New-York daily tribune. [volume] (New-York [N.Y.]) 1842-1866, 1853-09-24

The Ssu il mistaken in what IL fears, and IN what
Aepes The Yapk of England has as little as any
ether bank either he power OF expanding or OF coz
tracing the currency OF the country Inc reaiiy ns-
ehievons powers possesscd BY il are by no means re-
sfreted ut on fbe contrary strengthened By the Peel
Hstbe Bank Act Of 1874 is generally misunderstood,
md A IL working viii become, in the approaching
&c of paramount importance not only 70 England
kut 10 the whole commercial world, propose briefly
toexplsin the tendency Of the act
Pcels Bank Act Of 1874 proceeds on the assumption
that the metallic circulation il the normal that
the amount of the currency regulates prices that in
ne case Of purely metallic circulation, the currency
would expand, with favorable exchange and with an
infax Of bullion, while it would be contracted BY an
adverse exchange and drain of bullion that cireu-
lation OF bank notes has exactly 70 initiate the metallic
circulation; that accordingly there had 70 be degree
Of correspondence between the variations IN the amount
Of bullion In the vaults Of the Bank OF England AMI
the variations in the quantity Of its notes circulating
among the public that the issue Of notes must be ex
banded with favorable, and contracted with an una,
v0ribe exchange lastly that the Bank OF England had
tke control over the amount of ts notes IN creuapon
Now there ia not Of these premises Wmcn Is
WA not utterly fallsciOus and contradictory 70 Acts
Suppose even purely metallic cIrcuauon' tne amount
Of currency could not determine prices no more man
IL could determine the amount OF commercial ana IN
1ustral transactions but prices on the contrary would
leferpine the amount Of currency IN circulation I'm
favorable exchanges, and drain OF bullion would not
contract even purely metallic circulation as they
Woud not affect the amount Of currency in circulation
hut the amount Of currency in reserve sleeping In the
hanks az deposits in private boards On the other
hand favorable exchange and concOmitant influx Of
bullion would augment not the currency IN circulation
hut the currency deposited with bankers boarded by
private individuals The Peel Act therefore, starting
mon false conception of purely metallic circulation
naturally arrives at false imitation OF il by paper
Attenuation The idea itself that bank of issue has
control over the amount of its outstanding notes ut
terIy preposterous bank issuing convertible notes
ar Advancing notes generally commercial securities,
has neither the power of augmentng the natural level
Of circulation the power 70 cripple II ny one single
note bank may certainly issue notes TO any amount
its customers will accepts but fnot wanted for circu-
hton the notes will be returned 10 1t in the form OF de-
poss or in payment for debts or in exchange for metal
On the other hand if bank intend to forcby contract
tissues deposits would be withdrawn to the amount
needed for filing up the created in the crcula
fiop Thus a bank has no power whatever over the
quantity Of circulation, whatever may be its power for
the abuse ofother peoples capital Although in Scotland
banking practically unrestricted before 1885 the
sumber Of banks bad considerably increased since 1925
tbe circulation declined, and there only Ct (of
psper) per head Of population, while there was in
England f2 per head, notwithstanding that the
whole circulation below e5 was metallic in England
and paper in Scotland
IL an illusion that the amount Of circulation must
correspond 10 the amount of bullion Ii the bullion
increases in the vaults Of bank, that bank certainly
tries by all to extend it's circulation but, as ex
perience teaches, to no purpose From lS4l-43 the /
bullion IN the Bank Of England rose from E3,965O0O
10 eli O54 00O but ts total circulation declined from
f35 ego 900 to ga 900 Thus the Bank of France
had, on March 25, 1885, outstanding circulation of
3J6 900 00Of, with bullion reserve OF 23loJO,0OO;
but on March 25 1886 itscrcuatOn was 2494Oi OOOE,
with bullion reserve of only 1886, O0N
1t an assumption ess incorrect, that the inter
nal circulation must diminish in the of drain of
bullion At this moment, for instance, while the efux
Of bullion is going on, S3,OOOOOO have been brought to
the mint and added to the circulation of the country
Bot the main aacy rests on the suppositlon that de
pand for pecuniary accommodation, loan OF CAPT
tai must converge with demand for additional means
Of circulation as il the greater amount OF commercial
transactions were not effected by bills, checks book
credits clearing houses and other forms OF credit quite
upeopnected with the so-called circulation. There
sap exist no better mode of verifying the facility of
Bank accommodations than the market rate OF interest
And no more efficient for ascerainng the amount
Of business actually done by Bank than the return
of bills under discount Let us proceed on this two
fbld scale Of measurement. Between March and Sep
tember, Ie45 when with the speculatIonnania the
hctOus capital reached its utmost hight and the cOun
try was inundated with all possible enterprises on an
immense scale, the rate of interest being nearly IL
Der cent the circulation Of Bank notes remained near
" stationary, while at later period in l5l7, the rate
Of interest being l2 per cent the price Of shares
having sunk 10 the lowest ebb, and dscredt spreading
IN all directions, the circulation Of Bank notes reached
hs maximum.
The note circulation of the Bank of England was
Gel 1852 1853 Oh the 18th April; fl9995,227 on the 18th
Of May and els 943 O79 on the 2lst of August, 1917
But while this falling off in the circulation occurred,
the marketrate Of interest had declined from and to
per cent From the Dist Aug lSi7 the circulation in
creased from flS,9i3O19 to f2l ,265 1oS on Oct %
At the time the markerae of interest from
10 per cent On the 0h of October the circulation
Gel 764, Os5 the interest paid in LOmbardst amount
ing to 10 per cent. Take another instance:
BIZ. under Discount Notes in Circulation
Sept 1A lef6............ kl23&A8l6 tA9<(0l
April lgH........... h6I,lb spSlSNA
SO that the Banking accommodation in April, lo41,
sreater by 5000 900 than that of Sept 1916,
ned on with less amount of circulation.
Having exposed the general principles OF PEERS
Bank Act, come to its practical details Ii as
sumes that 900 of bank notes form the neces
essary minimum amount Of circulation. All notes Is
sued by the Bank of England beyond that amount
shall be represented by bullion. Sir Robert Peel inn
sened he had discovered seactng principle TOR the
issue of notes which, would determine with mechanical
accuracy the amount of the circulation, and which
would increase diminish in the precise degree IN
which the bullion increased decreased In order TO
nut this principle into practice the Bank was divided
into two departments, the Issue Department and the
Banking Department, the former mere fabric OF
notes the latter the true Bank receiving the deposits
of the State and of the public, paying the dividends,
ditcountng bills advancing loans, and performing in
general the business with the public on the principles
OF every other banking concern The Issue Depart
mept makes over its 10 the Banking Department
10 the amount Of IA 100000 plus the amount of bull
hon in the vaults of the Bank. The Banking Depart
nent negotates those notes with the public. The
amount of bullion necessary TO cover the notes beyond
E4OOO 000 remains in the Issue Department the rest
being surrendered to the Banking Department Ii the
of h,ll Atnin sh