The Northern Daily Times.
Liverpool, Merseyside, England, 1857-06-02 00:00:00

LITERATURE.

TUE BANK CHARTER ACT : OUGHT THE BANK OF
ENGLAND. OR THE PEOPLE ,OF ENGLAND TO RECEIVE
THE PROFITS OF THE NATIONAL CIRCULATION?
By Jonathan Duncan, B.A. London : D. F.
Oakey Paternoster-row.

The appointment of a parliamentary committee
to examine into the merits and the almost uni-
versally admitted disadvantages of the Bank
Charter Act of 1844, has given an opportunity for
the publication of this pamPhlet. Circumstances,
of late, have directed the attention of the mercan-
tile public of England keenly to the nature, and
the results of that series of legislation which
commenced in 1816, and was completed in 1844,
to which the Bank Charter Act belongs. The
strong dissatisfaction at present unquestionably
felt at the general results of those enactments,
will ensure careful attention and favorable disposi-
tion towards a treatise such as this before us, even
where it passes far beyond the limits of the com-
paratively narrow question involved in its title,
and' urges doctrines strongly in opposition to the
established opinions of most financial dogmatists.
The • first principle on which Mr. Duncan starts
is, that legal tender money does not neces-
sarily possess eny . intrinsic value whatever,
and • ought to be nothing more than the
symbol of the real wealth of a country. Legal
tender money ought to be the instrument of the
fiscal and the commercial operations of a nation;
being, in.the first character, the representative of
national taxation, and in the second, of the mer•
cantile transactions of the country ; expanding-and
contracting with the exigencies of trade. On these'
principles, therefore, the author would have the
government of the country empowered to issue a
certain quantity of notes from year to year, limited
by the amount of the year's taxation. These notes
would become legal tender, on the ground that
they would be received by the government as pay-
ment of taxes; and after being passed from hand
to hand they would thus, at last, come back to
their original source. Provision being made for
their periodical redemption and. extinction, these
notes could not suffer. depreciation. For the
purposes of commerce, notes should be issued by
banking houses, on the faith of securities deposited
with the government. On this point the author
says :
It being the prerogative of the crown to create and
issue imperial legal tender for imperial purposes, it is the
right of the people to create and issue commercial eir-
rency for the purposes of trade. As the former is the
representative of taxes, so is the latter the representative
of barter; and as all are privileged to barter as they,
please, so all are entitled to use such aids to barter as they
deem most efficient. But though government is never
justified in interfering, under the pretence of regulating
the currency, which will always regulate itself if left
alone ; yes, to protect the simple against the wiles of the
cunning, and give stability to credit, it is desirable that
government should receive tangible securities from those
capitalists who solicit an act of banking incorporation, in
order that the solidity of their notes may be certified to
the public. It is, therefore, proposed that all banks of
issue should deposit, in the hands of :the government:
approved guarantees in land, consols, or in other indis-
putable securities, the legal title to ownership being
attested by the law officers of the crown, and the value of
the property by the actuaries of the crown. These pre-
liminaries settled, the banks would then be permitted to
issue commercial currency to the extent of one-half, two-
thirds, or three-fourths of the securities deposited, the
exact proportion being determinable by parliament. The
notes of these banks would be made by government and
numbered, and ought to be impressed with a distinctive
die, similar to that used by newspapers ; and both the
amount of permitted issues, and the amount of securities
should be printed on the face of the notes. No man of
common sense would run on such a bank ; there could be
no excessive issues, and, therefore, no depreciation. If
such a bank failed, it would be entirely owing to the
Imprudence of its directors; but, in such an event, .every
holder of the notes would be safe, as the government
would have a power to sell the securities, and thus be
enabled to pay to all such holders twenty shillings in the
pound.
It need scarcely be added that the author does
not propose that this national paper money should
have any circulation beyond, the limits of Great
Britain. Gold and silver, either coined or un-
coined, would still remain as the means of trans-
acting the foreign exchanges. To the foreigner,
gold and silver, with the stamp of the British mint,'
