49. I am aware, however, there are persons who will admit all this, and yet will try to evade the conclusion that has been arrived at, by charging me with having omitted one most material point to be considered, namely, that banks will multiply to such an extent, and rivalry among them will so increase that they will tempt merchants to speculate to their own ruin, notwithstanding all the arguments which have been urged to the contrary. This, it must be admitted, is an argument that has been often used under the existing state of things, when men of straw are allowed to become bankers, and permitted to issue notes, and get them into circulation the best way they can. I admit that such banks will do all in their power to force out their notes at all hazards, but this is admitting nothing against what has been already said— it is only confirming the truth of the principle that has been relied on-that men will be universally guided by what they consider for their own interest-the banker, as a man of straw, may tempt merchants, as stated, to hazardous enterprises; because he (the banker) has little to lose, and he has the prospect of becoming rich by forcing out his notes, and he thus undergoes the risk as being for his interest so to do, but let the legislature refuse to license bankers without having landed security to guarantee their solvency, and let the issue of notes be totally withdrawn, then the case is altered-the banker has no longer the object of getting his own notes into circulation to make him inclined to encourage his customer in hazardous speculations, by giving him imprudent accommodation-in so doing the banker might indeed lose the capital he had, but would have little reason to expect by so doing he could add much thereto-on the contrary,

the banker's interest would be as decidedly against this line of conduct as it might now be said to be in its favour. Under the plan proposed, instead of being at all likely to be the encourager of his customer in any imprudence, he would be converted into a strict watch over his conduct to prevent him so doing, and if he saw him making a dangerous use of the credit he allowed him he would be the very person to check him in his imprudent career by withdrawing the credit which he saw it was dangerous to continue. It would appear, therefore, that under the plan proposed the interest of the public would entirely coincide with the interest of the parties who were themselves concerned, and if so, it will, I think, be admitted that no where could it be placed in more safe keeping.

The principle of self-adjustment here contended for, and which must always subsist between currency and commerce, when not interfered with, shews itself even under all the disadvantages of the existing currency laws; all the most practical witnesses examined before the last committee on banks of issue having borne testimony to the increase and decrease of their circulation at different periods of the year, when greater activity usually prevailed from local circumstances in the extent of commercial transactions, which, I trust, will establish beyond the power of contradiction the truth of the doctrines herein insisted on.-(See statement in Appendix, No. II.)

50. An inconvertible paper currency will likewise secure those requirements most insisted on by Messrs. Loyd and Palmer in their writings; for example:

Mr. Palmer, in his pamphlet on the causes and consequences of the pressure upon the money-market, states,

page 41,"nothing can guard against the effects of mismanagement and consequent excess, by such a numerous mass of issuing bodies as overspread the empire."

It will be seen, however, that the plan here proposed limits the coinage of notes to one establishment, and thus supplies the required remedy.

Mr. Loyd, in his reflections on Mr. Palmer's pamphlet, page 18 and 19, shews the impolicy of allowing the Bank of England to be charged with the regulation of the amount of the paper currency in conjunction with the ordinary business of banking, which duties, he states, " can be easily shewn, are in many cases conflicting, and therefore incompatible." And at page 46, he adds, " and probably much of the intensity which characterises the commercial convulsions of this country may be justly attributed to this cause."

The plan now proposed separates these duties, and places the regulation of the paper circulation in the hands of those who can have no interest in abusing the trust confided to them, and applies the desired remedy to the history of the present course of trade given by Mr. Loyd, page 44, which, he says, “revolves in an established cycle, beginning in a state of quiescence-next improvementgrowing confidence-prosperity-excitement-over-trading

convulsion-pressure-stagnation-distress-ending again

in quiescence."

The public would likewise not only be secured against the sudden contractions and expansions of the currency, so much complained of, but it would also be secured against all the worst features of any private banker's insolvency -inasmuch as all such establishments would be prevented from issuing any paper of their own, as already stated.

In thus applying a remedy to the foregoing points, which form the grounds of complaint against the existing system, most dwelt upon by each writer, the plan proposed seems to meet the wishes of each party. But when Mr. Loyd proceeds, page 50, to describe," the sole duty to be performed in regulating a paper currency is to make its amount vary as the amount of a currency exclusively metallic would vary under the same circumstances,"—here Mr. Loyd advocates a principle which, it appears to me, both reason and experience contradict; for reason clearly points out that the circulating medium, be it paper or otherwise, should only vary in its amount according to the variation in the amount of the transactions carried on through its agency (No. 9); and experience proves that when it is made to vary in its amount from any other cause, the whole monetary system of the empire is disturbed. (No. 25.) Reason also points out that a metallic currency as bullion must always be liable to fluctuations like any other commercial commodity, quite distinct from its office of a circulating medium. (No. 26.) And Mr. Palmer proves this clearly, by the demand for gold for export to America which has taken place within these few years, so that this must be considered a defect in a metallic basis which ought not to be copied, nor should it be tolerated.

This principle, therefore, I think, cannot be maintained -and if meant to be applied to a mixed circulation of paper, issued upon a metallic basis, it is plainly impossible to be accomplished; for Mr. Palmer states, the proportion of paper issued in relation to specie by the Bank of England, to be calculated at the rate of three to one-and part of this Bank of England paper forms the basis of another

issue by private banks of three, or, perhaps, four to one of their paper. Therefore as any reduction in specie involves more than three times that reduction in notes, the fluctuation of paper in a mixed currency can never be the same as the fluctuation in a currency exclusively metallic, at least as long as Mr. Palmer's rule is acted on.

It

Upon a full consideration of what has been said, it seems to me to be clearly shewn that neither a mixed nor yet a purely metallic currency affords security against undue fluctuation, in the amount in circulation, because it is plain in the late case of the demand from America, gold would have been exported, whether that circulation was or was not purely metallic, and would have produced the same misery and commercial embarrassment which a denial of discount must always produce; and it also appears, that under a mixed currency the fluctuation would always be at least three times greater in case the bank adhered to its own rule of maintaining the paper circulation in the proportion of three to one to the specie in its possession. therefore seems evident, the only circulation which can be relied upon in all cases to conform itself to the extension or diminution of the mercantile transactions of this country, is an inconvertible paper currency-the issue of which shall be confined to the supply of the different banks of discount, and entrusted to responsible parties, who shall be accountable to parliament, and who shall have no private interests to interfere with the strict discharge of their duty, and who shall be positively prohibited from dealing in any public securities whatever. Such a currency will be free from all those fluctuations to which a metallic currency is liable, (Nos. 26 and 29,) as well as from those to which it is not. Thus our trade and manufactures would increase