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Chambers, George H 

Everjbody’s question^ or, A few words on 
banking and currency, by one who for more than 
thirty years has dealt largely with money, 3d 
ed... London, VJilson, 18?3. 

39 p. 21 cm. 

No, 1 of volume of pamphlets. 


Reproductions may not be made without permission from Coiumbia University Libraries. 













1873 . 

Price One ShiUimj. 


Whirtr (i'buion, 



Chairman of (hr London and St, Katharinp Docks Company. 





1 — 

j- The accomj)anying pamphlet was published anonymously, 
the writer considering that the importance of the subject 
was too great to render the addition of his name of any 
consequence ; and although retaining this opinion, yet the 
offices he has since been called upon to fill have brought 
him before the public on several occasions, and further 
reticence would, therefore, seem out of place. 

Moreover, the direct and striking confirmation afforded 
by the events of 1866 of the opinions expressed in the 
jDamphlet, entitle him to claim some recognition of the 
soundness of the views he ventured to enunciate. 

At page 27, it is said ; — “ One fatal result of the Bank 
Act of 1844 is, that it has encouraged the notion of there 
being something in our legislation which keeps a whole- 
some check upon trade, and supersedes in some degree 
the necessity for caution ; nothing can be more fallacious ; 
the Act has no such power, nor can the place of discretion 
be supplied bj’’ any Act of Parliament.” And in another 
place it is said, with reference to the anticipated effects 
of the said Act, ‘‘ that the attempts to check speculation 
by tampering with the currency would inevitably fail ; but 
although powerless for good in this respect, the Act was 
powerful for evil, and instead of lu-eventing would increase 
panic, and that, if any severe crisis arose, the abandon- 
ment of the restriction clause would be inevitable.” The 
truth of what was there stated is now beyond question. 

The panic of 1 866 resulted, as is well known, from the 

A 2 


failure of Overencl, Gurney, & Co., Limited, and the 
causes of that failure deserve attentive consideration. In 
the panic of 1857, the Bank of England refused accommo- 
dation to Messrs. Overend, Gurney, & Co., then a private 
hrm, upon -which one of the partners -went over to the 
Bank, and dared it to adhere to its refusal, pointing out 
the consequences which in such a case must ensue. The 
Bank gave -?\'ay, and the following words — “ We do it 

this time, hut rememher, Mr. , let what may 

haj^pen, we will never do it again,” express the account 
which the writer received of the occurrence at the time. 

From that moment the position of Overend, Gurney, 
li' Co. was entirely changed. One of two things was abso- 
lutely certain, either that the firm must coniine its business 
within the limits of its own assured resources, or it must 
sooner or later fail. Instead of being lessened, a dvances 
were made more recklessly, and an admitted insolvency, as 
a firm, to the extent of about £8,000,000 was the result. It 
was stated that there were private assets, &c., which would 
meet this insolvency, but it was not stated that there were 
guarantees and other liabilities outstanding, not included in 
the admitted deficiencv : some of these became claims, and 
with other causes so nearly absorbed the private assets, 
&c., that, speaking broadly, the full amount of the above- 
mentioned insolvency had to be met by the Shareholders in 
the Company to which the business had been transferred. 

Not only, as alleged in the passage first quoted, was 
there nothing in our legislation to check this reckless 
trading in its course, but it is well known that, by a ruse 
of that veiy firm, probably even when in a state of 
insolvency, the Bank of England was induced to raise its 
rate of discount. Would it be possible to produce stronger 
evidence of the unsoundness of our Currency Legislation ? 


And now with regard to tlie second extract — what could 
have been more accurate than the statement contained 
in it ? In consequence of the panic induced by that 
great failure, the banks throughout the country, not 
knowing what calls might be made upon them, were 
obliged to strengthen their reserves, and a demand for 
currency placed the Bank of England not only at the mercy 
of its competitors as it was in 1857, but it actually 
borrowed notes from them to help the weekly returns. All 
this was, however, useless, and again the restriction clause 
in the Act of 1844 was obliged to be given up ; but what 
loss and suffering did not the attempt to maintain it entail 
upon the country ! 

Much misconception prevails with regard to what is 
called the balance of trade, and the necessity of having 
this balance settled in gold ; the writer will endeavour to 
throw a little light on this sulqect, and, at the risk of being 
prolix, will advert to some of the circumstances which have 
occurred within his own experience, in order to give more 
reality to the account. 

A young friend, destined for the army, having paid for 
his commission and outfit, invested the balance of his 
funds in Belgian Stock, to be ready for the purchase of 
his future steps ; l)ecomiug uneasy about Belgium, he sold 
his Belgian Stock, and bought Portuguese, in 1835, at a 
very high price ; but the finances of Portugal became 
deranged, and the Stock fell, and this gentleman had to 
obtain assistance when promotion was open to him. This 
and other circumstances directed the writer’s peculiar 
attention to Portuguese Stock. Now, we import provisions, 
largely from Holland : our imports of merchandise from 
that country exceed our exports, and according to the theory 
above adverted to, we should lia\ e to send gold there ; but 










the Dutchman is thrifty as well as industrious, and the 
last thing he would wish for is so profitless a comniodit} 
as gold ; he likes low-priced Stocks, which, as a rule, yield 
a large interest, and accordingly, when Portuguese fell, 
large purchases were made for Holland. The writer lias 
seen bundle after bundle of Portuguese Bonds sent off to 
Amsterdam, and Coupons by thousands sent back half- 
yearly for payment. 

Although some cheap things can occasionally be bought 
here, this countrv is too Avealthy to offer many bargains, 
so the Avriter’s Amsterdam friend established a house at 
Vienna, AA’hcro better purchases could lie made out of the 
proceeds of the cheese and butter sent here. But Austria, 
especially while she had the Italian proA'inces, bought 
various articles largely of Northern (Tcrmany, so she said. 
“ Don't pay me, pay Germany. ’ But the Germans uid 
not Avant gold ; they Avere large buyers ol American 
Securities, AA'hich Averc extensiA'ely dealt in on the London 
Stock Exchange, so they said, “Don't pay us, pay 
America.'’ But America Avanted gold less than any of 
the others, so she said, “ Pay us with your manufactures ; “ 
and thus, going from large things to small, it may be said 
that the Dutch cheese on our table is virtually paid for 
bv a cheese-knife sent to the United States. The Avriter 
is perfectly aAvare that all this will be common-place to 
our great merchants and dealers in money, but it is not 
for them he is AA'riting ; his object is to call the attention 
of those AYho have not hitherto thought much upon the 
subject to its great and all-pervading importance, and tAVO 
conclusions are obAdous, — one, that no approximate esti- 

* The circumstances under wliicli the Bonds came back again are within 
Irs knowledge, but the writer will not interrupt the narrative by dwelling upon 





mate of Avhat is called the “ balance of trade " can be 
formed merely upon the returns of merchandise im- 
ported and exported ; the other, that the last thing AA'hich 
the foreigner takes for its adjustment is gold. 

