The Sun.
London, England, 1857-01-10 00:00:00

71ZK

THE BANK CHARTER ACT. 7 4**"':' -------E
---.
( From the Daily .1Y eics )- raj l,,
—N...1-9d.9,.
The advocates of the Bank Cliartei Act Prifff, 6 ~.so `
ot
Ix ~ • a. ..
posej to treat the movement in favour of an i A 6. '' E F''
tr
into its effects as an attempt to introduce, thus "i. ,7:::- ,_ y, 4
tern of unlimited paper money. It is true,that a '''''-'• '
small
-
small knot of financial theorists is in favour of suoin:l. a s
a measure, but we are convinced that an over-
whelming majority of the commercial men of Eng-
land advocate, like ourselves, the practical conver-
tibility of the bank note. By practical convertibility
we mean, that all notes issued, beyond the amount
required for the internal transactions of the country,
shall be represented' by specie in the Bank coffers.
The chief point, therefore, to which the conimittee
will. have to direct its attention is the average
amount of paper moncy required for the home trade.
It must be evident to all, that this cannot be a con-
stant and invariable quantity. It must vary with
many different things. To go no further, it must
vary with the varying relative proportion of our
exports to our imports, with the greater or less
activity of the home trade and consumption, with
the greater or less number of contracts and
transactions that, from any cause, required to be
settled in coin, or notes, the legal equivalent of
coin. It must never be forgotten that the bank-
note serves two purposes ; one is, to make the
payments in transactions between parties dwelling
in England—the other, to enable the holder to pay
his debts wherever his creditor may happen to be.
For the former purpose it is clear that there is no
necessity that the note should be convertible into,
or rather represented by, gold ; for the latter,
this convertibility is absolutely ,necessary, inas-
much as the debt may be contracted abroad, and
can only be paid advantageously by the transmis-
sion of specie. To meet the first class of payments
notes issued against any securities of known value
may be safely employed ; and what we can desire
is, that some power may be given to the Bank
Directors to enable them to increase or diminish
that portion of their issue under proper restrictions
as the varying exigencies of the public may re-
quire.
But, say the financiers of the " Mercator" school,
your note is then the representative of a fiction.
The words " I promise to pay five pounds" mean
nothing, for you have no gold of that current value
4o pay it with, and your securities may rise or fall
in-value—they may, in fact, be unsaleable when
most needed, and therefore vitiate the promise to
pay. If this argument be good for anything, it is
good against the existing arrangement. The fixed
issue of the Bank is 175,000/. On the security
of what ? More than eleven millions of this sum is
guaranteed by perhaps the most inconvertible of all
securities held by any bank, the Government debt
to the proprietors. What, then, becomes of the
principle of absolute convertibility ? It is clearly
understood by the Charterites themselves as a rela-
tive term. But " Mercator," and those of his creed,
would have us believe that unless the inconvertible
issue is maintained at this mystic 14,475,0001. there
would be a peril of some dreadful character always
impending over commerce. Now, what we have beem
asking for from the moment we first ventilated the
question is, some facts in support of that opinion,
for all those within our own cognisance are diame-
trically opposed to it. It cannot be that an occa-
sional extension of the issues beyond the authorised
limit would send the Bank paper to a discount from
a doubt of its convertibility. In 1847 a very con-
clusive proof was given to the contrary. On the
announcement that more votes were to be issued,
unrepresented by bullion, so far from there being
a rush on the part of the public to change the notes
they held for gold, the precious metal literally
poured into the Bank coffers with such rapidity
that there was no necessity for carrying the pro-
posed measure into effect. In fact, commerce was
suffering under a panic fear of a deficient circula-
tion, and therefore individuals kept in their hands
a provision to meet the possible want. There was
abundance of gold in the country, but the surplus
beyond that which might probably be needed for
exportation was held by the public for purposes of
internal circulation, which might be quite as effi-
ciently performed by bank notes. We. have been
on the verge of similar panics more than once since
that period, and we have little doubt that a measure
analogous to that of 1847 would have at once re-
lieved the pressure.
But, says "Mercator," it is this beautiful ma-
chinery of the Bank Act which has carried com-
merce so safely through the groat perils of recent
years. To our thinking, the Bank Act treats com-
merce occasionally very much in the style of the
illustrious Squcers drilling his small pupil ; itgives
it a knock on one side of the head, which upsets
its equilibrium, and then administers a thump on
the other side, which sets it upright again. But
if this strict regulation of the issues by the bullion
be the great palladium of our monetary system,
how is it that the commerce of France has gone
through perils far greater than our own within the
last six years, and has, to say the least, escaped
them quite as effectually ? The Bank of France
has no limit fixed for its issues, but it has a limit
fixed for its rate of discount ; it cannot, under any
circumstances, charge more, than 6 per cent. Let
us see, then, what effect this variable ratio of its
issues to the bullion in its coffers has had during .
the last two years of commercial pressure. In 1855
the difference between the highest and lowest
points of its bullion was 9,493,0001., while the ex-
treme variation in the Bank of England was only
7,240,0001., and of course the note issue of the
latter was reduced to the same extent. But the
issues of the Bank of France only varied during
the year 2,826,0001., the ratio of gold to notes
being consequently at one period as 1,000 to 1,400,
and at another as 1,000 to 2,796. But in spite of
those violent fluctuations, the value of the Bank
of France note was as invariable as that of the
notes of Bank of England. By not restrict-
ing its circulation as the gold diminished, the
Bank of France was enabled to assist com-
merce materially, and its discounts during 1855
reached the sum of 150,480,0001., without a single
loss by failures. In 1856, again, the variatim
between the highest and lowest amounts of specie
was two millions greater in the Bank of France
than in the Bank of England ;"aud the ratio of
the bullion to its circulation varied from the pro-
portion of, as 1,000 to 2,138, to that of, as 1,000
3,731; and yet when this latter enormous excess
of paper against gold existed, the credit of the
note, and its consequent convertibility in.practice,
did not suffer for one moment.
" Mercator" is, we believe, a banker of long
standing, and a financier of high repute. He can-
not be ignorant of the facts we have stated, nor
that still more remarkable facts of a similar kind
can be brought forward. We are at a loss, there-
fore, to understand on what principle he ignores
them, conclusive as they are against the danger of
variable issues. We are notoriously no friends to
the popular financial theories current in France—
still less do we admire the practice of State finance
as conducted there of late years ; but there is no
doubt that by the power of expandingits circulation
on emergencies, without reference to the amount
of specie in its coffers, the Bank of France has en-
abled the country to tide over moments of com-
mercial peril as grave as any that have menaced
English credit within the same period. It has not
been able to prevent a crisis—neither has the Bank
Charter Act ; but had such an Act been in exist-
ence iu France during the last two years, no man
can doubt that there would have been a general
collapse, which might have created anarchy and
i°
confusion, and arrested the commercial progress of
ithhewcioliucuhtrtyhefeßraannkiAncdtefipnlaicteespuesniosdibisTl:re Peterpost
hasin
f Paul
him by a
lau
pay James
t
withtheiron for building a bridge,
bill at three months.
Peter
dtneiileud hasPa
James for a part of the iron with
cannot, now that it is due, take
and
has l
to
ihtisuopwwnitil;ilit'hat which he has received from Paul.
He is unable to get this latter discounted, except
at an exorbitant rate. Why not ? fs Paul's credit
or his own doubted? Nothing of the kind—an
east wind has been blowing for the last three weeks,
and the gold ships are delayed. -Voila tout ! As
soon as the wind changes the Bank of England
can issue some more .votes, and will be happy to
exchange them against Paul's bill for a moderate
consideration. And that is the way the Bank Act
works—and it is the perfection of human wisdom.

