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CHAP. When the market price of gold was 25 per cent above the Mint price.

XLI.

1844.

113.

"The effect of the Government plan will be to substiConcluded. tute small bills of exchange for promissory notes, thus establishing a currency more easy of issue and more dangerous than that which now exists, while any commercial crisis pressing upon securities will compel the Bank to draw in its notes by whatever means and at whatever ruin to private credit, and thus lead to commercial difficulties unprecedented even in 1825 and 1839. A drain of bullion like that produced by the bad harvests of 1838 and 1839, might close the banking department of the Bank, and lead to such distress as would force on the repeal of the Corn Laws. If all restrictions were removed on the issue of paper, save the one important one of its being convertible into gold, no banker could commit an over-issue, for it would come back upon him instantly if it exceeded the wants of the country. The notes in circulation now are little more than half of what they were some years ago, and no proof whatever has been adduced to justify the proposed restrictions. It is the most palpable injustice to lay the whole blame of overAnn. Reg. issue on the private bankers, and restrict them in future to 203; Parl. their present amount of issue, without saying anything of 1846. the Bank of England, with whom the system of over-issue always began.'

1844, 200,

Deb. lxxiv.

114. The Bill

passes both Houses. July 12.

1

Upon this debate, which went only to a subordinate part of the bill, and left untouched its leading principles, the majority for the Government was 155, the numbers being 185 to 30. A few small alterations in detail were afterwards adopted, but an attempt on the part of Mr Muntz, the member for Birmingham, to throw it out on the third reading was defeated by a still larger majority, 2 Parl. Deb. the numbers then being 205 to 18.2 In the House of Aun. Reg. Lords the bill excited very little discussion, and passed on 12th July without a division; so little was its paramount importance to all classes of the community under

1xxvi. 1061;

1844, 205,

206.

XLI.

stood in either House, save by its immediate authors and CHAP. promoters. It received the royal assent on the 19th of the same month.

1844.

115.

bills for

land.

In announcing his measure regarding the currency, which extended only to England, Sir R. Peel declared Similar his intention of introducing, in the next session of Par- Scotland liament, a similar measure applicable to Scotland and and reIreland. Early in the session of 1845 he proceeded to redeem his pledge, and the country was at that period eminently prosperous; and as no bad effects had as yet been experienced, so far as present appearances went, from the bill of the preceding year relating to England, the bill passed with very little discussion and scarcely any opposition. Sir R. Peel boasted, and apparently with reason, in bringing it forward, that "thus far experience was in favour of that Act; there had since been a period of extraordinary commercial activity and speculation, especially in manufactures and railways, and a great demand for capital; and the amount of gold and silver in the Bank of England was now £15,842,000." In pursuance of the principle of the English Act, it was proposed to withdraw all the present exclusive privileges enjoyed by the Bank of Ireland, and to oblige that bank, like all the other banks of issue in the country, to make weekly returns of the state of its business. In Ireland equally as in Scotland, the power at present enjoyed by the banks issuing notes was to be continued to them even below £5; but the amount to be issued by them was in future to be limited, so far as issuing on securities went, to the average of their note circulation for thirteen lunar months since 27th April 1844. Any excess of issue beyond these sums would require in both countries to be based on bullion. No bank established after the date of this Act was to have the power of issuing notes; and Bank of England notes were declared not a legal tender in Scotland. The amount of notes which under this Act might be issued on securities in Scot

XLI. 1844.

CHAP. land would be £3,041,000, and in Ireland £6,271,000 ; the whole circulation beyond which was to be based on bullion. Thus was Sir R. Peel's banking system finally established with almost universal concurrence in both

Deb. lxxxi.

1 Ann. Reg. islands, and the amount of circulation in the two, taken 1845, 203, 204; Parl. together, that might be issued on securities, was fixed at 374, 381. somewhat above £31,000,000, being little more than a half of what it had been at the close of the war.1 *

116.

on this de

bate.