When there is an extensive demand for gold for export- 
ation, it is to serve some special object in the country to 
AA'hich it is sent, as was the case AA'ith regard to France in 
the time of the late Emperor ; and Avhen gold is so Avanted, 
the attempt to retain it here by raising the rate of interest 
on the internal trade of this country is utterly futile ; there 
is no more connection betAA'een the tAvo things than the old 
talked-of relationship of GoodAvin Sands to Tenterdcu 

Much excei^tion has been taken to the Avriter's state- 
ment that there is a fixed price for gold in this country. 
To a great extent the discussions on this point resolve 
themselves into a mere quibble about terms, but the argu- 
ments by AA'hich it is attempted to prove that we have no 
fixed price will be found to be mere sophistry, for a little 
reflection will shoAV that, in order to their having the 
slightest basis of truth, it is necessary that the amount of 
gold and the amount of paper purporting to represent 
gold should be equal. In such arguments, it seems to be 
assumed that Avhen gold is taken to the Bank of England, 
bags of sovereigns of equal value are carried aAA’ay, but in 
reality, nothing of the kind takes place ; the addition of 
gold to the Issue department results in the addition of a 
corresponding amount of notes in the Banking depart- 
ment, and the Bank must find employment for these 
notes, or it onlv loses bv the transaction. 

Again, it appear.s to be forgotten that gold is an article 
of commerce as well as of currency. When brought to this 
country, if there be no export demand, it goes to the Bank 



of Eii-Jilaiid, ^vlle^o it must — not may, but must — be taken, 
and credit given for it at the price or rate of SI. IT*'. 9d. 
])er ounce, neither more nor less under any circumstances ; 
l>ut if there be a Continental demand, the gold is sold for 
export, and the importer finds himself credited with larger 
proceeds than the fixed price above named would give him, 
and it seems incredible that any intelligent person should 
contend, under such circumstances, that the price of gold 
in this countrv is not fixed. 

The grand truth is that, inasmuch as the spurious, if 
it will serve the same purpose, always tends to displace 
the real, it is not gold, as is generally supposed, but the 
arbitrarily limited legalized paper currency which there is 
not a particle of gold to meet, that virtually dominates all 
monetary transactions in this country. Under a sound 
svsteni of currencv. the rate of inteinst would never be 
so low as ‘2 per cent., nor so high as 8 per cent., and the 
attempt to check a demand for gold In’ raising the rate on 
the internal trade of the country is the most unnatural, 
most costly, and least efficacious way of providing what is 

The substance of the writer’s views can be given in a 
few words. If it be determined to uphold the principle of 
a gold currency, no paper must be issued as legal tender, 
which there is not gold to meet ; but if it be determined 
to have a legalized paper currency beyond the amount of 
the gold ill hand to meet it, then no arbitrary limitation of 
such legalized paper currency either can or ought to be 

Our common sense and the history of all nations show 
that a purely bullion currency cannot, under all circum- 
stances, be maintained ; it is doubtful, however, if opinion 
in this count!‘y lie prepared for iiny other system. Ncver- 


theless the writer believes that, notwithstanding what is 
said about “ the charm in the liit of metal,” what is gene- 
rally desired in the matter of currency is simply something 
which will pass again at the same rate at which it has 
been taken ; and although, perhaps not in his day, at some 
future period, a higher system, which could be upheld under 
all circumstances, will be adopted. 

It is an inex’itable consequence of proceeding upon a 
false basis that anomalies and inconsistencies are intro- 
duced, and our legislation upon the currency is no exception. 
Sir liobert Peel, in his speech on thn introduction of the 
Act of 1844, recognised the principle that any profit upon 
the currency should belong to the nation, but he had not 
the resolution to apply it to its fullest extent, and accord- 
ingly he continued to the Bank of England the prmlege of 
issuing paper money as legal tender, charging, howex’er, 
120,000/. a year, in addition to the 60,000/. as composition 
for stamp duties. The condition attached to the continu- 
ance of this privilege was that the Bank should provide 
gold for all the notes brought in for payment, and it would 
naturally be supposed that this condition might occasion- 
ally entail loss upon the Bank, but the result is directly 
opposite. ^Yhen circumstances arise calling for the fulfil- 
ment of the engagement to find gold for the notes, instead 
of the Bank being subjected to any cost, its profits are 
largely increased ; and although there is reluctance to em- 
ploy sensational writing upon such a subject, it is the 
literal truth to say that the extra profit realized by the 
Bank under Gox’ernment sanction, through the panic of 
1866, was wrung from the misery of the peojhe. 

It must not be supposed that, in thus condemning our 
legislation on the currency, the writer has any intention of 
attacking the Bank of England. The reverse is in his 


u.ind. He has reason to know that the Directors are most 
a axioiis to do the best the,y can under the difficult circum- 
s' ances in which they are sometimes placed ; and w^re the 
hank released from its obligations with respect to the cur- 
nmcy, there is no reason M’hy it should not pay as good 
d vidends to its proprietors as other large Joint Stock 
hanking Companies. 

In the same spirit that the writer commenced and con- 
c.uded the pamphlet, he now states that he lays no claim 
t( infallibility; indeed, some suggestions as to details, 
n)t entirely in accordance with his views, have been made 
t( him, which he thinks well worthy of consideration ; and 
ii any case, they confirm the propriety of the suggestion 


h ? intended to offer, viz., that in applying to our currency 
legislation the principle of free trade, due regard should 
be had to the interests which have grown up under the 
existing system. 






The attention which has been directed to the subject 
during the last few months, and the expression of 
opinion thereby elicited, suggest the probability of a 
reconsideration of our laws in relation to Banking 
and Currency during the ensuing Session of Parlia- 
ment ; and it is hoped that the following remarks, 
based on the observation and practice of rather a long 
period, may not be altogether without value. 

