between the issuing and banking departments of that establishment, and giving the directors full liberty to manage the latter at discretion, while they should have no power whatever over the other.

Principle on which Act of 1844 was founded. —The notes of the Bank of England in circulation for some years previously to 1844 rarely amounted to 20 or sunk so low as 16 millions. And such being the case Sir Robert Peel was justified in assuming that the circulation of the Bank could not, in any ordinary condition of society, or under any mere commercial vicissitudes, be reduced below fourteen millions. And the Act of 1844 allows the Bank to issue this amount upon securities, of which the 11,015,100% she has lent to the public is the most important item. Inasmuch, however, as the issues of the provincial banks were at the same time limited in their amount, and confined to certain existing banks, it was further provided, in the event of any of these banks ceasing to issue notes, that the Bank of England might be empowered, by order in council, to issue, upon securities, two-thirds, and no more, of the notes which such banks had been authorised to issue. Under this condition, the total secured issue of the Bank has (1858) been increased from 14,000,000 to 14,475,000l. But for every other note which the issue department may at any time issue over and above the maximum amount (14,475,000l.) issued on securities, an equal amount of coin or bullion must be paid into its coffers. And hence, under this system, the notes of the Bank of England are rendered really and truly equivalent to gold, while their immediate conversion into that metal no longer depends, as it previously did, on the good faith, the skill, or the prudence of the directors. And these important results have been attained without imposing any burden of which any one has any right to complain. Our currency rests on the fundamental principle, that all debts above forty shillings shall be paid in gold. But individuals and associations, including the banking or commercial department of the Bank, have the option, if they prefer it, to exchange goid for bank notes, and to make use of the latter in their dealings with the public. Hence, if A. or B. goes to the issuers of paper, and gets 100 or 500 notes from them in exchange for an equivalent amount of gold, it is his own convenience he has exclusively in view. He was at full liberty to use gold, but he preferred exchanging it for notes because he could employ the latter more advantageously. This is the way in which paper is issued under the Act of 1844; and such being the case it is contradictory to say that it is productive either of hardship or inconvenience.

It has been alleged that this system is injurious by shackling the Bank in the use of her credit. But it must be clear on the least reflection that it does nothing of the sort, It merely prevents her from issuing substitutes for money which do not represent money. It does not absorb or lock up a single sixpence worth of her capital; nor does it interfere in any manner of way with her employment either of it, or of her credit. The gold in the issue-department of the Bank was not purchased by her, and does not belong to her. She is its keeper, but not its owner. It belongs to the public, or to the holders of bank notes, who deposited it in the Bank in exchange for notes, with and under the express stipulation, that on paying the latter into the Bank, they should receive back their gold. Any interference with these deposits would be an interference with property held in pledge for others, that is, it would be an act precisely of the same kind with that which deservedly subjected Strahan, Paul, and Co. to transportation for fourteen years. The authority of Mr. Sheffield Neave, the present governor of the Bank, may be quoted in corroboration of this statement: "The issue department is out of our hands altogether. We are mere trustees under the Act of Parliament, to see that those securities are placed there and kept up to that amount; and in no case can any creditor of the Bank touch that which is reserved for a noteholder. We are in that respect merely ministrative; we are trustees to hold that amount in the issue-department, and our banking department has a totally separate function, which has no relation whatever to the issue-department." — (Min. of Evidence, 1857, p. 99.)

But though she may not lay violent hands on the property of the public, the Bank, it is obvious, has at this moment the same absolute command over her entire capital and credit, that she would have were the Act of 1844 non-existent. In her banking capacity she is free from all restraint, and is in precisely the same situation as other banking or mercantile establishments. She may lend or not lend as she pleases, and may lay down such conditions as she pleases in regard to the interest and the terms of her loans and discounts. In short, she may do whatever she likes with her own. But further she is not permitted to go. She may not substitute shadows for realities. She cannot, whether to assist others, or to relieve herself from embarrassment, issue a single note except upon a deposit of bullion. But this rule does not operate on herself only. It applies to all individuals and associations. And to relax it in any degree would be - disguise it as you will to authorise an issue of fictitious or spurious paper, and consequently to vitiate the currency and to abuse credit in the way that is sure to be In the end the most disastrous,

"

