The Sun.
London, England, 1857-11-26 00:00:00

(From, the
The last return
most remarkable
aent
since Paterson first conceived the idea of banking,
in the year 1691. The notes issued are stated at
22,554,5951. Of this amount 1,148,185/. are in re-
serve, thus leaving the active circulation, exclusive
of seven-day and other bills, 21,406,4101. But
2,000,000/. have been issued under the authority of
the letter from the First Lord of the Treasury and
the Chancellor of the Exchequer ; so that what may
be regarded as the normal circulation at the present
time is only 19,406,4101. Although 2,000,0001.
notes have been added to the issue, it appears that
even this amount alone has been insufficient tomeet
the pressure for money during the week ; for the
Bank, in order to obtain notes, sold stock to the
enormous amount of 3,000,0001. The private secu-
rities consequently show a heavy increase, having
r,ached the totally unprecedented aggregate of more
than 30,000,000/. From the amount added to the
private deposits, it is evident that bankers and
others borrowed more money than their wants
absolutely required. It is not often, when the
money market is active and high rates can be
obtained for the temporary use of capital, that so
large a sum as nearly 14,000,0001. is allowed to re-
main unproductive in the hands of the Bank. The
bullion was reduced to 6,484,0001., being nearly
2,000,0001. under the lowest point during the panic
in Oet., 1847. It is thus evident that the Govern-
ment assistance came, as we feared, too late to be of
any effectual service, and additional force is thus
given to our assertion, that the constitution of that
establishment is not suitable to the present expanded
state of commerce. Although, as we have before
stated, we have little hope of seeing either the Par-
liament or Government sanctioning any other sys-
tem of banking than that sanctioned by the Bank
Act of 1844, with some modifications, we confess
that the more wo consider this great question, we
fail to see any permanent safety to the country in
any other system than that of the establishment of
a National Bank, under the control of Parliament,
to which alone the issue of notes, based upon their
immediate convertibility, should be permitted. Re-
duce the banking system to this, and permit the
unrestricted establishment of bads of deposit and
discount throughout the country, and we will have
a machinery which can never be toned wanting in
the time of pressure.
This National Bank ought not to be permitted to
discount, and should be obliged to issue notes of all
denominations, not smaller than 1/. to whatever ex-
tent the wants of the country may require
bearing the Government stamp upon them
and passing as a legal tender throughout the
United Kingdom, except at the bank itself.
All other banks requiring these notes should be
supplied with them, on their depositing at least
one-third in gold and the other two-thirds in
securities immediately convertible, for which a cer-
tain rate of interest should be allowed. By this
means an enormous amount of gold would be placed
at the disposal of Government, to meet any de-
mands that commerce, either at borne or abroad,
might have upon it. Under such a system as this,
we would get rid of the present very unsound prin-
ciple of permitting the establishment of banks,
having nominal capitals of large amount, but with
only about one-fourth of that capital actually paid
up. In other words, we would get rid of a system
which permits of a banking circulation having three
fourth of its amount unrepresented by real capital.
It may be argued that, in such an important
commercial country as this, such a system as we
now propose would be found inadequate, as the
solid capital it would require could not be com-
manded ; but a moment's reflection must convince
the intelligent reader that such a notion is without
any foundation, as the wealth of these kingdoms is
unbounded, and it will not fail to be brought out
when sufficient inducements appear for its employ-
ment.
One great argument in favour of our theory is,
that it is thoroughly free trade in its principles, as
it recognises no other law than that of the
legitimate one of supply and demand. It is also
eminently simple its machinery, and well cal-
culated to preserve a proper'and wholesome equi-
librium between capital and labour.
Should the Government and Parlament not
entertain this theory, of which, as we said before,
we have little hope, we do trust that they will, at
any rate, make the following essential improve-
ments on the present Act :

let. Extend the issue of the Bank of England to
at least 20,000,0001.

2d. Permit „ tho issue of notes in England (as in
Scotland and Ireland) of all denominations, making
IL the minimum.

3d. Constitute Bank of England and Bank of
Irsland notes (or, at any rate, the former) a legal
tender throughout the United Kingdom.
4th. Permit the establishment of an increased
number of banks throughout the United Kingdom,
proportionate with the increase of trade, duce the
Act of 1844 was passed.