gold will be kept within the king- | much is said, are in truth the only dom."

persons who have not speculated, and who have exerted all their influence to arrest the dangerous spirit among their customers. A prudent regard for their own safety forced this course of conduct upon them. Where did the extravagant speculation which has been attended with such ruinous consequences originate? In Manchester and Liverpool, a district in which, as well as all Lancashire, no small notes at all were in circulation. Where did it next spread, and assume its most dangerous aspect? In the Stock Exchange of London, a city in which, and for sixtyfive miles around, no bankers' notes can be issued. In 1720, the only year in which wild speculations at all similar to those of the last year prevailed, there were no country banks or bankers' notes; and in 1797, when the run took place upon the banks which rendered the suspension of cash payments a matter of necessity, there were not only no country small notes, but no Bank of England small notes in circulation. It was the failure of the seven great bankers in London, in whose hands the bills of more than a hundred country bankers had been placed, which occasioned the greater part of the country failures; and had it not been for the solidity of the

12. On the other hand, it was argued by Mr Baring, Mr Heygate, and Mr Gurney, all great mercantile men"The proposed measure is alike inadequate to meet the evils complained of, and ill suited to the present state of the country. What is the cause of the embarrassment now so generally felt by all classes? Is it not the sudden contraction of the currency, and consequent destruction of credit at the close of last year? And what remedy does Government propose for the evil? To contract it still more. Taking the currency at £20,000,000, and the chasm produced by the recent failures in it at £3,500,000 the proposed measure will produce a further chasm to the extent of £7,000,000, with which it will be impossible to carry on the commerce of the country. The postponement of the suppression of small notes for three years is no alleviation, but rather an aggravation of the evil, for it is the nature of the human mind to exaggerate impending evils: nothing is so bad in reality as it appears in prospect. The country bankers, having the suppression of small notes hanging over their heads, must, as a matter of necessity, contract their issues, and this can only be done by refusing accommodation to their cus-country bankers, the catastrophe would tomers, and calling up such advances as they have already made. This will of necessity stop industry in numberless channels. This stoppage is what is now going on, and the proposed measure will seriously tend to aggravate it. The extent to which this evil is spreading no man living can estimate, | and it will probably lead to consequences which none can contemplate without horror. How is the gap which is to be made in the circulation to be filled up? and if it is not supplied, how is the industry of the country to be supported? As a measure of present relief, the proposed measure is unwise and inappropriate; as a measure of prospective security, it will be nugatory.

13. "The country bankers, of whose improvidence and mad speculation so

have been far greater than it actually was. So far from the country bankers having begun the mischief, and their notes having been the means of spreading it, it was the merchants and capitalists of Liverpool, Manchester, and London, without small notes, who began it, and the small notes of the country bankers were only brought in at the close of the day to arrest its devastation.

14. "The embarrassments which have been experienced are always ascribed to over-trading; but there is a great deal of injustice in this imputation. By far the greater part of it is to be ascribed to the fluctuations in the currency, which no prudence on the part of the mercantile classes could avert, and no wisdom foresee. In 1823 and 1824, the Bank had accumulated

a very great treasure, amounting at were indeed preparing; but they were one time to £14,000,000, in their cof- preparing by screwing, almost to defers; and their circulation was propor-struction, every farmer, manufacturer, tionally extended, which, as a matter or other customer in the country, from of course, led to a proportionate in- whom they could get their money. crease of the country bankers' issues, Was this the way to relieve a country which always increase with those of already suffering under a shortening of the Bank of England. In consequence credit and a want of money? Unless of the quantity of money thus thrown Parliament allowed them more time into the market, interest fell to 4 and to meet the new order of things, utter 3 per cent; and of course, as it could ruin to all the small shopkeepers, manbe got on such easy terms, speculations ufacturers, and farmers in the country of all sorts were proportionally ex- must ensue. The question is not, what tended. This ere long led to a run, is theoretically best, but what, in the as such a state of things must always circumstances, is most expedient ?— in the end do, on the Bank for gold to and the general distress which percarry on the immense undertakings vades the country districts is the first thus set on foot, great part of which thing to which, in discussing questions were in distant countries, and could of this nature, Parliament is bound to be conducted with nothing else; and attend. The present measure can be then the Bank, in its own defence, was productive of nothing but evil. What compelled suddenly and violently to is really required, and would relieve contract its issues. The banks were the distress, is to establish joint-stock compelled to do so, for the first duty banks on such principles as to induce of the directors is to look after their persons of capital to enter into them, own interests; but still the conse- to introduce silver as a standard of quences were the same. The London currency as well as gold, and to rebankers, hard pressed themselves, call-lieve the Bank of England from those ed upon their correspondents in the country, who again called upon their customers, and soon every creditor came to take his debtor by the throat. Then came the panic, which in such 16. Ministers carried their measure circumstances was inevitable, and the by an overwhelming majority, Mr BarBank was too much fettered by its en- ing's amendment, that "it is not exgagements with and advances to Gov-pedient, in the present disturbed state ernment to be able to afford the public any relief. That is the simple account of the whole catastrophe, and what had the country bankers to do with inducing it? So far from their having had any share in bringing it about, they were its first victims; and the real cause is to be found in the monetary operations of the metropolis, where their notes did not circulate, and with which they had no concern whatever.

