Jonathan Duncan, The Bank Charter Act, ch 5

The Bank Charter Act
Jonathan Duncan

CHAPTER V.

Attempts to renew Cash Payments. Letter of Mr. Mathias Attwood to Lord Archibald Hamilton. View of Sir James Graham. The Monetary Act of 1816. Did it fix the Price of Gold in British Coin ? Fallacies of the Bullionists on that subject. The Copper Coinage of 1798. Reports of Committees of both Houses of Parliament on the Market and Mint price of Gold. Testimony of the late Lord Ashburton. The Monetary Act of 1819. Denounced by Sir James Graham. Protested against by the first Sir Robert Peel. Repudiated by the Bank Directors. Its injustice pointed out by Mr. Mathias Attwood. Carried by the suppression of Evidence and the ignorance of Parliament. Retractation of his opinions by Mr. Ricardo. The fall of prices which followed the Act of 1819. Riots in the Manufacturing Districts. The Small Note Act of 1822. The Panic of 1825. Quieted by an issue of One Pound Notes. Abuse of the Country Bankers by the Government. Government Loans to the Manufacturing Districts to avert Revolution. The Reform Bill. Report of the Manchester Chamber of Commerce. Monetary disasters of 1836 and 1839. Fall of the Whig Party through the decline in the Revenue, the consequence of a vicious system of Money.

We have now traced our monetary system from the suspension of cash payments, to the close of the war at the battle of Waterloo, and arrived at the period when the legislature commenced its efforts to resume cash payments. It has been stated that a pledge was given to restore metallic money six months after the signature and ratification of a definitive treaty of peace, and the bullionists clamoured for the literal execution of the contract. It is here to be observed that this pledge or promise was disregarded at the peace of Amiens, so that constructively it was abandoned; nor was it ultimately carried in the terms of the statute, since it did not take effect till 1819, and even then the Bank was exonerated from a full payment of all its notes in coin till the 1st of May, 1823, though the directors of their own accord anticipated that date, and paid in sovereigns on the 1st of May, 1821. It may be well here to remark that the words, “The Bank Restriction Act,” are used properly as a compendious term for that whole system of measures and acts of parliament, commencing with 1793, and ending with 1814, by which the value of money was lowered; as the words, “Mr. Peel’s Bill,” are used as a compendious term for those other measures, commencing in 1814, by which the value of money was unjustly raised.

The Panic of 1825

Let us now examine the spirit and policy of the resumption of cash payments. In 1793, the national debt stood at £239,350,148. At the end of the war it figured for £864,822,540. The former sum was contracted in gold. The balance, £625,472,392, was borrowed in paper. In one sense it would have been just to merge the whole in the character of the money of the Restriction Act; for the war had become one of defence, and had England become a province of France, there can be no doubt that the whole debt would have been extinguished. To treat the whole as paper, was simply to charge the difference as a premium of assurance against the risk of confiscation. Whoever holds the securities of an indebted government must, in all honour and equity, be considered as responsible for his share of that indebtedness in proportion to his property, precisely in the same sense as the holder of land, shipping, houses, or mines. If it were at any time determined to liquidate the national debt, a tax for that purpose would not exempt the fundholder, who is now compelled to pay the income tax.

But whatever difference of opinion may exist as to the manner in which the debt existing prior to 1783, ought to have been dealt with, there ought to have been none in regard to that portion which was contracted in the money of the Restriction Act. Certainly the letter of the law ought not to have been complied with. No doubt a man is bound by a law, although he should not know of its existence or meaning. But, as Mr. Mathias Attwood, in his letter to Lord Archibald Hamilton, well observed, “it must be one which the makers of it themselves well understood. It is in that sense in which a law is understood generally in the country, and by those who made it, that any man is bound to understand it, and to know of its existence, and it is in that sense only in which he can be justly made to suffer by it. That act of parliament, the weighty import of which was that, at the return of peace, all the debts and taxes contracted and imposed during the war should be discharged in money of double value, was not believed nor intended by those who framed it to possess any such meaning. What they meant was, to secure the return to a standard of a more steady character than that in use; but not to one of a different value. It was denied that the standard which that act provided for the abandonment of, at a distant date, was of a lower value than that to which it proposed to return. The very existence of an act of parliament to return to the gold standard at a distant day, is a conclusive proof that it could not have been understood in that sense in which it is now said that it was justly binding. Could an act possibly have had an existence providing openly and in explicit terms, that at a distant and uncertain day, all debts should be discharged in money of a higher value than that in use ?”

The process of government in this nefarious fraud, unparalleled in the annals of crime, was this. During the war, they contracted permanent loans, the lenders receiving, on an average, £60 in three per cent. stock, the government binding themselves not to pay it off till that stock reached £100. This alone may be deemed a handsome bonus, even had it been paid to a foreign enemy, for it wears all the character of a “ransom.” But their generosity or injustice went further. These loans were contracted in paper, not in gold, and the paper was depreciated 33 per cent., for £60 in paper was only equal to £40 in bullion. As the ounce of gold at mint prices is coined into four pounds sterling, minus a small fraction, £40 represents ten ounces of gold. That was what the fundholders lent; and by the resumption of cash payments they became entitled to receive 20 ounces of gold for those 10 ounces.^[1]

While the Restriction Act was in force, all pensions and official salaries were raised to meet the depreciation of money. The judges received £5,550 instead of £3,500, while the pay of the soldier, which, in 1792, had been 6d. per day, was raised to 13d. These advanced rates are still enforced; but if it was just to increase salaries while cash payments were suspended, surely it would have been equally just to have reduced them when cash payments were resumed. But they who prided themselves in keeping faith with the public creditor, had no scruples of conscience in breaking faith with the public debtor.

Sir James Graham, before he sold himself to Peel, thus animadverted on the fraud committed ill resuming cash payments :—

“ It was strange, also when reliance was placed on historical examples, under circumstances totally dissimilar, that the course pursued by other countries, in a state of affairs identically the same, should have been entirely overlooked; for, in France, after the abolition of assignats and mandats, and the re-establishment of a metallic currency, the government ascertained the value of the Louis d’or as compared with assignats at different periods, and in this simple manner, on reference to the given market price of the Louis d’or, at any given time, contracts were reduced to their real value; and more recently, when the French government altered the value of its money to the extent of five per cent. only, it provided by law for a corresponding adjustment of all debts. The United States of America also, when, in the last extremity of their struggle of independence, they resorted to a depreciation of their currency, guarded against the fatal effects of their own measure, by enacting that no bargain or contract for land should be valid, if on a credit of longer term than three days. In the example of France we find retributive justice; in the example of America, prospective wisdom; but in vain shall we seek to discern the slightest vestige of either virtue in the British enactments of 1797 and 1819. Here, by law, we depreciated the currency, and by a solemn resolution of the House of Commons, denied the fact of depreciation. Here, by law, we raised the value of money, and instead of avowing our purpose and preparing for its effects, we mystified the intention and were blind to the results.”^[2]

When the Louis d’or of 24 livres purchased 600 livres in assignats, it is clear that an engagement made in assignats at that rate, was twenty-five times the value in good money. When the Louis d’or was worth 1,200 livres, a contract made in assignats was fifty times the value of the metallic money. In this simple manner, according to any given market price of the Louis d’or at a given time, contracts were reduced to their real value. The eminent French economist, M. Say, considers that the course that ought to have been adopted in England was to fix the standard at £5 9s. for the ounce of gold, instead of at £3 17s. 10½d., being a depreciation of 40 per cent., which he considers to have been the fact in 1819. He distinctly says that such a measure was dictated by justice and policy.

