On The Affairs And Conduc...
The Times, 1824-12-20T00:00:00

TO THE EDITOR OF THE TIM1ES. " Money is neither Whig nor Tory."-Swlft. Sir,-The good,people of these realms are destinedl to acquire great experience In all matters relating to currency; and deservedly, for none are more willing to paY for it, or possess to a greater degree tat amostinvaluablecast ofnmnd which-constantly disposesmentore- ward those by whom they are cheated. But experience (says the old proverb) is a dear school though foals will learn in no other; and therefore, as we confessediy have still much to learn, so will it natu- rally follow that we have much to Pay for, *pres tfail, sage Breton. More thantive years have now elapsed since I addressed sorae let. ters to you on the subject of our fi int regulations and the Bank re- striction; the formier remain a monument of human folly and ah- 3urditY; but of this, as a strictly scientific (and, therefore dry and unintercsting) subject, I shall fisy nothing at present. AMy present business is with the Banlk of EnRglnd. The Restric- tion Act was repealed in 1819; the B3nk has since reswmed cash payments; every thing has appeared to go on smoothly and com- fortably; and I little thought that I should again have to trouble you on this point: when, lo and behold! fresh mlatter arises; the Bank rushes headlong into a vast variety of engagenmats'snd under- takings, aome of immense n agnitude otlhers of less, brut all of them at varianed with every sound principle. It is, therefore. very far fromin impossible, that whileotl,ers warble a " Beatins ille" (that is, " Blessed is the Bank Director"), you and I may have to cbant the " miserere" of anothier restrIction. Bat I will explain nmyself. The first operation in which we find the Bank engaged since the resuntption ofca6sh payments, is the purchase frora Government of a part of the annuity created for the defraying of the naval and mili- tary pensions. The part so purehased by the Bank was 585,7401., and fr--whih it ,.ri toRV in sh. ---_ INOW, In cosequenice ot' this transaction, a very considerable ad- dition has already been made to thie paper money of the country from the same cause it is regularly increasing, and by the time the transaction is completed, the addition will be enormous. Now I say nothing on the measure itself, except that it was per.. fectly useless, foe if it had been necessary -to borrow at all, why not borrow froms the sinking fuind, and construct a new sinkin.g fuxnd out of the nlaval and miilitary pensionis as they fell in and became- extifiet ? The expedient wa~s simple, the country might equally htave been relieved from taxes, it would not have heA the"annuity to PaY sAtaring 45 years, and still a sinking fund of this description (taking the rate of interes t at 4 per- cent.) wontld have-amounted at tWi expiration of the 45 years, to upwards of 240,000,0Oll1. But, leaving all this eut of' the question, whiy sil this annuity to the Bank, andt -not co the public ? Because the public, thiough par.- sial -to perpetual aninuities, is averse to the purchase of' annuities for d termiof years. But the- nature of things will not be changed, and, whether in a terminable or a perpetual ainnuity, to burrow is still to borrow, the two miodes stand in a certain rlefined, fixed relation to each other. To compatre the value of an annuity for a term of years withi a perpetual annuity is -easv: and thierefore, if the public eb. jected to lead money ?n annuities tbr a termi of years, why not bor- row In perpetual annuities ? But let us proceed. The niext operation in wliieh we End ihie Bdnk engaged is the makingK advances on the sLeuriLy of landed property: what there advances may amount to I do not know, but The ext xpeienthituponin rder to Increase the iisues of genre efoue The etent f thes advaces Iam tals to deter- mine itmaybe wo, ut t crtanlydoes not fall short of one, nmil. lio; bt b Itwha itwil, i isanaddition to the general mass of paper. I mighlt go ona, but where so many, points remain to be discussed we must, be short on eachi: addl, then, to all I have stated, the ad. vances miade by thie Bank to the dissentients in the operation of re- ducing the 4 per cenits., and its regular advances to (Uovernmuent on Exchiequer-bills, ani you will findK a miass of paper far exceeding what would have circulated in the natural course of things, ankd which mutst therefore