15. "The distress which the crisis produced, and which was much more serious than Government seemed to be aware, will be increased rather than diminished by the proposed change. The very exertions of the country bankers to prepare for the intended change have already most fearfully augmented the general distress. They

incumbrances connected with Government which at present render it impossible for it to come forward on a crisis to relieve the public distress.'

of public and private credit, to enter upon the consideration of the banking system of the country," having been lost by a majority of 193, the numbers being 232 to 39. In the House of Lords the preponderance was equally great, the numbers being so decisive that the matter was not pressed to a division. The prohibition to issue £2 and £1 notes was at the same time extended to the Bank of England, by a majority of 66 to 7-in the face of a protest by Mr Gurney, that "if Government destroyed all the country bankers' notes, and at the same time stopped the issue of small notes by the Bank of England, they would leave the country in a state of destitution of which they could form no adequate conception." This observation produced no sort of

impression, and it passed into a law | trivial as the suppression of small that stamps for £2 and £1 notes should notes, and the substitution of soveno longer be issued either to the Bank reigns in their room, it is only necesof England or country banks, and that, sary to reflect on the universal influat the expiration of three years from ence which, in an industrious and March 1826-that is, in March 1829- highly-civilised community such as their circulation should be prohibited that of Great Britain, the price of altogether in England. commodities-that is, the remuneration earned by industry-has on the wellbeing, and through it on the feelings, opinions, and desires of all classes, and then on the immediate and decisive effect which the expan

17. Mr Canning said, upon this question being brought to a vote, that "he hoped the decision of it would be regarded as decisive of the principle, and determine it FOR EVER. It did so: and it may be added that, as put-sion or contraction of the currency ting the finishing hand to the currency has on these prices and that remunesystem of 1819, it in a great measure ration. It is a mistake to suppose DETERMINED ALSO THE FATE OF THE that political discontent, or an earnest BRITISH EMPIRE. Thenceforward a desire for change, either social or reliseries of causes and effects set in, gious, is ever excited among the people which no human power was after- of this country by mere fickleness of wards able to arrest; and which, in disposition or the arts of demagogues, their ultimate effects, changed the gov- how skilful in their vocation soever erning party in the British Islands, they may be. That is sometimes the induced Catholic emancipation, and case among a people ardent and changean entire alteration of our ecclesiasti- able, like the French, who have been cal policy, overturned the ancient con- long excited by the changes of revolustitution of the empire, and establish- tion, and among whom large parties ed a new one, resting on an entirely have come to look for advancement by different basis, and directed by entire- its success. But in a peaceable indusly different men, in its stead. It had trious community like that of Great a material influence in bringing about Britain, intent on individual wellNegro Emancipation, the Repeal of the being and social amelioration, it is in Corn and Navigation Laws, Free Trade, general suffering that the foundation and the entire alteration which fol- must be laid for the general desire for lowed in our foreign alliances, and political change. Demagogues, when policy, and system of government, the feeling is once excited by this domestic, foreign, and colonial. The means, often inflame it, and deterAct of 1826, justly regarded as the mine the direction which it is to take, complement of that of 1819 in regard but they cannot call the passion into to monetary measures, and which ren-being. dered our entire circulation and mercantile credit dependent on the retention of gold, the very thing which the daily-extending operations of commerce rendered it impossible at all times to retain, is to be regarded as the turning-point in our whole history, domestic, social, and foreign; and without a steady observation of it, and appreciation of its effects, all attempts to explain, or even understand, the subsequent changes which occurred in the British empire will be nugatory.