It is further objected to the Act of 1844, that it "limits the currency; "that it makes no provision for the increasing demands of the public; and confines us, in 1858, when the exports will probably exceed 120 millions, to the same amount of money as in 1844, when the exports did not exceed 58 millions." But though this statement has been made by parties who ought to have known better, the reader can hardly require to be told that it is completely destitute of foundation. The 14,000,0004, issued on securities, is the only thing that is limited in the Act; everything else varies with the varying condition and circumstances of the country, including the means by which the use of money may be economised. In the week ending the 29th of August, 1857, the issue department of the Bank had issued notes to the amount of 25,323,965l., being no fewer than 11,323,965l. over and above the amount authorised to be issued on securities. And if the country had really required a larger supply of money, that is, if more coins, or paper equivalent to coins, could have been absorbed into the circulation without rendering the currency redundant, and depressing the exchange, the additional quantity would have been forthwith supplied. For under such circumstances, merchants, bankers, and money-dealers, would have realised a certain and immediate profit by carrying bullion to the Mint or the Bank, that they might obtain coins, or notes, or both, with which to increase the currency. It is one of the chief merits of the Act of 1844, that, under its agency, the supply of money is not to any extent or in any degree regulated or influenced by the proceedings of the Bank, or the government, They have nothing to do in the matter, unless it be to coin the bullion which individuals or firms carry to the Mint for that purpose, and to exchange, when called upon, notes for coins, and coins for notes, The supply of money, like that of all nonmonopolised articles, is wholly dependent upon, and is determined by the free action of the public. It would, indeed, be quite as true to say, that the Act of 1844 limits the amount of corn, of cloth, or of iron produced in the country, as that it limits the amount of money. It maintains the value of the notes issued by the Bank on a level with the coins for which they are substitutes; but beyond that its effect is nil. It has nothing whatever to do with the greater or less amount of the currency. That depends entirely on the estimate formed by the public of its excess or deficiency, an estimate which, when wrong, is sure to be corrected by the exchange.

We may add, that no inference can ever be safely drawn from the number of notes or coins, or both, afloat in a country, as to whether its currency be, or be not, in excess, That is to be learned by the state of the exchange, or by the influx and efflux of bullion. If the imports of bullion exceed the exports, it shows that the currency is in some degree deficient, while if the exports exceed the imports, it shows that the currency is in excess, and that no additions can be made to it without further depressing the exchange and increasing the drain of bullion. When the imports and exports of bullion are about equal, then of course the currency is at about its proper level. These are the only criteria by which anything can ever be correctly inferred, in regard to the deficiency or excess of currency. Its absolute amount affords hardly even a basis for conjecture. When there is little speculation or excitement, an issue of 25 or 27 millions bank-notes may be in excess; while, at another time, and with a different state of trade and speculation, an issue of 35 or 37 millions of notes may not be enough. Except in periods of internal commotion, or when we are disturbed by alarms of invasion, the state of the exchange is the only, as it is the infallible, test of the sufficiency and insufficiency of the currency.

We have seen that bills of exchange, about which so much is said, though they serve some of the purposes of money, are not money. But whether the amount of them in circulation be great or small, and whether they be drawn at long or short dates, though highly important in other respects, has no reference to, or bearing upon, this question. When from any cause, whether from an excess in the amount of bills or notes afloat, the currency becomes redundant, the exchange is depressed, and notes are sent to the issue department of the Bank to be exchanged for gold, which is forthwith exported. And it is by the immediate action of the adverse exchange upon notes, and the consequent influence of the contraction of the latter upon bills, that the amount of the currency is lessened, its value raised, and the exchange brought to par. At such periods there is usually more or less of mercantile pressure, and a greater demand for discounts and pecuniary accommodation. This leads to a rise in the rate of interest; but no change in this rate has any influence over the currency, except in so far as its rise may diminish, and its fall may increase, the demands upon the Bank for loans. A system of this sort effectually prevents any great excess of bills from ever getting into the market; and thus checks, in limine, what would otherwise be the most copious source of wild speculation, overtrading and bankruptcy.

