Northern Times.
Liverpool, Merseyside, England, 1857-11-30 00:00:00

THE BANK OF ENGLAND AND THE CURRENCY.

A. paper on these subjects was tendered by the author,
a gentleman of Liverpool, through the President, for the
consideration of the Council. The following is a synopsis
of its propositions and arguments :
I. That the Bink of England shall cease to be a bank of
issue, and that the government shall possess the sole power
of issuing paper currency, leaving all banks to be dealers
in money only, not manufacturers of it.

2. That the Bank of England shall continue to be a
public institution, maaaging the national accounts as at
present, but that the issue of notes shall be conducted by
two distinct branches of the executive, without other
duties or powers, and by them only.
3. That a branch of the Mint be empowered to purchase
all gold tendered at a fixed price, say 17s 9d per oz.,
and to issue notes of no lower denomination than £5 to
the amount deposited, such notes to be always repayable
iu gold at the Mint on presentation.
4. That a national issue department be empowered to
receive deposits of government securities, and to issue
national notes of 1 and upwards, to the extent of three-
fourths of the par price of the stock deposited—the
interest on such stock, to the amount of the notes given for
circulation, to cease during such circulation, and to
recommence on their repayment.

5. That these two denominations of notes be the only
paper money permitted in the United Kingdom—be clearly
distinguishable from each other, and equally a legal
tender.

The author of the communication hell these two de_
scriptious of paper currency to be wholly unobjectionable
The Mint notes, he argued, being always convertible
into gold on demand would command unfailing confidence ;
and there would be equal, confidence in the National
notes, though not redeemable in gold, as the depositors of
stock would always have, the power of returning them
into the issue department. Though quite independent in
action, the two issues would operate reciprocally on each
other. Thus, supposing the paper currency required to
be £100,000,000, and the deposit of gold gave Mint notes
to the amount of £3O 000,000, it is certain that the commer.
cial rate of interest would continue just so much above
the rate of interest on Consols as to call £70,000,000 of
National notes into existence; whilst any tendency of
commercial interest to fall to 3 per cent. would occasion
the withdrawal of National notes from circulation,
because no banker would continue to pay such notes
across the counter unless he obtained from them a higher
rate of interest than the 3 per cent. obtainable on his
securities without risk or trouble. Thus the whole of
the required currency would have to consist of Mint
notes alone, based on £100,000,000 of gold absolutely
in the Mint coffers, before the rate of commercial interest
would fall to 3 per cent., below which it could not at any
time fall ; and, on the other hand, as the issue of National
notes would only be limited by the proportion of the
£00,000,000 of govern neat securities which would be
available for deposit, and the power of the public to pay
a higher rate of interest than these securities afford, it is
equally clear that the demand for currency arising either
from the withdrawal of Mint notes from circulation, or
from the expansioa of trade, would bring out National
notes to any amount that might be required, not by any
violent applications of the screw, but by the quiet daily
operations of the whole trading community. Tne benefits
to the National Exchequer from such a system must be
very considerable. A. there would, ordinarily, be from
£60,000,000 to £70,000,000 of National notes in circula-
tion, and three.tourtlas of the Consols deposited would
not bear interest, there would be a direct saving of about
£2,000,000 annually in interest, and indirectly, the cost of
raising that sum in taxes. The loss, or accidental
destruction of these notes would also be a National
advantage, instead of one only to the Bank of England.
Under this system the exportation of gold might be
permitted at any time, without other restriction than a
sufficient seignorage, and hoarding, that fertile source of
financial embarrassment, would be simply detrimental to
those who practised it, as government would save 3 per
cent. on all the National notes called into circulation to
supply the deficiency so caused. It is doubtful
whether the Mint notes, secured by actual deposits
of gold to their full ausount, or the National notes,
which would, in fact, be fractional parts of the
national debt secured from depreciation by a
guarantee of 25 per cent. would be most in favour with
the public; but it is clear that, conjointly, they would
place the currency of the country on a solid and self-
relying basis which it is now far from possessing, and
that whilst in the one case, they would turn a delusion
into a reality, in the other they would make both the
man who judiciously used, and the man who hoarded
either gold or notes, though unwittingly, a benefactor of
his country.

A question was raised as to how far the discussion of
these subjects came within the province of the Financial
Reform Association, especially as the council had, on a
former occasion, declined to enter into them, when one of
the then members proposed to call a public meeting for
their consideration, the refusal being based on the ground
that the functions of the association were limited to the
advocacy of fiscal reform and economy in the State
expenditure. It was now contended that as one of the
most pressing questions of the day, and one of figures and
economy, the subject did come specially within the pro-
vince of the Association. Amongst the reasons alleged
were, that there are large pecuniary gains constantly
accruing to the Bank of England properly belonging to
the State; that the State ought nut to pay interest on
Exchequer bills to the Bank, nor forego the profits on
paper issues guaranteed by itself; and that it might save
a large portion of the interest on the national debt by the
issue of a paper money based on the deposit of consols.
For these purpose, it was observed, many ingenious plans
had been suggested, and one of the best was that before
the Council. It was urged that the Council, without
pledging itself to any particular plan of banking reform
or system of currency, might join the Chamber of Com-
merce, and other influential bodies, in condemning the
Bank of England monopoly, and calling upon Parliament
for a thorough and impartial inquiry halo the present
system. It was the misfortune of the British public to
have a financial Government which consulted the levia-
thans of the money market—men made rich by public
calamities, and these men uniformly advised the con-
tinuance of a system so profitable to them, though
notoriously ruinous to thousands, who with valuable
goods about them, were sinking into bankruptcy for want
of the means to represent those goods in the traffic of the
world. It wds suggested that Government should be
called upon to summon a conference or convocation to be
held in London, of men from all parts of the kingdom,
specially delegated to discuss the subject from day to
day, taking all reasonable propositions into consideration,
and reporting on the plan most preferred, there being no
doubt that from a week or two of such deliberations,
a flood of light would be brought to bear on the
subject, such as hitherto had not reached either
the public mind or the government. The member
who made this proposition said the abolition of the bank
monopoly was the sine qua nen of free trade ; that the right
of the State to be the sole maker of all money, whether of
the precjous metals or of paper founded on government
securities, should be permauently established as a power
belonging to the State only, which was entitled to all the
profits arising from it. At present government was
paying hundreds of thousands of pounds annually to the
Bank of England, simply for giving its own paper in
exchange for Exchequer bills based on the revenue of the
country, which, in point of fact, was making the nation
pay interest on its own capital. Exchequer bills were
nothing but big notes ; why not issue smaller ones, based
on Consols, and thus save the money needlessly paid to
the bank.

It was suggested during the discussion that, inasmuch
as bankers and other persons receiving money on deposit
at interest, could only do so by employing it at greater
interest, and the money so employed could not always be
available, there should be a general law requiring a
month's notice to be given for the repayment of sums
beyond a certain amount, bills being given, if required,
which would always be negociable. As an instance of the
necessity of some such provision, it was stated that, on
one occasion, a great London capitalist deposited £470,000
with a certain banking firm one day, and sent a cheque
for the whole amount next day, just a quarter of an hour
before closing time. The object was obvious ; but the
bank paid the money and desired the capitalist to with-
draw his account.
With respect to the paper submitted, the following
resolution was passed :
" That the Council highly approves of the paper of Mr.

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