It is not contemplated to propose a specific plan 
as a cure for all monetary ills. The question, “ What, 
then, do you recommend ?'’ is not answered in a few 
simple words, when the subject is in its very nature 
abstruse, and involves problems which can only be 
properly solved by the deepest thought. When, 
therefore, the supporters of the existing law say, “If 
any of the railers at the Act would state precisely the 
clauses they would substitute, it might be possible to 
deal with them, because a reference to the most 

^ The end of IStil. 


elementary principles would enable that task to be 
eltected in half a dozen lines,” it must not be con- 
cluded that those who thus write are oracles of 

^^isdom, but that they have not minds sufficiently 

1 / 

powerful to grasp the comprehensiveness of this most 
im])ortant subject. It is at once admitted that, from 
the inahilit} ot the writer to withdraw at present 
fioin the acti\e operations ot commerce, in order to 
work out ideas to absolute conclusions, it is possible 
that some of the opinions now entertained mav be 


hereafter modilied ; but if certain facts be brought 
[uomixienth into notice, and some ot the fallacies so 
^\idel} pie^alent be dispelled, the way will be partly 
jleared tor those Avhose province it is to act for the 

aational interests. 

The bold title to this little worlc has not been 
diosen without much retlection, but when once it is 
•eahzed that 9 per cent, as the minimum rate of dis- 
•ount at the Bank ot England means davs and 


lights ot toituie and anxiety to niaiiv an honest 
rader, and that it also means starvation or the work- 
louse for many an industrious worlvinan, it will be 
iijen that the appellation is not too aspiring, and 
1 hat it behoves every one to consider whether such 
lamentable results How from natural causes, which 
( annot he interfered with except at tlie cost of pro- 
dicing greater evil; or whether they result from 
iQibcliicN Oils logislcitioii, ivliicli slioulcl be corrected 

I , 


with the least possible delay. Those who suffer 
thus painfully are at least as much entitled to lie 
considered as those who derive large profits from the 
existing system, and thus regard with comjilacency, 
as ‘'a corrective process,” the consequences of the 
most highly protective statute which has ever been 

embodied in our laws. It will be for the reader to 


determine whether enough evidence is produced to 
justify the term of a protective statute ; but it shall 
be proved that its supporters are precluded by their 
own evidence from questioning this title. 

Before proceeding further it is necessary to arrive 
at a clear understanding as to the meaning of some 
of the words employed ; for it would l)e amusing, 
were the sulqect less serious in its nature and conse- 
quences, to notice the confusion of ideas which is but 
too common. One illustration, however, will suffice. 
The following passage is extracted from an elaborate 
article in one of our first commercial publications : — 
“Our circulation being wholly based upon a gold 
currency, and that currency having suffered a decline 
at the very time when an important increase in it 
became necessary to meet the great improvement 

in our foreign and colonial trade, both inward and 

outward, the result has been great stringency in the 

value of capital in all quarters.” 

First, let it be observed that a distinction appears 

to be drawn between circulation and currency, 

« * 


altliougli, tecliiiically considered, both words ouglit 
to mean the same thing; and with this is coupled 
the obvious error of ‘‘ being wholly based upon 
gold,” for the last Bank return shows, in the issue 
department — notes issued, 27,221,130/. ; bullion, 

Then, as to the last line : If currency he our only 
“capital,” that “there has been great stringency in 
its \alue ” is true ; but if material wealth he capital, 
then the remark is obviously untrue, for property of 
all kinds (money excepted) has been depreciated in 
value. The causes of this confusion of ideas will 
become apparent as we proceed, and we will now ask, 
What is currency ? This question has been put to 
a thousand persons, without eliciting a satisfactory 
reply ; and yet the true answer is contained in a few 
words. Some have said, “ bank notes are currency ; ” 
“gold and silver are currency;” “checks are cur- 
rency ; ” “ anything that passes from hand to hand ; ” 
“ in Liverpool checks and bills of exchange are almost 
the only currency.” Let it not be supposed that the 
imagination is being drawn upon for these replies ; 
they are just as they have been made bv men of hio-h 
})Osition and wide experience, and they have been 
noted down from time to time. The true answer, and 
the only true answer, is, “ Currency is that which a 
man must, not may, but must, take from another at 
a fixed value, in discharge of an obligation to pay.” 


Nothing else, in the strict meaning of the word, is 
currency, and it follows, that “ currency” and “ legal 
tender ” are the only terms properly interchangeable ; 
even money— i.e., coin — is only partially “ currency,” 
for silver is not legal tender beyond the amount of 
forty shillings ; Bank of England notes are, however, 
currency, because they have been constituted “legal 
tender ” by Act of Parliament. Simple as the expla- 
nation becomes when once perceived, it is, never- 
theless, worthy of most serious attention ; for, until 
the conclusions to which it leads are thoroughly 
established in the mind, no true progress can be 
made ; and the first and most important conclusion 
is, that whether it be based upon bullion, or upon the 
public credit, or both, or whatever be its basis, cur- 
rency must be artificial : its value is determined by 
law, and is not, in any degree, the result of natural 
or unalterable causes. 

With this understanding of the meaning of the 
word currency, let us consider the laws respecting it 
now in force, together with their avowed object and 

The theory of our legislation on the subject is, 
that all engagements shall, if required, be met in 
gold; “the maintenance of specie payments,” “the 
convertibility of. the bank-note,” “the charm in the 
bit of metal ” — all these are expressions of the same 
idea, but the questions whether it would be possible. 


although, technically considered, both words ought 
to mean the same thing ; and with this is coupled 
the obvious error of “ being wholly based upon 
gold,” for the last Bank return shows, in the issue 
department — notes issued, 27,221,130/. ; bullion, 

Then, as to the last line : If currency be our only 

“capital,” that “there has been great stringency in 
its value ” is true ; but if material wealth be capital, 
then the remark is obviously untrue, for property of 
all kinds (money excepted) has been depreciated in 
value. The causes of this confusion of ideas will 
become apparent as we proceed, and we will now ask, 
What is currency ’? This question has been put to 
a thousand persons, without eliciting a satisfactory 
reply ; and yet the true answer is contained in a few 
words. Some have said, “ bank notes are currency ; ” 

“gold and silver are currency;” “checks are cur- 
rency ; ” “ anything that passes from hand to hand ; ” 
“ in Liverpool checks and bills of exchange are almost 
the only currency.” Let it not be supposed that the 
imagination is being drawn upon for these replies ; 
they are just as they have ])een made Iwmeii of hioli 
position and Avide experience, and they have been 
noted doAvn from time to time. The true answer, and 
the only true answer, is, “ Currency is that Avhich a 
man must, not may, but must, take from another at 
a fixed value, in discharge of an obligation to pay.” 



