going must be decisive of the advantages of having fixed principles to refer to-it brings, in all cases, the matter to a point, and the question is put into a tangible shape, but in order to see clearly the tremendous consequences which arise from this interference of the Bank Directors with the currency, and as the over issue in the example given led to the contraction in the following year, 1837 (a result which must naturally take place in all such cases), it is necessary to explain how even a very slight contraction of the circulating medium by the application of what is technically called the Bank screw produces its effects. This seems to me easily to be understood, when it is considered that all those bills, promissory notes, &c., which serve as currency, and carry on such a large portion of the exchangeable transactions of the community, evidently derive their сараcity of acting as currency from the state of credit being such that no doubt exists in the mind of the receiver of his being able to procure cash for them, in regular course, by discount, when he shall require it, or if disappointed in this, that he shall, at least, receive the cash on their becoming due. But when a contraction of the currency takes place, even to a very moderate extent, the difficulty of getting discount is unavoidably increased, and long bills cannot be got discounted; of course they are thrown out of circulation, as people will not sell for bills which cannot be turned into cash. Credits are, therefore, generally shortened, and if the contraction proceeds further, so as to render the discount of shorter bills difficult, then a still further number are thrown out of circulation, and only the most unexceptionable will be taken; and if this interruption of confidence, and consequent stoppage of trade, really cause many to be unable to fulfil their engagements, then comes a panic, when bills and promissory notes are almost all refused, and the exchangeable transactions are confined to cash pay ments. Thus but a moderate contraction, being accompanied, as it always is, by a certain degree of alarm and difficulty of getting discount, may lessen the amount of the currency employed in the commerce of the country to an amount almost incalculable. I believe it will not be denied that in 99 cases out of 100 all the exchangeable transactions of commerce and manufactures of any extensive character are carried on by the bill currency in ordinary times; and if, upon the occasions alluded to, these bills are thrown out of circulation, it is clear the embarrassment felt in the commercial classes will not be in proportion to the trifling contraction in Bank-notes, but will correspond with the amount of the bill currency thrown out of employ in the manner just stated. But, for the greater satisfaction of the reader, it may perhaps be necessary to attempt some calculation which may give a more definite idea of the actual amounts thus operated upon. For this purpose let us take a calculation recently made, founded on the extent of bill stamps annually made use of. In this calculation the average length of the bills was conceived to be three months, according to which estimate the sum actually afloat in bills was little short of 150 millions. Supposing, then, the average term of 3 months just mentioned to have been composed of bills from 5 to 6 months; from 3 to 4 months; and from 1 to 2 months; it becomes evident that if, by any diminished facility of obtaining discount, the 5 and 6 months' bills are no longer negotiable, then, as they are supposed to form of the bill currency, a contraction immediately takes place of 50 millions (being of 150 millions calculated to be always afloat), and if the term of discount is further reduced, so that 3 and 4 months' bills are no longer negotiable, then another 50 millions is taken out of circulation, and so in proportion as the term of discount may be still further reduced. The foregoing seems sufficiently to account for the enormous effect produced in the commerce of the country, by but a comparatively small contraction of the Bank-note portion of the currency; and seems calculated to convince the most sceptical that those laws which render a denial of discount imperative upon the Bank Directors, where a drain for gold takes place, is the true cause of all the calamitous results complained of-an opinion which will be found most powerfully supported by the arguments hereafter advanced. CHAPTER II. Short statement of the evils occasioned by the mixed currency of the United Kingdom in accordance with the principles laid down in the preceding chapter. 25. In England a mixed circulation prevails, and the monetary system may be said, in its different bearings, to be operated on by what has been remarked in Nos. 12, 13, and 14; but it may likewise be affected by other circumstances, for the Bank of England is by law obliged to pay its notes in specie of a given standard, at the price of £3: 17: 10 per ounce, no matter what it may cost to get it replaced from other countries; and by the operation of this law should any circumstances of a domestic or foreign nature produce a drain of gold from the coffers of the Bank, its only security and the constant practice is, to lessen its discounts, and not to issue paper which is thus to be returned upon it immediately for payment ;-but the immediate consequence of the Bank's refusal to discount is, and always must be, to plunge our commerce and manufactures into difficulty and embarrassment, and involve many in bankruptcy-throw thousands out of employment-and entirely destroy the prosperity of the country witness the periods of 1793, 1797, 1826, and more lately in 1837. 26. That the commercial credit of Great Britain must still continue subject to similar shocks as long as this law continues is evident, not only from the experience of the past, but also from the consideration of the two following arguments: 1st. Specie being, as bullion, a commercial commodity in general estimation over the world, it must be always subject, like every thing else, to those fluctuations in price which any alteration in the relative proportion of the supply to the demand must inevitably occasion in any commodity; and it being evident, whenever and wherever an increased demand may spring up for specie elsewhere, recourse for a supply will be had to that market where the price cannot advance, it follows as a matter of course that in all such cases, as long as the law alluded to remains. unchanged, a run on the Bank of England must take place, and give rise to all that disturbance in our monetary system, and the same derangement of our commercial affairs as has been just stated. 2dly. It is not alone in the natural fluctuations which must take place in bullion, like any other commercial commodity, that a run on the Bank of England may be anticipated, -the same will take place from any political or financial arrangements of foreign states, by which the demand for bullion may be affected, as may be seen by the late proceedings in the United States, to which Mr. H. Palmer, on the part of the Bank of England, attributes the drain for gold upon that establishment, and the late commercial embarrassments attendant thereon. 27. The monetary system of Great Britain, therefore, under existing circumstances, seems liable to derangement, not only from the domestic causes which may affect it, and from the natural fluctuations in the demand for |