The Sun.
London, England, 1840-01-02 00:00:00

OF THE CUR.

TO THE EDITOR OF THE SUN.

SIR—In my letter to you on the subject of the
currency, which appeared in your Journal on the
14th, I submitted, a few suggestions, which, if
acted upon, appeared to me calculated to afford in
time of difficulty a certain degree of relief to
public credit, without violating any of the princi-
ples by which it ought to be protected.
In adverting to this, allow me to notice an oms-
sion in the Bth clause of the scheme, of the " mo-
nosyllable " not before the word " exceeding,"
which stultifies the general tenor of my remarks ;
and, with your permission, I wonld beg leave to
offer a few further observations in illustration of the
views which I have adopted. For the sake of
brevity, I shall merely discuss the more prominent
points.
I have stated that "in consideration of the
public being in arrear to the Government to the
extent of the value of one year's revenue, and the
Government being virtually indebted to the Bank of
England to the extent of the value of the dead weight,
it would be expedient that Government should issue
Exchequer bills of 21. and upwards, not bearing
interest, and not exceeding in all ten millions, to
be used by the Bank of England in maintaining
the circulation of the kingdom by making advances
on approved securities ; and that so soon as (and
not sooner) the Bank of England should hold gold
equal in value to the amount of one-third of the said
Exchequer bills, and of their own notes actually in
circulation, then the various banks of issue through-
out the kingdom should be bound to lend to Go-
vernment at the rate of three per cent. interest. (and
which loan should form no part of the Consolidated
Debt), an amount equal to one-third of their actual
circulation, and one-fifth of their deposits, includ-
ing the amount at the credit of accounts current, as
well as that lodged on deposit receipts."
Now, I shall assume that sufficient considera-
tions have been shown to warrant the Government
in issuing (if necessary) Exchequer bills to the ex-
tent named ; and if this be conceded, it will then he
evident that the interest arising from the issue of
such Exchequer bills would accrue to the public
benefit ; and if there were issued, at an average, to
the extent of the extreme limits prescribed
(10,000,0001.), the saving to the public, at the
rate of three per cent. interest per annum, would
be 300,000/. ; and further, from the circumstance
of these Exchequer bills bearing no interest, there
could be no temptation to buy them up, for the
sake of selling at a premium, as a temporary in-
vestment.

The leading principles by which banking ought
to be governed are few in number and easy of de-
monstration. Supposing the various constituencies
are of such a character as to give confidence to the
public, it is only necessary to exercise the utmost
care and discretion as to the extent of their engage-
ments and the validity and fitness of the ecwities
held by them for repayment of advances, the greater
portion of which ought at all times to be readily
available ; and next to offer to the public such fair
and equitable inducements to lodge money in de- '
posit as might enable them to obtain a reasonable
profit, because in the majority of cases it is only by
doing business to a considerable extent, and bv
lending money so lodged on good security that airy
body of proprietors can be benefited so as to make
it worth while to incur the risk necessarily atten-
dant upon money transactions of an extensive cha-
racter, even under the best management.
But, while the interests of the proprietors are at.
tended to on the one hand, those of the public
must not be neglected on the other; and for this
purpose I have suggested that a certain portion of !
thaossets of all banks of issue ought to be vested
Government, at a fixed rate of
cuarnidty of
that
a sumequal in value to one-
thirdin interestth eosf ;
their actual security
circulation, and one-fifth of
their deposits should be so placed ; and that the
fund so appropriated should only be withdrawn in
the event of the bank or banks finding. it expedient
to cease carrying on business. By this means any
losses consequent on a fall of the prices of the public
funds would be avoided, and as this most frequently
takes place in times of panic and alarm, and (after
prices being lowered to a certain point) has the
effect of withdrawing money deposited with bankers
for investment in the public securities, the object
which I have in view will be apparent ; and, surely,
if in times of extreme distrust the security of Go-
vernment is eagerly sought after as a dernier
ressort, there can be no valid objection to take ad-
vantage of that security to a limited extent for
maintaining the public credit by the issue of Ex-
chequer bills as I have proposed.
It now remains to be shown how the bank of
of issue would be affected in giving the proposed
security to the public by lodging money in the
hands of Government to the extent proposed. In
order to make this as clear as possible, I have sub-

.11vd two statements, the one based upon a small
capital with a corresponding scale of transactions;
and the other upon a capital and scale of greater
magnitude. I admit that the extent of transac-
tions set forth in these statements is merely hypo-
thetical, but this will in no wise invalidate my argu-
ment, because whether the transactions of any bank
be large or small, the security required will be in a
corresponding ratiol:

STATEMENT, No. I.
LIABILITIES.

Paid capital £50,000
Dcpodts
Accounts current 75,000
Circulation
Total Liabilities .---..... £230,000

ASSETS.

Loan to Government-
-1-3d circulation £lo,ooo
1-sth Deposits and current
Accounts

40,000
Bills of Exchange
Other Loans 90,000
Specie and Bank-notes
Total Assets - £230,900