The Express.
London, England, 1857-11-07 00:00:00

rill atss LW THE Bezrr RATS OF DISCOUNT.

(From the Economist.)
The knowledge for some days past that, notwith- I
draffing the high rate to which the Bar% hid nisei the rate
of diexmat, balks has still been Irving this country both
for the Continent and the United States ; the somewhat lass
larawable amend which the last snivels from Amerna
have heeled ; the feet that in mate places on the Continent,
sad arpottally at Homburg, the isle of discount had reached
nine par cane ; and the certainty that at heat for some time
to come the drain of silver to the East, producing indirectly
• demand for gold here, would continue unabated, had pre-
pared the public for the Bother fne of one per cent. which
was made on Thursday in the minimum rate of Bank dis-
count ; and which now stands at eins per rent. The highest
rate ever before known in modern times was eight per cant.,
at which it stood for four weeks, from the 23rd of October,
1847, until the 20th of November, when it was reduced to
seven per cant. In that year, through the whole of the
months of August and September, and up to the middle of
October, the rate of discount was only 64 per cent. :
and when it is remembered how much more se-
vere was the pressure at that time than now, and
how much more dee :mental and destructive to private into-
ner we have • striking example of the fact that It is not a
high rate of interest that creaks panics and distrust, though
it may arise out of them, There is no more reason why •
We of discount of nine per cent. should derange &trade other-
wise IMO, however it may for the time somewhat diminish
W profits, than there is why a very high price of grain for a
sera should ruin • nation others lee wealthy, though it
may somewhat reduce that wealth. Both moat equally be
regarded as an exceptional state of things, as dila less or
more to be suffered, but not to be evaded by any tampering
with the laws of free supply and demsad, without the great-
est risk, nay the certainty, of aggravating than.
We ere glad to see that the money-dealers in Lombard-
stn' sad the joint-stock banks, who have assumed the im-
portant position of holders of the spare Hosting capital of
the country seeking employment, and who have thus become
the agents between the portion of the public who are lenders
and the portion who are borrowers, have acted promptly,
sad have come to the resolution of allowing 8 per cant. for
"scary at call." This step is much more important than at
first sight may be apparent. A rise in the rate of discount
leads to a (*ll in thy price of securities . —anti a fail is the
prim of. securities affords • new inducement for persons whose
mosey is lying "se tall" and available fur trade purpose. to
withdraw it sad invest it in securities. We have heard
much of late of ths public being free buyers of Commas.
But aa it randy happens that any mousy is actually held in
pate hoards in this country, tent is either plead with
bankers or with money dealers, the percher of escuritice
means the withdrawal from those channels of temporary
investment. It is true, that the mere purchase of sectudire
.barbs no capital in the &at instance. If lbws is • buyer
who rye kis money, there also a seller who receives We
money, end, so ter, the tact upon the way market should
be lief But at tines like the parent It freqnsalhe
that the seller of estatities menthe with a clew to
his capital aimed, either to mod the demands of
eats, or neon frequently to profit by investment ea favourable
WM, in fortis.. stocks. In that rue the indirect effect of the
=
withdrawing
their money from bankers end money
in order to invest in Consols, is to enable sales to r
node here for the purpose of investment abruad—tramme-
tioaa which lead directly to an export of gold. The truly
legitimate check which can be put upon such operations,
few in themselves is that the vnducement to continua to
keep money in the hands of bankers and money-dealers should
be enaintatned by a rate of interest proporeonata to the real
valued money in the market. We believe it would be very
difficult to estimate the MI advantage which the orrontry
has dental from its comparatively new practice of allowing
• rare of interest on "men" of all" Ractuding with, but
always closely apprommating to, the beak rats. By it
large manes of capital •re retained in craned of urea
which would otherwise, and especially at such moments as
the preeeat, soaoensinent investments in fixed secutities
at rasa or abr
The old fallacy is again revived, as it elways 1a at such
momenta, of • further issue of paper money. This fallacy
might ere now have worn Walt out, but for the unhappy
' encouragement given by the unsound theory upon eloch the
Bank Act of 1844 attempted to base • mend rete of prac-
tice kr the Bank to follow. Every one whma opinion is
worth anything, now admits that the Bank has no power to
Increase On circulation of notes, so long as they are redeem-
able in gold —the strongest reenter of the art of 1844 tell
es, and tell us truly, that if the Beak had the free power
of rue at this moment, they could not Increase the direr-
lion of paper by a single five-pound note. An evening con-
temporary says, and says truly:—" If the Bank of England
woe persuaded to extend its rues instead of rinsing its rate
of discount, what would be the effect ? Not • single rive-
pound note the more would there be in the country. The
only differaeoe would be that the gold would go out of the
Went, to Europe and America, with an increasing impetus."
Now,this is no doubt perfectly true. But then lithe Beek can-
not increase the circulation, what is the value of
the restriction upon which the whole theory rap?
It cannot be said that it is in order to prevent the exporte-
rs of gold, because the Bank is left With fall dieastima
to demount as much paper as it please., and at
whatever rate It pleases, end thus to place bullion at the
command of exporters to any extent it pleases. In these
inuardions it has only the discretion of the directors to
park, and that that discretion has been exercised for the
pablie benefit no one will deny. Bat how has this been
.e f By the only true method of certeadag advwue an-
athema., and preventing an undue abstraction of corbel,—
raising its price so as to take away the istheessent b spat.
Agreeing se much ea we do, with the grant objects of
tree who framed the ad of 1844, we cannot bet regret that
the theory adopted is so much calculated to give an Im—
portance to Bank notes which they do not possess, sad thus
to socourage the dangerous fellacy, that • promote for capital
can be aleriated by additional issues of paper. Any one who
is acquainted with the operations of the Bank of Englend,
must know that an enormous amount of notes flow od
every day, but flow back again In the shape of deposits
of bankers or others ; sad it must be plain to the com-
monest *teener that if the transactions of the country
Teallyomuired more than ore at present in circulation, that
additi quantity would be retuned by the public to whom
they are advanced:
What is really wanted at such • time as the present is
Wise, and not raper. Of what service would Bank notes
In to than who wish to make payments in New York or on
the tleatinest, except that they could exchange them for
gold f But if the Bank la prepared to put with its gold on
that will snit the remitter, it eon am well be obtained
diord, without the intervention of Bea totes; and to that
the law offer, no impediment. We Is not deny, on the con-
trary we here often urged, the great *tourney which might
be effected in the circulation of the country by well-
secured notes of a lower denomination. Sorb DONS would
perform the same !service as ie now done by gold, and
whatever extent they could be usefully and safely introduced,
bullion would be economised, and rendered effective r
capitol for all the pmyaes of trade abroad and at home.
But let it never be Icat eight of, that at this moment the
rirUcell which Is really going on is one between diffivent
countries for the poratessaa of the precious metals, in order
to lids over a penal when the usual channels of credit are
deranged by extraordinary and temporary events. That
this coantry is intrinsically better off ea regards Its obliga-
tions and financial position than mimed any other, we bolter
there can be no doubt ; end the real question fee tut to de-
ten:nese is this—shall we allow others, In order to aid their
ertoessilits, to outbid us in oar awn market for our own
money, and permit ourselves to be drained until one com-
merce is placed m the seine jeopardy and danger as that of
some other countries which have been less prudent or lase
fortunate than ourselves The dream which has already
been placed upon the bank, even at the high rated discount
now charged, is best *Mown by the fact that the advance.
upon private eduritim Dave Jammed in eleven days by the
large sum of 2,089,1971.