18. To understand how this came to pass, and how such mighty effects flowed from a change at first sight so

All the popularity of the cry for cheap bread, and all the talents of Mr Cobden, would have failed in bringing about the repeal of the Corn Laws, had not five bad seasons in succession brought the reality and evils of dear bread home to every family; and all attempts to pacify Ireland while the prices of agricultural produce were unremunerating, were as fruitless as all attempts to disturb it have been since the great emigration, and the opening of the huge banks of issue, by Providence, in California and Australia, have secured an adequate return for rural labour in the Emerald Isle.

19. To be convinced of the decisive

Three years of low prices and misery followed, which, driving to desperation an agricultural country in which they operated most powerfully, produced such an outcry as forced Catholic emancipation on a reluctant Government. The entire suppression of small notes took effect in 1829, and three years of still lower prices and increased misery followed, which induced general discontent and political agitation, and ended in the Reform Bill, the passing of which was a virtual revolution, and occasioned a total change in our entire policy, foreign and domestic. So close

effect which the destruction of small notes, and entire founding of the currency on gold, has had on the future destinies of Great Britain, we have only to cast our eyes on the table below, which shows the immediate effect of these changes on the prices of commodities, and the speedy result of their decline or rise in inducing or preventing political change. Three years of suffering and general misery followed the resumption of cash payments by the bill of 1819, and the determination of suppressing small notes in 1823, then announced. This absolutely forced Government to alter the law, and pro-and invariable is this connection, and long small notes for ten years longer; and three years' unbounded prosperity, good prices, and general contentment followed the change. The unfortunate dependence of our currency on gold by the bill of 1819, coupled with the entire abstraction of that gold to carry on our South American speculations, brought on the terrible monetary crisis of 1825; and it was immediately succeeded by the stoppage of the issue of stamps for small notes, and their announced suppression in three years.

so uniformly do the same effects follow from the same causes, that we have only to look at the state of the money market in London, the rate of discount fixed by the Bank of England, and the number of notes in circulation, for any considerable time during the last halfcentury, to be able to predict with unerring certainty the tone of general feeling, the amount of general suffering or happiness, and the degree of political change, which is immediately to follow.*

* AMOUNT OF PAPER IN CIRCULATION, THE EXPORTS, IMPORTS, REVENUE, PRICE OF WHEAT AND COTTON, WITH THE GREAT POLITICAL CHANGES IN GREAT BRITAIN IN EVERY YEAR FROM 1818 TO 1832, BOTH INCLUSIVE.

£

£

£

S. d.

8

s. d. 20

1818 26,202,150 20,507,000 46,709,150 5,113,748 46,603,249 36,885,182 53,747,795 83

Bank Restriction Act passed July 7, 1819.

1819 25,252,690 15,701,328 40,954,018 6,321, 402 35, 208, 321 30,776,810 52,648,847 72 3 1820 24,299,340 10,576,245 34,875,585 4,672, 123 36,424, 652 32,438,650 54,282,958 65 10 1821 20,295,300 8,256,180 28,551,480 2, 772, 587 36,659, 630 30,792,760 55,834,192 54 5 1822 17,464,790 8,416,830 25,881, 620 3,622, 151 36,968,964 30, 500,094 55,663,650 43 3

Small notes prolonged for 10 years, July 7, 18 22.

1823 19,231,240 9,920,074 29,151,314 5,624, 693 35,458,048 35,798,707 57,672,999 51 9 1824 20,132,120 12,831,332 32,963,452 6, 255, 343 38,396,300 37,552,935 59,362,403 62 0 1825 19,398,840 14,930,168 34,329, 008 7,691,464 38,877,388 44,137,482 57,273,869 66 6

Small notes limited to 3 years, February 26, 1826.

