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THE BANK ACT OF 1814.

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THE BANK ACT OF 1814. Those who undertake the defence of the Bank Charter Act of 18il have an easy task so tong as they confine themselves to answering the objections of such assailants as fir. Salt and men of the same school, whose rosl objection IS to the Bill of 1819, which provided for the convortii»iiity of Bank notes, and who attack the Act of in that sense only. It would be much more satisfactory to the public, and much more worthy of their mission if such writers would disregard as wholly without influence the small knot of "inconvertibles,"who still indulge in the arcam that wealth can be created by an unlimited issue of CI promises to ?'" upon the condition that payment is !le\'r to be demanded and were to graJnin'ie witf, the ob- ject'' )nto   1841 raised by tch ? as ?r. T k e T1 1.tr. t c) S?V° thf AMll,f 1J' '? ?' r'?'?t?. Between these emSoif wyters> and '"? most eminent of the opposite ,?ol who i'ave supported the principle of the Bank Act of such as Mr. Jones Lloyd (Lord CKerstone) and Colonel Torrens, there is at least a perfect accord upon the necessity of maintaining convertibility. All are equally the uncompromising ad vocates of the principle of the Act of 1819. It is therefore a mere idle waste of time, and can have no other effect than that of drawing attention from the real point at issue, to continue to discuss whether Bank notes should represent the real value which they profess to do, and whether, as the only means by which I that object can be attained, they should be convertible on demand. A few days ago a letter appeared in the Times bearing the signature of Mercator," which is described by the Editor as containing a few simple truths on the currency by a high financial authority." The object of this letter is a defence of the Act of 1S44. The whole of the argument in Mercator's" lettcr proceeds upon a fallacy so plain and so transparent, and which we thought, since the discussions which took place III 1847 and the evidence taken before the Committee of 1848, had become so generally acknowledged, that it never I would have been seriously urged again. That fallacy is that the Bank of England and Banks of Issue generally have the power to increase or contract the circulation at pleasure, Aldreator" says :-Before the Act of 1814 no restriction was placed upon the amount of the paper issues, except that which was supposed to be involved in the obltgation to redeem the paper notes in gold on demand. The obligation to pay in gold was thought to be a sufficicii t security to the public that the power to do so would at all times be maintained by the issuers. This delusion, however, was dispelled bv the events of 1825 and 1837. The excessive issues of paper money which preceded and mainly caused those convulsions were not found to afford any pro- teet/on against evils which ice are now toid are the offspring only of undue restriction. Nay more, they appear to have produced those evils in their most intense and foiimdabie form—severe pressure, high rate of interest, extreme alarm, extensive insolvency, approach within a few hours to a state of barter, and the specie reserves virtually exhausted. This was sufficient proof that the mere obligation in words to pay the notes in gold On demand is not a suffi- cient security against excessive issues, or a safe guarant y for the faithful fulfilment of that obligation at alt times. Hence the act of 1844, by which a new security was sought for the convertibility of the notes, and a new pro- tection against irregular and illegitimate issues. "Mercator" must not only have overlooked the discus- sions of 1848, but he must also have forgotten the expe- rience of 1847. True, it was professed that the reflations of thepctof is44 would effectually provide against finan- cial and commercial crisis, but the experience of 1817 soon dissipated that delusion. But then it was boasted that at least the convertibility of the note had been maintained Truly, but was that by the Act of 1844 ? Sir Robert Peal in his speeches in Parliament, and writers out of Parlia- ment, speak as if at various times between 1819 and 1814 the Bank had been obliged to suspend payment. On the contrary, was the convertibility of the note not equally maintained during the whole period from 1819 and 1844, as it has been since ? But was there ever a period when that object was secured at so great a sacrifice as in 18-17 The obligation to pay in gold was thought to be a bifl)cient security to the public that the power to do so would at all times be maintained by the issuers. This rlp- lasion was, h,),, ever, dispelled by the events of 1825 and 18'7. The excessive issues of paper money which preceded and mainly caused those convulsions were not found to afford ??VP/otcction against cdls," &c. Again This was a ?