The Sun.
London, England, 1854-03-29 00:00:00

THE CURRENCY QUESTION.

It appears from a statement just prepared that the
exact amount of diminution in the paper currency of
the country from the withdrawal of the notes of private
establishments since the passing of the Bank Charter
Act in 1844 is 696,3251. The number of banks among
whom this issue was formerly divided was 45, and its
extinction has resulted from two causes—namely, in
some cases, stoppage of payment, and in others from the
establishments having agreed, in place of circulating
their own notes, to substitute those of the Bank of Eng-
land, upon receiving from that institution an allowance
of 1 per cent. In either case its effect in depriving the
country of a certain amount of circulating medium is
the Caine, and the result, therefore, is, that during the
last 10 years about 500,0001. sterling may be considered
to have been unnecessarily withdrawn from our
resources. The process, for instance, has been as
follows :—At the passing of the Bank' Charter Act
14,000,0001. was considered the point at which the
credit circulation of the country, that is to say, the
circulation based on securities, and not on gold,
might be safely fixed, in addition to the circulation
enjoyed at the time by the various country banks,
amounting to 8,000,0001. Of this country circulation,
hoWever, only two-thirds could 'be considered to be
based on credit,
,since each issuing bank is supposed to
keep a reserve equal to one-third of its issues, in Bank of
England notes or coin. While the credit-circulation of
the Bank of England was fixed at 14,000,0001., that of
the country banks was therefore virtually fixed at
5,333,0001., making the real total of oredit paper
19,333,0001. Hence, the country circulation having
since diminished 696,3251., the actual diminution in our
use of credit must be taken at two-thirds of that sum—
namely, 464,2171. Accordingly, just as would be the case
with a private merchant, who, if his legitimate credit be
reduced, must obtain cash to perform the services which
had previously been efficiently fulfilled by bills, and
must thus unnecessarily call in a portion of his available
capital, which might otherwise have been profitably em-
ployed elsewhere, the country has been obliged to part
with commodities to get gold to supply the vacancy
thus created. Experience having shown that the
amount of credit-circulation fixed by the act of 1844 was
not excessive, the needlessness of the sacrifice incurred
by the extinction of any portion of it must be apparent
to every one, more especially since the act in question
made full provision against such a contingency. By an
order in Council, on the application of the Bank of
England, an increased issue can at any time be made
equal to two-thirds of the total circulation that may
have become extinct, and the profit of this increased
issue is to go to the public. Under these circumstances,
the operation would now be tantamount to an immediate
advance to the Government of 464,2171. in perpetuity,
free of interest ; and it seems inexplicable that, at a time
when a creation of Exchequer-bills is looked upon as
likely to be requisite to provide for exigencies that can-
not otherwise be conveniently met, a resource so obvious
and so calculated to lessen that disturbance in the
money-market which is sure to be occasioned by any
demand upon it, however slight, while it is under the
influence of the first vague apprehensions of the effects
of a war, should be neglected.—Tinges.