The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1844-06-08
THE NEW SYSTEM OF CURRENCY
PROPOSED BY
SIR BERT PEEL
British House of Commons.
MAY O, 1874.
MAY o, Is44.

This was Lord Liverpeops opinion al mat time
Is not this the fact at the present moment? II Is
attempted by the same process TO deter you from
regulating the paper currency, y which OF course
erpooI, s'paper currency is only bills payable, or
convertible into cash, at the viii and pleasure of
the holder" This statement assumes that paper
currency differs In that essential character which
belonged to other paper; and that, SO differing. we
were entitled to deal with II way different from
other descriptions of paper, for Ne purpose of reg
ulatlng that which we are best able to regulate our
selves; if, that is, we adhere 10 the measure of
value, we need not be afraid of any mass OF bills
of exchange The interests OF commerce
ought always to be the motive which should lead
us to guard against depreciation or diminutlon OF
the needful circulation. 1t has been commended for
by eminent writers that the only security and pre-
caution which you ought to take against an excessive
issue of paperscurrency is Its immediate converl.
bility. This doctrine is sanctioned by names and
authorities no less eminent than those OF ricardo
and an Adam Smith. These authorities assume
that there ought to be no hmitation-theysay II you
have the opportunity OF an immediate convertibllity
then you need be under no apprehension on the
subject with respect to the amount OF the issue.
venture, with great respect to contest this position,
and ask this house TO hesitate in adopting doc
trines even such high authority, 1t these doc,
trlnes shall investigation turn out not to be well
founded. We are in constant state OF progress
We are daily making new discoveries; do not there
fore let Us be deferred from abandoning prlncl-
pie, though sanctioned by Smith and Ricardo,
If subsequent lights thrown on the subject convince
us we are in error, (hear, hear.) must contend
that unlimited issue, with ready power OF con-
vertibty, does not give US the required security.
readily admit there Is great advantage In resort
ing to a supply of most articles by the means OF
free competition, because by the aid of competition
you obtain article you require at the cheapest
rate /; but then say, and what arm contending Tor
is, that paper currency is governed by principle
totally disferen, from that which governs almost eva
cry other commercial matter l do not want, sir,
the greatest quantity OF currency upon the cheapest
terms. What want Is, a competent supply OF
rh hall octlxy tN
the quantity OF gold, which with such supply OF
paper currency would be required for the business
of the country, and which shall be given and Sc
cured on the credit Of parties OF whose solvency
there can be scarcely doubt want this part of
the currency to be the best to quality, but as to
Its quantity it must from circumstances be unflxed
but if its amount 60 beyond that Tor which 1t IS In
tended to be substituted 80 far will be IN excess
The contrary opinion is held by those who are in
favor Of the doctrine of unlimited competition
with respect to paper circulation by banks OF ls'
sue and they maintain that where there Is an un-
limited competition allowed, the issue OF paper by
bankers authorized to issue will ultimately conform
to that amount of gold for which it is the substitute
in the circulation. We believe that the issue of
bank paper 10 supply wholesome circulation Of
this description should be greater than The gold
for which 1t is The substitute, and whenever 1t does
exceed, then the silent monitor, gold, by. be-
coming scarce, enforces the lesson OF immediate
denied by the advocates of unrestricted paper cur
rency and upon this part of the subject must en-
treat the attention OF the house to the evidence
given by MIR. Stuckey,. banker In the west OF
England, upon his examination before committee
of the hcunc, and the chairman Of committee
appointed to inquire into the condition Of private
banks in this couutry. GO. Surprising, tor ~
stance il should be ultimately thought that It is de-
sirable that the country circulation should have
general conformity 10 the state OF the foreign ex-
changes; do yea conceive that this could, IN any
way, be effected by the country bankers "A 90
not at present see how it could be accomplished;
and may take the liberty of going further in an
swer to that question: and saying that II appears TO
me that the country issues as conducted In the
west of England, have very little or nothing to 40
with foreign exchanges"
Such is tho opinion of most respectable gentle
man and banker in the west OF England, from
which 1t would appear that prices In the west OF
England had little TO do with the state OF the foreign
exchanges. 1t is admitted that these issues-that
is the issue Of paper by the banker, depends upon
prices so that when prices rise the issue OF paper
enlarges consequence. This Is most I'M
portant admission, and it shows that unless you
have controlling check upon those issues. and
unless you attend to the warning that IS certain to
follow--namely, the disappearance OF the gold IRON
circulation, you will go on to increase the EVIL by
increasing the issue OF paper. MI. Stuckey does
not enter into that question in his evidence: He
says he looked at the foreign exchanges "a laugh)
to see how they affected the currency, but his EVIL
dence Is only that In the west OF England he does
not think the foreign exchanges affected prices
Mr.. Hobhouse, the brother, believe, OF the hon
orable member for Nottingham, was examined be-
fore the committee, and being asked
SO In your opinion, with a rise IN prices, Will
there be an increase in the paper issues by coun-
try banks IA. There will oe an increase In the To-
cal circulation of the country when prices rise
Gold is a commodity OF which there may be glut
as well as a scarcity, and | could never see any
reason to be frightened at export or drain of gold
"Q Ought not there to be contraction OF the
circulation under such circumstances -; Wheth-
there ought or ought not cannot tell, but am
sure that in fact, there could not be. am perfectly
satisfied that it is quite impossible tor these local
currencies to be influenced by the price OF gold or
the foreign exchanges.
GO. Does it not often happen that your cirGula-
ton is increased in the beginning of a drain for
gold I'D. Yes; we do not pretend that our cir
culation is at all governed by what have stated
already.'S
per goes on demand ter gold Is the colse-
quence the paper becomes dscredlted; the banks
are run upon until they stop payment; credit Is
shaken, large fortunes lost; and rum to numbers Is
the lanentable result and finally, the bankers who
stand are compelled to retrace their steps by imme
diate and permanent abstraction OF notes from cir
culation (hear.) This then is the proof OF what j.
at an earlier period Of my address to you, stated
namely, that immediate convertibility where there
is unlimited competition in issue will not always
protect or prove safeguard TO you from sudden
monetary arrangements and violent convuslons.-
Let US ilok, for example, to what has happened In
the United States of America, and let us become
wise from their experience. In that country there
were no private banks; the banks OF issue were
joint-stock banks with many subscribers, and ~
some instances there was Joint liability OF all and
each of the partners established Yet, with these
guards and this precautlon, sudden crash came
upon credit, and the consequence was the rum oil
thousands (hear IT, ~ in this ease, there was es
tabllshed an immediate convertbly OF their issues
into gold, with an unlimited competition, and if a
system guarded were safe system, how d!d II
happen this crash Of credit, and the ruin of the
American banks, took pacel Cloud chceis) To-
gether with these banks they had national bank,
the Bank Of the United States; the effect OF which
on the other banks was, that it kept the banking
system within some bounds. The other banks
were compelled to conform to the principle OF the
Bank of the United States But it pleased the per-
sons in power to do away with that national bank,
and the result was such as / have stated From all
that have stated think have proved to the house
that which stated it was my intention to do
namely that unlimited competition with immediate
Of god