A FORTUNATE ESCAPE.—It has been stated that the
number of miners of the Cherie)) coal-pit of the Firminy
concession, near St. Etienne, who were drowned by the
recent irruption of water, was 14; but two of them have,
it appears, iniracWously escaped. When the water
rushed into the pit these men were at wtrk in an
isolated gallery, which the water did not fill ; but
they knew that ak number of galleries were in communi-
cation with a pit at a considerable distance, which had
been abandoned Boone years before, and they determined
to attempt to sate themselves. In several places they
found the galletie s blocked up by falls of earth, but they
resolutely cut their way through them. After working
for a whole day tl teir lamps went out, but, encouraged
by the progress th, 3y had a.reedy made, they determined,
although without f sod, to persevere. After nearly three
days' labour, they e eicceeded in reaching the abandoned
shaft, but found it c liised. Guided, however, by their
knowledge of the )(vitiates, they cut a narrow passage,
and at last saw daylivh t ; but when they found them-
selves so exhausted by fatigue and hunger that they then
despaired of saving the ,L iselves. One of them, however,
by extraordinary exerti oils crept through the pr vain.
age,
and endeavoured to exteit late his companion, but in
.venTouhse
He then called for help, a nd after awhile several persons
came to their aid. The ether man was likewse
had
out, and both were sent to the hospital. Having had
nothing to eat, for so long
for food, but it was only gee
men say that they were mane so hopeless of
pvl grineegrl ya
aolnlocew thEMselVes t.o
escape that they were dispose di
and the thought of their
die ; but that confidence in Goa v
them to persevere.
wives and children, encouraged .
viee than