The Sun.
London, England, 1857-02-07 00:00:00

hove that the minimum amount of notes that bad over been
in the hands of the public had been somewhere about
15,000,0007., and the sum of 14,000,000/. was taken as sn
amount below which it was improbable, if not impoesible'
that the notes in the hands of tbo public should sink.
The primary object of the bill was to secure that the
amount of circulation of silver and gold should vary pre-
cisely as the circulation of the notes of the Bank should
vary. I agree with my right hon, friend the Chancellor of
the Exchequer and other hon. members in thinking that
not mulch benefit would be derived from raising the sum of
14,C00,0001. Any other sum of about that amount would
equally attain the object. The sole advantage would be
that an increased amount would set loose so much gold,
which might be used in other ways. Whatever advantage
and economy there are in issuing notes instead of gold will
be attained by fixing the amount a little higher, but I do
not think that hon. gentlemen opposite would find that any
greater laxity of circulation would be attained. Hen. gen-
tlemen baring entered upon the question of the rate of in-
terest, I must beg leave to say that the rate of interest does
not depend upon the amount of notes in circulation. That
was shown when we went into committee by numerous
witnesses, and it was stated repeatedly in the discussions
which afterwards took place. The floating capital of the
country is sent up to London to be used as discount. If
there is an abundance of such floating capital, the rate of
interest is low ; if, on the contrary, it is scarce, the rate of
interest rises ? The rate of interest therefore must depend
upon the abundance or scarcity of available capital. (Hear,
hear.) I am almost ashamed to state what, in my opinion,
is such a truism, but I am obliged to do so, because, when-
ever there is a discussion in this house, the proposition is
denied by some hon. gentleman. lam rather astonished
at the argument of my hon. friend the member for Kendal
(Mr. Glyn) upon thie point, for he altogether excludes
from his consideration the reserves of the Bank. Hon. gen-
tlemen, on the other hand, take a contrary view, and look
at nothing but the reserves; but I do not know shat dis-
tinction can be drawn between the notes in circulation and

those reserves. The banking department of the Bank, '
acting like a banker, keeps a reserve of notes in its till,
just as a country banker keeps a reserve of gold or silver.
That reserve is a portion of the circulation quite as much
as the sovereigns of the banker. A good deal has been
said about the effects of the act of 1814, which, it has been
contended, produced the crisis of 1847. It was, however,
shown before the committee that a baseless system of credit
had sprung up previous to that crises, by which bills were
drawn and discounted and re-discounted, until after a
time,- as they could not be met, several failures took place.
But what was the case with regard to the notes of the
public? At the beginning of October, when the crisis began
to be severe, the notes of the public were not diminished
by more than 203,0001. from the amount at which they
stood in July, when there was no pressure. How, then,
can it be said that the act of 1844 produced the crisis of
1817? Again, in the three months preceding Oct., 1847,
the amount of accommodation afforded to the public in the
shape of discount to ps ivate persons was between 6,00,000/.
