*

finitely the more important consideration, amounted almost to one-half of the entire note circulation (they now exceed one-half.) Nor must it be forgotten, in estimating the respective abilities of the two banks to control the circulation, that whilst no monopoly in issue was possessed by the Bank of the United States, the Bank of England has the exclusive issue in a considerable portion of the country; a portion comprehending the metropolis, the centre, in a far higher degree, than any one town in America can be said to be so with reference to that country, of the financial transactions of the community. The vast power which these circumstances combined have placed in the hands of the Bank of England, has not always, as I have said, been wielded with perfect discretion, but it is greatly under the influence of public opinion, far more enlightened, happily, now than formerly in this matter; nor have the directors wanted its support in the struggle they have had to sustain with the rival issuing bodies of the empire, in the attempt to check an expansion of issues which the circumstances of the times rendered it impossible safely to maintain. For myself, not having inattentively watched the course of events in England and America for the last few

years, I avow, without hesitation, my complete conviction, that had the Bank of England not been in existence during the period that has elapsed since 1836, and

It is virtually exclusive-but legally so, only as regards banks with more than six partners.

the whole circulation of the country, as of America, been in the hands of competing banks of issue, England also would have had a suspension of cash payments, accompanied with a prostration of credit as much more severe than that of America, as our banking system, taken as a whole, is inferior to that of the United States.

Experience has shewn, beyond the possibility of a doubt, that competition among banks affords no security against such an expansion of credit circulation, whether in the form of deposits or notes, as renders a maintenance of the convertibility of paper currency impossible. The exchanging of notes between banks of issue, or clearing of debts and credits by banks of deposit, although tending to prevent an inordinate issue on the part of any one bank, is clearly no check on a disposition to excessive issue by all simultaneously. Upon an issuing body, consisting of 500 banks, public opinion scarcely acts at all. The responsibility of contracting the currency at the necessary moment resting on the whole banking interest, is but feebly felt by any one member of the body: by some the necessity will be denied, by others the preparations to meet it will be delayed, from reluctance to commence the task (always, of course, unpopular among the immediate connections of a bank) of limiting banking facilities. Amid the prevalence of such feelings and impressions, there may be a long course of unfavourable exchanges and efflux of bullion, with no

efficient effort made in any quarter to avert the danger which these omens portend; on the contrary, fresh notes will very probably be issued in lieu of those cancelled in exchange for specie. The currency being thus kept at an undiminished amount, the fall of prices, by which mainly an efflux of the precious metals can be arrested, is postponed, the importation of foreign goods and general overtrading continue, until the moment when contraction, the more severe from being so long delayed, can be no longer averted, and bankruptcy and ruin overspread the land.

But if to the absence of any other check on the issue of notes, than competition among the issuers, may, in great degree, be attributed the crisis through which America has had to pass; a scarcely less efficient cause of the monetary disturbances she has experienced is to be found in the dangerous extension to her paper currency, given by the issue of notes of very low denominations. By only two state legislatures (those of Maryland and Virginia), as far as I am aware, has any restriction been imposed on the issue of notes below five dollars, so that through the whole extent of the union, with the exception of those states, dollar notes may be circulated. The lower the denomination of notes permitted to be issued, the wider, of course, the substitution for metallic money; nor, supposing the notes issued not to exceed in amount the coin displaced, would there be in ordinary times any

inconvenience in the substitution of the one for the other, but, in the event of a demand for specie for exportation, it is clear that very serious difficulties might be felt from the reduction of the whole stock of metallic money-of that money which will alone be taken in payment by foreign countries-to the sum held in reserve by the banks, and which might or might not be enough for the occasion. But it scarcely ever happens that the notes issued are limited in amount to the exact equivalent of the specie they displaced; there will always be a greater confidence in issuing notes of any given denomination, if there be also the power of issuing notes of the denomination below it.*. Thus five pound notes would be issued with less reserve, if the issuers had the power of giving one and two pounds in exchange for them, than when they must on presentation, be liquidated in gold. In permitting the issue, therefore, of notes of low denomination, we not only incur the risk consequent on the great reduction of the stock of metallic money thereby occasioned, but exceedingly enhance the risk of the whole currency being in excess. The monetary disturbance of England and America respectively, would seem to have been measured in intensity by the degree in which the causes to which I have referred have been in operation. In

• Cobbett used to call 11. and 21. notes "the legs that the 51. notes ran on."

this country, by the Bank of England, a great though imperfect, control has been exercised over the issues of competing banks, and with respect to the larger part of our circulation, the issue of notes below 51. is prohibited. Here, accordingly, although there has been much disturbance of our monetary system, and much commercial distress, both have been incomparably less than in America, and the convertibility of our paper money has been maintained. In America there has been no check but competition on the issue of notes, and scarcely any restriction as to the denomination of the note of which the currency is composed; and there we have witnessed disturbances of the monetary system, which, by the concurrent testimony of all parties and all observers, have inflicted unparalleled evils on the community, and a depreciation of the value of paper money, so great and so general, as to render utterly powerless the most stringent laws ever devised for maintaining its convertibility.