The Sun.
London, England, 1856-01-24 00:00:00

THE BA K CHARTER ACT.

TO THE EDITOR OF THE TIMES.
Sir,—Permit me, through your columns, to make one
more effort to clear away the mists and obscurity which
bare been thrown around the question of the Bank
Charter Act, and its effect upon the present state of our
bullion reserves and of commercial credit. The subject
is not in itself intricate or obscure ; the public will find
it to be simple and easy intelligible, if they will only be-
lieve it to be so, and will approach it free from all pas-
sionate feelings, and from that impression of mystery
which creates the evil it dreads.
The act of 1841 was passed as a complement to the
act of 1819.

Its purpose was to secure effectually the maintenance
of cash payments, by rendering the absolute exhaustion
of the bullion impossible.
It had direct reference only to the safety of the mo•
netary system.
By its effects in this respect the success or failure of
the act must be tested.
The effect of the act upon credit and speculation is in-
cidental only.
Could it even be shown that it produces no effect on
these, still the expediency and necessity of the act would
remain unaltered.
But, no doubt, the contraction of notes as bullion is
withdrawn does act indirectly upon credit, speculation,
and prices—the extent of the effect thus produced vary-
ing according to other concomitant circumstances.
We have had a practical illustration of both these
effects of the act, the direct and the indirect effects, in
the present state of monetary affairs.
The store of bullion has been effectually maintained,
notwithstanding a pressure upon the exchanges, from
various causes, of the severest character.
And this has been accompanied by a gradual
restrictive influence upon credit and speculation, the
utility of which few reasonable persons will deny, and
the c)nnexion of which with the present safety of our
monetary system must be obvious to all who remember
the insecurity of our monetary system on former occa-
sions, previous to the act of 1844, when no such restric-
tive influence was brought into play during the early
period of a drain of bullion.
But, it is said, issues cannot be contracted so long as
bankers are liable to be drawn upon by depositors, and
are subject to demands from their customers for dis-
count.
It is surprising to what an extent a plain and simple
matter may be obscured and mystified by random asser-
tions couched in ambiguous terms.
It might as well he asserted that, notwithstanding the
deficiency of the supplies which Providence may furnish,
the foo 1 of a people cannot be contracted so long as hun-
ger prevails, and men must be fed.

The total amount of bank-notes is now made by law
to correspond to the total amount of bullion. If the
amount of bullion is diminished by foreign drain, the
amount of bullion is diminished to an equal extent by
law. The aggregate body of bankers in that case can
command a less amount of bank-notes with which to
work their business. What, then, are they to do ? Their
depositors draw upon them.
At first they endeavour to meet these demands from
the hank-notes in their till—i. c., from their banking
reserve.

Bat as the total amount of notes issued has been dimi-
nished in proportion to the drain of bullion, the reserve
of each banker, already restricted by this process, will
bear no further pressure. The approaching exhaustion
of thi- fund will compel them to resort to other mea-
sures, through which they may be enabled, notwith-
standing the decrease in the amount of notes issued, still
to meet their outstanding liabilities.
They will necessarily proceed to realise their securi-
ties, and to contract their credits and their discounts.
It is idle to deny the possibility of this ; it is what
must occur by the very necessity of the case; it is what
has occurred on former occasions, and what again is now
in progress, acting most beneficially, because the pro-
cess e')mmenced early and has proceeded gradually.
But the present state of commercial affairs, we are
told, requires an increased issue of bank-notes.
Let us consider what would be the certain and imme-
diate effect of such increased issue if resorted to.
The exchanges are at this moment barely maintained
at par. Bullion is on the point of going out of the
country ; indeed it is still subject to gradual diminu-
tion.

This affords conclusive proof that our circulation is
not too high in value, and therefore is not deficient in
amount when compared with the circulation of other
countries.

If we now prooeed to a further issue of bank-notes,
this will at once render our circulation redundant oom-
pared with that of other countries ; the exchanges will
be relaxed, and bullion will pass from us to those places
in which there has has been no corresponding increase
of circulation.

The process will go on so long as this additional issue
of notes is maintained at the increased amount.

It was by a persistence in this very process that on
occasions of adverse state of exchanges, before the act
of 1844, the bullion was reduced to an alarming ex-
tremity.

By the act of 1844 a recurrence to this fatal process
was rendered impossible ; hence the comparative safety
of our monetary system at this moment, and the satis-
factory state of commercial credit, as contrasted with
the state in which it was found at former periods of ad-
verse exchanges and consequent pressure.
Let it be clearly understood that no additional issue
of bank-notes can, under present circumstances, settle
down into a real increase of the circulation, if cash pay-
ments are to be maintained.