On the 2nd May, 1815, the market price of gold in London was quoted at £5 6s. per ounce; but after the battle of Waterloo, the exchange against England rapidly declined, and a bill being passed to continue the restriction of cash payments until the 5th July, 1816, the Bank obtained time to reduce the mercantile value of gold in relation to its own notes; and in January, 1816, gold was brought down to £4 2s. per ounce. In the prices of all other commodities there was a proportionate fall. These reductions were effected by government acting on the circulating medium which was at its highest in 1814, but was reduced to nearly one half in 1816. The consequence was a scene of agricultural and mercantile distress of unprecedented severity. In 1815, the total number of bankruptcies was 1,285; in 1816 they increased to 2,089, being an addition of 55 per cent. in one year. In reference to this period, Sir James Graham asserted, and, as he declared, on the authority of the most competent judges, that the losses sustained by individuals at that period “counterbalanced all the profits of all the bankers during the war.” The government became alarmed, and the restriction of cash payments was further extended from July, 1816, to July, 1818. The bankruptcies which, in 1817, had been 1,575, were reduced to 1,056 in 1818, being a decrease of 33 per cent. The national distress began to disappear; in fact, remunerating prices and prosperity were restored, but distress again returned, when it was ascertained that gold was again rapidly leaving the country. Before the close of the session of 1818, the Chancellor of the Exchequer announced to parliament that it was not advisable for the Bank to resume cash payments in July, 1818, as had been intended, and the Restriction Act was extended to the 5th July, 1819. It is here desirable to fill up the outline of this short but memorable period.

On the 22nd June, 1816, an act was passed to provide for a new silver coinage, and to regulate the currency of the gold and silver coin of the realm. Its first clause repealed the 18th Charles 2, c. 5, which permitted any person, native or foreign, to take plate, silver bullion, or foreign coin to the mint, to be there coined into the current money of the realm of England without charge. It then directed that the pound troy of standard silver, eleven ounces, two dwts. fine, which had hitherto been coined into sixty-two shillings, should henceforward be coined into sixty-six shillings. Clause 11. enacted that in future gold coin should be the only legal tender in payment of debts, exceeding forty shillings. It was falsely pretended that this act and the act of 1819, presently to be noticed, restored the ancient standard; and this palpable untruth has been repeated over and over again in the various pamphlets of Lord Overstone, and the speeches of the second Sir Robert Peel; and no extent of charity can permit us to assign any other reason for so gross a violation of veracity than the deliberate purpose of wilful deception. The ancient standard to which those gentlemen referred was the standard of Elizabeth, A.D., 1601, which allowed the debtor to discharge his obligations, according to his pleasure, either in gold or silver; whereas the act of 1816 restricted him practically to gold, silver being lowered to the character of a subordinate counter, and restricted as a legal tender to forty shillings.

We now come to the vexed question of the fixed price of gold in our coinage, which the bullionists deny, asserting that the 123 grains in the sovereign are merely a weight to which no price is attached. To expose this stupid and pernicious fallacy, we must quote at some length from the Act of 1816. Clause XIII. is thus worded :—

“ And be it further enacted, that from and after the passing of this Act no person shall by any means, device, shift, or contrivance whatsoever, receive or pay for any gold coin lawfully current within the United Kingdom of Great Britain and Ireland any more or less in value, benefit, profit, or advantage than the true lawful value which such gold doth or shall by its denomination import; nor shall utter or receive any piece or pieces of gold coin of this realm at any greater or higher rate of value, nor at any less or lower rate of value, than the same shall be current for in payment, according to the rates and values declared and set upon them pursuant to law; and that every person who shall offend herein shall be deemed and adjudged guilty of a misdemeanor, and being thereof convicted by due course of law, shall suffer imprisonment for the term of six calendar months, and shall find sureties for his or her good behaviour for one year more, to be computed from the end of the six months; and if the same person shall afterwards be convicted of the same offence, such person shall for such second offence suffer one year’s imprisonment, and find sureties for his or her good behaviour for one year more, to be computed from the end of the said last mentioned year; and if the same person shall again offend against the Act, and shall by due course of law be convicted of any subsequent offence, he or she shall be imprisoned for the term of two years for every such subsequent offence.”

Clause XIV. orders that when a person is brought to trial for a second offence, the Clerk of the Peace shall certify the former conviction. Clause XV. Takes away from the party accused the right to traverse. Clause XVI. releases the prosecutor from the obligation of proving the money lawful.

In these clauses it would be difficult to discover a sentence, line, or word, which treats the gold sovereign as a mere weight. They expressly enact that current gold coin shall not be received or paid for more or less than its value, according to its denomination. What can the monied denomination of the sovereign signify, but twenty shillings; The denomination can not mean weight. The intent of the Act, therefore, is most plainly that he who gives more or less for a sovereign than twenty shillings, is liable to imprisonment, and the penalty proves that the legislature intended to fix the price of the gold contained in the sovereign.

On this subject the bullionists have put forward the following fallacy. Take, say they, a definite quantity of wheat, and call it a quarter; divide it into eight equal parts and call each part one bushel; here they contend there is nothing but weight and division.—Granted. They then proceed thus : Take a definite quantity of gold, and call it an ounce; divide it into four equal parts and call each part one sovereign; here also the bullionists declare that there is nothing but weight and division. But this can not be conceded. There is no parallel between the two cases. On the wheat no monied denomination is placed.—The weight of the quarter or bushel of wheat is immutable, but the price fluctuates from market day to market day; the weight and price of the ounce, and quarter ounce of gold are both immutable. Therefore the assumed parallel between the two substances has no real existence, and it is demonstrated that while the price of wheat is variable, the price of gold in our coinage is fixed. It is difficult to believe that any man who can realise in his mind the operative significancy of the term “a monied denomination,” can resist the reasoning adduced; but if such a person is discovered, he might be asked what he takes to be the difference between the mint price and the market price of gold; and it is to be presumed that he would be sorely puzzled to give any answer that did not convict him of error.

