connected with the habits and