and 7,000,0001. The act of 1844 could not therefore have
produced the crisis of 1847, either by diminishirig the
amount of notes held by the public, or by diminishing the
power of the Bank of England to assist private trade. The
hon. member for Wick (Mr. Laing) said that the word
" money" was used in two senses, and half the discussions
which took place respecting the currency would be avoided
if those two senses could be properly distinguished. Money
used as floating capital available for discount is a different
thing from money need for circulation. It is true that gold
is money in both senses, and it is equally true that the gold
sent to the Bank of England in the shape of deposits is a
portion of the fund available for discount. When, there-
fore, gold is exported from this country, when there is a
drain of gold, the amount of capital available for discount
is diminished. People accordingly look, as an hon. gentle-
man has observed, at the reserves of the Bank as an index
of the amount of floating capital available at a particular
time (although they do not contain the whole of that capi-
tal), because it is the practice of merchants to deposit their
gold in the Bank, and the amount withdrawn from the re-
serves is used for circulation in the country. Tho rate of
interest of the Bank is also an index of the rate of interest
elsewhere, but the Bank cannot raise or lower it at plea-
sure. In ordinary times, as the rate of interest required by
the Bank is high, people in want of accommodation go where
they can obtain it at a lower rate, but at periods when accom-
modation is limited they have recourse to the Bank. I be-
lieve that the act of 1844 is the best and the least stringent
of rules that can be laid down, but I do not wish to enter
into the discussion of that topic now. The variety of
opinions which have been expressed is in my mind a suffi-
cient reason for the appointment of the committee, where
the subject would be far better sifted than by a discussion
in this house. A select committee, composed of gentlemen
of conflicting opinions who examined the witnesses brought
before them is a fitter engine for the extraction of the
truth in this matter than this house, and therefore my
right hon. friend has done wisely in proposing the appoint-
ment of a committee. With respect to the last part of the
motion, relating to joint-stock banks, I think there is great
force in the objection to referring that to the same com-
mittee us tho one which would have to consider the Bank
Acts, especially as joint-stock banks are not banks of issue,
and Ido not believe that my right hon. friend would be
disposed to insist on that part of the motion, if it should be
the wish of the house that it should be omitted from the
present motion. (Hear, hear.)
Mr. MALINS in explanation, said be had not recom-
mended an extra issue of six millions, but argued that the
circulation should not be brought down.
Mr. SPOONER was happy to hear that these questions
were to be referred to separate committees. The discussion
must be in committee, where there could be an interchange
of opinion. (Hear.) Reference had been made to 1819 ;
and ho contended that the contract then made was an un-
just one; it had never been carried out, and never would
be. The evidence of what had happened since proved it
to have bean an unjust contract. Ho remembered Mr.
Horner proposing his resolutions in 1810, declaring that
there was a largo depreciation in the currency. This wall
denied by Mr. Vansittart and the Chancellor of the Ex-
chequer, who maintained that the one pound bank note
and the sovereign were, for all practical purposes, the same.
The effect of this on the country was to induce persons of
property to deal with it, and to make engagements on the
faith of there never being a return to cash payments. But
we had done more : we had returned to a far more strin-
gent system than existed before 1819. Previous to that
time there were restrictions on the melting and exporting
of coin. Now, gold was made both an article of commerce
and au article of currency; and thus its fixed character as
a real currency was destroyed, and it was thrown into the
markets of the world. He repeated that the contract of
1819 was an unjust one, which never could be acted up to;
and the bill of 1841 was an abortive attempt to bolster up
the former measure. Immediately after 1819 great distress
ensued, which continued till 1822. Lord Castleskagh then
brought in three bills, whose object was to increase the
currency. The result was a period of prosperity, which
was afterwards checked by restriction; and this had been
going on ever since— alternate depression and elevation.
He believed it was possible to establish a currency which
should do justice to every one, and not be subject to the
fluctuations whioh had occurred of late years. As to the
rate of discount, he contended that it depended on the
supply of notes in the market, including those held by the
Bank in reserve. Immediately the public saw that the re-
serve was getting low there was an increased demand for
discounts. This was proved by what occurred in 1847. The
moment it wasknown that the restriction had been removed
from the Bank the demand suddenly ceased. Ho remem-
bered what passed between the late Sir R. Peel and his
father on occasion of the bill of 1819 being introduced, and
he (Mr. Spooner) was convinced, despite Sir Robert's elo-
quence, that his father's arguments were the most cogent.
He was convinced that no real relief would be obtained
until the bill of 1844 was remodelled. Since then 157
millions of gold had been imported into this country.
Where would the currency have boon without it? Under
the present arrangement, he defied any man to say what
a pound was, or what it would be a month hence. What
was wanted was something which would secure equability,
which was the foundation of all trade. His wonder was,
that the Bank of England managed so well under the pre-
, sent law. He hoped the right hon. gentleman would not
go into the committee with his mind made up, but with a
mind open to conviction. If the committee was impartially
formed, he had no doubt as to the conclusion they would
come to. The report of the committee on the bill of 1811
was only carried by twelve to ten, and, to his knowledge,
the two members of that committee who were unavoidably
absent on the division would have voted with the minority.