The bullionists refuse to listen to the voice of experience. In 1798 a new copper coinage was adopted. By a mere accident the market price of copper then happened to be 16 pence per pound. The bullionists deluded themselves into a belief that an ounce of copper ought to be identical with a penny in money. Accordingly, the copper penny was coined of one ounce, and for an evanescent period the market and mint price corresponded. Loud was the exultation, but short-lived the triumph. Copper advanced in the market to 20 pence per lb. when the bubble burst and the vision vanished. The braziers melted the penny pieces, worth only 16 pence per lb, instead of buying copper at the market rate of 20 pence per lb; and then ceased the equivalency between the legal ounce weight and the legal penny. But this warning, which settled the principle in dispute, was disregarded, though the fact was remembered, for the Report of the Committee of the House of Lords stated that, “unless the market price of gold was so fixed, and shall continue to be afterwards, so near the mint price as not to afford a profit upon the exportation of that metal, it has been abundantly proved by past experience that no law can prevent such exportation, and the consequent demand upon the Bank.” The Report of the Committee of the House of Commons was to the same effect :— “No accumulation of treasure,” it says, “to whatever extent it may be carried, can render the Bank competent to satisfy the demands which will inevitably be made for gold, if the Banks are under an obligation to issue it at the rate of £3 17s. 10½d. per ounce, and if the parties having a right to demand it can continue to derive a profit of five or six per cent. on its exportation.”

This part of the subject may now be dismissed, for the writer has exhausted fact and argument; and he considers it established, both by authority and reasoning, that the price of gold in British coinage is fixed by Act of Parliament.

We have seen in the numerous bankruptcies which took place in 1815 and 1816, evidence of the discredit into which the country had fallen, in consequence of the circulation having been reduced one half, compared with the circulation of 1813 and 1814. In the early part of 1816 the effective circulation of the Bank stood at little more than twenty-five millions; but by the autumn of 1817, the terrified government induced the Bank to raise the circulation to £30,112,661. The consequence was that prices again rose actually to the level of the war, and general prosperity returned, thus refuting the silly idea prevalent among many classes that a state of hostilities had caused the war, the truth being that it was wholly due to the emission of paper money. If historical evidence be demanded to sustain the doctrine, such evidence can be adduced. During the American war of independence, the colonies used paper money, while England retained its metal money. At that period all prices advanced in America; in England no advance took place. In the war against revolutionary and Imperial France, England adopted paper money; France maintained its metal money. Land and all products advanced in England; they maintained an equal level in France, after the suppression of assignats and mandats.—Prices did not advance in England during the American war of independence, nor in France during the war to which we have referred.—From these examples it is evident that taxation lifts prices, and paper money permits or enables them to be lifted.

It has been stated that prices rose in 1815 to the war level, and that rise has been referred to an expansion of legal tender of seven millions over and beyond the amount of circulation prior to the autumn of 1817. It was shewn before the Agricultural Committee of 1821 that, in 1818, wheat was 84s. 1d. per quarter. As compared, not with the consumption of the war, but with the consumption of 1818, taking the large towns of Liverpool, Manchester, Birmingham, Sheffield and Leeds, not only bread, but meat, fell in 1819, 1820, and 1821, that is, after gold payments were ordered to be resumed. The fall in meat in those towns was proved before the committee to have been 15 per cent.; and proved by the most decisive evidence, the diminution of hides being 15 per cent. If anyone superficially considers that a fall of 15 per cent. was a proof of cheapness, let him bear in mind that the supply of animal food had declined to the same scale of per centage; and let him further take notice that a petition from Birmingham to Parliament in 1821, stated that less butchers’ meat was consumed as butchers’ meat fell, showing such a decline of wages simultaneously with the decline of food, as deprived the working classes of that command over commodities which they had enjoyed in 1818, when the supply of the legal tender was ample. The year 1818 was not only a prosperous year for agriculture, but a prosperous year for commerce and shipping. In reply to questions asked by the Committee on Foreign Trade, which sat in 1820, Mr. Tindall, an eminent ship builder, said, that in 1818, the value of ships had recovered from depression; and that there was enough employment for all ships, including the transports discharged after the war, at good freights. Mr. Tooke stated, “in 1818, I had very great difficulty indeed in getting the requisite quantity of shipping.” But, in 1819 and 1820, that is after Peel’s Bill was passed, ships were again too numerous for commerce; then Mr. Tooke said, “he could have procured double the quantity of tonnage he desired.” Mr. Marryatt, a member of the House of Commons, and a most extensive West India merchant, averred in a speech delivered by him in Parliament in 1820, that a vessel called “The Sesostris,” which cost in 1818, £12,175, was sold in 1820 for £6,300. If this case stood alone, it would be insignificant in support of the present argument; but Mr. Marryatt declared that the rule was universal, of which he cited numerous instances. In fact, during 1818, commerce, manufactures and agriculture all flourished.^[3] But of this prosperity one more crowning proof maybe given. The following statement is taken from the report of the finance committee of 1819, in which it comments on the revenue of 1818 :

“ It appears that the total revenue of Great Britain, in the year 1818, exceeded the same revenue for 1817 by the sum of £1,705,510; and that the total revenue of Ireland for the year 1818, exceeded that for 1817 by the sum of £192,969, making a total improvement of the revenue of the United Kingdom, as compared with 1817, of £1,898,479; but this comparison will be rendered still more correct, and the result will be more favourable, if the sum of £2,330,531, being the amount of unappropriated war duties received in 1817, be deducted from the income received in that year; and if the sum of £566,639, the amount of appropriated war duties received in 1818, be also deducted from the total revenue received in 1818. It will then appear that an improvement to the amount of £3,662,371 has actually taken place in the permanent revenue of the United Kingdom in 1818, as compared with 1817.”

The bullionists, being in possession of Downing Street, were obstinately bent on resuming cash payments, though, as we have seen, they had been compelled to postpone the measure from time to time. They urged the Bank to commence an issue of sovereigns to keep up appearances, and prepare the public for the change; and the Bank did issue some in October, 1817. At this very juncture, the French government commenced a series of monetary operations, the object of which was to provide itself with gold. They had borrowed a loan from English capitalists, and as the price of our sovereigns had been fixed, by the act of 1816, at £3 17s 10½d an ounce, though the market price of gold in December, 1817, was declared to be £4 0s. 6d., the French agents, of course, took away our cheap gold; the consequence was, that by the end of 1817, the Bank was drained of £1,240,422, which it had been laboriously collecting and converting into coin. This process went on, and by the end of 1818, the Bank had parted with the enormous sum of £6,756,000. Thus were we punished for our folly in fixing the price of gold, and thereby selling it for less than the market price. The preceding account of this drain rests on the authority of Mr. Alexander Baring, whose house contracted for the loan. The following passages are extracted from the evidence he gave before a Committee of the House of Commons, and embodied in their report :—

“ In France it appears, by the report of the minister of Finance, that there has been carried to the mint of France in the sixteen months preceding the 31st December, 1818, gold to the amount of 125 millions of francs (being equal to about five millions sterling); and silver to the amount of a little more than three millions of francs. Of that gold, upwards of three fourths was in coin from this country; and this operation has continued during the present year (1819), though the amount of the importations of this year has not been reported."