It may be said, perhaps for there is no end of apologies for whatever is vicious that if the issue of notes were in the hands of government, the entire profit accruing thereon would belong to the public. But supposing such to be the case, the difference

between that profit, and that which is or may be realised under the present system, would either be nothing at all, or so inconsiderable as to be wholly unworthy of attention. It will be afterwards seen that at this moment the public receives by far the greater part of the profit made by the Bank on the fixed issue of 14,000,000l., and if it be deemed expedient, that part may be still further increased, or turned into the lion's share. Assuming, therefore, for a moment, that the power to issue notes is vested in government commissioners, it is not pretended that these notes are to be legal tender. Nothing so monstrous as that could be thought of, or at all events, durst be proposed. The notes issued by the commissioners, like those issued by the Bank, must be paid on demand. But to do this, a stock of bullion must be provided; and unless the plan now followed were adopted, and all issues above the amount of 14,000,000l., or thereby, were made upon deposits of bullion, the public would not have that perfect security which is given them by the present system, and which is worth more than ten times all the profits arising out of the fixed issue. Even under the old system, or that which existed previously to 1844, the rule of the Bank was to keep a stock of bullion on hand equal to a third part of her issues. But this rule was not, and in truth could not, be acted upon. It is plain, however, had it been bona fide carried out, that the profits on the issue of notes would not have been materially, if at all different, from what they are at this moment. Nothing, therefore, can be more completely futile than the talk about the large profits that would accrue to the public by vesting the power to issue notes in commissioners appointed by government. With the same security as at present for the conversion of the notes into coin, nothing would be gained by such appointment; and if, as would most likely be the case, it lessened the security referred to, and added to the chances of over-issue and mismanagement, the injury to the public hence resulting might be enormous. We, therefore, are disposed to believe, that of the various proposals in regard to the currency, that which proposes to vest the issue of notes in the hands of government commissioners, is one of the most objectionable. The chances are ten to one that they would act as directed by the government of the day; and this, at all events, would be popularly assumed to be the case. Supposing, however, that they did nothing of the sort, but were perfectly independent, still it is obvious, that whatever they did more or less than is done at present, would be mischievous. And such being the case, it is not easy to see what advantage would be gained by their appointment; while it would have the serious disadvantage of making government directly responsible, in the public estimation, for whatever inconvenience might at any time be supposed to result from the limitation of the currency.

The objections to the Act of 1844 are so various and so opposite that they are not easily recollected. Sometimes we are told that it is inconsistent with itself and incomplete, and that it deals stringently with the Bank of England, while it hardly interferes with the country banks. But this is an unfair representation. In dealing with the country banks the Act may not have gone quite so far as it was desirable it should have gone, or as Sir Robert Peel wished it to go; but it notwithstanding effected, even in that respect, a very great improvement, and really left but little to be wished for.

To prevent future over-issues of country paper, it was enacted, that from and after the passing of the Act, no new bank for the issue of notes should be established in any part of the United Kingdom. And it was further enacted, that the maximum issue of notes by the existing country banks should, in future, be limited to the average amount which they had respectively in circulation during the twelve weeks preceding the 27th April 1844*; and various penalties are imposed on those whose issues exceed that fixed amount. It was then, also, ordered that the names of the partners, in jointstock and other banks, should be periodically published.

These are most important regulations. No doubt it would have been better had provincial issues been entirely suppressed, and Bank of England notes been made the only legal substitute for coins. But in matters of legislation what is practicable is of quite as much importance as what is absolutely just and proper. Sir Robert Peel knew what he could carry through Parliament. Had he attempted more he would not only have failed of his object, but would, most likely, have endangered the success of the other and far more important portion of his measure which related to the Bank of England.

Under the operation of the Act of 1844 the extinction of the country issues is being gradually effected, partly by some of the issuing banks finding it to be for their advantage to use notes of the Bank of England instead of their own, and partly by the winding-up of some concerns and the bankruptcy of others. But, owing to the limitation of the issues, comparatively little inconvenience has resulted to the public from the latter circumstance.

This condition applies only to banks in England and Wales. The issues of those in Scotland and Ireland are limited to the average amount of those in circulation during the twelve months ending the 1st of May 1845. See post.

On the whole, therefore, there does not appear to be much ground on which to object to the existing arrangements in regard to the country banks. Though not theoretically perfect, their practical deficiencies are unimportant. To attempt to obviate them might imperil other and more important arrangements. And we incline to think that the

notion that such would be the case has had not a little to do in making them be pressed on the attention of the public.

Suspensions of 1847 and 1857.—But it is said, “that even the best system cannot always be carried to an extreme. The Act of 1844 has had to be suspended in 1847, and again in 1857; and machinery for its relaxation in periods of difficulty should be introduced into it!"

We beg, however, to express our dissent from this doctrine. It would be easy to show that the embarrassment of the banking department of the Bank in 1847 which led to the suspension of the Act, was mainly a consequence of the injudicious proceedings of the directors; and it is to be hoped that the experience they acquired on that occasion may not be forgotten. But in whatever way the crisis may have originated, there can be no question that the suspension of 1847 was a measure of doubtful policy. The exchanges had already become favourable, and it was the prevalent opinion in very wellinformed quarters, that the panic which had begun to show itself would speedily have disappeared without the intervention of government. It should never be forgotten that, apart from internal panics, the time when the Act is said to be working harshly and oppressively, is the very time when it is most for the public advantage that it should be honestly carried out.