Nothing else, in the strict meaning of the word, is 
currency, and it follows, that “ currency” and “ legal 
tender ” are the only terms properly interchangeable ; 
even money— coin— is only partially “ currency,” 
for silver is not legal tender beyond the amount of 
forty shillings ; Bank of England notes are, however, 
currency, because they have been constituted “legal 
tender ” by Act of Parliament. Simple as the expla- 
nation becomes Avhen once perceived, it is, never- 
theless, Avorthy of most serious attention ; for, until 
the conclusions to Avhich it leads are thoroughly 
established in the mind, no true progress can be 
made ; and the first and most important conclusion 
is, that Avhether it be based upon bullion, or upon the 
public credit, or both, or Avhatev^er be its basis, cur- 
rency must be artificial : its value is determined by 
law, and is not, in any degree, the result of natural 
or unalterable causes. 

With this understanding of the meaning of the 
Avord currency, let us consider the laAvs respecting it 
now in force, together Avith their aA^owed object and 

The theory of our legislation on the subject is, 
that all engagements shall, if required, be met in 
gold; “the maintenance of specie payments,” “the 
conA’ertibility of. the bank-note,” “the cliarm in the 
bit of metal ” — all these are expressions of the same 
idea, but the questions Avhether it Avould be possible. 


and, if possible, whether it would he wise, to rely on a 
currency based only upon the precious metals, need not 
for the moment be discussed, inasmuch as the prin- 
ciple is departed from at the very threshold of our 
■xistino- legislation ; a cuiTencv in aid, as it may he 
correctly termed, liaving been legalized, for whicli 
iliere is no loundation whatever in bullion. The 
amount of this currency in aid was originally fixed 
at 14,000,000/., with provision for its increase under 
certain circumstances, which have partially occurred, 
110 that the present amount is 14,050,000/. The 
alleged reason for fixing on the former sum was, 
iliat it had been found by experience that the Bank of 
I'lngland notes in the hands of the ]uil)lic had not, 
under any circumstances, been less than 14,000,000/., 
therefore, it might be assumed, keeping the conver- 
\ le note in view, that this sum, against 
c ebt due by the Government to tlie Bank of England, 
night be safely issued by the Bank in addition 
t) the value of the bullion in its possession. This 
extra currency was accordingly authorized by the 

I ank Act of 1844, coupled with an obligation on the 
lank to buy, at the price of 3/. IT.u 9d. per oz., all 
ghd bullion that may be offered; but, on the other 
hand, it must find sovereigns for all the notes which 

II ay bo brought in tor payment, and, consequently, 
the Bank is liable by law to sell about 14,000,000/. 
worth more gold than it possesses — not at the price 


which the gold may be worth at the time, but at the 
Mint price of 3/. 175. lO^d. per oz. 

It would be difficult to find words too strong for 
the condemnation of such a scheme as this, for let it 
be most carefully observed, that the improhahility 
of being called upon to meet it, not the ahility to do so, 
is made the basis of the extent of the engagement. 

But, in reply to this objection to the Act of 1844, 
it has been said, (and nothing can show more clearly 
how little the true nature of the subject is appreciated,) 
that, in banking operations, it is not necessary to keep 
in reserve more ready money than has been proved 
by experience to be sufficient to meet all calls. The 
ans^ver is, that the operations of a banker and legis- 
lation on the currency ought to be perfectly distinct ; 
the former must be open to the exercise of discretion, 
the latter should be governed by the most rigid 
adherence to sound principle, and when this is super- 
seded by expediency, mischief must ensue. Nor can 
the supporters of the Act escape from this dilemma ; 
either the notes issued should have been limited to 
the amount of bullion, or, if 14,000,000/. in addition 
to the bullion currency were necessary, or desirable, 
or justifiable for the population and trade of 1844, an 
increase should iioxv be made to'meet the wants of the 
population and trade of the present period. 

It may be well to consider now’ the avowed objects 
of the last and most important Act, that of 1844, 



iiffecting the currency, and prominent among these 
vere the maintenance of the sovereign at an equal 
/alue, the repression of undue speculation, and the 
orevention of those monetary panics by which the 
20 untry had been so much disgraced, all which objects 
were to be attained by the operation of the restriction 
clause. Well was it said by those whose commercial 
and monetary experience enabled them to detect the 
fallacies in which the subject had been involved, that 
in every respect there would be disapitointment ; that 
to attempt to maintain an arbitrary lu'ice for gold in 
the face of the wants of other nations would entail a 
loss vastly exceeding any possible advantage to be 
derived from it ; that the attempts to check specu- 
lation by tampering with the currency would inevitably 
fail ; but although powerless for good in this respect, 
the Act was powerful for evil, and instead of prevent- 
ing would increase panic, and that if any severe crisis 
arose, the abandonment of the restriction clause would 
be inevitable ; every word thus spoken in condem- 
nation of the Act has been most completely justified. 
The absurdities into which we have fallen in our adhe- 
rence to the Act are perhaps more strikingly exhibited 
in our dealings with other nations than in any other 
way. Obviously if the legislation on ^vhich our system 
of currency is based were sound, the currency would 
be a part of the capital of the countiy, but the prin- 
ciple being unsound, not only is our currency regarded 



as something different from capital, but as positively 

< antagonistic to it ; and it is spoken of as a good thing 

to depreciate capital in order to increase currency. 
There is not the slightest exaggeration in this state- 
ment ; over and over again it has been said, so fre- 
quently that it would be idle to quote particular 
instances, that it is desirable to bring down the prices 
of goods in order that the foreigner may take them 
instead of gold. Now, this involves two propositions, 


and it would be difficult to say which is the more pre- 
posterous. The first is, that the Foreigner’s demand 
for our productions is not to be regulated by his own 
wants, but by our want of something of a different 
nature ; the other is that to depreciate our material 
wealth is the best mode of increasing our prosperity. 
Unfortunately in too many instances the intentions of 
the authors of the Act have, in this respect, been ful- 
filled ; goods have been unduly depressed in price, but 
does it follow that the equal value of the sovereign 
has thereby been maintained ? The very reverse is the 
case. The real value of the sovereign in relation to 
what can be obtained in exchange for it has been 
altered to the extent of even 50 per cent, in some 
instances ; but were the price of gold not unnaturally 
influenced by our legislation, so great is the power of 
the wealth of this country, that we could attract here 
all the gold we might require without any alteration 
in its value beyond a trifling per-centage. We cannot, 

B 2 





however, do this so long as the Bank of England is 
bound by law to sell again some 14,000,000h worth 
more gold than it possesses at the fixed price of 
SI. 17s. lO^d. per oz. 