This export arose because the Bank was compelled by law to sell its coined gold for less than it was worth, that is, at the mint price, not at the market price; and if any sceptical reader refers it to the only other cause that could then have operated, viz., an adverse balance of exchange, the crushing answer is, that the balance of trade was in our favour during the whole period, every part of the world being indebted to England. We have seen the Emperor Napoleon the Third act on similar tactics in 1855 and 1856; he has bought our coin at a fraction above our mint price, and drained us of all that we received from Australia. True, he paid a premium for it, and that premium yielded a profit to the London brokers; but how has it fared with our own merchants and manufacturers ? Discounts have been raised to them to such a height as to deprive them of all their profits by the French operation. How evident, then, is the remedy, and how imperative its enforcement for such a state of things, which may happen at any time that it suits the foreigner, and against which the English can offer no resistance. Treat gold as a commodity, and put it at its market price in national paper money. That is the efficient, as it is the sole corrective.

Nothing daunted by their abortive attempts to carry their point, and making no provision for a recurrence of a drain such as that just described, the bullionists persevered in their policy, and in 1819 Mr. Peel’s bill was carried. It provided that between the 1st of February and the 1st of October, 1820, the Bank should pay in standard gold for notes tendered to an amount not less than the value of sixty ounces, after the rate of £4 1s. per ounce. Between the 1st of October, 1820, and the 1st of May, 1821, it was enacted that such payments should be made in gold calculated after the rate of £3 19s. 6d. per ounce. Between the 1st of May, 1821 and the 1st of May, 1823, it was ordered that payment should be made in gold, calculated at the rate of £3 17s. 10½d. Clause 10, permitted the export and melting of the coin; which was a violation of the act of Elizabeth, 1601. The Bank was allowed to anticipate each of the three periods mentioned; but any of the intermediate rates being once fixed, the Bank was not allowed again to avail itself of the prescribed scale. The Bank Directors of their own accord commenced paying their notes in sovereigns on the 1st of May, 1821, and thus this measure was completed.

Sir James Graham, in his pamphlet on “Corn and Currency,” thus exposes the machinations by which it was carried :—

“ The government, in the course of the year preceding, had resolved to return to cash payments, and with this view it had reduced its debt to the Bank of England, and thereby diminished the paper circulation, both of the Bank itself, and also of the country banks. The approximation of the price of gold to the mint price, in 1819, was effected by these means. Moreover, no less an amount than seven millions of gold coin had, at the instigation of the government, with a view to this measure, been poured into the market at the standard price of the Bank of England; and this operation was in progress at the time when the committee on Mr. Peel’s bill assembled. An artificial reduction in the price of gold was the consequence; and the committee, and even the legislature were thus betrayed into the error of estimating the extent of the depreciation of paper by the current price of gold. Hence they adopted the fallacy that the paper money was then only four or five per cent. below the value of the ancient standard which they sought to restore. They formed their judgment of the value of money at that time, not by the price of commodities generally, but from the price of a single commodity—gold—with which the government had been tampering, for the express purpose of forcing down its value.”

The first Sir Robert Peel, on presenting a petition from the bankers, merchants, traders, and others, of London, in favour of the continued restriction of cash payments, and against the bill of 1819, made the following remarks, showing that the committee were wholly incompetent, or most grossly prejudiced :—

“ In looking at the reports which had been published on the subject, he must say that the witnesses were not men likely to give any information to the public, not men acquainted with the state of the country; the last men who should have been questioned if government wanted to arrive at the merits of the case. He begged to state his opinion, that the petitioners were the best judges of such a measure. He would also add, that though they were intimately connected with all that concerned the welfare of the country, the most experienced men, and the best qualified from their connection with our manufacturers and commerce, yet they had not been examined before the committee.”

The Bank Directors protested against the Bill, saying that they could themselves meet their engagements perfectly well, but that mercantile industry would be crushed; and, as they had been misrepresented on former occasions, they entered their present protest, lest at some future date, it might be asserted they had acquiesced in so ignorant and ruinous a scheme. To show that the Act of 1819 was passed in utter ignorance of its character, we must here deviate from strict chronological order, to what transpired in 1832, when Mr. Mathias Attwood was examined before the SELECT COMMITTEE on the state of Agriculture. That gentleman was asked, “Do you remember what was stated at the time in Parliament on that subject—that the Act of 1819, would not alter prices more than four or five per cent. at the utmost ?” Mr. Attwood gave this answer :—

“It was never stated that the abolition of the silver standard would alter prices at all. It was stated, with reference to the Act of 1819, which established the present standard, that this would alter prices to the extent of four, or perhaps five per cent. A member of the Committee of 1819, stated in his place in the House of Commons, nine years after that time, that he, as a member of the Committee, was entirely misled as to the character of the measure which was founded on its recommendation and report. He stated that, in his belief, every member of that committee was similarly misled; he addressed himself to the Chairman to ask if this was not so; he stated that the Committee, entirely inexperienced in such matters, were misled by witnesses perfectly uninformed, who talked of a fall of prices of four or five per cent., when it was since rendered undeniable that a fall of prices had been produced, and an alteration in the value of money, not of four or five per cent., but of twenty, thirty, or forty per cent; that if the character of that measure, the Act of 1819, had been known to him he would not have voted for such a measure, or supported it in the House or in the Committee, nor did he believe that any one member of the Committee, knowing the character of the measure, would have supported it, or that the Chairman of the Committee would have done so.”

Mr. Attwood was then asked whether Mr. Robert Peel was not the Chairman alluded to ? The answer was “yes, He was present, and made no answer to that statement. It was Mr. Bankes who made the statement. Another member of the House of Commons, Sir James Graham, put a question to the Chairman of the Committee (Mr. Robert Peel) in the House, immediately after the statement of Mr. Bankes, whether he contradicted that statement, and he gave no contradiction.”

We return to the year 1819. Not one word was said in debate of that clause in the Suspension Act which pledged parliament to restore cash payments six months after a definitive treaty of peace. It was felt that such a pretention, several years after peace had been signed, was ridiculous. The reasoning of the bullionists was of a very different character. As their spokesman they put forward Mr. Ricardo, a gentleman largely engaged in stock exchange operations, and who was looked up to as an authority on trade and finance, he being the author of some able works on political economy. He gave it as his opinion that the return to cash payments would only lower prices about four per cent., and he was believed as an oracle is believed. This fall was so trifling that all effective opposition ceased. Mr. Baring, Mr. Attwood, and Mr. Ellice, warned the House that the fall would be at least 25 and probably 50 per cent., but their counsel was unheeded. But it must be stated in justice to Mr. Ricardo, that he afterwards had the magnanimity to confess the gravity of his error, thus favourably contrasting with Peel, whom a false pride, or some motive still more unworthy, rendered obstinate and callous. On Mr. Western’s motion in 1823, Mr. Ricardo said that he had computed the whole rise in the value of money since Mr. Peel’s act at ten per cent., but at the same time avowed that he had very little ground for forming any correct opinion on the subject. “By comparing money,” he said, “with the standard value, we had certain means of judging of its depreciation, but he knew of none by which we were able to ascertain with certainty alterations in real or absolute value.

