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in their early growth those tendencies to overtrading, and excessive rise of prices, which, by their undue expansion under our present system and the consequent violence of their subsequent collapse, produce the extreme intensity which cha racterises the commercial crises of this country.” That an anticipation of deviation from sound principle, prompted by the motives to which we have referred, is not an unfounded apprehension, the evidence given before the Committee of 1840 affords abundant proof; indeed, the evid Horsley Palmer, the Governor of the Bank, clearly shews, that since 1833, the instances have been more frequent of deviation from, than of adherence to, the wholesome rule, which, before the Committee of 1830, on the renewal of the Bank charter, the directors stated they had laid down for their guidance, and which is again stated by Mr Palmer,viz. that the Bank should, “with reference to the period of a full currency, and exchanges at par, be guided in the regulation of its issues by the principle-always excepting special circumstances of keeping an even amount of securities to the extent of two-thirds of their liabilities, the remaining onethird being held in bullion and specie, and the increase or decrease of the circulation left to the action of the public, as that action might be influenced either by the state of the foreign exchanges or internal demand.” In the opinion of the directors, the “special circumstances" have occurred in

almost every year since the principlewas first enunciated.

On the ground of any peculiar skill or experience required for the due regulation of the currency, not the shadow of a case can be made out for intrusting its issue to banking associations, whether on the principle of monopoly or competition. The regulation of the currency, the “ pumping in or forcing out of bullion”-as Mr Tooke calls it is difficult and complex, precisely because it is intrusted to banks instead of the Government-intrusted, that is, to bodies who have the power of issuing it on any other occasion than in exchange for the precious metals.-Separate the two functions of banker and issuer of paper money-let notes be given only in exchange for gold-let the issue of them be merely in the nature of a mint operation-a mere substitute for the process of coining a given amount of bullion, and your paper currency will regulate itself. The whole skill and science of the thing will be at an end. The watching the exchanges, the taking note of prices, the shrewd appreciation of the signs of the times, are important only as affording the means of deciding whether the currency be in excess-a fact which, under a sound system, would be as apparent as any natural phenomenon, and, I may add, as little worth attending to with any view to its control. What would be thought of the wisdom, or sanity of the engineer-who, the object being to keep the water in

the London Docks on a level with the Thames, should construct an elaborate guage to ascertain the height of the tide, and engines to pump the water in and out, when opening the gates for its free ingress and egress would answer all the purpose ? Such, and no greater, appears to me to be the wisdom of a people who, wishing to maintain the equality of value of a paper currency with the specie it professes to represent, permits its amount to be regulated by the operation of any other causes than the influx and reflux of the precious metals.

But if it be true that the issue of paper money may be regulated by a process so simple as that to which we have referred, and can be safely regulated by no other; if it be also true, that the abuses to which a paper currency is liable are of most disastrous effect on the welfare of the community, then it is clear that the due regulation of the issue of paper money falls completely within the class of those functions which the state can efficiently discharge, and which it should entrust to no other hands. I am aware of no valid arguments which can be urged against this proposition. The talk about “free trade” in banking, meaning thereby a free trade in issuing notes, is not worthy of a moment's consideration. None of the arguments which prove the advantage of perfect freedom of individual agency, in the production and distribution of commodities, have the slightest applicability to the case of paper money. To issue notes

requires neither inventive genius, nor acquired skill, nor capital, nor labour; the creation of a paper currency demands none of those qualities which are to be found only in the earnest conflict of the energies of individuals, but its due regulation does require that preference of the welfare of the whole community over the interests of the immediate agent in its emission, which from no individual have you any right to expect. There is no argument for “ free trade in issuing notes," which will not apply with equal or greater force to free trade in coining metallic money; and conversely, there are none of the reasons ordinarily held conclusive for reserving coinage to the State, which are not even more cogent in their application to a like reserve in the case of paper money. Insomuch as the circumstances which determine the value of a note, namely, in the first place, the sclvency of the issuer,

-and in the second, whether the currency of which it forms a part has or has not been issued in excess, are less within the competence of individuals generally to ascertain, than the qualities of weight and fiveness which determine the value of a sovereign, by so much more is it the duty of the State to protect the public against fraud and loss in the case of paper than metallic money.

With respect then to the limits within which a · paper currency must be restrained, as well as to the means by which those limits are to be preserved, it would appear that there are grounds for coming to


conclusions on which we may with confidence rely. The issues of a paper currency must not exceed the total amount of the metallic money which would circulate, were coin the only circulating medium,to insure their not exceeding that amount, their fluc. tuations must be regulated solely by the influx and efflux of the precious metals,—and in order that they may be so regulated, the power of issue must be in the hands of authorities appointed by the State, and in theirs alone.

With regard to the second point to which I have referred as important to the stability of a paper currency, viz. the degree in which it should be substituted for metallic money ; in other words, what should be the lowest denomination of bank note, I am not aware that any data exist from which absolute rules for our guidance can be drawn. The following considerations, however, may suffice to direct us to a conclusion on which we might not insecurely act. On the one hand we must bear in mind that, by limiting the notes to be issued to very high denominations, we lose sight, in a great degree, of the objects of economy and convenience for which recourse is had to paper money. If, on the other hand, we permit the circulation of very low denominations, we, in the first place, narrow inconveniently, as already stated, the metallic base of our circulation. In the second, we place a paper circulation in the hands of the very humblest and least informed classes, thus greatly increasing the chances

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