That the Act has been powerless to prevent specu- 
lation requires no demonstration, but again it may 
be advantageous to consider the meaning of the word 
used. All trade is, to a certain extent, speculation. 
The farmer, the manufacturer, the merchant, all specu- 
late on a demand to take off the commodities which 
they respectively provide ; but it would be affectation 
to pretend that these are the speculators whose opera- 
tions are regarded with disapproval. The speculators 
whom it is suggested should be kept in check are those 
persons who, having no ordinary business in markets, 
merely buy upon the chance of realizing some differ- 
ence in price ; the prevalent idea is condemnatory of 
such persons, but perhaps through insufficient reflec- 
tion ; it sometimes happens that the regular dealers 
in markets are so engrossed by the considerations of 
the moment, that they do not look sufficiently ahead, 
and till speculators come in to operate, their attention 
is not called to the probability of deficient supplies. A 
benefit, not an injury, is thus sometimes conferred 
upon the general community by speculative opera- 
tions ; but, further, it should surely be open to every 
man to buy what he thinks right, either land, houses^ 
goods, or consols, provided he pays for them with his 


own money ; the evil arises when speculation is car- 
ried on with the money of other people ; but in such 
cases it is not so much speculation as undue credit 
which is in fault, and this undue credit will form the 
subject of some subsequent observations. 

As a matter of experience it may be confidently 
stated that no rise in the rate of interest for money 
will check speculation in any article, so long as the 
opinion is maintained that the supply will not be 
equal to the demand, and the reason is obvious ; be- 
cause, wdien an advance, more or less speedy, of ten, 
fifteen, or even more per cent, in the value of the 
principal is confidently looked for, a difference in the 
interest for the time is comparatively unimportant ; 
and further, no speculations proceed very far unless 
taken up by the public at large. 

‘ ‘ If the public do not come in to buy, there will 
be no great go in the market,” is a remark which has 
been made a thousand times ; and it will, no doubt, 
be deemed a sufficient apology for introducing slang 
to say, that it is thought better to repeat the words 
actually used, than to construct a more elegant phra- 
seology. Two examples will be sufficient : the sugar 
speculation in 1855 ; and a previous speculation in 
another commodity which cannot be named, or the 
remarks upon it would be of a personal character. 

With regard to sugar, for many years after the 
emancipation of our own slaves in 1884, the produce 


of slave countries was excluded from our markets ; in 
1854 the distinction ceased, and the consequent com- 
petition led to very low prices at the commencement 
of 1855. As the year advanced adverse intelligence 
was received from certain places of growth, and the 
opinion hecame general throughout the country that 
a great scarcity was imminent ; prices advanced until 
the sugar, worth 295. 6d. per cwt. in January, was 
sold at 635. per cwt. in November. The rate of interest 
had been raised at the Bank from 3|- per cent, in 
June to 5 per cent, in September, and to 6 and 7 per 
cent, in October ; but so far from checking the specu- 
lation, the advance in price was 'more rapid between 
October and November than at any former period. 
Deliveries had been on a very large scale, and it was 
concluded, not unreasonably although erroneously, 
that consumption had been greatly stimulated by low 
prices ; in November it became known that 11,000 tons 
of shipping had been chartered to bring sugar from 
one French port alone, the stock at which, according 
to official returns, was 3,000 tons only ; but the larger 
quantity speedily arrived, the high price having in- 
duced sales from private stores ; from other quarters 
supplies were also coming forward. A collapse of the 
market was instantaneous ; it had been said, with 
reference to the rapidly-declining stock, that “ you 
could not eat your cake and have it,” but it was found 
that the cake had been bought, not eaten, the public 


having been the great speculators ; those who usually 
supplied themselves with 71b. having bought 281b., and 
those who usually bought 281b. having laid in a bag 
or a barrel, and for several months the trade was 
almost at a stand. But although a high rate of interest 
had not checked speculation while the expectation of 
scarcity prevailed, it aggravated the pressure when 
reaction set in, and prices were thus forced down 
several shillings per cwt. below the level at which they 
stood when business was generally resumed. The 
other article alluded to is one which enters largely 
into several manufactures, and the great advance in 
price, resulting from the expectation of short supplies, 
attracted attention in the Bank parlour ; two, certainly, 
and perhaps three Bank Directors were holders, and at 
the same time that it was noticed that bills of a certain 
class were generally “thrown out,” it was also dis- 
covered that extensive sales had been effected pri- 

vately; the idea was rapidly taken up that some 
better information as to supplies had been obtained, 
and the market was paralyzed. The notion that “ an 
inflation of prices,” as it is termed, can be maintained 
by speculation is only worthy of a past age. Even 
in the days of high protective duties and stringent 
Navigation Laws, the strongest combinations for such 
a purpose were almost certain to result in failure, of 
which the great Tallow speculation was a notorious 

example ; but now that our ports are freely open to 



supplies from all cpiarters, the natural law may be 
safely left to take its own course ; for, mark the prac- 

tical working of interference by withholding, or in- 
creasing the cost of the usual Banking facilities, as 
in the case of the unnamed article above alluded to ; 

our competitors for it being wiser, and rightly con- 
cluding that if prices be forced up too high, increased 
importations will speedily bring them down again ; if, 
on the other hand, the expectations of scarcity be 
not unfounded, it will be advantageous to be well in 
stock, and the expected deficiency from one quarter 
being increased by comparative failure in another, we 
should have to give for manufactured goods more than 
we could have produced them at om’selves, sustaining 
the double injury of ditference in price, and loss of 
profitable employment. It has be(ai thought expe- 
dient to dwell at length on these cases of actual 
experience, in order to dispel some of the miscon- 
ceptions which are unfortunately too popular, and 
which induce an approval of the Act of 1844 by those 
who have not reflected sufficiently on its operation. 