The House of Loris' committee was against the act of
1841. The balance of opinion, therefore, could slot be said
to be in favour of that act. The right hon. gentleman
(Sir C. Wood) assigned this as the reason for ordering the
suspension of the act in 1817—" Considering the enormous
amount of the deposits of the Scotch banks, the shortness
of the notice, and that the gse ater part cf the securities
could not be realised, their application for assistance be-
came a very alarming one."
Sir C. WOOD—It was not an application to the Govern-
ment.
Mr. SPOONER—It was an application to the Bank of
England, hut no set of bankers had such large sums of money
in the public funds, and they were at that period unsaleable
without such a lossthatinsolvency must have been the result
of converting them into money. And what was the state
of things now? The reserve in the Bank was 4,000,0001. ;
the deposits 9,030,0001. If only half of them came and
asked the Bank fortheir money, what became of its solvency?
(Hear, hear.) Not that the Bank was insolvent because
the Government owed it 11,000,000/. The Bank would
say, lot the Government find the gold for me. But where
could the Government find it ? The appointment of a
committee was, in his opinion, the only way of properly
investigating the question.
Mr. WILKINSON, in reply to the question where they
should be if the gold of Australia and California had not
been discovered, said they should be a great deal better
without it. It added nothing to the real wealth of the
world. (Hear, hear.) On the contrary, it would be in-
jurious for a long time to the labouring classes, because the
price of commodities in reference to gold would rise.
There were two points necessary to be clearly known in
discussing this subject. One was that nothing was to be
gained by a paper currency but the economy and conve-
nience ; •and the other, that interest was paid for capital,
and not for the circulating medium. The hon. member
(Mr. Spooner) said that the rate of interest rose when the
reserve was low, and fell when the reserve was high. In
saying that, the hon. gentleman put the cart before the
horse, for the reserve depended on the rato of interest, and
not the rate of interest on the reserve. If interest was paid
for capital and not for the circulating medium, there was
an end of the whole question. The complaint was that the
operation of the act of 1811 was to raise the rato of inte-
rest, but if the rate of interest was not affected by the
circulating medium at all, how could the act of 1814 have
that effect ? The right hon. gentleman truly observed
that the rate of interest rose in countries whore the act of
1841 did not exist. It was the system of credit which led
to panics, and, that being so, he did not believe that pe-
riodical panics could be prevented. If gentlemen could be
only persuaded that the circulating mediuM had nothing
to do with the rate of interest, it would put an and to a
groat deal of confusion. (Hear, hear.)
Mr. MUNTZ said that if a stranger were to come into the
house, and listou to the remarks of hon. gentlemen, he would
conclude that in the midst of such various croeda this ques-
tion conic! not be solved. The object of his rising was to
know what the committee was for ? What wore they to do
or inquire into ? He believed it was one of the greatest
palmed on the house.
shams ever (Hear.) What was the
use of a committee to inquire into the act of 1814 when
they were told by the mover of the committee that it did
not require alteration or consideration ? The only object
of the committee could be to shift the
responsibilityefrom
the Government and throw it upon the house.
was determined to go into the whole
question, with wistsh ite
bona fide intention, it was an insult to the house and
country to appoint this committee. Whatever might be
y
the effect of the act of 1811, no ono could deny that
never were such variations in the cost and value of money
as since 1844. (Hear, hear.) And never wore they so
frequent or injurious to the industry of England. That
was the great thing to be inquired into.
Mr. HILDYA RD said there was a great deal of truth in
the obseevations of the hon. member (Mr. Mentz). But as
it was agreed that theynvere to have a committee, and as
the right ken. gentleman the Chancellor of the Exchequer