In his “Protection to Agriculture,” Mr. Ricardo makes a similar admission in the following words :—

“ That it is a question exceedingly difficult to determine what the effect has been on the value of gold, and consequently on the value of money produced by the purchases of bullion made by the Bank. When two commodities vary, it is impossible to be certain whether one has risen or the other fallen; there are no means of approximating to the knowledge of the fact, but by a careful comparison of the value of the two commodities with the value of many other commodities.”

Mr. William Ward, formerly one of the members for the city of London, published the following curious and interesting details in his remarks on the “Commercial Legislation of 1846”:—

“ Mr. Ricardo was asked, in 1819, why the reduction of four millions of notes had not corrected an unfavourable exchange ? His answer was, ‘It ought to have done so, and would have done so, had not counteracting causes, of which I know nothing, and could know nothing, operated.’ He was afterwards asked whether a reduction of five per cent. in prices and currency might not be greatly embarrassing after speculation, stagnation, &c. His answer was, ‘An alteration in value of five per cent. does not appear to me very formidable, but of this matter I do not profess to know much. I have had very little practical knowledge upon these subjects.’ It is most remarkable that on this very point Mr. Ricardo was in reality greatly mistaken. When asked what the effect would be on the price of commodities by a reduction of Bank issues, his answer was, to the amount of about five or six per cent., being the excess of the market over the mint price of gold. Mr. Ricardo lived to change his opinion, and shortly before he died, expressed that he had done so. The late Sir William Heygate was with him, when he said ‘Ay, Heygate, you and the few others who opposed us on cash payments have proved right. I said that the difference at most would only be five per cent., and you said at the least it would be twenty-five per cent.’ ”

Thus it appears that the Act of 1819 was condemned by its chief promoter; and it will be remembered that Mr. Bankes, a member of the committee which had recommended the House to pass it, declared that it was passed under a complete misapprehension of its nature and consequences. These facts are important; they refute the silly assertion that the currency question is settled, and furnish the strongest argument in favour of a serious reconsideration of the whole of our monetary system.

Immediately on the passing of the Bill, prices began to fall. Those persons were fortunate who obtained £75 for what had previously sold for £100. Profits and wages rapidly and extensively declined. Riots broke out in the manufacturing towns. The Luddites attributed their sufferings to machinery, and destroyed it when they were able. Large meetings were held, demanding parliamentary reform as the proper cure for the evils endured. To aggravate the pressure, and add fuel to the flames of discontent, three millions of fresh taxation were imposed. The agricultural labourers now emulated the mechanics of towns, burning corn stacks and hay ricks, for which some of them were hanged. The harvest of 1821 and 1822 proved abundant; wheat fell to 43s. 3d., and the ruined farmers petitioned for agricultural relief. Government, infatuated with bullion errors, and spurning the idea that any distress could arise from the resumption of cash payments, attributed all the misery of which the farmers complained to the extraordinary productiveness of the crops. Such ignorance and impiety are scarcely credible, but the fact is not to be disputed, as the parliamentary debates in Hansard attest; nay more, the walls of parliament rang with approving cheers when the doctrine was enunciated. However, the ministerial triumph was short. Not only were the English labouring classes unable to obtain bread in the midst of this imaginary over-production, but quickly news arrived that there was a famine in Ireland. Subscriptions were raised; every pulpit, by royal command, was put into requisition to solicit alms, and the bubble of over-production burst.

The contraction of money, which had caused the crisis of 1816, produced in 1822, a recurrence of distress, failures, and general embarrassment; and as in the former, so in the latter period, relief was afforded by expanding the circulation. On the 29th April, 1822, Lord Londonderry gave notice of the introduction of the SMALL NOTE ACT, which was a modification of the Bill of 1819. Among other obligations which the new system imposed on all bankers, was one which bound them to pay cash on demand for all their notes, and to discontinue the issue of paper for any sum under five pounds, after the year 1824. The Small Note Act removed that obligation, and private bankers were permitted to issue one and two pound notes. Four millions were added to the circulation. There were loans to government, loans to parishes, loans to landed proprietors, loans to public works. Thus the crisis of 1822 was averted, by an addition to the circulating medium. Country Bank paper was greatly enlarged. The Bank of England pushed out its notes in all directions. It lent on mortgage and on stock; it purchased the dead weight annuity, and made advances to government to pay off dissentients on the conversion of the five per cents. into four per cents., and granted a loan of two millions, at two and-a-half per cent, to the East India Company. In 1825 the circulating medium exceeded, or nearly so, by 50 per cent., the amount that was in circulation in 1823. This was the epoch of “Prosperity Robinson,” now Earl Ripon. On opening parliament in 1825, his Majesty said, “There never was a period in the history of the country, when all the great interests of society were, at the same time, in so thriving a condition.” But the sunshine was soon to be succeeded by the murkiest gloom. As all our goods had risen in price, from the pressure of indirect taxation, and that expansion of paper which permitted the rise, they became dearer than untaxed gold, which the statute had tied down to the barter level of £3 17s. 10½d. per ounce. The foreign merchant, therefore, to whom our gold was not money, but a commodity, took away the gold as merchandise, because it was the cheapest commodity he could find in this country, and to him the most profitable. This drain caused the panic of 1825. One eighth of the English country banks were ruined, and six of the London Banks stopped payment. The increase of the circulating medium, which had been progressing for two years, was annihilated in a few weeks. The aggregate losses of the nation would have redeemed at least two-thirds of the national debt.

Lord Liverpool, prime minister, gave the following account of this catastrophe, in February, 1826. “In March, 1825,” said his Lordship, “the Bank saw the necessity which was pressing on them, and they then did begin to draw in and reduce their issues. In the month of March, they reduced their issues by £1,300,000; between the 15th March and 15th May, they made a reduction of £700,000; between August and November, they further contracted their issues, making altogether a reduction of £3,500,000 in their issues.” This avowal, as Mr. Mathias Attwood remarked in the House of Commons in 1830, explains the whole mystery of this monetary convulsion. “The measures of relief, by the issue of four millions of government paper, commenced in the distress of 1822; the notes were drawn back in 1825; the last of them in November, 1825, and early in December broke out the panic.”

Government, of course, accused the bankers of creating all the ruin. But the truth is that the bankers merely furnished the paper instruments which permitted prices to rise to the level of taxation; and had not parliament fixed the mint price of gold, gold would have risen with all other commodities, in which case no temptation would have been held out to the foreigner to take our gold instead of our goods. But the act of parliament offered the foreigner a premium to abstract the metal, and ruined the industrial classes by its egregious folly. However, the legislature, too obstinate to acknowledge its own blunders, or too conceited to imagine that its pretensions to wisdom were less than perfect, determined to wreak its vengeance on the innocent. The absolute suppression of all the small notes in three years, and the immediate suspension of the issue of any more stamps, were the first measures introduced and sanctioned by parliament, although the law had guaranteed the issue of such small country notes up to 1833. As to the ruined manufacturers who petitioned and remonstated, they were flippantly told that they had brought all the mischief of which they complained on themselves, by producing excess of commodities. We have already seen that agricultural suffering in 1821 was attributed to a superabundance of corn, which was refuted by an Irish famine; a kindred sagacity, in 1826, ascribed the prostration of manufacturing industry to over-production of clothing; but before the ensuing winter was over, the very ministers who had propounded the worthless doctrine were compelled to send old army clothing to the very people whose skill and toil had been deemed worthy of parliamentary censure for having overstocked the world with linen and calico, woollen and blankets. This same government, when it ordered appeals to be made in the churches and chapels to assist the spinners and weavers, so strongly reproved for their ignorant and suicidal activity, officially declared that places containing two hundred families, in the very heart of the manufacturing districts, had only four blankets among them !