But its most signal failure has been with refer- 
ence to the restrictive clause, the impossibility of 
maintaining which, in times of real difficulty, in con- 
nection with the other conditions of our currency 
laws, was distinctly foretold. In 1847, permission 
was granted to disregard the restriction, and so arti- 
ficial were the difficulties under which the countrv 

had been labouring, that not only was it unnecessary 
to act on this permission, but money which, on 
the morning of the day on which it was granted, 
could scarcely be had at 10 per cent., could not 
be lent on the following morning at 2 per cent. 
Again in 1857 was the principle of the bill aban- 
doned, but on this occasion the hesitation to act was 
nearly fatal ; it cannot be too widely known that on 
the morning of the day on which for the second time 
permission was given to ignore the restriction clause, 
a draft for about 500,000/. would have stojjped the 
Bank of England, and that not only the leading joint- 
stock banks but some private firms might, if they 
pleased, have passed such a draft. There is no 
exaggeration or misrepresentation in this statement ; 
it is in every respect strictly and literally true. 

The excellence of the bill is now being extolled 
by its supporters, because it has not been again set 
at naught ; but the true cause why the necessity for 
doing so has not at the present crisis been imperative 
is kept out of view. It is possible to play tricks with 
a strong man which could not be endured by one of 
weak constitution. Last year, through the blessing 
of Divine Providence, there was so abundant a harvest 
that the wealth of the country was more added to 
than if we had doubled everv ounce of bullion in the 
Bank of England ; again this year have our fields, on 
the whole, been fairly productive. Kor is this all ; 

our people are industrious and provident beyond all 
precedent. It was stated recently by an eminent 
banker of one of the Midland Counties that many of 

the artizans in his district now have their two or 

three sovereigns in reserve, and to such men thirty 
years ago gold was almost a thing unknown. Had 
the case been otherwise, had there been any j)ressure 
for food, again must the Act have yielded to it ; but 
although a high rate of interest lias been borne, it 
must not therefore be concluded that no mischief has 
resulted from it ; many a trader on making up his 
books this year will find his profits absorbed by the 
extra interest he has had to pay ; and it is to be 
feared that the sacrifice of capital, which in many 
cases has been inevitable, has sown the seeds of 
failures to be declared hereafter. 

With reference to these remarks it has been asked, 
“Do you, then, disapprove of the separation of the 
issue and banking departments, and would you allow 
the Bank to issue an unlimited amount of paper 
money ?” The answer is, that the separation of the two 
departments of the Bank was perfectly right, but it is 
only one step in the path which must be followed to the 
very end before our currency legislation can be on a 
sound basis. It is the Queen’s head on the coin which 
is the guaranty of its weight and fineness, and alone 
gives it value as currency, and if we are to accept 
paper as legal tender, it should be the issue of the 



State only, not the issue of a private company, how- 
ever powerful, still less of a company placed under an 
engagement which it is known that it could not fulfil, 
and resting its security simply on the assumption that 
it will not be called upon for the fulfilment. 

The objection is one of principle, and no argu- 
ments, however specious, in favour of a departure 
from it should be allowed to prevail ; if coin must 
come from the Queen’s Mint, still more should the 
Queen’s Government be directly responsible for paper 
currency, and any shifting of this responsibility or 
mixing up of the currency with banking operations 
must be attended with mischievous results. 

The currency should be established on such a basis 
that the whole amount should be perfectly free and 
available for the national wants, unfettered by the 

exercise of any discretion whatever ; but millions may 
be and are held in reserve at the discretion of the 

directors of the Bank of England ; it is not intended 
to reflect in any manner on these gentlemen person- 
ally; indeed it may be truly said that the Bank 
Court is composed of gentlemen whose intelligence 
and high character would reflect honour on any 
country; but the system is radically wrong. To 
allow men engaged in business to have control, how- 
ever limited, over the issues, is to place them in a 
false position ; occasions will arise in which the 
judgment must be afiected by considerations of self- 


interest, apart from wliicli it will be difficult to 
satisfy the public mind that jealousy of competitors 

has no weight in the scale. 

Separate as the two departments of the Bank of 
England appear to be, there is a close connection 
between them. A diminution ot bullion in the issue 
department lessens the power of the Bank to fultil 
its engagement to pay the notes in gold ; and strin- 
gency in the banking department, by raising the rate 
of interest, is adopted as a remedy, with this result — 
that the whole trade of the country, which is now so 
large that there can never be less than engagements 
to the extent of two hundred millions unliquidated, 
is liable to be disturbed by the difference of a few 
hundreds of thousands of bullion in the coffers of 
a private Company. Had the Bank no liability in 
respect of the currency, this could not happen ; but 
let us take another view. 

The four principal joint-stock banks in London 
hold deposits to the amount of moje than sixty 
millions : let us suppose that, accidently or by 
concert, instead of paying their surplus money into 
the Bank of England, they collectively retain in their 
tills about 2,000,000?. more currency,— bank- 
notes and coin— than usual ; (the supposition is not 
a wild one ; the account of one of the joint-stock 
banks in question shows that it opens shop habi- 
tually with about 750,000?. in currency, and has an 

29 - 

equal sum on its account at the Bank of England :) 
V what would be the consequence ? Unquestionably an 
advance in the minimum rate of discount. Thus, by 
keeping an extra 2,000,000?. idle, a very much larger 
profit might be realized on the amount employed. 