necessarily interfere wifn theuasual and ordi- nary transatctions of the com-munity. There is also one obrervation whichi is applicable to alt these transactions-viz, that thiey arc com- pletely at vairiance with the original purposes for whicth the Bank was established, andI withi every sound principle of banlking. Tfo this it is saidt that the trade of the Bank in discounts falls oil, and that therefore it has recourse to these expedients in order to in- crease its issues. But 'whose fault is this ? and who will apply to it for dlacount,when moniey nmay be had in the streets ? And this shows the folly of thec system- ; for in a regular statte of things, whenever the curr~ency is deficient, great and 1requent applications are made to the Bank for discounts, anid this soon cuires the evil; but our present systemn ig the verv reverse of this, and leads to very different coinse- quences : for we first create money, and then, instead of waiting for solid cusitomers anid a regular demiand, we attempt by every possible sPecie-sofouackery to force it into circulationi. At length we succeed, and then w-e immediately cry out thtat thie applications for discount di- mninish;, that is, we first overstock the nmarket wvithi mopey, andl then, in prsimplicity of soul, we wonder thiat people do not ask for mnore. 'pTheens again it is contenided, that the Bank hans a large capi- tal and great resources, anid that, keeping within certaini linits. it hias a right to employ this capital as it pleases. Now all this is very easily sad, and perhaps not quite so easily an- swered. Involved in the gloomi of a mysterious intricate system, thie Bank studiouisly withhiolds all knowledge of its zaffiirs from thie public; but lhe4e and thiere, throughi chinksa and rcrannies, light breaks ; a few leading tfactst, whci chan he neither misrepre. sented nor conitroverted, jut out as promenitorles to diret us in our course ;.and thterefore, thiough we cannot spealk with thze utmost cc- curucy and precision, vet 1 believe it will be foutnd that we know quite enough of thie all'airr of the Bank for all the purposes of illus- tration). The original capital of tiie Bank, and subsequent additions to this cptal, amoujnting altogether to 14,686,8001., is lenit to Government at 3per cent. ; here. therefore, thje Banik stands in the simple rela. tion of a fundholder, and this is niot property of whichl the Bank stands possessed, but property that it has parted wvith, and in lieu of which it receives an anniuityv; it is not avail4ble for any of its pre- sent operations, nor is it indeed available for any purpos;e whatever, because the mnoney hias been long since %pent and -one; and before it cani be returned by Governimenat to thie Bank, it imust be raised by loan or taxesx on the public, and thierefore, thiough this capital so lenit by the Bank to Government may be a good security for thie alid- inate solvency of the Banik, yet it is no security, whatever against a suspension of cash payments: it was not so in Mr. Pitt's time, and at the petiod of the last suspension, nor will it be in aniy other. Come we then to thte active disposable capital of the Bank-to that capital, in short, which alone is applicable to ita present tranit. actiors. Whien the affairs of the Bank were investigateAd in the year 1819, thie Bank Directors delivered in a statenmient, dated the3let of Mlarch, 1819, and by which it appeared that t-he then capital of the Bank~ was 5,231,1901. Since that time the Bank has made profits, and on thte othier iiand hss paid dividends to its proprietors; but by the considlerable reduic- tioni in the rate of initerest in general, and particularly on all Go- verniment riecurities, the profits of the Bank must hiave miaterially diminished ; and, Including the remuitneration for thie pavyment of the dividends, anid thle interest it receives9 on its capital lenti to Govern- ment, I do not believe (its own expenises deducted) thiat the annual average niet profits of the Bank sinice 1810 hiave exceedetl 900,0001., and certainily not 1,200,0001. Take themi, however, at the laitter sumn, and then thte account will stanid thus:- The aclive capital of the hunk, according to the state. ment dlated the 31st of Marchi, 1819, wee. . ?5,231,190 Add profits madle fromi April, 1819, till October, 1824, at the rate of 1,200,0001. per annum - - 6,000,000 Deduct 4 yearly dividenids of 10 per cent.' Onl X183, 14,688,8001.?X5,874,720 Deduct 2 yearly dividends of 8 per cent. oni the came sum 2.349. Remains - - 3,606,582 It would thierefore appear that the active capita of the Bank is at present only about 3), mrillions. Now I believe that nothing I have liere siaidl can he materially or substantially contradic!ed. 