The Sun.
London, England, 1850-12-14 00:00:00

is a pretext, however shallow and flimsy, for violating
the main principle ; in the former there is none w hat-
ever. The system stumbles on the very threshold.
The theory next requires that the Bank of England
and all other banks of issue shall hold gold iu their
coffers in exact equivalency to the amount of notes
issued in excess of the authorised circulation of each.
Assuming then that the Bank of England had
7,000,000 of gold in its coffers, it would be permitted
to issue 21,000,000, of notes, of which 14,000,000
would represent the debt, and the remainder
the 7,000,000 of sovereigns ; but if 1,000,000 of
those sovereigns were drained out from the cellars,
then the Act of Parliament compels the withdrawal
from circulation of 1,000,000 of notes, and the
total issue of paper would be reduced to
20,000,000. This is styled by the bullionists the
self-acting principle. The theory next enunciates the
principle of convertibility, which requires that every
note should be convertible or exchangeable into gold
at the demand of the holder, when he presents is at
the counter of the Bank of England. By this con-
trivance it is assumed and asserted, that, even with a
paper note circulation, the whole currency is essen-
tially metallic; but this is not true, since no metallic
auarantee whatever exists for the convertibility of the
:31,000,000 of unsecured notes which the Act of 1844
authorizes to be circulated. In defence of the sys-
tem it is urged that there is no likelihood of all the
notes being presented at once ; nor indeed is there
when credit is sound, and confidence unshaken ; but
that is a sorry system which can only be depended
on when the mercantile horizon is unclouded, and
no danger threatens ; to say the least, it makes the
bullionist scheme a lottery subject to the chapter of
accidents ; and the experience of the panic of 1847
showed that a few of the London bankers could and
would have stopped the Bank of England in that year,
had not the Bullionist Act of 1844 been suspended by
a Treasury letter. Gold may be drained from the
Bank in two ways. It may be required for exporta-
tion to foreign countries to pay an adverse balance of
trade. This happens when the value of goods im-
ported exceeds the value of goods exported. The
drain may be an internal one. This happens when
the people are fully employed in useful productions, for
to raise and circulate an increased amount of produce
obviously requires an increased amount of money.
Incidental to both these states, and consequent
upon them, is private hoarding, which locks up gold
and prevents its flowing into the ordinary channels
of circulation ; this is the result of panic. To these
diversified operations and results the Act of 1844
applies one uniform and inexorable rule, the Bank, in
all cases, being compelled to contract its issue of notes
exactly in proportion to the drain of gold. We pro-
ceed to show in what manner the action of the law is
destructive of industry. The rational remedy for a
foreign drain of gold would be the additional produc-
tion and export of commodities, in order that the ad-
verse balance of trade might be squared by barter;
but this the law prevents; for as gold disappears, the
circulation of notes is contracted, the interest of legal
tender money rises from its forced and artificial scar-
city, and discounts are only obtained by the favoured
few at a ruinous cost. The manufacturers, therefore,
so far from being able to add to produce, are com-
pelled to close their factories and dismiss their opera-
tives. Still, however, commodities must be forced
out to the creditor countries to check the drain of
gold; and as all future production is arrested while
the pressure lasts, no alternative remains but
to export goods already in existence. They
must be sold at any sacrifice, however much
below the cost of production. By this destructive
process, gold is brought back from foreign countries
to the cellars of the Bank of England, and the
adverse balance of trade is rectified ; but it can only
be done under the bullionist theory by suspending
industry, and ruining manufacturers and merchants.
This consequence is indeed avowed by Mr. Jones
Loyd, now Lord Overstone. In his "Remarks on
the Management of the Circulation," p. 38, he thus
expresses himself :—" Against the actual exhaustion
of its treasure by a drain through the foreign ex-
changes, the Bank, under almost any circumstances,
has the power of protecting herself ; but to do this,
she must produce on the money market a pressure,
ruinous from its severity ; she must save herself by
the destruction of all around her." Such is the
scheme which unreflecting legislation deems best
suited to this commercial country. In times past the
export of gold has chiefly been caused by large im-
ports of foreign corn required in deficient harvests.
