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the Bank would buy and sell, and which would be an approximation to that uniformity in its value which is acknowledged to be so desirable.

That this plan would realize every one of these advantages, and that it would place our currency on a better footing than at any former period, cannot, we think, be disputed. In a sound state of the currency, or when bank notes are exchangeable for gold, should the Bank issue too much paper, so as to depress its value below the value of the standard, then, as the holders of paper money would make a profit by exchanging their paper for gold, there would be a run upon the Bauk; and it would be compelled to restrict its issues, in order to raise the value of its paper. This was the way in which the value of paper was sustained previously to the Restriction; and the same check would operate in precisely the same manner, if the Bank were now obliged to give bullion, instead of coined gold, for its notes. As a device for preserving paper on a par with gold, Mr Ricardo's plan is, in some material respects, infinitely preferable to the old method of exchanging notes for coins. When a currency consists partly of paper and partly of the precious metals, any overissue of the former depresses, not merely the value of the paper money, but of the coins which circulate along with it. These coins are, therefore, immediately converted into bullion; for it is admitted, on all hands, that laws prohibiting the melting of coined money, become in such circumstances quite inoperative. Bullion, however, cannot be accumulated in any one country without losing its relative value; and hence the ultimate effect of an over-issue of bank paper, in a country whose currency partly consists of gold coins, is an exportation either of coin, or of bullion formed out of the coin. But, on Mr Ricardo's system, as there would be no coin in circulation, there would be no employment for the melters, and no loss thereby occasioned to the State. As soon as the bullion merchants found that a profit might be made by sending notes to the Bank to be exchanged for bullion, they would do so; and, as the exportation of bullion would be perfectly free, there would be no occasion to hire a starving wretch to swear, that a bar formed from melted guineas had been made up of foreign coin. The value of our currency would not, as formerly, be sustained by the underhand agency of the most worthless of characters,-the melters and clandestine exporters of coin.

As the maintaining of paper on a par with gold at the least possible expense to the country, and with the least inconvenience to all parties concerned, is the great object to be effect

Economical and Secure Currency, p. 25.

ed by Mr Ricardo's scheme, there does not seem to be any very cogent reason why the Bank should be obliged to give so small a quantity as twenty ounces of bullion, in exchange for a proportionable quantity of their paper. It would save a great deal of trouble, or at least obviate a great deal of cavilling, were the minimum quantity of bullion which could be demanded from the Bank fixed at 500 or 1000 ounces; and as, according to the plan in question, the value of paper would be prevented from falling below, or rising above the value of gold, by the operations of respectable bullion merchants, a class of men remarkable for their shrewdness, and generally possessed of large capitals, this regulation, while it would be productive of benefit to the Bank, would not, in a public point of view, be attended with any ill effects.

Though it is certainly against the interest of the Directors of the Bank greatly to reduce their paper, still it cannot be denied, even by those who contend that they have no power indefinitely to add to their issues, that they have the power to refuse to discount, and that consequently they have it in their power to reduce the currency to the narrowest limits. Such a power ought not to be entrusted to the State itself, and still less to the managers of any private banking company; for there can be no security for uniformity in the value of the currency, when its augmentation or diminution depends solely on the will of the issuers. But, under the operation of this system, the Bank would not only be prevented from reducing the value of its notes below the value of bullion, but it would also be prevented from raising them above its value.-Should the Directors capriciously limit the quantity of their paper, they would raise its value; and bullion would forthwith be carried to the Bank and exchanged for notes at the rate of 31. 17s. per ounce. The minimum quantity to be offered to the Bank in exchange for its paper, ought also, in order to save trouble, to be limited to 500 or 1000 ounces. And as it is the interest of the Bank to furnish the circulation with such a quantity of paper as would keep its value from rising above the value of bullion, it could not complain of being subjected to a regulation which would never operate except when its issues had been improperly reduced.

With a paper currency convertible into bullion, the Bank would in a great measure be secured against the ill effects of any sudden panic.-Panics generally operate with the greatest effect on the lower classes, or on the holders of small notes; and it is they that, on such occasions, press to the Bank to demand payment. Extensive merchants and money dealers are aware that no Bank, however wealthy, could retire all its notes

in the short space of eight or ten days; and they are also aware that the maintenance of their own credit is intimately connected with the prosperity of the Bank. But such considerations do not influence the holders of small notes; and accordingly we find, that the drain upon the Bank in 1783, and the crisis of 1797, were chiefly brought about by the prevalence of a panic among the retail traders and small farmers. But by fixing the minimum quantity of bullion to be given by the Bank in exchange for its notes at 500 or 1000 ounces, it would not be in the power of the holders of small notes to make any sudden run. Before sending in notes to be exchanged for bullion, meetings would have to be held, and a number of different individuals would have to join together and make a demand in common. A considerable time being thus necessarily required in the adjustment of the preliminary steps of the business, the Bank would be enabled to make the necessary preparations to meet the run; and, what is of still more consequence, since the panic could not, under such a system, operate immediately, it is probable that, by the time preparations had been made for demanding payment from the Bank, it might have altogether subsided. This certainly forms a very strong recommendation of the plan in question; and it is one which was not in the contemplation of Mr Ricardo.