'rhe item of 5,231,190t1. ist founded on the Batik's own statemnent; and that itsprofits sinice 1819 must liave materially diminished, not only fromi tie resumption of cash pay- ments, but alsco from the great decline in the ratte of interest on All Giovertnment securities, is, I believee,, past all 9uestion). And, in- deed, If. this were not thie case, whiere was the niecessity to redluce the annual dividend from 10D to 8 per cenL ? But I hmave no wiishi to ex- aggerate, the profits of thie Bank may have been greater than I h-ave sta-ted;, I am wvilling to beait error, and to allowr(whar I do neC be- lieve) thatt the profits of' the Bank have been such as; to admit of the dividendls it has made since 1819 without the least diminution of its then active capital ; and theni I will leave it. to thie determination of any prudent, considerate, sober-minded man, wlmeether, uponi the foundation of so limited a capital as five millions, the Banik of Eng- lan.d is warranted in entering itito suchi stupendous engagew'ents anid operatieons. But then there is agreat deal of gold in the country. Thiis is not qutite so certaini. On the contrary, I ens f'ully persuiaded thiat all the gold in the coiitriy does not er.ceed fourteeni, and certainly not six- teen., millions. How this is divided between the Batnk anid thie pub. lic is not very easily determined : prhaps about five or six millions ,may be deposited in the coffers of the Bank, and the remainder in circulation, and in the hands of the public. But at the period of the suspension in 1797, upwards of thirty m-illions ef gold currency ex- isted in the country, and vet Mlr. Pitt, merely by borrowing ibout ten. millions from the Bank, caused it to stop payemrnt. Then, again, we are told that somne or all of' she new mining asso- -ciationst are to introduce large quantities of gold from Mlexico. Very likely ; but this gold is not yet concocted, it is gold1 4ir ,raligro, and as far as the fact standls at presenIt, the whiole idea is ricdtculous : be- cause at this presenit momecnt of time large quantities of both gold and silver are on their passage from this country to Alexico, Colombia, and the Brazils. inde-ed, these M1exicans end Colombians are miost excellent customers to the people of this country. for not only are they content to take our goods, but they ,are wifling to take oar mioney into the bargain. WI'hat a pity it is that they are not also willing to take the notes of the Governor and Com-pany of the Bank of England ! But semehowvorzrther this is a commodity which foreigners do not rate quite, so highly-as ourselves. Thus, if I go to Paris wvith 100 sovereigns. I ram sure to receive fromn 2;515 t6 2,629 francs ; but i-f I take a 1001. Bank-note, I shall only get about 2,490 francs ; and therefore, in tire estimation of a -Frenchman at least, Banik-notes are at a.-djscount. But, get gold front Mexico, or the mnoon,.or where you like, and, Where is the utility ? You will only receive it in tresrsitw, and Jt will immnediately be exported to, other countries. It is a nmaxirn in carrency, that the mioney' which is wvorthless or of inferior value -will drive out that which is good. How, then, is gold to remain in the country whien thie cuirrency is already redunidant ? And as to ex- port the paper would be of no utility (because nothing could be bad in return for it), it is evident thiat the gold miust be sent out. Duir- ing the restriction imimense quantities of gold and silver were uin- ported, and yet the vihiole disappeared, aind along with it all the :golr4 currency ofthtle country. Now let us view the mnatter in another lighit: let ua- con- trast the state of thiings, producett by thete operatiotins of the Bank, -with that stale whiich exists wthen things are left to themselves, and Inr their natural ordler. .Thus, if the money borrowed by,-Goveinment of the Bank for de- fraying the naval and military pensions ha bee-n borrowed of the pnblic,the latter wtould hasve advanced a real capital, and the amount of currency 'would have remained the same; but when the same txi.saction