It is difficult to say whether what was said or what Reflections was left unsaid, in these all-important debates on the currency, which ended in the entire establishment of Sir R. Peel's system, is the more calculated to awaken surprise and suggest reflection. The avowed object of the system was to check undue extension of the circulation, in periods of speculation and excitement, by the over-issue of bankers, and to provide a solid basis for any extension of the currency beyond what was deemed reasonable, by compelling it to be based, whether issued by the Bank of England or private bankers, on bullion alone. To effect this object, it was deemed essential to compel the Bank of England to take all the gold which might be brought to it at a trifle below the Mint price; forgetting that if the precious metals came to flow on in abundance into the country, and no extraordinary drain existed from

The Notes now issuable on Securities in the British Empire were :-
Bank of England,

English country banks,

Bank of Ireland,

Irish country banks,

Scotch banks,

In 1815 the Notes in circulation on Securities were :

Bank of England,

English country banks,

Scotch and Irish banks (estimated),

-Ann. Reg., 1845, p. 204.

£14,000,000

8,000,000

3,706,000

2,565,000

3,041,000

£31,312,000

£27,261,000

19,010,000

12,500,000

£58,771,000

XLI.

1844.

foreign wars or domestic deficiency of harvest to cause it CHAP. to flow abroad, it would all be brought to the Bank of England, which would thus be forced to issue a corresponding amount of notes, and could only indemnify itself for the large amount of bullion thus kept in dead stock at its expense in its cellars, by forcing its business in every direction. Thus, to a certainty, an immense amount of notes would come to be issued by the Bank of England, and of course all other banks, at the very moment when it was least required, and most perilous in consequence of a large influx of the precious metal at any rate taking place into this country.

117.

not fore

seen.

If what was said in support of the measure was surprising, what was left unsaid was still more extraordinary. What was It was not said that the currency of the country, irrespective of that based on bullion, was now fixed at little more than half of what it had been thirty years before, when the population of the country was only two-thirds, and its transactions not a third of what they had since become.* It was not said that the arbitrary line of £31,380,000, then taken as the limit of the notes which would be issued on securities, was to be a fixed line, admitting of no increase, even although the transactions of the country, as was the case within the next ten years, should be doubled. It was not said that, the whole currency beyond this line requiring to be based on bullion, if that bullion was drained away from the country by any cause, as a bad harvest at home, or a serious war abroad, the necessary result would be a sudden and violent con

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1844.

CHAP. traction of the currency and destruction of credit, at the XLI. very time when undertakings the most vast, speculations the most profitable, were in course of being carried into execution. It was not said that, as the whole currency of the country, whether based on securities or on bullion, was convertible at the pleasure of the holder into specie, this contraction would of necessity arise long before the Bank was approaching the end of its coffers, and when it still possessed the means, save by the operation of this law, of sustaining the commerce and credit of the country. It was not said that, in this way, the credit of every person in the kingdom would come to depend, not on the prudence of their undertakings, or even the amount of solid realised wealth they possessed, but solely on the retention of gold by the Bank of England. It was not said that this retention for any great length of time had been rendered impossible by the system of Free Trade, which was simultaneously introduced, which, of necessity, induced an immense balance of imports over exports into the richer country, which would then become, as Spain had long been, not the depositary of gold, but the channel of its transmission to other states. None of these things were said in the Legislature, though they were loudly said in the country. It will appear anon what were the consequences of this omission, and by what providential interference the nation was for a time rescued from the abyss into which it must otherwise have fallen. An event, associated only with scenes of regal pomp Visit of the and magnificence, but symptomatic of the altered relations French to of sovereigns and their subjects, occurred this year. This was the visit of Louis Philippe to Queen Victoria, in order to receive the investiture of the Order of the Garter, with which he was honoured on the 9th September. The ceremony was performed with great splendour in the Throne Room of Windsor Castle, in presence of the Queen and ten Companions of the Order, and a brilliant

118.

King of the

Eugland.

Sept. 5.

Sept. 9.

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