The revulsion in 1857 was occasioned by the stoppage of the American banks. The real value of the exports from this country to the United States amounted in 1856 to 21,476,000l. of which a large portion was unpaid when the banks stopped payments; and a further and very large sum was due to us on account of dividends on state, railway and canal stocks, and so forth, held by parties in England. The sudden cessation of so large an amount of payments could not fail to occasion a good deal of distress among the merchants and others dealing with America. And it was among this class, or those intimately connected with it, that the greatest overtrading and abuse of credit had taken place. Some firms in Glasgow, which had been notoriously overtrading for a number of years, were the first to give way. And their failure being on a very large scale, the banks by which they had been principally supported became the objects of suspicion. And from suspicion to distrust there is but a step. Notwithstanding the numbers and wealth of the shareholders responsible for the banks in question, they were subjected to a run on the part of the inferior class of note-holders and depositors, and their resources being either anticipated or locked up, they were obliged to suspend payments. And had they only failed, none could have regretted the result. On the contrary, it would have been nothing more than they deserved, for they had for a lengthened period grossly abused the ample resources at their command, and resorted to the most questionable means to bolster up the speculators with whom they had become identified. But the mischief is, that the disastrous effects of such proceedings cannot be confined to the guilty parties. A fire originating in a pig-stye may destroy a palace. The suspension of the offending banks, by generating uneasy feelings and suspicions in the public mind, led to a run on some of the other banks. And to provide for their own safety these establishments immediately began to sell securities, and to adopt other means, by which to obtain supplies of gold. Large amounts of it were in consequence carried to Scotland. And, in addition to the demand for gold, that for discounts, notwithstanding the high rate of ten per cent. charged by the Bank, continued undiminished, so that the reserve in her possession was reduced on the 11th November to 1,462,15sl.; and it was the general belief, that this inadequate reserve would be forthwith either much reduced or wholly swallowed up. To avert the possibility of such an event occurring, the directors were authorised, on the 12th of November, to issue notes without being bound by the conditions of the Act of 1844.

This, though a brief, is, we believe, a sufficiently accurate account of the circumstances that led to the suspension of the Act in 1857. The weight to be attached to them will be differently estimated by different individuals. The suspension is believed by some to have been, at least, premature, and others think that probably it might have been avoided. It is alleged that the panic in Scotland had begun to subside previously to the measure being adopted; and it was all but certain that when it had subsided, a considerable portion of the gold that had been sent to Scotland would speedily find its way back to London, and some considerable risk and inconvenience should have been encountered rather than that measures should have been adopted, the effect of which will be to protect speculators and money dealers without capital, and wanting alike in character and conduct, from the consequences of their unjustifiable proceedings. But, at the same time, we admit that the immediate exposure and punishment of these parties. however desirable, was not to be purchased at the risk of a general revulsion. And as

the information laid before ministers made them believe that such a calamity was imminent unless the statute of 1844 was suspended, they were bound to act upon that conviction, and to provide ne quid detrimenti respublica capiat.

But whatever may be thought of these conclusions, it is at all events certain that the Act of 1844 had nothing whatever to do with the late revulsion. It did not occasion the American stoppage, and under its operation the foreign drain for gold had been entirely stopped; and though it could not prevent the abuses in banking, and the system of rediscounting and overtrading in which so many banks and firms have been engaged, it contributed in no ordinary degree, by preventing the issue of spurious paper, to confine them within comparatively narrow limits, and to lessen the violence of the crisis.

The Act of 1844 is a rule to be enforced in all but extraordinary and unforeseen emergencies, the urgency of which cannot be appreciated beforehand, but must be determined at the moment. But when these occur, it may, like the Habeas Corpus Act, be properly suspended. It is mainly calculated to regulate our currency by the exchanges, or through our commercial intercourse with other countries; but it is not applicable, nor is any system of which the convertibility of paper into coin makes a part applicable to a state of internal discredit or panic. Had it existed in 1797, it must have been suspended; and its suspensions in 1847 and 1857 are only to be justified by the state of our domestic affairs making an adherence to principle inexpedient and impracticable. But, whenever the circumstances referred to, that is, when the panic and distrust that occasioned the suspension of the Act subsided, it is clear it should be, and it has been, revived in its pristine vigour. The Habeas Corpus Act is not the less efficient at this moment that it has been repeatedly suspended in periods of danger and difficulty. We beg to subjoin a full