We wish to impress on our readers that this memorable panic arose solely out of the want of a single commodity gold. All other commodities were plentiful. The prosperity of the country is attested by the speech from the throne at the opening of the Session of 1825, already mentioned. “There was, literally,” says Mr. Francis, in his History of the Bank of England, “a whole population, with food in abundance staring them in the face, unable to procure it, as nothing but gold would be taken.” “Many a firm of unimpeachable honour and unquestionable solvency was compelled to bend before the storm. It was remarked that the question would soon be, not who goes, but who stands. It was stated that the distress arose from want of confidence in men able to pay 40s. to 50s., and 60s. in the pound.” The terrified and stupified government ordered the officers of the mint to coin sovereigns with all possible despatch; they worked night and day, and during the space of a week, one hundred and fifty thousand were manufactured every twenty-four hours. But this activity did not stay the panic or remove the pressure; and the reason is obvious. It was not a question of quantity that was involved, but one of price. The sovereigns were still kept down at the mint price, and being cheaper than other commodities were exported as fast as they were coined. The operation did not help British subjects, but enriched foreigners. Nothing could have averted the ruin that ensued but putting gold at the market price, for that alone could have checked the exportation of the metal. As a striking proof that stagnation was complete and confidence utterly lost, it may be stated that no one would purchase Bank Stock or East India Bonds. Exchequer Bills, that species of Government paper for which the whole resources of the empire were responsible, fell to a discount of sixty-five shillings. We are told by Mr. Francis, that “owing to the difference in the money and account prices of consols, those bankers who were compelled to sell stock to raise cash, paid at the rate of 72 per cent. for the necessity.” It cannot be too often repeated, that all this calamity was caused because parties, possessing abundance of valuable commodities, could not convert those commodities into gold, or printed bank notes payable in gold, Peel’s Bill having offered a high premium to foreigners to export the coin.

On the subject of the panic of 1825, Mr. Jeremiah Harman, who had been Governor of the Bank of England, was examined before the Secret Committee on the Bank Charter in 1832, and his evidence is too important to be overlooked in this historical sketch :

“ Question 2220. Did the government recommend to the bank an increased issue of one pound notes at the time ? Whether they recommended it or not, may admit of a doubt; but that they encouraged it is most certain.”

There we have proof that the bullionists had no faith in their own doctrines; they sought safety in the very paper they had repudiated, though, as Mr. Harman declares, they refused the application of the bank for an Order in Council to restrain payments in gold. Had the bank issued more paper, as the government encouraged it to do, without the protection of an order in council, their bankruptcy must have been inevitable. What is to be thought of such administrators of public affairs, who desire the end but refuse the means ? But we must proceed further with Mr. Harman’s evidence.

“ Question 2230. It was stated by tile late Mr. Huskisson to a member of the House of Commons, that he, as a member of the administration at that time, suggested to the Bank that if their gold was exhausted, they should place a paper against their doors, stating that they had not gold to pay with, but might expect to have gold to recommence payment in a short time ? There was such a suggestion.”

Here is another remarkable proof of the utter incompetency of those men to whom the interests of the community were confided at that period. Their only device for sustaining the credit of the Bank of England was to placard the doors with “Call again to-morrow.” Had that insane course been taken, it is highly probable that the panic would have been aggravated into a revolution. Every debtor might fairly have claimed the same privilege, and the whole country would have been thrown into a state of commercial anarchy. And now let us see how the nation was saved from the consequences of blundering legislation and ministerial incapacity.

“Question 2232. The Bank issued one pound notes at that period; was that done to protect its remaining treasure ?

“Decidedly, and it worked wonders; it was by great good luck that we had the means of doing it, because one box, containing a quantity of £1 notes, had been overlooked, and they were forthcoming at the lucky moment.”

“Question 2323. Had there been no foresight in the preparation of these notes ? None whatever, I solemnly declare.”

“ Question 2234. Do you think that issuing the £1 notes did avert a complete drain ? As far as my judgment goes, it saved the credit of the country.”

At this juncture, Mr. Huskisson declared that the country was within twenty-four hours of barter. So, then, the despised paper, the vituperated rags, the outcast flimsies, rescued the country from a state of barter, and, probably, kept mitres and coronets on the heads of bishops and peers. For aught that can be affirmed to the contrary, they may have preserved the monarchy.

In a letter written in 1826, by the Earl of Liverpool and Mr. Frederick Robinson, Chancellor of the Exchequer, now Earl Ripon, the crisis of 1825 was mainly attributed to speculation, fostered by the country bankers, a charge as stupid and as groundless as the over-production of food in 1821, and the overproduction of clothing in 1826. Mr. Harman was referred to that letter and asked if he concurred in the opinion it expressed; he answered most decidedly in the negative. The truth is, that any continuance of internal prosperity is incompatible with gold money fixed in price at the barter level. In 1825, every labourer in the country was fully employed at good wages, and the profits of the employer were equivalent; consequently, goods became dearer than gold, and, of course, gold was exported, the foreigner taking our cheapest article in payment for his imports. Then the whole monetary system collapsed.

It is difficult to believe that the Earl of Liverpool was not fully conscious that the system he upheld was false and ruinous, or ignorant that the contraction of the circulating medium had produced all the mischief, since he immediately adopted measures for expansion; but he had not the high-mindedness to confess his error, as Mr. Ricardo had done. He addressed a letter to the Bank of England, in which he observed, “that under all the circumstances of the present distress in the city and country, it appears to us that it would be advantageous, with a view to public and private credit, if the Bank were to give directions for the purchase of Exchequer bills to the amount of £2,000,000.” This recommendation was complied with, and some relief was afforded. Joint stock banks were then proposed, and the Bank of England established branches in the country. It was next determined that the Bank of England should advance money on the security of goods, to an amount not exceeding three millions. All these measures prove that the contraction of legal tender had prostrated industry; and, indeed, the nature of the remedy shows the nature of the disease. Assistance was rendered to the following manufacturing towns in the following proportions :—

Manchester .................. £115,400
Glasgow ....................... 81,700
Sheffield ..................... 59,500
Liverpool ..................... 41,450
Huddersfield .................. 30,300
Birmingham .................... 19,000
Dundee ........................ 16,500
Norwich ........................ 2,400