What is here put as a supposition is precisely 
what happens from raising the rate of interest at the 
Bank of England, especially when the advance is 
carried to an exorbitant extent. Apprehension is 
^ excited that a point may be reached at which money, 
meaning currency, cannot be obtained ; and to meet 
the probable demands upon them, the several banks 
throughout the country are compelled to hold addi- 
tional Bank of England notes and coin to an amount 
which, in the aggregate, would be sufficient, if avail- 
able, to allay all alarm ; that this is so, is placed 
beyond doubt by the fact, that immediately permis- 
sion is given to relax the restriction on currency, panic 
subsides, and money is found to be superabundant."^ 

But to justify the stringency above adverted to, 
it is said that trade being extended, and profits 
increased, more capital is called for, and capitalists 
are entitled to share in the increased profits by 
receiving a higher rate of interest ; unless for capi- 
talists, monev-dealers be substituted, the statement 

* Evidence was given before tbe Committee of the House of 
Commons, in 1858, that one country bank, working usually with 
30,000^. or 40,000^. in notes and coin, felt it necessary to keep 
235,000^. in the till in time of panic. 



is utterly fallacious. Of what advantage would it be 
to a capitalist to obtain a temporary high rate of 
interest when he must make a large sacrifice of 
' principal to render his capital available; that he 


' ■ would have to make this sacrifice the following 

extract will be sufficient to prove : — “ Consols have 
experienced a further fall, and are again approaching 
the lowest point of the year, while in all other secu- 
: rities there has been corresponding weakness. The 


symptom of the market to-day was, that any attempt 
to press a large sale of any particular class of stocks 


i or shares would have been met by a heavy decline.” 

In the very same article we read, and the apparent 
inability to appreciate the contradiction is positively 
i. marvellous “ As regards the financial position of 

the country everything is going on well.” ^Yhat 
is here stated with regard to stocks and shares was 
equally true with respect to land, houses, goods, 
or any description of property. The effect of the 
restrictive clauses of the Act of 1844, in connection 
with the other conditions of our legislation respecting 
currency, is to confer a heavy protection on the dealer 
in money, and to place the whole trade and industry 
of the country at his mercy. So long as the restric- 
tion, coupled with the obligation on the part of the 
Bank of England to sell more gold than it possesses 
at a fixed price, is maintained, so long does the pro- 
tection continue ; and a reference to the evidence 




before the Committee of the House of Commons in 
1857 will show that the supporters of the system 
cannot object to the term of a protective statute. 
Before that Committee it was distinctly avowed by 
the witness upon, or, as the word upon has been 
objected to, in entire accordance with whose evidence 
the Act of 1844 was passed, that, in his opinion, 
the pressure of the debtor interest was always a pre- 
dominant power, and that the Government ought to 
extend protection to the creditor interest ; and can 
it excite wonder that legislation, guided by such a 
spirit, should bear bitter fruit ? Our usury laws 
have been abolished, and perhaps wisely, but it must 
not, therefore, be concluded that there is no such 
thing as usury ; the Holy Scriptures are of everlast- 
ing application, and the thing meant by the word 
usury, when applied in a condemnatory sense, will 
be found among us as long as the world exists. It 
may be perfectly fair, when both sides are free to 
act, that 10 or 15 per cent, should be received and 
paid for the use of money ; but in such a case a part 
of the payment only is really for interest, the other is 
the premium of insurance on a risk mutually known 
and admitted ; but when the power is all on one side, 
and advantage is taken of it to charge the premium 
of insurance where no risk is incurred, then usury, 
in the objectionable sense, steps in. Until Consols 
are at 50, nothing but legislation on false principles 


can render it possible for the money power to tax 
the honest and legitimate trade of this country with 
interest at 9 or 10 per cent. 

But another consequence of the unsound system 
on which our currency is based, is that the abundance 
of material wealth is held up as the cause of scarcity 
of capital. If the only result of having a currency ' 
be to involve us in such a contradiction as this, we 
had better revert to ])arter than to adopt a servant 
which becomes so perverse and tyrannical a master. 

The defenders of such a system are frequently 
found to adopt very reprehensible means in support 
of their arguments, as the following instance will 

show: — “The balance-sheet of Messrs. , whose 

failure was mentioned yesterday, shows liabilities 
(chiefly on acceptances) to the amount of 32,768/. 
and assets estimated at 3,684/. If the result of the 
present pressure is mainly to put a stop to business 
carried on in this manner, there are few who will fail 
to recognize that the corrective process has become 
necessary.” Can anything more disingenuous than 
this statement be conceived If, in his chapter on 
fallacies, Mhately had wished for an example of the 
petitio principit, could ho have found one more in 
point ? The impression intended to be conveved is 
that the pressure, viz., the high rate of interest is 
good, because it stops business conducted on such a 
basis ; but is a high rate of interest necessary to stop 


such business ? The merest tyro in figures could 
'' answer No ; the lowest rate of interest would speedily 
bring matters to a crisis where such a disproportion 
between liabilities and assets existed. Our svstem is 
, powerless to prevent such business, but it is power- 

ful to aggravate the evils [resulting ; by heavy charges 
for interest and depreciation of assets, it has been 
eminently successful in reducing dividends. 

But because our legislature may be imperfect, it 
does not follow that there are no other evils to be 
corrected; prominent among these is the reckless 
manner in which credit is given, of which some in- 
stances, not drawn from the imagination, but which 
have actually occurred, shall be adduced. On a large 
scale, the credit given to America, which led to a 
severe financial crisis, may be profitably considered. 
Thirty years ago nothing was heard but praise of the 
^ United States ; the old Royalist feeling had nearly 

died out, and the future of the great Republic was 
regarded in this country with the most hopeful pride. 
To promote her public works we pai'ted with our 
capital, not our money, for of that, in the technical 
sense, little was sent, but our coals, our iron, and our 
various manufactures, receiving in return principally 
^ bonds and stocks and shares, which were simply 

promises to pay ; at last there was a collapse, but 
the facility of obtaining money here by which it was 
for a long time averted, was so obvious to those who 






had opportunities of watching the means employed, 
that it was stated that a man favourably known might 
start in business almost without capital, and in a 
short period owe a quarter of a million ; the idea 
was ridiculed at the time, but there have been unfor- 
tunately too many cases since to prove its accuracy. 
Another instance shall now he mentioned. A gentle- 
man on the Stock Exchange had, in consequence of 
the retirement of his hanker, to place his business 
elsewhere ; shortly afterwards, having a heavy ac- 
count, he called on his new bankers to know if, in the 
event of its being required, they could let him have 
40,000/. or 50,000/., on his transferring consols into 
their names; the answer w^as, “Oh! thank you, 

