The Sun.
London, England, 1844-05-16 00:00:00

N

THE CURRENCY QUESTION
AFFECTED BY THE PROPOSED MEXSUR"

A
TO TILE EDITOR OF THE 511.x.)t.,1 "V(
Stn,—As the pros and cons of this question are very imper-
fectly understood,_ and it is one of very great importance to
the commercial, manufacturing, and industrious classes gene-
rally, the following summary has been attempted of the lead-
ing propositions contended for on each side. We are now
entering on a career of legislation which will leave lasting
traces upon our monetary system, and become the prelude to
still greater changes. Are the principles proposed for adoption
sound, or are they not? The reader must determine fur
himself.

PRINCIPLES PROPOUNDED BY
THE ADVOCATES OF NON-INTER:.
FERENCE WITH THE MORI'
OF IS.SUE AND OF FREE 4
TRADE IN DA NEINC.
. The right to issue paper 1. Coin and Bank-notes bare
money belongs solely to the two totally different bases of
Government, as in the case value; the former passes cur-
of coin. rent from its intrinsic value,
_

TUE GOVERNMENT.

and the latter, like all forms of
paper credit, from the credit
given to the issuer of his ability
to redeem it, in gold, when
required. To assert that the-
Government has a right to
issue notes, to be paid or re-
deemed, not by itself, but by
•ther persons, is, on the face of
it, an untenable proposition.
This right, if it exist, can
apply, only, to inconvertible

aPer-
2. The profits arising from P
2. The banker is as much
a paper issue belong to the entitled to the profit arising
Government alone. from the use of his credit, as
the professional man to the
results of his skill. Practi-
cally, the assertion of such a
right by the Government will
merely lead to an extra charge
to customers of the bank.
3. Bankers' notes are not 3. In principle they are en-
like other forms of paper tirely identical. The endorse-
credit, such as bills of ex- ments on a bill merely add to
change, protniesory notes, the number of its credits, and
&a do not necessarily add to its
-glue. r^- al,

value, nor can they Alter its
character. All these instru-
ments are based on credit,
with the quality, or property, of
being convertible into gold, or
Bank of England notes.
4. The Bank of England
may over issue, because it has
extraordinary facilities for get-
ting out its notes, but pro-
vincial issuers cannot over
issue, their notes being con-
stantly returnable by the prac-
tice of exchange between
bankers and the demand of the
holders for gold. Free trade in
banking never existed in Ame-
rica; their banks are chartered
banks, with limited liability ;
there was no practice of pe-
riodical exchange between
them ; and there are many
other differences. Scotland, on
the other hand, may well be
referred to as au example of
unlimited right of issue, with-
out excess. No case of over
issue- has been established
against the -private and joint-
stock banks.
5. A drain of gold, from
whatever cause, is a fact which
no banker will overlook. He
will be guided by this, without
any necessity for the imposi-
tion of an abstract rule. The
supposed difficulty about ex-
changes (i. e. the want of unity
of action on this subject be-
tween the Bank of England
and other banks of issue) is
the effect of that monopoly
which constitutes the former
the great depository of gold.
All provincial issuers assert
that they cannot regulate their
issues by the exchanges, and
that there is no necessity for
their doing so, except so far as
they may, indirectly, affect
them. If there were no Bank
of England notes, but their
own notes were redeemable in
gold only, the action of the
exchanges would be more
readily felt by them than it
now is. The proposed altera-
tion will not make them con-
form to this rule.
6. It is expedient to put a 6. If banks (with the ex-
.imit m the amount of note ception of the Bank of England)
circulation cannot and do not over issue,
this is unnecessary, and will, ul •
timately, be injurious to the in-
dustrious classes. The chief
use of a bank is to afford pe-
cuniary accommodation when
most required ; any artificial
limit which interferes unne-
cessarily with their ability to
do so should be avoided. Acts
of Parliament for this purpose
have all the vices of class
legislation, they increase
the wealth of the rich and the
poverty of the poor. It may
be desirable to limit the circu-
lation of the Bank of England,
because it is not subject to the
same checks as other issuers
are.

4. The practise of private
or unrestrained issue leads
to over issue. This has been
proved to be the case in the
example of the banks of the
United States.

3. Isamu must be regu-
lated by the .foreign ex-
changes.

7. The issue of notes should 7. This is a subject of in-
be managed by a separate de- ternal arrangement of little
partnient in the Bank of importance to the public.
England.
S. The limitation in the 8. The mismanagement of
amount of note circulation banks proceeds from over-
is the only direct interference trading, i. e. an abuse of real
which should be practised by and bowl fide capital by loans,
the Government to prevent over-drawn accounts, &c., and
banking mismanagement. drawing or accepting bills of
large amount, and not from
any over issue of notes.
The London banks and Manchester joint-stock
banks which have failed (the latter most egregiously)
did not liana their own notes, but those of the Bank
of England. Overtrading should be checked by en-
forcing proper rules of management. Such, for exam-
ple, as the following, viz.:—The banks should be com-
pelled to hold capital in reserve (i. e. gold, Bank of
England notes, Exchequer Bills, or Government Stock)
equal to the extent of their whole circulation, and of
one-fifth plait of the amount of the deposits and average
balances.* The observance of this rule, the state of their
overdrawn accounts, &c., should be ascertained, from
time to time, by a system of inspection by officers elected
by, but not otherwise dependent upon, themselves,
or appointed by the Government. With some check of
this kind, and others relating to the formation of new
banks, uniformity of management, amount of paid-up
capital, auditing of accounts, and the like, a free trade in
banking might be safely allowed; except that a revival
of U. notes may not now be desirable.
The case of what may be termed the respondents has
been stated much more fully, because, it was, in a great
measure, necessary, and because it is placed at a dis-
advantage from its opposition to the great authority of
the Government.—l am Sir,
Your obedient servant, P.

" Remarks on Prevailing Errors Respecting Currency
and Banking," by Robert Cockburn, Esq. It is not intended
to assert that there is anything like unanimity amongst the
opponents of the Government scheme in their views of the
checks on mismanagement, or that all admit that any are
necessary. Probably many would prefer the Government plan
to the rule above propounded. It is only put as an example
of a check -that might be created. The true question is,
is over issue the real evil ? If it is, the disease and cure have
been rightly apprehended, if it is not, it is an example of
straining at gnats and swallowing camels.

PROMISSORY NOTES.
The Banking Returns of the Circulation of Notes in
in England, Scotland, and Ireland, are for the four weeks
ending the ?7th ult., and exhibit the following results:—
ZNGLAND.
Bank of England, Now
Last time .. 20,842,000

Increase
Private Banks, Now
Last time,

987,000
5,295,239
4,983,646

Increase
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