ABSTRACT OF THE ACT 7 & 8 Vict. c. 32, for regulating the IssuE OF BANK NOTES, AND FOR GIVING TO THE BANK OF ENGLAND CERTAIN PRIVILEGES FOR A LIMITED PERIOD. 19 JULY, 1844. Bank to establish a separate Department for the Issue of Notes.-Whereas it is expedient to regulate the issue of bills or notes payable on demand: and whereas the act 3 & 4 Will. 4. c. 98. gave to the corporation of the governor and company of the Bank of England certain privileges for a limited period, under certain conditions; and it is expedient that the privileges of exclusive banking therein mentioned should be continued to the said governor and company of the Bank of England, with such alterations as are herein contained, upon certain conditions: be it therefore enacted, that from and after the 31st day of August, 1844, the issue of promissory notes of the governor and company of the Bank of England, payable on demand, shall be separated and thenceforth kept wholly distinct from the general banking business of the said governor and company; and the business of and relating to such issue shall be thenceforth conducted and carried on by the said governor and company in a separate department, to be called "The Issue Department of the Bank of England," subject to the rules and regulations hereinafter contained; and it shall be lawful for the court of directors of the said governor and company, if they shall think fit, to appoint a committee or committees of directors for the conduct and management of such issue department of the Bank of England, and from time to time to remove the members, and define, alter, and regulate the constitution and powers of such committee, as they shall think fit, subject to any bye-laws, rules, or regulations which may be made for that purpose: provided nevertheless, that the said issue department shall always be kept separate and distinct from the banking department of the said governor and company.—§ 1.

Management of the Issue by Bank of England.-Upon the 31st August, 1844, there shall be transferred, appropriated, and set apart by the said governor and company to the issue department of the Bank of England securities to the value of 14,000,000, whereof the debt due by the public to the said governor and company shall be and be deemed a part; and there shall also at the same time be transferred, appropriated and set apart by the said governor and company to the said issue department so much of the gold coin and gold and silver bullion then held by the Bank of England as shall not be required by the banking department thereof; and thereupon there shall be delivered out of the said issue department into the said banking department of the Bank of England such an amount of Bank of England notes as, together with the Bank of England notes then in circulation, shall be equal to the aggregate amount of the securities, coin, and bullion so transferred to the said issue department of the Bank of England; and the whole amount of Bank of England notes then in circulation, including those delivered to the banking department of the Bank of England as aforesaid, shall be deemed to be issued on the credit of such securities, coin, and bullion so appropriated and set apart to the said issue department; and from thenceforth it shall not be lawful for the said governor and company to increase the amount of securities for the time being in the said issue department save as herein-after is mentioned, but it shall be lawful for the said governor and company to diminish the amount of such securities, and again to increase the same to any sum not exceeding in the whole the sum of 14,000,000, and so from time to time as they shall see occasion; and from and after such transfer and appropriation to the said issue department as aforesaid, it shall not be lawful for the said governor and company to issue Bank of England notes, either into the banking department of the Bank of England or to any persons or person whatsoever, save in exchange for other Bank of England notes, or for gold coin or for gold or silver bullion received or purchased for the said issue department under the provisions of this act, or in exchange for securities acquired and taken in the said issue department under the provisions herein contained: provided always, that it shall be lawful for the said governor and company in their banking department to issue all such Bank of England notes as they shall at any time receive from the said issue department or otherwise, in the same manner in all respects as such issue would be lawful to any other person or persons.-2.

Proportion of Silver Bullion to be retained in the Issue Department.-Whereas it is necessary to limit the amount of silver bullion on which it shall be lawful for the issue department of the Bank of England to issue Bank of England notes; be it therefore enacted, that it shall not be lawful for the Bank of England to retain in the issue department of the said Bank at any one time an amount of silver bullion exceeding 1-4th part of the gold coin and bullion at such time held by the Bank of England in the issue department. § 3.

All Persons may demand of the Issue Department Notes for Gold Bullion.-From and after the 31st day of August, 1844, all persons shall be entitled to demand from the issue department of the Bank of England Bank of England notes in exchange for gold bullion, at the rate of 31. 178. 9d. per ounce of standard gold: provided always, that the said governor and company shall in all cases be entitled to