Our monetary condition, stated in round numbers,
stands thus :

The issue department holds 10,000,0001. of bullion
and 14,000,000/. of securities, against which it has
isßued 24,000,0001. of bank-notes.

In this state of things the unsettled state of the ex-
changes tells us that the circulation is rather in excess
than otherwise, compared with that of other countries.
Suppose, then, we issue more bank-notes--say
4,000,0001. Bu'lion will at once begin to leave the
country, until the equilibrium between the amount of
our circulation and that of other countries is estab-
lished.

We shall then stand thus :
The i,sue department will hold 6,000,0001. of bullion,
and 18,000,000/. of securities, against which it will have
issued 24,000,000/. of notes.
We shall still remain with the same amount
(24,000,000/.) of notes issued ; the only difference being
that our reserve of bullion will have been diminished,
and a corresponding increase will appear in the amount
of securities.

(Joon the supposition now under discussion—namely,
a further increase of bank-notes under present circum-
stances —we are inevitably brought into this dilemma :
—lf the increased amount of circulation be maintained,
the bullion will immediately leave the country, and a
snsperpion of cash payments must ensue. If the in-
crea.ed amount of circulation be not maintained, we
then revert to our former position ; the advantages an-
ticipated from an increased amount of circulation will
not have been obtained, while our protective reserve of
bullion will have been seriously diminished.
I must not trespass further to follow out these views
to all their legitimate and not unimportant consequences.
Their duty must be performed by the public on its own
account. I have endeavoured to indicate the tine
course of inquiry, and to state the case in the shortest
and most simple form. In the terrent of discussion with
which this subject has been overwhelmed, we have bad
toa many words and too little of clearness and simplicity
of views. Truth, however, is in its nature always simple
and clear ; and so it will be found in this case, even by
our imperfect faculties, when we seek it with singleness
of purpose and free from the misguiding influence of
prejudice, self-interest, and impatient passions. The
present confusion of tongues, we must hope, is the pro-
cess through which truth will in the end be elaborated.
MERCATOR.

IRELAND.

DUBLIN, WEDNESDAY MORNING.

STATE OF THE CORN TRADE.

The country grain-markets continue to show a down-
ward tendency. In Dublin, too, the decline in prices has
been even more marked, and at the Corn Exchange yes-
terday there was a further reduction to the extent of 2s.
on wheat, with a proportionate fall in other kinds.
Altogether the market was an extremely dull one, and
speculation is quite at a standstill, and will doubtless
remain so until something decisive transpires with
respect to the actual progress of the negotiations Dow
pending. A Kilkenny paper of this day reports as fol-
lows :

" A serious panic was created among the farmers gene-
rally by the sudden intelligence of a final peace last week,
but the altered tone of the newspapers has restored con-
fidence in some measure. But, at the same time, we
would admonish our agricultural friends not to hold
back their produce when first-rate prices are offered in
the market in the hope of obtaining others better still.
They might suffer severely from such rash. speculation."
At Dundalk, another important gram•market wheat
fell yesterday 2s. 6d. lower than on Friday, and business
being extremely depressed, quotations for all kinds were
merely nominal. In fact, so far, the reaction in favour
of the consumer exceeds the general anticipation. The
fall in the price of the loaf, nevertheless, is scarcely
worth mentioning.

WRECK OF AN AMERICAN BARK.
The following account of the wreck of a fine American
hark on the north-eastern coast of Ireland appears in
Saunders of this day
".DROGHEDA, Tuesday, Jan. 22.—This morning a
splendid American bark, the Independence, of Bath,
State of Maine, Capt. Marshall, was wrecked on the
strand, near Bettystown, north of the Nanny river.
The vessel was returning on her first trip to New
Orleans from. Liverpool. She was 1,300 tons register
and 2,000 tons burden, having at the time a crew
of 30 hands, and carrying
700 tons of salt in bags.
She struck on the above strand about 4 o'clock a.m., a,
brisk breeze blowing inwards at the time, and which
continued during the day. About an hour afterwards one
of the Drogheda steamers, the Foig-a-Ballagb, Captain
Heeney, coming from Liverpool, opportunely arrived,
saved all the hands, and had them safely landed at the
Drogheda quay. The Sir Wm. Stainer, of Maryport,
Captain Bluff, coming towards the Drogheda port im-
mediately afterwards, is described as having sailed lite-
rally through spars and rigging belonging to the ill-fated
vessel, but owing to the heavy sea running at the time,
and the darkness of the morning, no attempt could be
made to secure them. The wreck at present lies on the
banks, and the wind continuing as described, there is
every probability of her being broken up.!