(:i", t proof that the mere obligation in words top?y the notes in gold on demand is not asufficient security against excessive issuers," &c. No one doubts that a prom;se to pay does not necessarily imply the ability to pay. But that is a question which touches the character of the issuers of the notes, as to their solvency or insolvency, but does not touch the principle upon which a notoriously wealthy and Qolvent publi, establishment shall conduct, its issues. Was there ever a moment between 1819 and 1844 when the slnncy of the Bank of England was disputed, or its notes dIscredited? But then it was excessive uses which pro- l* prf and mainly caused the convulsions of 182? ?d 1837," tnd, therefore, they ought to be restricted. Such is the argument. ?cre, then, is obviously a confusion be- ,g currency and capital,—between circulation and credit. lt is that there were "excesive issues" at the se • s • The years of 1821, 1822, 1823, and the first half of 10- ,wcre certainly not periods of speculation. Towards the close of 1821 some excitement prevailed, and it in- creased until the summer of 1825, when it was at its height A reaction began about September, and it increased into a panic or convulsion" in the middle of December, first by the suspension of London banks, who by law were pruhi- bited from 'ssuing notes. Well, how stood the circulation of the Bank during that period? We refer to the Returns 111 the Appendix to the Report of the Committee on Com- mercial Distress, and we find the circulation of the Bank to have been- x 1821 August 20,295,000 I 1822 February. i8,6C?OOO A?t. 17,464,000 ,1? February 18,392,000 August 1?231,000 W 1824 February 19,730,000 ?"?st.?. 20,132,000 1825 ?'?y. 20,753,000 August.?.??.? 19,398,000 Is it possible to recognise any proof of "excessive issues" in these figures ? But what is most striking is, that notwithstanding the slight variation in the circulation during tne great excitement of 1825, when speculation was eo rash and credit so indiscriminate, after the greatest possible restriction had been placed upon credit in Decem- ber alld January. the circulation of the Bank had risen on the 28th of February to C25,467,000 including the million of one-pound notes then issued. Again, let us examine the facts us they existed in 1837, and poor to the" convulsion" of that year. The years 1833 and 1834, and the first half of 1835, were periods of no excitement or speculation. Towards the close of 1835 the great American speculations set in, and continued during the greater part of 1836. In October of that year some difficulties began to be experienced, which increased in intensity till the middle of 1837. Well, how stood the circulation during those years ? Again, quoting the same return We find it was as follows:- "T.- 1833 February. 19,370,000 August. 19,629,000 1834 February. 19,252,000 August 18,839,000 1835 February. 18,328,000 August. 17,892,000 1836 February. 18,102,000 August. 18,158,000 1837 February 18,232,000 What proof is there here again of excessive issues" having led to the "convulsion" of 1837? On the contrary, it is curious that the moment when the great speculation began, in the autumn of 1835, the Bank issues were at a lower point than at any time during the whole period. But these are the facts upon which the principle is based that dictated the Act of 1844. We have said that the great error consisted in the confusion between circulation aud loans, If we return to the Bank returns, we shall easily discover how, upon this explanation, the convul- sions" of 1825 and of 1837 arose. We shall find that, a l- though the circulation continued almost stationary, the advances by way of loans and discounts rapidly increased, and led to the excitement and indiscriminate credit which in those years led to such disasters. From August, 1821, to 'he end of 1825, the securities held by the Bank were as ,Itow, 'v'  August 18,475,000 Iko., February 15,973,000 1822 February. Ii' 2UO, 000 toon ?"SU6t. 17,290,000 ?-0 -February 18,319,000  A,,g.?t i?? ooo 1824 FebruarY 18,872,000  August 20*904,000 1825  20,904,000 1 IKo. February 24,951,000 August 25,100,000 A" H| we have during the period in question an i0? a? s?'securities held by the Bank of ?6,6?,000, and tb?'?'y at the peiod corresponding with the great tli*-jpuj v' and speculation :—and the account is even more c??inc take for comparison only the portion of those ? ritie ?,?'"tchparticularty represent private credit. The sf'ivatg.j 6<??.m??curitief, consitttint; chieily of hitis discounted, uYe in 8fcuritie», consilltin chiefly of bills discounted, ";If had -?ust, 1821, only ?2,722,000; in August, ISU, t? h-, ?creased to £ 0,255,000 and in August, 1825, thl[re in ?rther increased to ?7,691,000,—showing an ''?e of J}arly £5,OOO,OO; and this took place ^ifhout a in the circulation whatever ;-and yet 1 u ''the ^crease in the circulation whatever ;—and yet all oe without is said to have arisen from excessive ? '?a lo°h an lthout any reference to the true cause of exces- | capital. If, the,, ?'s Bank Act of 1844 was based upon such er- 3 ''?it?t?sumptions, it cannot be a matter of surprise 1 I$ t It 81 1(juld have so seriously disappointed the expecta- 1 ''•> of '? framers. It certainly cannot be said to have 1 f? to ]???'! speculation, for tne country in the years -I)' ?to l '?asmorethe victim of that evil than in any t ?crDp ?'??'H the memory of the present generation and, 0 ptaee 0 place Of having alleviated the crisis when it came, it 13 j?110 t b Q deiiied that it had the effect of aggravating it; II life °t¡t 40? that the Act was virtuaUy suspended. We d <?eoh)? ?°? '?su?bt mit the Bank accounts to the same cxa- n )i|iatioi ?? ?'