Mr. , we never lend money on stock ; but if you 

want 50,000/. or more, we shall be very happy to 
place it to your account without any transfer.” In 
this instance the bankers were safe ; they knew 
their customer had means, and more, they knew 
his character ; but never to lend money “ on stock,” 
hut to lend it without security, is scarcely a safe 
rule of business. Similar in substance was the fol- 
lowing observation : — “ I never lend money on war- 
rants ; warrants I know nothing about ; but bills I 
understand, therefore bring me hills.” Again, a 
highly-respectable firm had some large transactions 
open, and to guard against the possibility of their 
clients not being duly ready with the money, they 



applied to the friends with whom they had occasional 
transactions to know if an advance could he made to 
them, if required, upon the deposit of the securities ; 
they were told, “ Me would rather not have the 
securities, but if you will draw a hill, get it accepted, 
and bring it to us, we shall he very happy to dis- 
count it for vou.” It is not necessarv, hut it would 
be perfectly easy to multiply these instances, hut let 
the operation he carefully observed ; when an ad- 
vance is made on warrants, or other securities, there 
is usually a good margin as to value, with possession 
of the property ; when a bill is drawn, it is usually 
for the utmost cost of the goods, which are left in 
the hands of the borrowers, to be used again, it may 
he, in some shape or another, should an emergency 
arise, and if not, there can be no recourse to them 
till the maturity of the bill. One fatal result of the 
Bank Act of 1844 is, that it has encouraged the 
notion of there being something in our legislation 
which keeps a wholesome check upon trade, and 
supersedes in some degree the necessity for caution ; 
nothing can be more fallacious ; the Act has no such 
power, nor can the place of discretion be supplied by 
any Act of Parliament. Credit must of course be 
given, but when more monetary accommodation is 
required than a man can obtain from his own bankers, 
or from those from whom ho may fairly expect it in 

the regular course of his trade, caiiuoii is necessary 

c 2 

3 () 

with regard to the security ; if for the sake of oh- 
tainiiig a better price than a competitor in hnsiness, 
or for the sake of a commission, or high rate of inte- 
rest, credit l)e improYidently given, the creditor 
slioiild al)ide the consequences, ami not be able to 
make up a shilling of his loss by extra charges on 
other persons. 

But there are many who consider that over- 
production and over-trading occasion our tinancial 
difficulties ; no doubt, there may be a surplus at 
some time of a particular commodily, and that some 
individuals will trade bevond their means ; but it 
has been shown that by allowing the natural law of 
supply and demand to have free course, any evils of 
this kind will work their own cure much more satis- 
factorily than if any attempt be made to correct 
them by tampering witli money. It is idle to talk 
of over-production or over-trading in the aggregate 
wdiile there is a single person -who is compelled to 
go short of a dinner, or wants a coat to his back. 
To point to the large increase in our imports and 
exports as a proof of over-trading is simply absurd ; 
if we govern India wdsely and cultivate amicable 
relations with China and Japan, is it anything un- 
reasonable to suppose, considering the many valuable 
articles they have to give us in return for use and 
distribution, that they should take some twenty 
shillings’ worth a head per annum of our inauufac- 

«i ry 


tures and of goods \vhich can be most advantageously 
procured through our instrumentality ? Consider in 
addition the widely-extending commerce with other 
places wiiicli we are wisely endeavouring to encou- 
rage, and it will be seen that a thousand millions 
may scarcely be the limit of our operations ; and 
shall we crush a trade like this because some fancied 
equivalent in gold is not offered to the Bank at the 
price of 3/. ITs. dd. per oz., wiien it may suit our 
neighbours to offer 3/. Iffix Id. ? To these com- 
plainants about over-trading the writer would address 
the same arguments wiiich he used thirty years ago 
upon another subject. At that period the cause of 
all our difficulties was suj)posed to be a redundant 
population ; it was in vain then to say that the 
Divine command to increase and multiply and re- 
plenish the earth and subdue it, was still in force ; 
the men of that generation were wdser than the 
Great Creator of the Universe, and a supercilious 
shake of the head wnuld satisfy you that at least 
four men out of six w’ere disciples of Malthus and 
Miss Martineau. The error was so beautifully illus- 
trated by one of our popular writers that the tempta- 
tion to quote his eloquent words cannot be resisted : — 
“ God ! to hear the insect on the leaf pronouncing 
on the too much life among his hungry brothers in 
the dust ! ’ ’ 

Thirty years hence, or perhaps sooner, for intelli- 




gence is rapidly increasing, it will be as plainly seen 
that to complain of over-production or over-trading is 
to begin at the wrong end, and that to provide facili- 
ties for the distribution of the means of comfort 
and enjoyment which the blessing of Divine Pro- 
vidence upon our industry and enterprise places at 
our disposal, is far wiser than to find fault with their 

Two courses may be suggested as a basis for the 
currency ; it might be entirely a bullion currency, or 
a currency based exclusively on bullion, in which case 
it would be important to consider whether one of the 
precious metals only should be adopted to the exclu- 
sion of the other, and it would also be necessary to 


take the most direct means of securing an adequate 
supply, in place of the tortuous and mischievous course 
now pursued with that object, or, we might find our- 
selves in a position similar to tribes in Africa, starv- 
ing in the midst of an abundant harvest, because a 
ship with cowries happened to hang for a few weeks 
on the bar. 

Or, having provided that the interest on the 

Government debt should be three pieces of gold per 

annum of a certain weight and fineness for every 

hundred pounds, to base the further currency required 

on that debt, rendering it reconvertible at the option 

of the holders ; but in this case the cancellation of 

Government debt and creation of currency must be 





one operation ; there must be no use of the same 
capital twice over, and the surrender of the interest 
must be the price paid. Whether either of these, or 
any other plan be adoj^ted, the following considera- 
tions should always be borne in mind, viz. 

That currency, whatever its basis, must always be 
artificial in its value, and that care should be taken 
in legislating upon it to preserve, not to injure, that 
which is material. 

That currency, being the creation of the Legis- 
lature, should be the issue of the State only, and that 
in a direct manner, not through any private company. 

That the basis of it being well established, the 
natural law of supply and demand should have free 
course, and that to give to any class of men, however 
eminent or respectable, either control over, or prior 
knowledge respecting it is to commit an injustice on 
their competitors in trade. 

The facts herein mentioned are within the actual 
Imowledge of the writer; the fallacies adverted to 
have been forced upon his attention by long expe- 
rience. His opinions have not been formed without 
much reflection, still they are not propounded dogma- 
tically ; for if it can be shown that in any respect he 
is in error, it will be a satisfaction to him to have 
that error corrected : truth, and truth only, bein^ the 
object he has had in view.