The Sun.
London, England, 1861-09-10 00:00:00

RAILWAYS.

Cash. Account.
Orleans 1421 25 .. 1422 50
Northern ....
New ditto
915 .. 916 25

Lyons and Mediterranean 1021 25 1022 50
Geneva —
Southern 652 50 .. 655
Western

Eastern

Sordinian .. ..
Austrian
Lombard

TfIE BANK ACT AND CURRENCY
REFORM COMMITTEE.

Mr. Stansfeld will be obliged by the Editor of
The Sun inserting the following letter, as explana-
tory of his views in joining the Committee.
Highfield, Windermere,
Sept. 6, 1861.

H. BROOKES, ESQ., SECRETARY TO THE BANK
ACT AND CURRENCY REFORM COMMITTEE.
Dear Sir,—l duly received the packet of circulars
and petitions, and will distribute them with plea-
sure. They are both excellent, embodying many
views which I have long entertained and published.
There are some, however, from which I differ ; but,
nevertheless, as a deadly foe of the Act of 1844, .I
should wish my name to be added to the Com-
mittee.
In compliance with your wish, I will state the
principal points of difference.
The circular asserts " that the issue of
£14,000,000 of Bank notes, all payable in gold on
demand, against a Government debt which is prac-
tically not convertible into gold, is not a sound or
natural foundation for the national cuirency."
I once held the same opinion, but further reflec-
tion led me to entertain the very contrary. When
I considered that the payment of the interest of
the debt was guaranteed by the entire property of
the nation (valued at £6,000,000,000), and that
repudiation was impossible, I came to the follow-
ing conclusion that the £14,000,000 of notes were
really based on the property of the nation.
That the national property was the` best staple
out of which a national currency could be manu-
factured.
That if the notes were issued with the liability
and ability to pay them in gold on demand they
would constitute a sound national currency, and
that the ability would be insured if one-third of
the amount were issued against bullion, and two-
thirds against Government securities.
We have the evidence of the Bank directors
that they always considered from experience that a
reserve of one-third of bullion to their liabilities
was perfectly safe, and our highest authority on
economy, J. S. Mill, Esq., says " that the substitu-
tion of paper for the precious metals should always
be carried as far as is consistent with safety ; no
greater amount of metallic currency being retained
than is necessary to maintain both in fact and in
public belief the convertibility of the paper."
The trading community know little, and care less,
about the convertibility of Bank of England notes ;
it is the monied interest only who, through the
machinery of the Act of 1844, make it a bugbear
for their own benefit. Wt-e- •-en ever did or would
serer:. Le °ell LIS 8.0tt9 tot Bans. ea notes
from a fear of their not being convertible -In the
panics of 1847 and 1857 the cry was, " Give us
notes;" these very notes issued only against Govern-
ment Securities, and the moment permission was
given by orders in Council to issue an unlimited
quantity, the panic ceased.
Nevertheless, the principle of convertibility should
be maintained as being necessary to keep up the
notes to our standard of value. Let us now con-
sider the consequences of depositing £14,000,000 of
gold in lieu of the Government Securities, against
which that amount of notes is issued under the act
of 1844.
Undoubtedly it would remove all fear of Bank of
England notes not being convertible, for in that
case gold would be deposited for every note issued ;
but it would restrict our legal tender money to
metal and to one metal only, making the rate of
discount dependent solely on the supply of gold ;
and as the Bank of England would remain restricted
to an issue of £lOO in notes to a deposit of £lOO in
gold, whilst the Bank of France could issue £3OO
or more against £lOO of gold, the Bank of France
could outbid the Bank of England for gold, and
afford money at a lower rate of discount to our
rival manufacturers and merchants.
Again, to procure the £14,000,000 of gold the
country would have to export that value
of productive capital (commodities used in
production) in exchange for unproductive
gold, to be locked up in the coffers of the Bank,
diminishing pro tanto the fund for the employment
of labour. And, again, taking the loanable value of
the £14,000,000 of gold deposited at 3 per cent. only,
the annual cost to the country would be £420,000;
and this we should have to bear without procuring
any increase to the supply of money, the one thing
needful for our ever increasing commerce.
Could it, however, be used as a National Reserve
Fund of Gold (as suggested in my Plan for a
National Bank of Issue), to counteract the evils of
drain, it would be cheap even at that cost. Re-
garding the essential character of money to be that
of a security for the transfer of equivalent values
of property (in order to supersede the inconvenience
of barter), I consider paper money, based on
national property, and payable in gold on demand,
to be an adequate security, constituting a per-
fectly sound national currency.
The property of the nation is a guarantee that
the holders of the notes will get 20s. in the
round, and the liability to convertibility ensures
the pound being kept up to our gold standard, con-
stituting as steady a measure of value as is prac-
ticable.
In the petitipn (paragraph 9) it is stated that prices
rise because the circulation has been unduly in-
flated with bank notes. This, I believe, to be a
very common fallacy, contrary to fact (see N. 8.),
and opposed to the opinions of our highest scien-
tific and practical authorities.
Mr. Y. S. Mill says, "I apprehend that bank notes,
bills, and cheques, as such, do not act upon prices at
all. What does act upon prices is credit, in what-
ever shape given, and whether it gives rise to any
transferable instrument capable of passing into cir-
culation or not," and Mr. Thomas Tooke, after the
closest investigation, arrives at the conclusion " that
the prices of commodities do not depend upon
the quantity of money indicated by the quantity
of bank notes, or upon the atimunt of the
whole circulating medium, but that, on
the contrary, the amount of circulating medium
is the consequence of prices." And this view is cor-
roborated by Mr. Newmarch, who says that
" whatever effects have been produced in raising
wages:and prices, and in extending and increasing
trade, have been accomplished by means of reduc-
tion in the rate of interest and discount and by
advances of capital, and net in any way by the
medium of circulation." It is inflated credit, and
not inflated currency, which causes speculation and
raises prices. I send by this post a copy for each
of the committee of a plan for a National Bank of
Issue, containing suggestions for remedying the
evils of our monetary system, and should the com-
mittee think them worthy of being submitted to
the consideration of the press and of Chambers of
Commerce, I will print another edition, and send
them as many copies as they may require for that
perpose. For a further explanation of my viewi I
would refer them. to a pamphlet entitled "Money
anti the Money Market Explained," to be had of
Simpkin and Marshall, as I have no copies by me.
I remain, sir, yours sincerely,
S3T,
sBNs6uSle.
N rFd Ea L D
H N.B.—The
t:1 dhe amount , Windermere,of ilalE
Aug.Ai k
notes 2
credit only (country bank notes) has actually been
diminished about a million and a half s
passing of the Act of 1844, and consequentlynegeain the
against
the panics and fluctuations in prices since then can-
not be attributed to any inflation of the currency.