? ??'c'' period, as we have already done with t fj?ar^ lodu, t 0 ??o to 1837, to show that no effect whatever was 1 t?t t? d the Act of 1844 in preventing s peculation, but )- crc \?'rcun)stances which led to it at the latter period le :)3?0h Y similar to those of the former period, both in 3 >curiije 'o circulation and to advances of capital upon 10 curili,? These two elements in the Bank returns stood III ig. Circulation Private securities. Ll, Pebi-uar3, 21,148,000 5,837,000 je I845 August. 1,485tOOO 7,870,000 February. 21,201,006 11,809,000 184c August 22,109,000 11,712,000 February 20,968,000 23,212,000 is I847 'August 21,390,000 12,765,000 id ebruary 20,1.51,000 15,819,000 Ii It is ir Aiigugt 13,828,000 16,923,000 of ? (J?sible to examine these facts, without arriving I an *? ;?llelusion that "excessive issues" had nothing I of do %v?lt 4 the panic in 1847, but that, as in 1825 and ,in 37, credits were the sole cause. So far from .c- the circulation being excessive at the moment the panic arrived in Sept., 1847, it was lower than it had been at any time during the whole period, but the advances upon private securities had increased from £ 5,837,000 in 1814 to X16,920,000 in August, ISH. Acting upon the fallacious assumption, then, that all over-trading and consequent panics have been caused by excessive issues," and that the Bank had it in its power to increase or diminish its issues at pleasure, Parliament was induced to pass the Act of 1844, the supposed effect of which would be to regulate the currency ac- cording to prescribed rules. But experience has shown, that while the Bank has every power over the amount of its advances, it has little or none over its circulation. Sir Robert Peel appeared to think that the only means by which bankers could issue notes was by the way of loans or discounts; and that they had therefore the power, by eontra-cting their loans, to contract also the circulation, and by extending their loans permanently to increase the cir- culation. The slightest consideration will show that both these views were equally unfounded. The Bank may at pleasure contract its loans and discounts cither by raising the rate of interest, or by refusing accommodation; but the B mk cannot contract the circulation at will, so long as it hold: large deposits on behalf of the public which they can withonwat pleasure.. If notes are required for the purposes of circulation, they will be withdrawn by de- po>itors in spite of any attempt of the Bank to contract their amount. Indeed, it generally happens when the Bank is contracting its credits, the circulation for a time becomes larger in place of smaller. So, on the other hand, the Bank cannot extend the circulation at wiil. It may, indeed, increase its loans and discounts; but if the notes are not required for circulation, they will imme- diately be returned upon the Bank for payment. So much so is this rccogni<ed to be the case by practical bankers, that it has now become a rule in banking that no advance should be made in notes, that could not conveniently be made in coin. The actual circulation at any time is deter- mined by the requirements of trade in order to conduct internal exchanges, and net by the will of the issuers of notes. As long as bankers hold large amounts in deposit belonging to the public, the circulation cannot be reduced below the necessary amount required by the convenience of trade, however much bankers may contract their credits and as long as the notes are payable on demand, the issues cannot be excessive, however imprudent bankers may be in extending their credits. But, then, it may be said, that even admitting all this to be true, and further admitting the necessity of main- taining the principle of convertiblility, the object of the Bank Act of 1844 is only to give greater security to ih P. t principle. No one who contends for controvertibility will deny that it is the duty of the issuers of notes, to retain in their possession at all times such a reserve of that com- modity in which their notes arc payable as will enable them to fulfil their obligations. This is an obvious duty not applicable alone to banks. Merchants understand perfectly the necessity of maintaining such a command over money as will enable them to meet their obligations as they become due. But while this principle is fully recognised and admitted, no one will contend that a rule laid down in 1841 by Parliament can be a safe and sur e guide under all circumstances, and that it is to take the place of discretion and judgment, whatever the circum- stances may be. The Bank of Kngland equally maintained cash payments before 1844 as it has done since and it has equally unduly extended its credits since the Act of 1841 as it did before. The more this subject is discussed, the more it will appear that the Bank Act of 1811 was passed by Parli L- ment under an entire misconception of the principles which determine the fluctuations of trade and currency; — and consequently that it has been productive of no one of the benefits which men predicted from it. In another article we will examine how far it has been productive of injury at those times when it has had any effect at all.- Economist.

CATTLE FEEDING ON ARABLE LAND.

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THE BRITISH CORN TRADE. I

FOREIGN CORN TRADE.

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RAIL WAY SHARES.

CARMARTHEN CORN RETURNS.

WEEKLY CALENDAR.

I LONDON GAZSXIE