The Northern Daily Times.
Liverpool, Merseyside, England, 1857-03-10 00:00:00

27 it E E NY NEED OF MONETARY REFORM?

To THE EDITOR OF THE NORTHERN TIMES.
was complained by several speakers, in the
debate on the motion for a committee on the Bank Act,
It' the Government were approaching the subjeCt with
a foregone conclusion as to whet should be the issue of the
labours of that committee; and that foregone conclusion,
if
; anY such there be, is that the present monetary system
perfect, and that, therefore, legeslators have nothing
e to do with the question than to prevent any radical
Change. •
Y.i
Mope,
this complaint is well founded or not, the fact
efts having been made, will, ope, be a sufficientipolcigy
o i
for ttlY troubling you with a few- observations tending to
knw, that our present system is not only wrong, but most
radically wrong. But, before adducing these proofs, I
ask all candid thinkers if the simple fact that so
frl,aay intelligent men entertain such very different opinions
s" the subject of Currency is not of itself an indisputable
tProof, either that the present system is wrong, or that if
t'ght the arguments of its defenders are radically defec_
:ve ? They who have the well-being of society at heart
Shouldl never rest content with any system for which they
_ a preference until they can find arguments which will
~.4toleast close the mouths of those who are opposed to it.
tali:ever abstruse the question may be, there must be some
a," of Proving any view to be right which is absolutely
VA! , or at least of proving the reverse to be wrong ; and,
therefore, until such proofs are adduced on the present
13ubject
110 modest man can contend, dogmatically, that
we need no reform,
li this The reader will observe, that the objections advanced
letter are urged against the existing monetary
intern rather than against the Bill of 1844. The motive for
this is, I feel convinced, that that much canvassed measure
" about the best that could be devised, if it be assumed that
the Principles hitherto laid doyen by the leading political
Tittle
are corresst. Most assuredly there is very
Coons few improvement in the measure, so long as the
Prinei
ple of convertibility into:gold on demand is adhered
and it is deebtful whether any of the projects which have
hitherto been put forward as substitutes for this form Of
tirertibility could have been reduced to practice without
00, risk of deranging the currency; therefore, all things
4:'idered, we shall have little cause to grumble at the
friends and supporters of the bill of 1844, even if it should
I,°?' appear that the economical principles on which they
thave relied are spurious. The worst that can be said of
44era is, that they are rather too dogmatical in their
them Port of the measure. The best that can be said of
that they, or the majority of them, have honestly
reduced to practice that which, for the time being,
aD
Peered to be the nearest approximation to political
114111 The worst that can be said of the measure itself
!s, that it is not final ; the best that can be said is, that it
is a.r°,l patch on a radically unsound monetary system.
eo ,r." arguments I shall adduce in proof that the existing
re' system is wrong will be in support of the
- llo'log propositions
d.,vsst- The system falsifies the natural relations between
`u._.tc'rs and creditors.
t "1. The system attempts to fix the supply of legal
4nellader, but makes no seeovision for preserving the "bill
3 elearehce systeen" from derangement. •
lee I`t
he
The eyetem prevents the natural laws from regulat.
rates of interests.
.CUR MONETARY SYSTEM FALSIFIES THE NATURAL
it
POSITION BETWEEN DEBTOR AND CREDITOR.
does this.
ju assuming that all debts are debts of gold, and that
all
creditors own gold to the full extent of the debts owing
,0
'era. This assumption is ,most erroneous, as any one
may see who will carry his mind to the bottom et the
the
Who that does so can for a moment suppose that
..s aggregate creditors of this country actually own an
mount of gold eqnal to the debts owing them ? Why,
the ee. total amount of these monetary debts is more than
t. Y times that of all the gold in the country,- and per-
five times that of all the gold in the possession of the
;I'l ,3;4 race. It is absurd, therefore, to suppose that
teeer-,:°rs actually own as much gold as the debts owing to
ez• " would express. They cannot own what is not in
e4,-sterlee, or which, if in exestenee, is in the possession of'
„ 'owned by, other pef,ple ; and, therefore, any monetary
siTera must be wrong which is based, as ouP own .is, on
assumpti.en that every debt is a debt of gold, and that
erY ep Zeseditor has a moral right to demand payment
th
wreelef in gold.