The body politic and the body commercial, as well as the body natural, are all left languid after protracted disease. It requires time to recover from a state of torpor or prostration. In reference to monetary affairs, in spite of the new measures to which we have alluded, a gloom rested on business. Men did not know the secret enemy which had trodden them into dust, and became apathetic, discontented, and then revolutionary. Wages and profits were kept down at the barter level. Every cause was suspected but the right one. At length the pent-up passions burst forth; the whole blame was thrown on the rotten boroughs, and the people, convinced that they were on the right scent, united and energetically demanded a reform in parliament. There was more danger of a levelling revolution than the statesmen of the day chose to confess. The Duke of Wellington, still popular as a soldier, became odious as a politician. The King had accepted an invitation to dine with the Lord Mayor at the Guildhall, but when his Majesty heard, that on the occasion of this intended visit, all the walls of the city would be placarded with an exhortation to the public, to “Run to the Bank for gold,” he determined to remain at the palace. But the placards told; the Bank was besieged, and its specie reduced to about five millions. This panic of 1832 arose from causes purely political, but those causes were themselves of a secondary character; for the demand of parliamentary reform was obviously traceable to the fall of prices and the contraction of trade, which not only lowered profits and wages, but drove hundreds of thousands out of work into compulsory idleness. It was Peel’s act of 1819 that called the political unions into existence. Who organised them ? Thomas Attwood, the brother of Mathias, from whose writings we have so frequently quoted. Why did he organize them and threaten to march at the head of 400,000 men, bivouacked at Birmingham, as the point of departure, to London ? Because he knew that the true remedy for industrial prostration was monetary reform, which he could not expect from the pledged hacks of the legislature, pledged to cash payments, and who were compelled to vote as the holders of rotten boroughs commanded. He had hopes, reasonable hopes, that if the large towns were admitted within the parliamentary pale, they would send to the House of Commons commercial men who understood the money juggle, and abolish the iniquitous bill. He was no revolutionist, but a wise conservative; a wise physician who desired to purge the body politic of its peccant humours, and infuse fresh and healthy blood into its putrescent veins. True, he was deceived and disappointed; the new constituencies and the new representatives were as ignorant as their predecessors, and as subservient to the worship of the golden calf.

The reform bill passed in 1833. Men of business then became more active and enterprising, thinking they had entered into the promised land. Speculation, in 1834, directed itself into channels of railways and mining, joint stock banks and foreign loans. But no sooner did activity begin than, as the inevitable consequence, gold began to escape from the Bank cellars. By June, 1835, the full effects were manifested. Compared with 1833, the specie had declined nearly five millions. But Bank of England notes had been declared legal tender by the charter of 1833, for all sums above five pounds, except at the Bank of England itself, and at its provincial branches. That establishment therefore increased its note circulation by five millions, and at the same time refused to discount any paper drawn or endorsed by any joint stock banks of issue. This determination was enforced in 1836, and in that year the Manchester Chamber of Commerce affirmed that the loss on cottons, wool, silk, linen, and hardware amounted in Manchester alone to forty millions. However, in spite of this loss, the metropolis of the manufacturing districts is one of the strongholds of bullionism. It is fond of money that “rings on the counter.” The admirers of the solidity of gold, and the practical men regard paper as a fiction or shadow, if not “a mockery, a delusion, and a snare.” The Chamber of Commerce published a report in Manchester, an the 12th December, 1839, about the losses the town had sustained in 1836, in which the authors of it showed themselves utterly ignorant of monetary science, for they attributed all the calamity they had suffered to the Bank of England, instead of to those acts of parliament which the Bank of England had vigorously opposed. The following introductory remarks preface the report :—

“ It is little more than two years since this Chamber was assembled on a similar occasion to consider the sufferings which the country was labouring under in consequence of a commercial panic. At that time resolutions were adopted by the Chamber, that those sufferings had come over the country while we had been in possession of the blessings of peace, ample harvests and mitigated taxation, but they resolved that they were unable to find a rational cause for this adversity among those blessings. The recurrence of another period of distress so soon after the last has naturally directed the attention of this Board to the causes of those frequent panics which were paralysing trade, suspending our commerce, and bringing distress upon the whole community; and the directors might, as their predecessors had done, resolve that they were unable to find any general cause for the recurrence of adversity. But they felt that it would be departing from their duty if they took such a course. They found there were causes, and that those causes were the erroneous management of the currency by the Bank of England.”

It is plain, from this exordium, that these acute and experienced merchants had made but a very imperfect study of monetary legislation. Their predecessors frankly acknowledge that they knew nothing of the matter, honestly confessing their ignorance; and as they were among the most intelligent members of the town, it may be presumed that up to the date of their administration no light had shone upon the darkness of Manchester. Panics, however, were not a novelty. They had periodically occurred since the earliest attempts at resuming cash payments, but the Directors of the Chamber of Commerce had never been able to trace them to the true cause. It is, however, very remarkable that, in the report now under consideration, the real nature of the disease is distinctly pointed out; but those who prepared it did not allow their minds to dwell long enough upon the subject, or they must have seen their way out of the difficulties. The fourth section of the report contains the following paragraph :

“ Towards the close of 1836, the stock of bullion in the Bank had fallen to little more than four millions; while, at the same time, it was indebted to the world upwards of thirty millions for its circulation and deposits. The directors now determined to check the drain upon their coffers, and to increase the stock of bullion on band. It had been stated on the authority of the Bank Directory, in a memorandum presented to a Committee of the House of Commons in 1882, ‘that a supply of gold could be procured from abroad only by reduced prices of commodities;’ in other words, at the expense of the mercantile and manufacturing classes, and the object of advancing the rate of interest in two months, from four to five per cent., to which we have alluded, was undoubtedly with a view to depreciate the value of commodities twenty-five per cent.”

The passage quoted from the statement of the Bank Directory is most significant. “ A supply of gold can be obtained from abroad only by reduced prices for commodities.” Here the fact is avowed, and the clue given to an outlet from the labyrinth. It was a hint which ought to have led the shrewd population of Manchester to a more searching inquiry. Had this been the case, the question must have arisen, why does gold go abroad ? Why do foreigners take it in payment of their imports instead of goods ? But no such inquiry was instituted. Manchester did not perceive that the price of gold was fixed in our coinage at the barter level, while its price was permitted to rise in other countries, under the law of supply and demand. It failed, also, to perceive that while the price of the metal in a coined form was kept permanently low by an inexorable law of parliament, its representative, the bank note, was allowed to rise in price, as indicated by an advance in the rate of interest. The thing signified remained cheap, but the representatives of the thing signified became dear. So palpable a contrast ought to have arrested the attention of the chamber, and stimulated research into the contradiction involved. But it was entirely unnoticed. Reproof fell on the wrong parties. In the judgment of the Chamber of Commerce, the Bank of England, as manager of the circulation, was alone to blame. It was forgotten that that institution was merely a creation of Law; and that the same law which sanctioned its existence, compelled it to act on prescribed rules. The innocent party is censured in the following severe, unreflective, and unmerited terms :—

“ Although it scarcely comes within the scope of their present object, the board will add a reflection upon the subject of the undue privileges possessed by the Bank of England. That such a power over the property, and, as has been seen, the health, morals, and very lives of the community should be vested in the hands of twenty-six irresponsible individuals, for the exclusive benefit of a body of bank proprietors, must be regarded as one of the most singular anomalies of the present day; that the secret acts of these individuals, veiled as they are even from the eyes of their own constituents, should decide the fortunes of our capitalists, and the fate of our artizans—that upon the error or wisdom of their judgment should depend the happiness or misery of millions—and that against the most capricious exercise of this power, there should be neither appeal nor remedy—that such a state of things should be allowed to exist must be regarded as a reproach to the intelligence of the age, and as totally irreconcilable with every principle of public justice.”

