The Sun.
London, England, 1837-01-04 00:00:00

'Tr 4-

LONDON,
WEDNESDAY EVENING, JANUARY 4, 1837.

A small pamphlet, entitled " The Monetary System,"
has just been published by RIDGWAY. The author's
object is to recommend a plan which he thinks would
obviate the great inconvenience attending the rapid
fluctuations which take place in the value of money
under the present system, and which are the necessary
consequence of a sudden contraction or expansion of
the circulating medium. The Bank of England is
the regulator of the monetary machine, but expe-
rience has proved that it is incapable of performing
this office effectually. In saying this we do not mean
to impute blame to the Directors of this great Insti-
tution. On the contrary, our opinion is that they have
discharged their duty to the public faithfully and con-
scientiously. Occasions may have occurred, as in 1825,
when they adhered too closely to their principle of con-
tracting their issues when there is a drain on their coffers.
They made no distinction between the drain occasioned
by 9. sudden panic when gold is demanded for the purpose
of hoarding, mid that which is the consequence of an ad-
verse state of theforeignexchancres' when it is wanted
for exportation. This was an
error in judgment and
was—until it was discovered to be so, and a directly
opposite course adopted—productive of great mischief.
The Bank was in fact reduced to its last guinea, and
the panic was still increasing, when a seasonable issue
of notes produced an instantaneous re-action. In a
short time confidence was restored, and the gold which
had been drawn out in a moment of unreflectir, alarm
soon found its way back again to Threadneedle-street.
But the Bank of England cannot by possibility re-
gulate the currency, and for this plain reason that it
is not the sole issuer of the notes which form so large
a proportion of the circulating median- If the Bank
contracts its issues, other banks may exi.')d theirs,
and vice versa. Its operations are thus liable to be
counteracted and neutralised by the operations of other
banks, and have in fact been so counteracted to a con-
siderable extent during the last twelve months.
It is therefore unfair to blame the Directors of the

(kV: kuL4l(l ^f@r tlia\whicla they. cannot help. '
e fault is inTh6 syNem—in the constitution of the
Bank and in the state of the law—and until these are
altered, it is in vain to expect that equability in the
motion of the machine which is so essential to its sa•
lutary working, and which cannot be attained while
the regulating power is too feeble and subject to per-

petual jars from the collision of other antagonist powers
The author of the pamphlet before us gives a sketch
of the history of the Bank of England, which, as it is
very brief and cannot fail to be interesting to many of
our readers, we here subjoin :
" The Bank of England originated in the necessities of
the Government. In 1694 the Government borrowed
1,200,000/. of Mr. William Patterson, and granted to him
and his associates in that loan the original charter of the
Bank of England, with the right to have a capital of
1,200,000/. ; and the charter was to continue in force till
the Ist of August, 1705. Thus the Bank started with an
advance to Government of the full amount of its capital,
and was authorized to issue Bank notes exceeding that
amount.
" In 1696 the notes of the Bank were at a large dis-

count. It was doubtless well known that the issues of
the Bank far exceeded its funds in specie, and the credit of
the Government was not good enough to sustain the credit
of the Bank. Wrong in its origin, this institution has
been bound ever since, by the circumstances which pre-
sided over its birth, in a close and reciprocal dependence
with the Government ; sometimes of infinite benefit to
the nation in its emergencies, but nevertheless, by the
necessity it has felt of sudden contractions of its circula-
tion, pregnant with mischief to the enterprising and indus.
trious mechanic, manufacturer, tradesman, merchant, and
shipowner, whose success in business constitutes the wealth
and welfare of the nation.
" In 1696 the Bank suspended payment of its notes,
under favour of the Government, and was relieved by the
privilege of augmenting its capital to 2,201,1711. This
brought, of course, a supply of coin and bullion into the
Bank.
" In 1708 the Bank made a further advance to the
Government of 400,0001., making the amount of its
advances to the public 1,600,000/. ; and by an Act in
the same year, the charter was extended to the Ist of
August, 1732, the Government being precluded from re-
fusing its renewal then, as now, without repayment of its
loans. The Bank was allowed to take further subscrip-
tions to double the amount of its capital, making the new
capital 4,402,343/. ; but upon the condition it would cancel
1,500,0001. of Exchequer bills which, it had previously
agreed to circulate ; which sum, with interest, amounted
to 1,755,027/.,'making the aggregate of advance to the Go-
vernment 3,375,0271., while its capital was 4,403,3431.
" In February, 1709, and December, 1710, the capital
was further increased, so that its amount in the latter year
was 5,599,995/.
" In 1713 the charter was further extended till 1742.

