The Sun.
London, England, 1848-08-03 00:00:00

that one fixed amount of notes out of the custody of the
Lank, and in the hands of the public, will at all times
produce the same effect, and will be governed by the
same laws. Unless this proposition be true, the uniform
and fixed rules of the Act of 1844 can hardly be justi-
fied. It seems to have been on this principle alone that
the following evidence of Mr. S. J. Loyd has been given.
lie was asked whether, in consequence of the low state
of the reserve in 1847, the Bank were not constrained to
put a very heavy pressure on cosamereial accommodation.
He answers—
" I totally deny that fact, and I appeal to the published
returns is support of the denial. .At the very moment
spoken of, the total amount of securities in the hands of
the Bank was 31,000,0001., and the total amount of the
private securities was 20,000,000 i., an amount almost, I
believe, altogether without a precedent. Therefore I
cannot understand how any person can say that at that
time, the Bank of England was putting a severe pressure
upon the mercantile world, when, in point of fact, the
notes in the hands of the public were to an amount almost
unexampled, and whilst the amount of accommodation
given to the public by the Bank in the form of discounts,
wsn an amount which I believe had never been known
before."

It would appear that in this answer, Mr. Jones Loyd
looks mainly to the numerical amount of notes issued by
the Bank, and assumes that the accommodation possessed
by the public may be measured by that amount, and by
the corresponding securities in the hands of the Balk.
Oa considering the evidence given before the committee
this will be shown to be a defective standard. This in-
ference may be drawn from the following evidence of Mr.
Horsley Palmer.

"In answer to some questions that were put to you
with respect to the amount of notes issued by the Bank
rout the month of October, 1847, you stated to the
Committee upon a previous occasion the amount of notes
then out. But is it not the fact that that is not the mea-
sure of their activity in the market ? Was not a consi-
derable portion of the issue in October, 1847, an issue
rather for the purpose of precaution and reserve than
for active circulation in the country ?—I belie►e, from
the best opinion I can form, that there were nearly
000,0001. of notes issued merely for the maintenance
of credit, and not required for circulation."
. The Governor of the Bank, whilst fully confirming the
fact stated by Mr. Loyd, draws a distinction in rotation
Lo the notes out of the hands of the Bank, which esta-
blishes the principle which the Committee are now inves-
tigating. It was not that there was an insufficient
amount of accommodation +_iven to the public, but that
the public were hoarding notes ; bankers would not part
with their money, and country bankers bud a large
amount of notes sent down to them.

Mr. Norman draws the same distinction. He states,
in reference to this period, that the amount of the cir-
culation was high, at least much higher than on many
former occasions ; but the panic occasioned much
hoarding.

Therefore it diminished the amount of paper that was
actually- in circulation, and diminished the activity and
efficiency of the circulation?—The spirit of hoarding di-
minished the efficiency of the circulation.
This spirit of hoarding. as it has been termed, refers
to the necessity under which every banker or commer-
cial man finds himself in times of internal discredit and
alarm. lie is compelled in prudence to increase his re-
s-rvas, and then to withdraw notes from active circula-
tion. This obvious fact is stated by AIL Loyd in reply
to the question:—
" Does not such a state of disturbance of public confi-
dence necessitate au increase of the reserves which all
men under great pecuniary engagements must keep in
order to answer those engagements ?—ln a period of
disturbed confidence the reserves of bankers are aug-
mented."

Tho experience of Mr. Samuel Gurney leads him to
the adoption of the same principle, and his calculation
of its practical results in 1847 carries him even beyond
the conclusions of Mr. Palmer.

When you say that a diminution in the amount of
the reserve in the Bank and of the bullion in the Bank
occasions scarcity, it only occasions scarcity inasmuch as
it obliges the Bank to diminish its accommodation to the
public ?—Clearly. But I would go on to say, that seve-
ral causes began to operate upon the rapid riso in
the value of money. (I am now speaking of August,
October, and November.) The failures began to take
place in August. The number of failures in each week
was increased, and was at last followed by a considerable
panic. The effect of that panic was to cause very gene-
ral distrust, and a gradual running down of the reserved
fund of the bank as well as of the bullion. After u
little time people began to think, under the influence of
this panic, how are we to get circulating medium ? And
the wealthy and more powerful took care very largely to
over-provide themselves, and drew upon the reserves of
the Bank infinitely beyond the real necessities of the
case. The consequence was that the amount of notes in
the hands of the public amounted to nearly 21,000,0001.;
and I have not the slightest doubt that at that period at
least from four to five millions sterling of the notes
issued were locked up and inoperative, in consequence of
tiro alarm and of a fear of nut being able to get bank-
notes at all."

Oa a subsequent day Mr. Gurney confirmed this
evidence, and described in a very striking manner the
contrast which exists between the effects of a smaller
amount of Bank-notes in times when no alarm exists and
a t tic It larger amount during a period of discredit.
" I wish to call the attention of the Committee to the
:act, that at the end of October of last year the amount
or Bank notes in the hand's of the Bank was 20,800,0001.
A.:: that period there was great difficulty in getting pos-
F.-..siion of Bank-notes in the money-market. This arose
from the alarm of not being able to get them in conse-
q ,ante of the restriction of the Act of 1840. At present
atnottnt of Bank-notes in the hands of the public, cc-
vordim; to the return in the last Gazette, is 17,700,0001.,
bit there being now no commercial alarm whatever it is
much bi-yond what is required. There is no banking-
hott-ie or money-dealer in London but what has a larger
amount of Bank-notes than they can use."
(To be continued.)