such a redundancy in our circulating medium, (see No. 6,) as might raise the price of labour and materials so as to leave no profit in the export of our manufactures, and thus cut off the supply of bills brought to change.

However, to meet the effects produced by such different causes, the Bank of England, according to the existing system, has in all cases but the one remedy, namely, to lessen their discounts, and make money scarce,-a remedy which, however rightly it may be applied to correct a redundancy in the circulation, is wholly destructive to commerce and manufacture when applied in the other cases mentioned; for instance, the case of a loan to a foreign Government, which resembles in its effects the demand for specie for America alluded to. I, therefore, again quote from the same work, page 106, a case of the same kind there mentioned:-"Suppose, for instance, the Messrs. Rothschild contract with the French Government for a loan of twenty millions sterling. It will be readily conceded that neither merchant, manufacturer, nor agriculturist, have any concern in the matter, or are at all aware of the transaction. They may be supposed following their different trades and employments successfully, but to no imprudent extent relying on the continuance of the customary discounts for carrying on their business, when, unluckily for them, the loan we have alluded to takes place the first effect of which is, that, for the purpose of transferring the stipulated funds to Paris, all direct bills on Paris are bought up, and (failing them) all bills on other continental commercial towns, in order to create funds for the purchase of all bills on Paris there to be had, or (failing them) to buy gold to send in

their place. By this means all the continental exchanges become advanced, until at length it becomes cheaper to remit bullion direct from England than pay the high price which bills have advanced to. Bullion, of course, is resorted to, and a drain of specie, therefore, is immediately felt. No precaution, no restriction, can prevent the coin of the realm from being exported under these circumstances. Go it will, in spite of all opposition, wherever or whenever a tempting profit can be made by exporting it. Thus the stock of bullion is found to be reducing-the drain on the Bank becomes alarming-the Directors withhold their discounts, and thus take out of circulation all the payments which come in and give nothing out. The whole trade of the country is thus taken aback. When the circulating medium is suddenly contracted, money is said to become scarce,-whoever owes money is called on to pay. No one is able to buy-of course no one is able to sell. To part with goods on credit is dangerous to the seller, and does not relieve him. For the bills he would receive he cannot get discounted-all credits, therefore, are shortened, and articles of first necessity will, therefore, only be parted with for cash; and as few have that to give, there is less competition,-and the owner, to relieve his wants, must sell at reduced prices or fail in his engagements. Bad as the general trader is, the manufacturer is worse. The scarcity of money disposes people to defer purchases. He can make no sales, except at short credit, or for cash; this he cannot get by the sale of his goods. His workmen cannot subsist without meat, and meat they cannot get without money. He does not like to discharge them, and throw his works idle. He

forces sales, therefore, by exporting at a great sacrifice, or sells to some capitalist, perhaps, who speculates in the article.

"This may be submitted to for a time; but eventually workmen are discharged, from want of means to pay them -bills are protested-stoppages ensue-a panic is created, -and all the commercial world is thrown into disorder and dismay, to the great loss of most, and the positive ruin of many, all arising out of the simple, and what ought to be harmless operation of making the necessary remittances to fulfil the loan contractor's engagements.-Now, this is evidently not as it should be. These consequences should be guarded against. The Bank Directors are not to blame, because they are obliged to have a stock of gold to pay their own engagements; and if they find that stock going away, they are right to call in as many of their notes as they can, and to hold all the gold they can, until money is made so scarce that it becomes the interest of the contractors to look elsewhere for a supply; or that the impossibility of raising money by any other means forces merchants and manufacturers (who have credit sufficient) to draw accommodation bills on their foreign correspondents; or if not, to ship off their goods, now unsaleable at home, to some continental market, and, by drawing in advance, supply their immediate wants; and thereby such a number of bills are brought into the market as eventually supplies the demand. And thus a remittance by bills becoming feasible to the loan contractors, the exportation of specie becomes unnecessary-the drain teases-the Bank alarm is at an end-discounts are again attainable- things return to their usual channels-and in a little time, all reverts to its former state, after being the cause of incalcu

,able mischief to the country, and of absolute ruin perhaps to thousands, without their being chargeable with any crime, or possibly even imprudence." And, in short, the cycle of commerce, as given by Mr. Loyd, (p. 53,) begins to run its round again, and things take a fresh start.

33. We have seen how the Bank remedy operates in the case of a foreign loan. Now let us see how it acts in regard to another case, in which, from some temporary commercial cause, the export of specie is resorted to from the scarcity of bills and the consequent unfavourable state of the exchange for making remittances in that way. I shall suppose this to be occasioned by a large import of grain rendered necessary by a failure in our crops; of course neither our merchants nor manufacturers can reasonably be blamed with this; nevertheless, the existing state of the law, binding the Bank of England to pay in gold at a certain price, forces that establishment to sacrifice both these classes for the preservation of its own existence. The consequence to them of the Bank refusing to discount is precisely the same as that just described in the quotation made from the "Claims of the Landed Interests," shewing the ruinous loss to which both manufacturers and exporting merchants are forced to submit, by sacrificing their goods, and shipping them off to raise money by drawing against them,-for the payment of which bills the said goods must finally be sold in a market in which they decrease in value precisely in proportion to the further decline in prices at home, according as the pressure for money may be prolonged-which it may be, until perhaps the entire stock of goods may be inadequate at such low rates to restore the equilibrium required, and this desideratum is at last ob

tained by the operation of the scarcity of money putting a stop to all further import of goods whatever-the low prices rendering importation unprofitable.

Now it is perfectly evident that if the export of specie did not step in, the unfavourable exchange would have increased by degrees, until at length there would have been a profit on the shipment of onr exports,-and then the same articles would have been voluntarily shipped off to the advantage instead of loss of their owners, and have brought (from their not being sacrificed) a greater amount of bills into the market than they could have furnished in any other way. But the security of the Bank will not admit of this. As long as specie is to be had, it is so much preferable to goods as a remittance, that while it can be got it will always be used for that purpose before goods will be resorted to. And, therefore, the specie would in this instance be all taken away, unless the Bank Directors adopted the necessary measures for self-preservation. But if payment in specie was abandoned, and national paper a legal tender, then goods must of necessity be resorted to if there was any deficiency of bullion,—and the import of grain supposed to have taken place, would be the means of forcing out our manufactures, and giving thereby additional activity to trade by the very necessity of paying for the said import.*

* In order to give the utmost latitude to the argument against me, I admit the supposition that neither specie nor bullion shall be procurable; but the experience of the Bank Restriction Act shews that an inconvertible currency does not prevent bullion being always obtainable. See Note, p. 35.