1 11

1 5

1 1

1 0

0 10

1 0 1 0

1826 21,563,560 8,656,101 30,219,661 7,369,749 31,536, 723 37,686, 113 54,894,989 56 11 1 0 1827 22,747,600 9,885,300 32,632,900 3,389, 725 37,181,335 44,887,774 54,932,518 56 9 0 101 1828 21,357,510 10,121,476 31,478,986 3,322,754 36,812,756 45,028,805 55,187,142 60 50 83 Catholic emancipation passed April 13, 18 27.--Small notes extinguished, Feb. 26,1829. 1829 19,547,380 8,130,327 27,677,697 4,589,370 35,842,623 43,981,317 50,786,682 66 3 0 83 1830 21,464,700 7,841,396 29,306,096 3,654,074 38, 271, 597 46, 245, 241 50,056,616 64 3 0 8 1831 18,538,630 7,914,216 26,452, 846 5,848, 478 37,164,372 49, 713,889 46,424,440 66 4 0 91 1832 18,320,000 8,221,895 26, 541,895 3,247,169 36,450,594 44,586,741 46,988,755 58 8 0 9 Reform Bill pass ed July 1832.

-PORTER, third edition, pp. 356, 475, 148; ТооKE On Prices, vol. ii. pp. 382, 383, 401; MARSHAL'S Parliamentary Tables, p. 55.

20. The persons who debated the case | great and most distressing diminution of the suppression of small notes in of accommodation, and ruin of credit 1826, able and well-informed as they to persons engaged in business, at the were on both sides, took a very partial moment it takes place, but by a lasting view of this great question; and sub-reduction of prices, often continuing sequent and dear-bought experience has enabled us to discover wherein their error consisted. They argued it on the one side as if the sole point for consideration was, how the currency could be rendered secure, and the holders of it be saved from those terrible failures which had recently spread such universal consternation; on the other, as if the chief danger to be apprehended was the shortening or cutting off of credit to persons engaged in commerce or agriculture, and the suspension of industry which might ensue in consequence. What was alleged on both sides was in reality the truth, but on neither was it the whole truth. Neither party seemed to be aware of other effects resulting from the measure under discussion, which subsequent experience has nevertheless completely brought to light, and which has given the paramount importance of the decision now taken to future times.

21. The first of these is the consideration that small notes, from their adaptation to small, and therefore the great bulk of transactions, are the ones which can chiefly be relied on as likely to remain in circulation; and upon the plenty or scarcity of which, with the public, the ease or tightness of the money market is mainly dependent. Every banker knows this; if any private person doubts it, let him reflect whether he most frequently has several £5 notes, or an equal amount in sovereigns or £1 notes, in his pocket. The second is, that the plenty or scarcity of these notes, or of sovereigns, in circulation, determines not merely the amount of credit which persons engaged in either commercial or agricultural speculations are to receive at the time, but also the price of the articles in which they deal for a course of years, and consequently whether their business is to be a gainful or a losing one for a long period. Invariably it will be found that a contraction of the currency is followed, not only by a

for years together, and which occasions the destruction of a large proportion of these persons. The third is, that a currency, consisting, below £5, entirely of gold and silver, is liable to be entirely withdrawn at times by the necessities of war or the changes of commerce; and, consequently, if there is no other currency equally adapted to ordinary operations to supply its place, entire ruin to credit and industry may at any time be induced, without the possibility of human wisdom or foresight guarding against it. A campaign on the Rhine or the Danube, three weeks' rain in Great Britain during August, a potato rot in Ireland, a great demand for gold in America in consequence of commercial distress or political convulsions, may at any time bring ruin upon the whole industry of the country, when most wisely conducted, and in the most prosperous state, and sap the very foundations of our national existence, by driving some hundred thousand of our most industrious and valuable citizens annually, for a course of years, into exile. This is exactly what happened in 1847, and from the effects of which the nation so long suffered; and the same effects may be confidently expected to return from the same cause, as long as the ordinary circulation of the country is rested entirely on a metallic basis.

22. What the Legislature should have done in 1826 on this all-important question has now become apparent, and had been so clearly pointed out by experience, that had not a small but influential portion of the community, who, from their wealth, got the command of the public press, been interested on the other side, it was impossible that the proper remedy could have been mistaken. What brought on the crisis was the entire dependence of the circulation on gold, which inflamed speculation as much in 1824 and 1825, when the precious metals were plentiful, credit was high,