By lessening the danger to be apprehended from sudden runs, and by preventing all demand for bullion for the purposes of internal circulation except as small change, this plan would enable the Bank to carry on business with a comparatively small supply of bullion in its coffers. In ordinary cases, indeed, no bullion would ever be demanded, unless when the Directors had plainly overstepped the proper limit in discounting; and the country would not only be benefited by the profitable employment of the capital which would otherwise be invested in coin, but it would also be benefited by the profitable employment of the greater part of that capital which, previously to the Restriction, had been locked up in the coffers of the Bank.

Were the plan now proposed adopted, it would only be necessary to make Bank of England notes a legal tender. No alteration would be required in the law relative to country banks. These would then, as now, be required to pay their notes, when demanded, in Bank of England notes, or in the legal currency of the country.

It appears, therefore, that by this plan of making notes payable in bullion, we should have all the security against fluctuations in the value of the currency, that we could possess were the Restriction act repealed, and bank notes made payable in

But

coined money: while we should be able to realize these advantages, without incurring any part of the expense of a gold or silver coinage, except what might be required to effect small payments below one pound; thereby effecting a saving which, on account of Great Britain and Ireland, cannot be estimated at less than three millions sterling annually. And it further appears, that the security of the Bank against the pernicious effects of sudden panics among the holders of its notes would be greatly increased, and that the banking business could henceforth be carried on with a much less amount of unproductive capital. It may perhaps be objected to this plan, that it would have a tendency to perpetuate the crime of forgery-a crime which has, of late years, increased to such an alarming extent. it must be observed, that the present engraving of Bank of England notes is so very rudely executed, that there is scarcely a bungling mechanic who cannot imitate them with considerable exactness. That the Bank should, for so long a period, have persisted in issuing notes so very miserably executed, is certainly a good deal extraordinary; but now that the public attention has been awakened to the subject, and since it has been demonstrated, that the utmost severity of the criminal law is unable to deter from the commission of crime, where the temptation is so very great, it cannot be doubted that steps will speedily be taken to remove this stigma from our monetary system. That it is practicable to engrave notes in such a manner as to render their forgery a work of extreme difficulty, appears, from the concurring testimony of the ablest artists, to be established beyond all doubt. In America, forgeries used some time ago to be very frequent; but since the bankers have issued notes of a finer fabric, and the engraving of which, without being rendered too complex, is extremely neat and distinct, forgeries have been much less common.

The present prevalence of forgery does not, therefore, afford any ground for refusing to render bank notes payable in bullion. It will not, we presume, be contended, that paper should be entirely banished from circulation; although nothing short of this would be sufficient to secure us against all risk on the score of forgery. In every currency, consisting partly of the precious metals and partly of paper, there will be ample scope for the operations of forgers. Whether ten or twenty millions were added to, or abstrated from, our paper circulation, would not in this respect make any very material difference: Since it is certain, that more forgeries have been committed since the reduction of our paper in 1814 and 1815, than in any previous period of equal duration.

Whatever commodity may be adopted as a circulating medium,-whether our currency shall consist of gold, silver, or paper, or of part of each,-it must, in the nature of things, be impossible completely to guard against the attempts of those who may be inclined to issue spurious money. But it does not appear that there would be any greater difficulty, provided proper precautions were taken, in securing the public against loss from forgery, than from the issuing of base coins; and, considering the many superior and peculiar advantages which must result from the use of a properly regulated paper money, we shall extremely regret, if prejudice induce us to resort to a system of less utility.

⚫ The introduction of the precious metals for the purposes of money, may, as Mr Ricardo has justly observed, with truth be considered as one of the most important steps towards the improvement of commerce, and the arts of civilized life; but it is no less true, that, with the advancement of knowledge and science, we discover that it would be another decided improvement to banish them again from the employment which, during a less enlightened period, they had so advantageously performed.

It now only remains to inquire, whether bank notes ought to be made exchangeable for gold or silver bullion; and as our previous remarks have already extended to so considerable a length, we shall endeavour to despatch this part of the subject in as few words as possible,

As the value of gold and silver, or, what is the same thing, the cost of their production, is perpetually varying, not only relatively to other commodities, but also relatively to each other, it is impossible arbitrarily to fix their comparative value. Gold may now, or at any given period, be supposed to be to silver as 15 to 1; but were guineas and shillings coined in that proportion, the discovery of either a gold or silver mine of more than the ordinary degree of productiveness, or the discovery of any abridged process by which labour.could be saved in the production of only one of the metals, would be sufficient to derange this proportion. As soon, however, as the mint proportion between the different metals ceases to be the same with that which they bear to each other in the market, then it becomes the obvious interest of every debtor to pay his debts in the metal whose mint valuation is highest.

In 1718, in pursuance of the advice of Sir Isaac Newton, the value of the guinea was fixed at 21 shillings; or, the value of fine gold compared with that of fine silver, was estimated in our coinage at 15 to 1. But, notwithstanding this reduction, the guinea was still rated at a higher value, compared with silver,

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