ia.cntered into wishL the Bank- of England, the case ja' altered immediately, because the Bank, ha'ving no capital to, lend, does, and can, in reality, only fumnish thie Government with a certaiin utmoufitff papet.: and Ethen, as -a result of the oparation,.an imaen- diate-addition is made to the paper currency of the cunntry, and which but for this wrokdd not have exia-ted ; andl which clearly in not necessary, becatuse the quantity ofoomumoditiee stil remains the sarme ;the operatiop itself neither tends to increase nor dlimi ish thiemn; that they tshould. circulate, at their fair niaturalrdaue, no additional quantity of currency wras tlierefore neceneaary ; and there- fore, the quantity of commodities remaining dite same while the quantity and amount of currency is increased, it is-quite evidept that the natural tendencv pf that operation which borrow/s paper from the Bank instead of c~pital fromn the public, Is necessarily to raise the money value of commodities : and this is thte natural. tendency of every jobbing transaction whbich takes; place between Gloveranment .and the Bank of England. So seem ,whent the 4 per cents; were reduced, the Bank by paying thae Aibsent?erns, In reality advanced nothing: but there seAs merely a certain quanttity and amnount of Bank, paper added to ftht which alreadv existed- whiereas, if the mouey to pay thec disseeatlents had been borrowed from thie public, the cui-rency would nut have been atfhetesi. And why this was -not dorie. I am at a loessio imagine ; for uuon what grounds and on whiat pretence do wve reduce the 4 per cents. ? Simoly because the rate of' interest is reduced. Borrow' then ate reduied rate of interest.--not in rags, but in rezlity; borrow from the public that has somefthng to len4, and not from uhe Bank thiat has nothing.- Agaii: te xhen money is advanced by Individuals on mortgage, this mtoney is lent in a cuarrency which already extists which Passes .#om hand to hand, and is applicable to thiis andi every other ~roeof the comutnunity : but let the same advances be madle by th ak, and immediately the quatt of' money in circulation is augmaented, becaiuse the advance Is mde in paper createexrs. ly fr th occsio, an whih b t frthis would never have existed. Finlly le adancs o fudedproert bemade by, individuals, and he aoun of urrncy illreman ualteed;buit let the same advanes h madeby te Ban,andimmediately the amhount of cur. Now et s edeaour o acerainthepresent amount of the legal currencv of the country, and compaei with the createst amiount of moltey in circulation during the. a. I emi aware that so do this exactly is impossible, because the Bank, true to its'sysitem of mys..~ tery a-nd concealmient, obtained leave, (I beliere) during the last seas. sion of Parliament, to wvithhold all knLowledge of its issues fronm the . public; 13uthe're again we know enotigh for the purposes of-ilUus. tration); and if I err, it tshall not be wilfully, or to favour my owa h ypotehesis. Te averag amount of Bank-notes in c-irculation dur- ing the last 'une months, may, I think, at the highest, . be esti- mated at 26 millions, and at the lowest at 22 millions ; and'theretore I might take the mnean, a-nd L-6timate it at 24 millons, but I wrill take it ar-22 milliuns-l 'will even take it art 20 millions;, and'it is quite imposible, I believe, with the least regrd. to truth, to rate it beow this amount . To this siaist be added the gold aLnd silver currency; anti all this together tri furnish us with the following statement :- 21 Bankt-notes in circulation X0Z 8 Toal amiount of gold currerecy, about- - - 14,000,090 Ditto of isilver currency, about - -6,11,000 Total . ?000,0 Deduct the am-ouint of gold currency in the coff'rs of the Bank Remains - ?3,0,0 And therefore the total amount of the legal currencyof the coun- try in circulation amounits, I believe, at the lowest to 90i0,000L Now let usq look at the state of our currency duTing the war and the late restriction, The period during the late war at which our- paper currency stotod the highesit was ini the year 1813, and there wams eleo,dnring tha,.