are but articles of market value, fluctuating like
all other commodities, and wholly unaffected by
any fictitious worth which-the name of a pound or
a shilling may force upon them at, home. The
instrument of legal tender would, therefore, be
secure against export, and being wholly limited in
its, functions to the discharge of fiscal and mer-
cantile liabilities at home, the difficulties which
are at present felt in- Great Britain, when the
cheapness 'of gold leads to its wholesale export,
would be altogether obviated. This latter point
forms a leading feature in the argument of the
author. There is, an obvious difficulty when the
business of a country is carried on by means of
an , instrument having a fixed and stamped
value at borne, and a fluctuating marketable
value abroad. The mint price and the market
price of .a sovereign being incessantly at
variance, the inevitable result is, a frequent diffi-
culty in obtaining the means of carrying on the
commerce of the country, even when• the real
wealth of the country is abundant. One collateral
result arises at once in the creation of excessive
usury, thus accumulating on trade many of the
worst evils of scarcity, when no real wants what-
ever exists. We need not, however, enter into any
detail of the disadvantages stated to arise from the
enforcing of the dogmas of the bullionists. The
results of the system have been assailed and
defended by so many authorities, that it is only
necessity for us briefly to point to the leading
principles on which-the arguments of the author
now before us are based. That in denying the
necessity for the money of a country to possess
any intrinsic value, he comes into collision with
some of the greatest authorities upon financial
questions is evident. From the declaration of
Turgot, that gold and silver became universal
money by the very nature and force of things, to
the emphatic, dicta of the present Lord Overstone ;
from Huskisson's celebrated pamphlet, to the self-
answered, " What is a Pound," question of the late
Sir Robert Peel, our author has arrayed against
hint a line of the most formidable antagonists,
whose influence cannotbe shaken by mere theories,
however plausible ; or arguments, however, in.
genious. We do not mean to enter into the
argument at present. It cannot be denied that
many of the difficulties which Mr. Duncan ably
points out seem inseparable from the existence of
the present system, and that some measure of
relief, embracing a part of the remedies he suggests,
must sooner or later be adopted. Without accept-
ing his views where be inclines to mere abstract
declarations, much of the argument with which he
supports his views is wholly irresistible. Probably
the chief difficulty he will experience is in showing
a sufficient amount of security against delusive
schemes and issues. Perhaps no one can avoid
thinking of John Law's famous, or, one might say,
rather infamous paper scheme, and this point the
author does not fail to meet. Of that scheme he
says :
John Law, of Lawriston, a Scotcbman by birth, esta-
blished a bank in Paris, in 1716 ; in 1787, by an order in
Council,:the Western or Mississippi Company was created,
and, by command of the Duke of Orleans, Regent, of
France, during the minority of Louis XV., the company
and the bank were incorporated. This was an act of
power which Law could not resist, and he ought not to be
held responsible for the results. They who took shares
in the united undertaking were allowed to pay a part of
their subscriptions in state paper, which was then at a
depreciation of 54 to 60 per cent. A grant was made to
the company, and then to the bank conjointly, of all Louis-
lane, then a province utterly uncultivated, and of course
of no real value, but it was forced upon Law as the basis
of the company's credit. In 1718 the subscriptions were
declared royal, and thus the government stretched its
hands over the whole concern, and John Law at once
became a subordinate. The Regent now became the sole
proprietor of the shares. Law was made director under
the Regent and the minor king, and from that' time a stroke
of the Regent's pen was all-sufficient for whatever was to
be done. At the end of that year, banks, dependent on
the one described, were established in several great
towns. In 1719 the interest of money was reduced to 33/4
and 21 per cent., and at last to 2 per cent., thus keeping
the value of money in a constant state of fluctuation by
con.tradlotory edicts. In 1720, a new edict was issued,
commanding that no corporation or individual should
keep more than 500 livres (francs) in specie, on pain of
heavy fine and confiscation of cash discovered ; and the
officers of justice were ordered to make all the inquisi-
torial visits and searches required of them by the director:
of the bank.
Akan assembly of stockholders, the_Regent being pre-