The Press.
London, England, 1857-12-26 00:00:00

THE PRESS, DECEMBER 26, 1857.

Now, is the Bullionist party that defends Sir
R. PEEL'S Bank Act willing to extend it thus
far? If so, we would at once admit that they
have some ground to go upon, and that they
aim at a desirable end, though we do not
believe that that end can be efficiently secured
by any sort of legislation. But while they
attempt to remedy a general deficiency of bul-
lion by a provision which only tends suddenly
to contract the circulation, we say that they are
aiming at an end which is not only insufficient,
but absolutely hurtful, because it throws all
the strain on to the least elastic element, and
adds the evil of panic to the other evils at
work.

The public now know that it is useless, and
worse than useless, positively injurious, to at-
tempt to meet a state of general excitement and
discredit by forcibly contracting the circula-
tion ; and they know that it cannot be done by
legislation so long as the much more influ-
ential element of discounts and advances on
loan is left entirely uncontrolled by legisla-
tion. All we maintain, all that the intelligent
opponents of the Bank Charter Act ever main-
tained, amounts to this,--that if the bullion
reserve has been allowed to get too low in pro-
portion to the Bank's liabilities, it is folly to
attempt to contract those liabilities by
a sudden tug at the note circulation. The
circulation is more than anything the fixed
and permanent element in the Bank's liabili-
ties. Times of poor trade do not aggravate, but,
except in the last crisis of panic, rather alleviate
the demand for circulating medium. So long
as you take adequate Government security for
your note circulation, that element will neither
foster, nor in any ircpor;.ant degree affect, a
commercial crisis. The bullion reserve should
be held against general liabilities, wherein the
notes will be found to constitute the least
variable item. Any law which affects to secure
a bullion reserve for notes only, directs the
banker's mind to the wrong anxiety. And this
Mr. BUCHANAN'S Message clearly admits.
In fact, it is easy to show that if the issue
of bank-notes is permitted only against a
deposit of Government securities to the full
amount, as Mr. BUCHANAN seems to say is the
case in most of the American States, and as
we know to be the case in Sew York, then the
note circulation is just the part of the banker's
business which does not promote commercial
speculation, while a free system of general
advances on the part of a bank undoubtedly
may, and often does, foster a system of un-
sound trade. If, indeed, bank-notes are
issued against no adequate Government se-
curity—against nothing which must remain
their full equivalent in value, after allowing
fur all reasonable depreciation—then, of
course, they give a false stimulus to the
demand for commodities, because they
directly increase the apparent property of the
community until the time comes when the in-
sufficiency of the security and the impru-
denee of the banks' paper advances is de.
tected. And so far as the several States banks
have been guilty of this folly Mr. BuenAs.ts is
quite right in saying that the over-issues of
paper have stimulated demand unnaturally,
and raised general prices, for a time, above
their natural level. But in such States as New
York, where the paper currency has all been
amply secured on Government stock, the note
circulation is just that part of the banks' opera-
tions which cannot have given a false stimulus
to the market. This is obvious enough.

The only way in which a banker can abso-
lutely increase the demanding power of the
community above the point to which it could
rise without the help of a bank, is by rely-
ing, as all bankers rely, on the permanent
use of, say two-thirds of his depositors' money.
Instead of keeping. these depusits in his till, lie
advaaces them to those who need them, and
thus becomes the medium by which his cre-
ditors lend to his debtors. In this way he no
doubt really increases the demandintz power
of the community, for he lends on private
securities money that would otherwise he idle,
to those who could not otherwise borrow at
all. The banke►'s special experience gives
him, or is at least supposed to give him, the
opportunity of judging how far securities are
good which few private persons could pro-
perly judge of at all ; and his command of
other persons' money gives him the means