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jkritfii 28, 1860. j The Leader and Satu...
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Note: This text has been automatically extracted via Optical Character Recognition (OCR) software. The text has not been manually corrected and should not be relied on to be an accurate representation of the item.
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Amendment Of The Bank Act, M He Quarrel ...
Money is the measure of value or of labour , as a foot or a yard Is ; a measure of a portion of space ; and accordingly all bank-notes , whether issued by individuals or the authority of the State * like goldsmiths' notes , promise to pay on demand a stipulated sum , or portion of this ineasure , five pounds , florins , livjes , roubles , or thalers , of the money of the country in which they are issued . Even when issued on the security of land , of commodities , or of . public debts , it is essential to bank-notes now as at the begiuiiiug , to make them convenient , that they should -rep-resent or promise to pay a stipulated amount of the common metallic ineasure of value .
Some years ago Mr . Ricardo suggested that the Bank of . England should pay its . notes in bars of assayed gold , which at the moment might be convenient ; but even then the notes were promises to pay money , not bullion . Bullion , in fact , is the . material of which money is made , but is not money , as wool is mot cloth . An ingot weighing 20 lbs ., which must be re-weighed : eyery . time it is removed from the custody of one person to another , cannot readily be passed from hand to hand , and is neither money nor currency . But a bank-note promising to f » ay £ 1 , 000 ^ about equal in value , to an ingot of 20 lbs . — -is extremely convenient currency , though it only promise to pay money . * It is a substitute for coin , and can only be a convenient
substitute for bullion after that is manufactured -into money . Bullion in Australia , or in the hand of a bullion merchant , is not money , and it does not become money by being placed in the Bank of England . In fact , . bullion' and coin pel form different functions .. The former , from possessing qualities universally recognised , may be ¦ called international or universal currency . It serves to adjust the balances between nations . The latter is limited in use to particular communities . It serves to circulate commodities in one country-only ' as'the rule , and to liquidate the debts of . individuals , in every other country it is only valuable as bullion . If bullion be the currency of all society , corns are the currency of peculiar countries .
Bank-notes , then , are always promises to pay money , not bullion , nor anything else ; ami . accordingly , as at first , they can only be conveniently issued on the money of the country . JSTow bullion in ¦ the ; Bank is not ' money , though it can , by a process of some duration , be converted into money . It is not , however , because it is not wanted in that form , and because it is wanted as bullion , to be coxiveniently sent to any part of the ¦ world . Till 1844 , bank-notes , whether of the Bank of England or of any other bank , were issued on the money in the possession
of the banker , or on property that could be immediately converted into money , and were issued at his discretion- They wore naturally and necessarily limited by his power to pay them in money ; and though individual bankers were frequently unable to pay as they promised , or there were cheats and bankrupts . amongst bankers as amongst other classes , Aye can safely assert that bank-notes thus issued freely on money as a whole , were never , from-the time they were first issued by goldsmiths in the reign of Charles II ., ' till after the Bank Suspension Act , discredited in England . .
As longj in fact , as they arc payable in . money , to discredit them or debase them below the value of money is impossible . At the same time the qualities of the precious metals , which make them at all times and places the most convenient material of xnoney , are so fixed in nature , and the dilticulty of getting them in quantities sufficient to satisfy wants is so great , Unit no art and no luminn power can make them cheap , or degrade ) ¦ or debase them . The obligation to pay notes in , money has been
found sufficient through upwards of two centuries , as in . the main it is found sufficient to secure the payment of all debts , —to keop notes on a level in value with the money of the country . Through the same period the . qualities of bullion have been amply sufficient , in spite of all the political convulsions of which Europe lins been a prey , and of the State paper with which it Las been , flooded , to keep it as the standard or measure of value , without any sensible or detrimental change .