Vhe reader will, perhaps, ask, "If the debts owing to
t"l.7,i,tors are not debts of gold, then what are they debts
b This
,is a very pdrtinent question ; and it is
cause monetary writers and speakers have never yet
d:.aight to define what it really is that creditors owe in the
e, 'its that are due to them, that so much confusion has
eeee rto clouded this important subject. In another letter
1101,
It i endeavour to supply this definition; for the present
surnce that it is not gold they own, and that, there-
o • ese,e, all sYsiems must be wrong which empowers them to
2"iaAd gold,
MONETARY SYSTEM ATTEMPTS TO FIX THE
tIIPPLY OF LEGAL TENDER, BUT MARES NO PROVISION
sOri PRESERVING THE BILL AND CLEARANCE SYSTEM
Isitoll DERANGEMENT.
is 'Y what is here called the "Bill:and Clearance System"
11.1smeant the combined system of discounting bills and
sing them through the London Clearing House. It is
Vi
Trteu 'flown that in the process of clearance the bills due
all the clearing banks are almost wholly met by those
'll are due to them—by which means there results
4aell an immense economization of legal tender that, on
s average, the real payments of legal tender are only
bout one twentieth part of the whole amount cleared.
Bat this bill and clearance system, as at present
eve
eatezed, is extremely uncertain in its economizing
b'ets on the legal tender. It is a system running side
et; slae with the currency system, sometimes superseding
tNeteretrleY to a most enormous extent, and sometimes con-
el lag its effectiveness, and, consequently, throwing
ra and irregular burdens on the currency; and the
t7reet in our system which we are now about to discuss
s4lsists in the fact, that not only have we no means of
Otllar •
e 6 ging the supply of legal tender or currency to meet
'4ll
41' •
e eXtra work thus thrown on it, but this extra work is
Y 8 liable to be thrown on it at the very time when the
see,
is being decreased by the exportation of gold.
tee. order to obtain a clear idea of the manner in which
bill and clearance system affects the currency, let us
Itipl3Pose every person who uses bills to have a ledger
thle.oUnt at some central. clearing house,' and to pay into
et clearing house all bills due to himself; it would then
,°,llew, that the amount of all bills paid in by A. would be
' raced to his credit, and to the debit of the several accep-
' 411's of the said bills. And, in like manner, all bills
eePted by A, and paid in by other parties, would be
Pl
a aced to the credit of the several depositors, and to the
;shit of A. By this means, the bills drawn by A on other
ttieePle would be set against, and, thereby, made to cancel
,r°se drawn by other people on him. But, in the majority
eases, it would be found that the bills paid in to the
e,h
't of the customers accounts would fall due or expire
1:0 or three months before those which were paid
as set offs against them. Therefore, to enable
et: a system to work, it would be necessary that the
'eering house should give credit to such parties to the
itTellt to which their debit bills were in advance of their
elit bills ; and so long as this amount of credit was
)',Ceo, the system would work smoothly, and bills of
eeshiatige would be made to discharge all the duties of
slender But everything would hinge on the granting
'slit's credit, and hence, if at any time it should be with-
hethe whole system would come to a dead stand, and
.aeraYments previously effected by its means would then
• s," to be effected by means of legal tender.
tlem4e(Vtlireupd.thaer
bankingfatiobsper d by. the means
uoleeess ot discounting
Atti)eh,lll, and will; pyroceeds meeting or paying another
ekit to fall due, produces an encouraging effect on the
)teetp etender, which is almost exactly similar towhat
`e be produced-under the above supposed system.
,I/roe:24lY persons it might shave t in such a
'`ac4;:s, the bank would have to provide the
n•-' wherewith to meet the expiring bill, but
Ole 7,ertlaps nineteen caries out of twenty, nothing of
eti.,l"c!rt would be required. The bank would meet the
ois. "'lie bill by presenting against it at the London
fuelling house, some other expiring bill or bills due to
• , ,t 1,4 or to some of its custemers, and thus the transac-
• 4 th,,eald be effected without the use of money. But
as in the foregoing case, credit would have to be
de to the extent to which the credit bill was behind the
the bill, and hence the power of the one bill to discharge
bill‘e.tioa,.etion of. legal tender in meeting or paying the other
'aelo„`"Ll entirely hie on the ise ditit of the banker
Llf he consn
engted to give the required credit