% year, raised by loan for the public service the enormoats sum of 27,080,0001. Now the average amount of Bank-notes i n circulation during the year 1813 was 23,612.SOO1. ; there was not a particle of e-oldt coin in circulation. The average price of gold during the veai~was 11. Ga. pusr ounce, and therefore the Banuk-note %7as worth only 14s. 8d. ; and thierefore the real value of the 23,012,3001., when reduced into gold, or into paper on a par with gold, was only 17,315,681.6 l3s. 4d. Add now to this about 45 millionst (at the very utmost) in Banik tokens and a depreciated silver currency, and you will leave a total amount of legal currency fror the year 1813 of about 22,000,0001., and thea the conclusion is irresistible; and iifdurring speriud of war, of great Government expenditure, heavy loans, excessve taxation, and dthOu- cult coniamunicution with other -parts of the world, a cnrrmne~y of 212,000,0001. was sufficient for all the purposes of the community, it is quite certaink that during a period of profound peace, reduced taxes, and a promipt and ea-s comimunication with all parts of the worldi, a currency of 34,00{ 0001. must be reaundant. But we want no calculations, we are undler no necessivty o prove, or even to inquire into the ac tual asnountofourcurrency; i6r thte fact being that the real (not the nominal) exchangehbas for thtis soime timne past been below pAr, end that goldha been regularly exported to France and otther parts of tMP continent, this alone is conclusive evi- dence that the currency is redundant. Now, leave the Vublic out of the question, and view the matter in se, and with relation to the Bank alone. 4 The Bank was instituted for the purpose of discounting moer- chants' ncceptar.-qe, and against the-se it issued its notes ; tdoes it discount merchants' acceptances now ?-Certainly. To a large cx.. tent ?-Very trifling ; and indeed so trifling. that nine-tenthst, and perhaps nineteen-twentietha of the Bank circulation is founded not on merchants' acceptancest, but on land anid on Government escri- ties. But does it oansist with any sound pr-inciple ofbsnking, that nineteen-tweutieths, or even nine.teatuis of' the issues of en establisha- moont which prides itself on its solidity and good conduct, abould be founded or securities which before they cin bc'asesmuetlirsi be sold in the mnarket ?.- of Now look at the extreme ridicule of the thing. lit it in the nature ofthings that land should circulate and float up and down the coun- try in the shape ofBank-notes? Or doesit consiNt with right reason that Governmnent securities. should become the currency of the country through the instrunmentality of Bank paper ? Butt it will be. said thiat this was the case during the warand the late restriction. No doubt ; bat the war is at an end, and the act of 1319 repealed the restriction, an;d ail the state doctors assured us that we should recover our senses. Btut I see how mnatters stand, and as the do g returns to his vomit, so is it intended that we shotuld again bebrouglat to take up withi this vile trash of a paper currencyv. But how is this a public question, or howv does it concern the pub.. lie that the Ilank should make advances on land; and on property in the fuLnds ? Not at all, provided these atlvance be miade in reel capital; but byadvancing mare paper, whbich costs noithing, but which the law ficknowledges as money, and whlich in pDint of .fa-ct- performs all the functionis of mioney, the relation which before sub- sisted between m2oney anti commodities is destroyed ; money, frmm its grae bunidance, becomes cheaper, and commodities become deaZrer; whil'e all this timie no one real thing, not one singe particle of wealth, is added to t he public stock, and there is merely a certain profit made by thie Bank, which, somehow or othLer, must come out of the pock-etsof the people. Now, mark the progesof the operation:- first, by means of a mortgage ,41and, oravanee on Governmenit securities, a certain quantity of money is thrown into the market which otherwise would not have existed; and then, as the Instrument is ready to the hiand, and that this money must be employed, we imniesliamely begin to think of speculating in commodities, or to formt some new company, And so the public ist deluded;- and therefore this is directly and esen- tially a public question, and one in wrhichi everY plain, honest, in- dustrious mnan in the kingdomn is interested. , Is cannot, and it will not come to good." But I will neither break mny hea-rt nor hiold miy tongue,; but as long as thisi frail body draws breath, and in utter disregard of all conseqtiences, I will con- tinue to deprecate a system which tends, to raise the price of the