The report gives copious evidence of the evils inflicted by commercial panic, showing that it not only ruins fortunes, but frightfully increases disease, crime, and mortality. The proofs are not confined to Manchester. It is stated that, in 1837, the Savings’ Banks were drained by the depositors at Leeds, Sheffield, Birmingham, Stockport, Huddersfield, Blackburn, and Bolton; that in the manufacturing counties of Stafford, Nottingham, and Leicester, “a cessation of the demand for labour took place in 1837, more sudden in approach, and more extensive in its operations, than has been known on any previous occasion.” The same industrial prostration happened at Coventry, at Foleshill, Nuneaton, and Mansfield. “In Birmingham large subscriptions were raised to relieve the distress of the almost unprecedented numbers of unemployed labourers.” In Glasgow 18,000 people were fed from the soup kitchen. Similar distribution prevailed at Paisley, Dundee, and in many other towns. The Report of the Dublin Mendicity Society, in 1837, states they “have struggled through a year of almost unparalleled difficulties, and that within the recollection of the oldest inhabitant, there has seldom or ever occurred a period when outdoor employment was so much restricted.” The Belfast House of Industry Report, on the 10th of March, 1837, gave a most lamentable description of the state of the poor, and attributed the depression of trade “to a panic in the money market.”

The distress was general and overwhelming in the three kingdoms, and the cause is every where traceable to the monetary system. So far Manchester was perfectly in the right, but it put the saddle on the wrong horse. It is evident that the parties who drew up the report knew very little of the legal constitution of the Bank of England, and far less of the Acts of Parliament which controlled the currency. Their ignorance not only made them unjust, but rendered their labours utterly useless in preventing a recurrence of the disasters they so bitterly deplored.

When Mr. Cobden was examined, in 1840, as a witness before the Committee of the House of Commons, on banks of issue, he made the following statement :— “I believe that great evils have been occasioned to the trade and manufactures of this country, in 1836 and 1837, and in the subsequent period, by fluctuations in the currency—greater evils, pecuniary, social, and moral, than by the direct failure of all the banks of issue since they were first established in this country.” Notwithstanding this statement, Mr. Cobden voted for the complement bill of 1844, which rendered the act of 1819, which he had condemned, infinitely more disastrous in its operation; he also voted with the majority in the committee of 1848, who affirmed, notoriously in the teeth of overwhelming evidence, that the panic of 1847 was not aggravated by the act of 1844; and that gentleman even now denies, in opposition to common sense and the clauses in the act of 1816, already quoted, that the price of gold in our coinage is fixed.

While ruin, borne on the wings of monetary pestilence, smote to the dust the most prudent and experienced merchants and traders in the great marts of British industry, General Jackson, President of the United States, determined to follow the policy of the English bullionists. In consequence of this infatuation the great Bank of Pennsylvania stopped; scores of minor banks shared the same fate; of those which stood the shock, the dividends of many ceased to be paid, while some repudiated the principal. British capitalists, who had made large investments in Transatlantic funds, were seriously impoverished, or wholly ruined. In addition to these calamities, the measures of General Jackson tended to some extent to drain bullion from the Bank of England, and on the 7th of February, 1837, the amount had fallen to £4,032,000. Several large American firms foundered in the storm, and one of the greatest must have become bankrupt had not government come to its aid. The pressure continued for the next two years, and, in October, 1839, the bullion in the Bank had fallen to £2,522,000. The Bank struggled hard to keep its ground. It raised the discount to five per cent., but without effect. It increased it to five and a-half per cent., but still the specie disappeared. It offered to sell the dead weight, either for money or stock; but finding no purchasers at an eligible price, it actually pledged a portion of it, and borrowed £750,000 in Exchequer Bills from the East India Company. Yet all these efforts were fruitless; bankruptcy stared the corporation in the face, and it only escaped destruction by obtaining a loan of two million and a-half from the Bank of France.

The whole period from 1833 to 1839 is a memorable and warning epoch in the history of bullionism. It was an era in which legislation, more bustling than wise, busied itself in barren attempts in reforming the monetary system. Some of the exclusive privileges of the Bank of England were withdrawn, and joint-stock banks were called into existence for the purpose of enlarging the amount of the circulating medium, and guaranteeing its solidity. Between these new establishments and the old corporation a jealous rivalry sprang up, which aimed at personal profits instead of at the promotion of the general interests of commerce ; for we have seen that the Bank of England refused to discount any bills, however unexceptionable, which emanated from its competitors; while the government, whose duty it was to give fair play to all, especially to those called into existence by its own act and encouragement, secured to the old corporation that amount of monopoly which invested it with a trading dictatorship. The London private banks, acting on the same narrow and selfish principle, excluded the London and Westminster Joint Stock Bank from the facilities of the clearing house. In fact, a monstrous monied power had arisen on which all industry was dependent. The STATE, having abdicated its functions, transferred the monetary prerogative of the Crown to a handful of its subjects, who, possessing the instrument of exchange, controlled every market, now exalting, now depressing—encouraging enterprise by low discounts, then hurling it to the ground by high discounts—introducing uncertainty into every transaction that ranged over any lengthened period, and luring the inexperienced to destruction by tempting them to borrow, and compelling them to pay, before their most legitimate transactions could be matured. This is the power of despotism maximised. When a state delegates that power or permits its exercise, it becomes the most cruel oppressor of the people.

Let us continue the history of events. Prices continued to fall. Men were thrown out of work. The consumption of taxed articles declined. The revenue was diminished. In 1839 ministers endeavoured to make the income square with the expenditure. Mr. Baring, then chancellor of the exchequer, proposed an addition of five per cent. on all taxes. By this scheme he anticipated an augmentation of revenue of £1,895,575; the actual increase was about one-ninth of his calculation, or £206,715. Proof was thus afforded that the great body of the people had reached the fiscal limits of consumption; we say fiscal limits, since the natural desires of hunger and thirst remained undiminished but unsatisfied. The excise fell because wages were reduced or withdrawn. From 5th January, 1838, to 5th April, 1843, the total deficit was £10,072,638.

We are now on the threshold of the Bank Charter Act of 1844.

1 This is the heinous State crime which attaches to the memory of the second Sir Robert Peel, and which the future historian will brand with withering condemnation.

2 Corn and Currency. By Sir James Graham.

3 These facts are taken from a letter addressed to Lord Archibald Hamilton by Mr. Mathias Attwood.