Surely there is a refined cruelty in the bullionist
system which dooms us to a famine of money, by the
very effort which saves us from a famine of food; it
only allows life to be preserved by the bankruptcy
of fortunes. In this stage of the argument it is im-
ported to ask, whether the rich who consume without
producing, who buy but do not sell, suffer any injury
by the operation of the system at all equivalent to that
which is sustained by the employers of labour, and
by those who live on wages? So far from this being
the case, it is certain that they derive a positive and
considerable benefit from the periodical prostrations
of industry ; for when these occur, the prices of all
commodities fall in the home market just as low as
in the markets of exportation; and a fall in prices
is only another term for expressing a rise in
the value of money. It is clear, then, that
during the pressure which continues till the ex-
change between the debtor and creditor countries is
brought to par, the purchasing power of all fixed in-
comes is increased; so that they who are rich in such
incomes are benefited by monetary panics. Selfishness
make this class friends and all', s of buliionism.
Another result of the system is its effect on tax-
ation. Nominally the taxes remain the same, that
is to say, they are computed in " pounds" whether
the country is in a state of commercial confidence or
commercial panic; but while a panic lasts they are
practically increased ; for in a general fall of prices
a man must give more goods for a " pound" than
when prices are high. If a tax is levied on a house
amounting to ten pounds, and the inhabitant is
selling his goods at a remunerating price, the tax
may fall on him with comparative lightness; but
in a panic, when the prices of his goods decline, he
may have to sell twice as many goods for the same
amount of money he received when prices were re-
munerating; in which case the tax of ten pounds
nominally so expressed in money, becomes twenty
pounds when expressed in commodities. In this
manner all producers suffer ; but the rich annuitant,
fundholder, mortgagee, placeman, and pensioner, are
all reversely affected ; what they economise in the
general fall of prices goes far to discharge their tax
or even to discharge it in full. We pass now to an
internal drain of gold, the mischief of which is as dis-
astrous as when it arises from a foreign drain. We
have already stated that when this former species of
drain occurs, :it indicates a high state of industrial
activity ; indeed it never can happen unless the people
are fully employed, and as wages must increase under
such circumstances, an increase of money to pay them
becomes an inevitable necessity. 'Whatever the de-
mand for more money may be among the employers,
the Act of 1844, leaving no discretion to the Bank of
England, the limitation of paper issues cannot be ex-
ceeded; the same rigid rule, of course, acts upon the
country banks. The employers, therefore, are com-
pelled to demand gold, or to suspend or contract their
operations, since the law prevents the further emission
of notes ; they take the gold, and with it for a brief
time continue their business ; ,but as the gold is
drained away from the Bank cellars, the Act of 1844
comes into merciless operation, and the circulation of

notes meets with an immediate check. But the evi,
day is only postponed by the employers; indeed they
have accelerated their own doom by taking gold from
the Bank, which has merely afforded them a tempo-
rary respite. There is no longer sufficient legal ten-
der money to carry on internal trade. The Bank
must save itself, and Mr. Jones Loyd has shown us
how it can be done, and how it must be done.
Discounts cease; all pecuniary accommodation is
suspended; there is no longer any confidence be-
tween man and man ; all undertakings are checked,
even the most useful, while the greater number of
them are wholly arrested ; employment ceases,
wages disappear, the poor-rates are increased.
Such was the case in 1847 ; for when the panic of
that year occurred, the foreign exchanges were in
favour of England both on the continent of Europe
and in the United States of America. Mr. Cotton,
Governor of the Bank of England, when examined
before the Lords' Committee on commercial distress,
deposed that from the Ist August to the 30th Oc-
tober in that year, 1,373,000/. was purchased by
the Bank ; but that 2,200,000/. in sovereigns went
out into the country in consequence of the internal
demand, on which account the bullion in the Bank
had decreased, although the importation from abroad
was steadily progressing. Here, then, is a case in
point, in which it is confessed that the bullionist sys-
tem checks production. The bullionist answer to this
charge is, that the evil complained of does not arise out
of their system, but out of over Troduetion. To which
we reply by asking, In what sense are we to under-
stand the operative force and significancy of the pre-
position "over" prefixed to the substantive produc-
tion ? It cannot with truth be said that productio n
is " over" the natural wants and necessities, the na-
tural appetites and desires of the people, unless it can
be proved that every man, woman, and child have
more of all the good things of life than they desire to
possess ; but such a state of things has never oc-
curred, and consequently, in the sense referred to,
the doctrine of over-production is a fallacy.
The only rational interpretation of the phrase that
remains is, that the production of commodities has
been " over" the amount of money required for their
circulation. Under this view we establish a
very clear case of the under-production of legal
tender, the instrument of exchange, instead of an
over-production of the goods to be exchanged.
Bullionist legislation, therefore, decides that it is
better for the industrious classes to be deprived of
employment and food than to allow the cellars of
the Bank of England to be drained of gold.
This theory requires that the number and amount