" In 1717 the Bank cancelled Exchequer bills to the
amount of 2,000,0001., making then the advance to the
public 5,375,0271.
" In 1722 the Bank bought of South Sea Company
Stock 4,000,000/. ; and to sustain the Bank in making
this purchase, it was allowed, on June 24, 1727, a further
subscription to its capital of 3,400,0001., and was repaid
out of the sinking fund 1,000,0001., on account of the
above-mentioned aggregate of 1,775,0271. At this period
the actual advance to the public was 8,375,0271., and the
capital 8,959,9951.
" In 1728 the Bank advanced, upon a pledge of cer-
tain duties, the sum of 1,750,0001., making its ad-
vance to Government 10,125,0271., while its capital was
only 8,959,9951. Shortly after, the Bank received two pay-
ment,s, amounting to 1,275,0271., reducing the advance to
8,850,06,9/. But shortly after it advanced on lottery,
under the Aet 2 Geo. 11., c. 2, 1,250,0001., making the ad-
vance 10,100,0061:
" In 1742 the Bank advanced 1,600,0001., and its charter
was extended to 1764. Its capital was further augmented
at this time in the sum of 840,000/., and afterwards, in
1746, in the sum of 980,0001., the Bank agreeing to cancel
Exchequer bills to the amount of 986,800/. ; the amount of
advance being in 1746, 11,686,800/., and of capital,
10,780,000/.
" In 1749 Parliament exacted a reduction of interest on
the loans of the Bank to Government.
" In 1764, a further advance of 1,000,000/. on Exchequer
bills was made, and the charter renewed till August 1,1786.
In 1781 the Bank was allowed to increase its capital 8 per
cent., 862,400/., making its capital 11,642,400/. ; and its I
charter was extended till August 1, 1812. But at the
same time it was required to advance 2,000,0001. at 3 per
cent. for three years.
"In 1800 its advance stood at 14,686,800/., and its capital
at 11,642,400/. Then its charter was further extended to
August 1, 1833, for which the Bank advanced 3,000,000/.
without interest, for six years.
" In 1816 a further sum was advanced to Government
of 3,000,0001., making the aggregate advance at that time
17,686,000/., the Bank being allowed to add to its stock
25 per cent., 2,910,600/. out of the accumulated profits ;
so that in 1832, when the question of the renewal of the
charter was under consideration, and the Committee of Se-
crecy was appointed, the capital was 14,553,000/., and the
advance to Government was 17,686,000/.
" This rapid sketch and the evidence of the Bank officers,
and of bankers, and brokers before the Committee of Secrecy
in 1832, demonstrates beyond question that the notes of the
Bank of England have never been the representatives of
coin and bullion ; that its only means of providing for pay-
ment of its notes, beyond the small portion of specie retain-
ed in Bank for this purpose, viz., one third or less of its cir-
culation, is by forced sales of public and private securities
in its possession : that however such sales may be effected
on some terms in ordinary pressures upon the Bank, ori-
ginating in drains of coin and bullion for mere purposes of
trade, yet in political panics, when coin and bullion is sought
for the purpose of hoarding, or from distrust in the stability
of Government, or in extraordinary drains from other
causes, the Bank has no power to sustain the credit of its
notes, and can have no relief against such pressures but in
suspension of all payments of specie under the protection
of Government."
The author then proceeds to make some remarks on
the monetary affairs of the United States, anticipating
the immediate adoption of a system of currency in
that country which will compel us to resort to a simi-
lar plan in self defence. The Americans, he argues,
are without any national debt ; the treasury contains
ten millions sterling in coin and bullion, and a like
sum may be annually accumulated from duties on fo-
reign merchandise. With this capital, a national bank
may be formed, issuing treasury notes, not payable in
money, but receivable in payment of Government dues,
and of debts to the Bank. A branch would of course
be established in each State for the purpose of equal-
izing the exchanges, as well as accommodating the
citizens at a low rate of interest. The coin and bullion,
which he supposes might in a few years amount
to fifty millions sterling, would never be withdrawn ;
and the Treasury notes thus- issued, being the true
representatives of the precious metals, would, he con-
ceives, " form a circulating medium, perfectly stable,
and eventually adequate to all the monetary wants of
that republic, in war as well as in peace."
After stating the effects which the establishment of
such a system in America would produce on our mo-
netary system, the author proposes his own plan which
we give in his own words. How far it would be prac-
t'cab e we shall not take upon us at present to say :
" Why may not England adopt a monetary system in
some respects like this ? Why may not this richest and
most powerful country in Christendom expand its resources
to have, as Rothschild avers she may, ' the trade from the
whole world ?' She has only to establish a stable circulating
medium, capable of self-expansion to the utmost limit of
rational prospects of gain.
" This may be done, and without infringement on the
privileges of the Bank of England. A measure may be
adopted in Parliament which that Bank will rejoice to ac-
cept, as an amendment to its charter.
" Let an Act of Parliament authorise the Bank of
England to receive in deposit coin and bullion, and from
the same depositor an equal amount in Government stocks,
and thereupon issue a new emission of Bank notes, not pro-
mising to pay specie, but pledging the Bank and the Go-
vernment to receive the same in payment of all debts and
dues to them respectively, and binding the Bank to pay the
amount in specie if ever the Bank or the Government should
refuse to receive them in payment accordingly—the amount
of such Bank notes so to be issued being one hundred and
fifty pounds for every one hundred pounds of bullion, and one
hundred pounds of stock so deposited. The depositor or
his assigns to receive the interest, on the stock, through
thean d
stock Basaink, until the stock be redeemed by Government,
:Elthbeadnekp
redeem the whole
cent. at the Bank, in "
name of the Bank,
the depositors or their3l3
notes,os:tor the will haveGo receivedvernm ent shallfifty per
have cent.rigohnt histo
" Let the Act of ege
onas
aapsapsyilgniesn.t of the remaining fifty per
specie or bank notes, at the option of
of Government.
The .stock to stand in the
i
vernmeni shall have • ht to Parliament.. further provide that the Go-
rig deposit coin, and bullion, and
stocks from the :inking-fund on the like terms,
one hundred and fifty pounds in bank notesfor every one
hundred pounds of eoin and bullion, and receive
and
every
one
emn a