commodities, in order to render the exportation of those commodities profitable to the exporter, and thus gain for them the preference for exportation to the foreign market instead of gold, which would remain in the possession of the Bank of England?

In the examination of S. J. Loyd, Esq., before the Committee of the House of Lords, this gentleman states in his Evidence, p. 157.:

1409.-"But with regard to the store of gold in the Issue Department, it seems to me important that it should be clearly understood that all the advantages to be derived from that gold, as forming part of the circulation, are really accorded to the public through the representative of that gold, viz. the bank notes. You put the gold into store, and instead of the gold you receive for your convenience bank notes. That being done, you must not afterwards say, 'But we have got so much gold in the cellar, it is absurd not to use it.' The answer is, 'Well, use the gold, but then give back the bank notes which have been issued to you against that gold, otherwise you want to have both the notes which represent the gold and the gold itself in circulation at the same time.""

This reasoning appears to me neither just nor deducible from the facts of the case. The gold and silver appropriated to the Issue Department, and deposited there after the passing of the Bank Act, was the excess of bullion in the Bank beyond what was required for the circulation; the circulation did not require this portion of the bullion, nor does it require it when it is wanted for exportation : Mr. Loyd says, "All the advantages to be derived from that gold, as forming part of the circulation, are really accorded to the public through the representative of that gold, viz., the bank notes." But the gold is not wanted in order to "form part of the circulation;" it never was in the circulation; it would not remain in the circulation; the circulation being full admits no more: the public who want the gold are not the public among whom the bank notes circulate, but the international public, the Great Mercantile Republic; those who want the gold for exportation.

The advantage sought in exchanging gold bullion for bank notes had no reference to the circulation in which they are not wanted, and in which they will not remain: the wants of the public, as respects the circulation, were not increased by the importation of the bullion: the bank notes, after having discharged their office as a medium of exchange in the purchase of commodities, will be returned to the Bank to remain there in deposit, and the Bank will then themselves hold the bank notes and the gold: the convenience sought by the bank notes was that of having a medium of exchange, as valuable as coin, in the home market, without any delay, and at the expense only of the difference between 37. 178. 10d. and 37. 178. 9d., or a little more than per cent., which was charged by the Bank as a commission for the accommodation: with that accommodation the transaction ended; the gold remains in store, with a claimant in the form of the British public for domestic or national circulation, or of the foreign merchant for exportation the nature of this claim cannot be altered by any private arrangement of the Bank, such as a division of departments: this regulation of the Bank cannot alter the force of the obligation to deliver the gold either to the depositor or to the bearer of the note. The gold is placed in store, to be returned when required by the public, where it remains, either for circulation or exportation as the wants of commerce may require. Is it fair to require from the exporter of bullion the bank notes which were given to the Bank by another party to make these bank notes the key of the chest containing the gold, which key has been returned to the Bank, and which the Bank can retain by the power which the Act has conferred, of controlling the currency; and in the possession of which key the safety of the Bank and the security for the payment of the note is by the Act supposed to exist? But the note does not represent the gold; it represents the

"fortune, probity, and prudence," of the Bank, as implied in the promise to pay sovereigns on demand.

When Sir Robert Peel says, p. 57.:-"It is not probable that more than 22,000,000l. (of bank notes) can be made available for the legitimate demands of commerce:" the legitimate demands seem to be limited to the home circulation; are not the demands for bullion for foreign commerce, for international commerce, legitimate, and which bullion can be obtained from the Issue Department only by means of bank notes? Does not the Bank of England ignore the right of the Great Mercantile Republic ?*

The real question is, whether those who may want gold for exportation, and who import the bullion, have placed it in the right store; whether it will not be more available in the possession of the owners of the bullion than in the custody of a national bank, of those who act as bankers as well as storekeepers; who apply this bullion to the purposes of the domestic circulation, who claim the right of withholding it whenever it may be thought needful for their safety as bankers: that is the great object of inquiry, and which I have endeavoured to elucidate in this Treatise.

• See p. 164., antè.

CHAP. XIV.

ON THE EQUIVALENCY OF BANK NOTES TO COIN.

P. 27. SIR R. PEEL:-"We do not want an abundant supply of cheap promissory paper. We want only a certain quantity of paper, not, indeed, fixed and definite in nominal amount, but just such a quantity of paper and that only, as shall be equivalent in point of value to the coin which it represents. If the paper be cheaper than the coin it is an evil and not an advantage." Should it not be rather: We do not want cheap loans founded upon an issue of paper? It is the loan through the medium of paper which affects prices, by increasing the number of buyers. The increased prices will require an addition to the paper circulation, without at all disturbing the relative value of the paper to the gold, and if not wanted, will be restored to the banker.

P. 77. Sir R. Peel expounds his opinions, and which form the principle of his Bill, in the following words:

"The present measure is not an extension of the principle of the Act of 1819; it is the fulfilment and complement of that Act, but it does not carry the principle of a metallic standard farther than it was carried by the Act of 1819. That Act restored a metallic standard; it required that promissory notes should not be issued excepting on the condition that they were convertible into gold at the will of the bearer. They are issued on that condition. Under the system that exists, they may not for a time conform in value to gold-they may be issued in excess-they may be the means of affording a greater degree of temporary accommodation, than could be afforded by a metallic currency-they may increase prices, and create for a time the appearance of prosperity. But they do all this with the certainty of ultimate reaction-the cer

tainty that the time must come when, if you adhere to a metallić standard, and if you maintain it unaltered, that standard will assert its supremacy, will refuse to conform to the value of paper, and will require that paper shall conform to the value of gold. When the depreciation of the paper is sensible-when it becomes a matter of notoriety, the law enjoining its equivalency to coin will be enforced by every holder of paper, from the man whose whole property is a single five pound note, to the great capitalist, who influences the foreign exchange by the extent of his dealings in money. The certain means of realising a small profit will impel every holder of paper to demand coin in exchange. What advantages will there have been in the temporary accommodation? what advantage in the temporary increase of prices, if they are to be followed as I contend they inevitably will- by such a contraction of paper as will make it equal in value to coin?

"Let us not confound that accommodation which is afforded by the liberal advance of capital, that increase of prices which springs from general prosperity and increased demand, with the accommodation and increase of prices, which rest on no surer foundation than an undue issue of paper. I call it an undue issue, if its value do not conform with that of the coin which it professes to represent, and which the law has made the measure of value."

How is it possible that notes that are "convertible into gold at the will of the bearer," and actually paid, can be of less value than the gold? How can they be depreciated? when does depreciation become sensible? when did it ever become a matter of notoriety? when did the holder of a five pound note ever demand the payment of the five sovereigns, "as a means of realising a small profit?" when did the great capitalist do the same? The equivalency of the paper to coin is tested by the performance of the promise to deliver coin on demand, and, if that is performed, how can the paper be depreciated?

There seems some confusion in using the words "metallic standard" and "metallic currency," as if the one could correspond with the other. If we had only gold and silver coin, and no paper money, that might be called a metallic currency; but whether we have gold and silver coin only, or gold and silver coin and promissory notes payable in coin to bearer on demand, we have in either case a metallic standard.