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April 28 , 1860 . J The Leader and Saturday Analyst . 393
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Money is the measure of value or of labour , as a foot or a yard is & 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 measure , five pounds , florins , livres , roubles , orthalers , 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 beginning , to make them , convenient , that they should represent or promise to pay a . stipulated amount of the common metallic measure 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 not cloth . An ingot weighing 20 lbs ., which must be re-weighed every 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 pay £ 1 , 000- —about equal in value to ah 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 perform different functions . The former , from possessing qualities univei * s < dly 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 allsociety , coins are the currency of peculiar countries . Bank-notes , then , are always promises to pay money , not bullion , nor anything else ; and accordingly , as at first , they can only be conveniently issued on the money of the country . Now 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 conveniently 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 were naturally and necessarily limited by his power to pay them in money ; and thoug h , individual bankers were frequently unable to pay as they promised , or there were cheats and bankrupts amongst bankers as amongst other classes , we 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 If . / till after the Bank Suspension Act , discredited in England . As long , in fact , as they are payable in money , to discredit them or debase them below the value of money is impossible . At the snine time the qualities of the precious metals , which moke them , at all times and places the most , convenient material of money , are so fixed in , nature , and the difficulty of getting them in quantities sufficient to satisfy wonts is so great , tlint no art and no human power con make them cheap , or degrado or debase them . The obligation to pay notes in money has bwufound sufficient through upwards of two centuries , us in the main it is found sufficient to secure the payment of all debts , —to keep notes on a level in value witll the money of the country . Through , the some period the qualities of bullion have been amply sufficient , in spite of all the political convulsions of \ yhioh Europe has been a prey , and of the State paper with which it has been flooded , to keep it as the standard or measure of voUio , without any sensible or detrimental change . In 1844 , the Legislature first invented a now principle for regulating the business of issuing notes . It took from the bnnkor the power to issue at discretion his promises to pay money on demand , and ordained that no new bunk of issue should be established , that banks of issue already in existence should issue only a certain amount of notes regulated by tho average amount previously issued , and that the Bank of England should issue £ 14 , 000 , 000 on Government securities , with . as mnny more notes ns it possessed coin and bullion , Then tho Legislature departed from the great principle consecrated by two hundred years' experience , and adopting , to some oxtent , Mr . ItioAitpp ' s sug-gestion , instead of allowing the Bank to regulate its issue of notes according to its own discretion by tho money in its till , it ordained a positive issue , varying iu 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 oiice be converted into money at the Bank , and when wanted be again procured . Thus the Act of 1 S 44 , over and above , authorizing an issue of paper on debt i created a State paper currency equivalent in amount- and varying in proportion , riot to the money iii 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 strange law could have foreseen the Californian 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 , and must suffer the disgrace . of failure when , departing from them , consequences ensue very different from their calculations . From 1844 to 1 S 50 inclusive , the average of the exports of bullion for the seven years ( the imports were about the same ) was £ ( 5 , 300 , 000 ,. . the averse exports for the seven years 1851-53 was £ 21 , 200 , 000 . In consequence , of the gold discoveries , the bullion , including coin , in the Bank of .. England , has varied , between 1844 and 1858 , from £ 2-2 , 232 , 000 to £ 0 , 4 Si , 006 ; and the Stntovpnpor promises' to pay . money have varied'in amount in exactly the same , enormous ratio . At no part of the period betwixt ' 1 . 844 and IS 58 has the business of the country so increased and decreased , as to . require such . ¦ amazing variations in the quantities issued of legal tender . On the contrary , the legal tender money actiuilly used by the public , or the amount of bank-notes in circulation / has only varied between £ ' 1 . 8 , 300 , 000 and £ -25 , 300 , 000 . There is no means of ascertaining the variation in . the amount of sovereigns actually in use ; but we undertake to say . that , . except ' at a short period of recoiiuige , when great ¦ inconvenience , was experienced , and except any gradual increase of the' quantity in lue , it has never exceeded half a million ste-rliri" -. Thus , while tin- ; variations in the circulation have not exceeded thirty-eight per cent ., the variations in the Sttite poper ordained to be ' issued on bullion for the professed purpose of keeping the State paper as steady- us a metallic currency , have equalled 243 per cenf . This discrepancy , full of public inconvenience , is entirely the consequence of that great change made in 1 S 44 , when , for the first time , the amount of bank-notes issued wins regulated by the amount of bullion in the ; Bank . . " We confine ourselves to the single consequenqo of the Legislature ordering bank-notes to be issued on bullion , the money of the world , the amount of which continually and rapidly varies with the arrival of every ship from Australia , and every demand from abroad , instead of " allowing it to be issued as before , by individuals or by the Bank , on Urn money of the country , the quantify of which varies very little . There have ensued in consequence great and sudden clumps in the amount of Jcg'ii ][ tender , creating abundance or scarcity , and Jii ^ h or low rates of discount , and causing cNeiteiiicnt , dishus * , disturbance , ; ind dissension . That the A ' et also wastes the resourees of tho oountry by locking up capital , and forcing- us tousolo n far greater extent than is necessary costly coins instead of cheap notes , are admitted fuels . AVo rost our present objections entirely on the enormous variations in th « amount of legal tender created , by the . Sl . nle , the result of substituting bullion for money as tho rule for issuing it . These are now so glaring that they attract f » reht attention , and must , wo think , very speedily forcu on tho legislature the tusk of remedying them . How arc they to be remedied ? Vovy easily . The second auction of the A (' apt 1844 says , that from thai iinw 'it shall not 6 fl lawful for tho said Governor ami Company to issuo Bank of England notes , either unto tho bunking < lcpiirtnnsi . Lt of the Bank of England or to any person or persons whatsoever , »< im in exchange for other Bunk of Englnnd notes , or for gold com , or gold or silver bullion , " oto . To nniyml the Act , it would be only necessary to louvo out the word .- ) \ vu have umloraeorod , and restore to the Bunk the liberty every man , whether banker or not , naturally hns to promise to pay any sums of money ho pleases . The simplo alteration would make it lawiul lor tho Bank to i * gue whatever amount of notes it pleases ; and tho public might , wly on its-discretion , and on tho cm-tiuuty that it would Imj ti disgraced bankrupt from tho moment it declined to radooin a ainglo promise to pay , Unit tho issue of notes woulji bo steady and iu conformity to the wants of the country . Tlio removal of that one restriction would sntisly the disciples
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Citation
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Leader (1850-1860), April 28, 1860, page 393, in the Nineteenth-Century Serials Edition (2008; 2018) ncse2.kdl.kcl.ac.uk/periodicals/l/issues/vm2-ncseproduct2345/page/5/
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