poor mnan's loa of bread, antd to abridge his comforts. And now upon the whole matter. I'e heave seen what she Banl:e has unidertaken, tshe truly, slender mneans at its disposa to enable is to curry such gigantic operationisinto effect, we have ascertained that our currency ist redun-dant;, and we have also ree-- the way in which a muost unnatural influx of currency must necessarinly influence the transRactions of t-he community. And are we, thien, so ur.skiiled in the signs of the times, that we mnust vet wait for a sign "m~m Heaven ? Do we wonder that corn has risen-ihat land has risen-that the ex- change for this sombe time pat lies been declining, and is now below CZ ?-that gold is regularly exported-that new Companies spring up oe ater he therlik musroos-ad that the abundancie of plier,andsheconequnt aciitywih which it may be obtained, is thesigal nd ancionforevey wldand desperate species of adven- ture Whre,the, sallwe e, f (n addition to all I have stated) thiscounry souldnextyearrequre n iortation of fbreign corn ? Andwha i threthe toprven se Bank from suspending cash I)atYis thtpis system to be continued?' I belie-Ve so. Hitherto, at least, thiere is not the tlightest indfication of a chbange. Ask the Bank for money onimortgage :it is granted. Aek for an advance on console:- you have it immelieztelg. in making rdvances upon stock, there is, however, one part ot the conduct of the Bank which is, highly deserving of aporobation : there is no excePtion of persns:- hut you are greeted wvith a Walk in,,tentlemsen; shecash is ready: first come, first served, whether it be a lord or a chimney'-sweeper." But is there no remedy? A very simple one. The Bank must recall a part of its issues ; and the sooner it does thia the beLter : but. if' the p resent courise be persisted.in, then that iMPulse which has al- ready been given to things, andwhichel now creeps as a canker,wi? be- come too powerful to, be checked, and we shall have a catasftophe, and hisver shotly ifthe ounry houd require an importation of foregn orn hu somthig lter thugh with equal certainty, if thisImpotaton souldnorbe ncessry.The eyes of the public wil thn b opned an th moopoy 0 se idank of~ ~gIandi a'll Thee i threfre o ateratie, ndno means exist to avert the impen4ing evil, and to restore the equilibrium of things, but to re- duce the Bank issues. The same cause, generaly speaking, vill produce the same effect; and if Lilr. Pit,tmerely by borrovring about 10,0,0901. from the Bank in 1797, caused it to stop pavrment, tL,e same and other jobbing transactionp of the li*e natare, but to a still greater eZtent, will inevitably now lead to the same result. Every reliance, I know, may be placed on the honour and inte- grity of the Bank Directors, hut this is not sufficient; new maxinis prevail, and this is an era of spectalaiun and experiment. Uncer- tain, therefore, as to the eourse they wil adopt, lett us be prepared for a denouemnt ; an.d as we al! in that case have to travel aeaan over the same ground, it will not btatniss that we consider the na. ture and efFecs of our paper currency during the late restriction: and this I will do, if I have tint, and you wiU allow rne space iai your columns. In the mean time,what shallnre do with the large establishment on Tower-hill (the Mlint)? Shll we shut itup at ence in order to save expense? or ihall wve convert it into apaper-anufaciory ? Talk, in- deed, of coinsing -.soney, and of a perfet n 'aacal system of currency! Talk of rags, and egg-shells, and eel.skins, and eave the curtency of theke ntry (w here itisats been hefore) in the hand5s of the Governor and Company of the Bank of England. You will bh <.^ .u,,e. a ,?tn.l7t; c,nvnlr .'np, - -0- .-. - DANIEL HARDOASTLE. At the sitting oi' the magistrtes on Th-arsday last, a poor woman appeared as- the bar with an infant in her arm-, about 16 months old, totally blind; which Ebe titated Was caused by her nurse tving poured spirits into its eyes whn ooly a few days old, as a remedy fior a slight mflammiation which had arisen from a cold, Wrc mention this d.-cunutance to guard persons against the ignorm1t presumption too common among nurses and dactresses. Thze 15ench, in the mLost hummae manner, ordered the 6liild'e name to be plac- d& on the list of anplicaions for adm.haion into the Asylum for the 'blind, in L.anaon.-Btir9_on Gaa#e. ON THB AFFAIRS AND CONDUCT OF THE BRANi Or ENGLAArn.