In 1844 , the Legislature first invented a now princip le for regulating the business of issuing 1 notes . It took from the bunker tho power to issue at discretion his promises to pay money on demand , and ordained that no new bank of issuo should be established , that banks of issuo already in existcjico should issue only a certain amount of notes regulated by the nverngo amount previously issued , and that the Bunk of England should issue £ 14 , 000 , 000 on Government securities , with as innny more notes as it possessed coin and bullion . Then the Legislature- departed from the . great principle consecrated by two hundred years' experience , and adopting , to some extent , Mr . Eioaiimo ' s suggestion , instead of allowing the Bank , to regulate its issue of notes according to its own discretion by the money in its till , it . ordoinod a positive issue , varying in amount according to tho amount of
bullion , including coin in the . possession of the Bank . At the same time it constituted the Bank by law a ready , and certain market for bullion , ordaining that it should issue notes against all that was offered , to it at a certain price . Bullion waiting ; for a market could always at once be converted ' . info money at the Bank ^ and when wanted be again procured . Thus the Act of 1844 , over and above authorizing an issue of paper on debt , created a State paper currency equivalent in amount and varying in proportion , not to the inoney in use , nor the . money required for the convenience of society , but to the amount of bullion in the Bank of England . If those who framed this new and stran » e law could have
foreseen the California !! and Australian . discoveries of gold , and have foreseen how completely this country was to become the central mart of the bullion of the world , it -would-. never . have compelled , the Bank of England to buy all the gold offered to it , and never would have ordained that the Bank should issue notes ' against all that came into its possession . Legislators , not foreseeing events , are bound even more than individuals , rigidly to adhere to right principles , arid must suffer the ' -disgrace of failure when , departing from them , consequences ensue very different from their calculations . ' ¦ " •' . - ¦ ¦
From 184-i to 1 S 50 inclusive , the average of the exports of bullion for the seven years ( the imports were about the same ) ¦ was £ 0 , 300 , 000 , and the average exports .-for the seven years 1851-53 was . £ 21 , 200 , 000 .. In . ¦' consequence of the gold discoveries , the buliiohj including coin , in the'Bank of England , has varied , between 1 . 844 and 1858 , from £ 22 , 23 . 2 , 000 to £ G , 4 S 4 , 09 G ; and the . State paper , promises--to-pay money have , varied . hi . amount in exactly the same enormous ratio . At iio part of the period betwixt " 1814 and ISyShiis the . business of the country .-so increased and 'decreased as to require such ¦ . amazing variations ill thequantities -. issued ' of legal tender . On the -contrary * the legal tender money . actually used by the public , or the . amount of bank-notes in circulation , lias onlv Varied between £ 18 , 300 , 000
and £ 25 , 300 , 000 . There " is - no . means- of ascertaining "the variation in the amount of -sovereigns ' . actually in vise ; but we undertake to say that , except at a short period of rccoinage , when great inconvenience was . experienced , and -except any gradual increase of the quantity in u ' o-t , it lias never exceeded half a . million . sterling . Thus , while the variations . in the circulation have not exceeded thirty-eig ht ¦ per cent ., the variations in the State paper ' ordained to be'issued onbullion for the professed purpose of keeping the Slate paper- as steady as a . metallic currency , have equalled 242- per cent . This discrepancy , full of public inconvenience , is entirely the cnnsiM-j ' uenoe ' of that great change made in 1 S 44 , when , for the ' 'first time , the amount of bank-notes issued was regulated by the amount of bullion in the
Bank . We confine ourselves to the single consequence of the ; Legislature ordering bank-notes to be . issued on bullion , the . l . noney of tho world , the . amount of which continually and rapidly varies with the ; irrival of every ship from Australia , and every demand from abroad , instead of allowing it to be : issued as before , by individuals or by the Bunk , on the money of the country , the quantity of which varies . very little . Thorc have , ensued in consequence great ami sudden changes in the amount , of legal tender , creating abundance or scarcity , and high or low nit . es of discount ,
and causing excitement , distress , disturb . nine , and dissension . That the Act also wastes the rosourws of the country by locking up capital , und forcing us to use to a far greater oxlenl , Ilian is necessary cosily coins instead of clump notes , are , admitted I ' licts . AYfi rest ' our present objections entirely on the enormous variations iu tho amount of . legal tender created by tho SLnto , 'the result of substituting bullion , for money as tho rule for issuing it . These arc now so glaring th . nt tbey attract great jiUention , and must , we think , very speedily force on the Legislature the
task of remedying them . 11 ow are they to bo remedied ? Very easily . The . second section of tlic Ad of 1844 says , that from Unit time " it- shall » ol bo lawful for the said Governor and Company to issue Bank of Kngland notes , cither unto thu bunking department of tho Bank of England or to nny person or persons whatsoever , hwo in cixcihnngo for othor Bank of Kiitflnnd notes , or for gold coin , or gold or silver bullion , " v . Lo . To nmcml tins , Act , U would bo only necessary to leave out ; tho words we- huve underscored , and restore to ' the Bunk tho liberty every man , whothor banker
or not , naturally hn « to promise to pay any sums ol money lie pleases . The simple alteration would inako it lawful for tho Bunk to issue whulover amount of notes it pleases ; and tliu public might rely on its discretion , and on the certainty that it , would be ii disgraced bankrupt from tho moment it declined to vodaein u single promise to pay , that tho ihsuo of notoa would bu steady und in conformity to tho wants of the country . # ThV removal of that one restriction would satisfy the disciples
Jkritfii 28, 1860. J The Leader And Satu...
jkritfii 28 , 1860 . j The Leader and Saturday Analyst . 393
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Citation
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Leader (1850-1860), April 28, 1860, page 5, in the Nineteenth-Century Serials Edition (2008; 2018) ncse2.kdl.kcl.ac.uk/periodicals/l/issues/cld_28041860/page/5/
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